This morning, PG&E announced a massive new charging station network of over 25,000 charging stations in its service territory. This is a departure for charging networks, in California, for direct ownership by the utility company, however PG&E says they will only own the infrastructure and will contract out the billing relationship to third party companies. The plan was submitted to energy regulators in California this morning, and requires their approval before PG&E can start work. It’s expected drivers will be able to use the first of these charging stations in 2017.
This sounds cool – massive increase in charging station deployment – but a conference call this afternoon to discuss the plan with the press grew pretty rancorous, with tough questions being asked of PG&E, and not enough answers.
Let’s start with the plan, then discuss the controversy.
The plan – PG&E to grab 25% market share by 2020
PG&E’s projections are that in order to meet California’s climate change goals — 1.5 million zero-emission vehicles in California by 2025 to help meet the state’s greenhouse gas emissions reduction goal 80 percent below 1990 levels by 2050 — that PG&E’s territory must have over 100,000 public charging stations by 2020. PG&E’s plan is to take care of 25% of that market, or 25,000 charging stations.
Evade blocked charging stations with one of these handy J1772 extension cords.
To do so, PG&E will procure the hardware but work with host sites, 3rd party contractors, and existing charging station networks to deploy that hardware. PG&E will own the hardware, and work with one or more charging network operators to manage the hardware. The charging network operator will buy electricity from PG&E, and turn around to sell it to their customers for a fee.
PG&E see’s their proposed effect as being to grow the market, building it up for everyone involved. Throughout the conference call they reiterated claims that they don’t want to crowd out other companies, but to create an effect like that adage of “a rising tide lifts all boats.”
The vast majority of the stations will be level 2 charging stations (25 miles range per hour of charging) installed at workplaces, retail shopping centers, and multi-unit-dwellings. All three of those are under-served segments of the electric car charging market. PG&E is not interested in getting involved with home-based charging.
In addition, the plan includes a 100 station DC Fast Charging network (supporting both CHAdeMO and ComboCharging System) to support deployments along the West Coast Electric Highway. I find that statement in PG&E’s press release curious, because the West Coast Electric Highway in California is essentially dead. Back in 2009 promises had been made that California would take part, but since then nothing has been done in California. All the WCEH action is occuring in Oregon and Washington, where EV drivers can enjoyed much more freedom to travel using the existing WCEH infrastructure.
The start of deployment in 2017 is due to the fact that PG&E, as a regulated utility, has many more hoops to jump through than typical (less regulated) companies.
They have to spend a few months wrangling over the plan with the state regulators, and then they can start planning the network in earnest. One thing or another will cause the first availability to occur in 2017.
The little bit of controversy that could be a big deal
What got the rancor going in the conference call was this line in the press release: “The cost of PG&E’s plan, if approved, would be shared by all electric customers as a contribution to helping the state meet its clean air and climate goals.”
As a regulated utility company, PG&E has to be careful about the financial impact on ratepayers, and as an investor owned company they have a fiduciary duty to shareholders. That quote, and PG&E’s answers during the conference call, did not answer that concern except to say that PG&E’s 10K filing with the SEC tomorrow will have a lot more information.
As it stands approximately 1% of PG&E’s ratepayers will benefit from this expenditure of ratepayer money. Specifically, among PG&E’s 5+ million customers there are about 60,000 electric cars registered within PG&E’s service territory. (By the way – that’s 1/5th of the total plug-in vehicle registrations in the whole country) Five million divided by 60,000 is a bit over 1%, meaning a small portion of Northern California ratepayers will benefit from this charging network, the expense for which will be spread among 100% of the ratepayers.
The question is whether this is fare to the ratepayers, or whether they will even know about the financial arrangement because it won’t appear as a line item on the electrical bill.
PG&E won’t earn direct revenue from these charging stations. Instead the 3rd party management company/companies they contract with will buy electricity from PG&E, then turn around and charge drivers whatever fee they deem appropriate. So, while PG&E won’t see direct revenue, they will see revenue from selling kiloWatt-hours at a commercial rate to the charging station network operators.
Will PG&E earn enough revenue to pay for the charging station hardware, installation and maintenance? The hardware cost won’t be passed through to the charging station network operator, but instead will be paid by PG&E ratepayers.
It’s expected the cost, as amortized out over PG&E’s customer base, will be 1/10th of a cent per kiloWatt-hour ($0.001 / kWh). The total cost and other information is supposed to be in tomorrow’s SEC 10K filing.
Will PG&E customers like having to pay for charging stations?
When PG&E was asked how ratepayers would feel about this, the majority of whom do not own electric vehicles, there was a very long pause. PG&E hasn’t surveyed their customers about this program. Instead they have looked at studies around range anxiety issues and tuned the program to provide charging infrastructure to reduce barriers to EV adoption.
They expressed a hope that, over the long term, owning charging station assets will help them better manage the electricity system and put a long-term downward pressure on electricity rates. The theory is a little convoluted, but by putting more kiloWatt-hours through PG&E’s system it spreads the fixed costs out over more kWh’s, lowering the fixed cost per kWh.
Site hosts will not have out-of-pocket costs. Instead, PG&E will pay for building and maintaining the hardware, and the charging network operator will pay for the electricity while charging their fee to EV drivers. This should reduce the barrier to getting site hosts on board.
Charging station deployment plans
The deployment plan cited by PG&E is not what I would like to have heard. Instead of studying the infrastructure to determine where there are gaps, and building it to cover the gaps, they plan to work more closely with those cities that will help PG&E educate the public about the benefits of electric vehicles. PG&E plans to provide educational literature to site hosts, and hold Ride&Drive events to raise public awareness.
The fast charging stations will be deployed to support inter-city travel. As I said earlier, the California segment of the West Coast Electric Highway is dead as a door-nail. Maybe this, and the BMW/VW/CP plan announced a couple weeks ago, will awaken that dormant idea? One can only hope.
Why? California state climate change goals?
Why should PG&E even do this when the 3rd party market is already spreading pretty quickly? What PG&E answered was not a business/income/revenue purpose, but instead to say that while the EV Charging Infrastructure is growing it’s not doing so quickly enough to meet California’s electric car adoption target.
In order for the State Government to meet that target, PG&E is acting to “expedite” the market. By building infrastructure, prospective electric car buyers should ramp up the adoption rate.
However, reading between the lines I believe that PG&E has dollar signs in its eyes because they envision a future where it is they who are the transportation fuel providers and not the oil companies.
The size of the oil companies suggests just how big is the market for supplying transportation fuel. PG&E and the other electric utilities could stand to make huge megabucks by ensuring they are the fuel provider of the future.
But that’s not what PG&E said during the call. Instead they kept discussing California’s climate change goal. To which I wonder, just why is it PG&E’s business to achieve the State Government’s goals?
In another announcement a couple weeks ago
, Kansas City Power and Light announced a deal with ChargePoint to deploy a thousand charging stations around the Kansas City region. Clearly, ChargePoint is willing to work with electrical utility companies to deploy charging stations that are owned by the utility but managed by ChargePoint.
When PG&E said they plan to contract with a 3rd party to handle customer billing and customer interaction, ChargePoint would be (in my opinion) at the top of a very short list of potential partner companies.
However, ChargePoint has some grave concerns about PG&E’s plans. I wasn’t able to schedule a time to talk with them on the phone, but they did supply this statement.
PG&E’s program is needlessly expensive. They are going to spend hundreds of millions in ratepayer funds. We have seen private investment fuel national growth in EV charging infrastructure. ChargePoint alone has already sold nearly 25,000 charging ports, over 6,000 in PG&E’s territory alone for far less money than PG&E is looking to spend.
This creates a monopoly. Allowing one utility to choose the hardware and features will reduce competition and innovation. Because the utility will dictate the hardware, pricing and features, there will be little incentive to drive costs down or provide better services to consumers. This program will slow down the market. We know how important flexibility is in this industry – we’ve seen other companies fail at giving away free infrastructure because they’ve forced the hardware and set pricing.This hurts drivers: Ratepayers are stuck with the bill even if they don’t drive an EV. And PG&E didn’t even ask their ratepayers if they support this plan.ChargePoint believes that utilities should play an expanded role in the EV industry and the infrastructure that supports it. The right approach with utilities focused on installation and consumer education, similar to Southern California Edison’s filing, will:
Cut the cost of enabling a site with EV charging by reducing installation costs;
Communicate the benefits of driving electric to rate payers to accelerate EV adoption;
Lower energy costs for all ratepayers by managing EV load in a way that limits the additional capital resources that need to be deployed; and
Provide for site owner choice of the ultimate charging solution, sustained innovation and spur competition and private investment.
PG&E isn’t the only California electric utility to propose direct ownership of charging station assets. A couple months ago, the California Public Utilities Commission made rule changes allowing utilities to directly own charging stations. Since then, San Diego Gas & Electric and Southern California Edison both have proposed plans, and now so has PG&E, to directly own charging station networks.
CP’s statement refers to the SCE plan as the preferred alternative.
To echo one of the points ChargePoint makes, the PG&E plan explicitly says “level 2 charging (25 miles of range per hour of charging)”. That’s an excruciatingly slow charging rate, made palatable only because it’s faster than the 3.3 kiloWatt charging rate that gave 12 miles of range per hour of charging.
I expect that by 2017 or so the electric car makers might be selling EV’s with higher power on-board AC charging units. If so, these cars are going to be hobbled by public infrastructure running at a measly 6 kiloWatt charging rate. In other words, in my opinion, the charging network operators need to bite the bullet and install higher powered charging stations, in preparation for future EV’s that can utilize higher powered charging. Instead, PG&E is planning to engrave the 6 kiloWatt charging rate in stone.
We already have 4 such vehicles on the market – BMW i3, Tesla Model S, Mercedes-Benz B-Class, and Toyota RAV4 EV (gen2) all support a higher charging rate on level 2 AC charging. There could well be more of them by 2017.
The 800 pound Gorilla effect
In 2012 at least one of the charging network operators, ECOTality, then the owner of the Blink Network, filed suit to block the deal between NRG and the CPUC. A large part of ECOTality’s complaint was the 800 pound gorilla effect.
Namely, NRG as a huge company, has a lot more resources in its back pocket than ECOTality, ChargePoint, and the other startups in this space. When a big company yawns, sometimes the little companies fail to survive the change.
PG&E is also a huge company. Will they cause problems for the fledgling electric vehicle charging network market?
For their part, PG&E’s representatives repeatedly said during the conference call they’re working hard to support the whole of the market rather than take over the market. However the truth is that they’re plunking down a large chunk of money (CP said “hundreds of millions of dollars”) to take a 25% market share.
That they’re structuring the plan to work with 3rd party companies helps, but a 25% market share is significant.
Despite all the concerns cited above, this (and other announcements from other electric utilities) are a validation that the electric car market is becoming real. The big players are starting to horn in on the territory, in other words.
It’s the electric utilities that stand to gain the most from electric car adoption. Becoming a transportation fuel provider opens a whole new market niche for them.
Where do you think it will go? Do you think PG&E’s proposal is fair?
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