Hub model catches the eyes of EV investors

inspiratia gathered together three leading market participants in the EV charging infrastructure space last week for a roundtable discussion on some of the current trends in the market, in the first of a two-part series. Join us in November as we continue the conversation at EVS Whistler 2019

The EV charging sector is rapidly developing across the globe, as new players enter the market and companies get creative with business plans to try and forge successful ventures in this nascent market.

To help inspiratia take the pulse of current developments in the area, we sat down last week with Pinsent Masons partner Peter Feehan, Zouk Capital partner Colin Campbell, and Dominique Houde, partner at Drake Star Partners in Amsterdam.

High on the agenda during the discussion were some of the emerging openings out there in the market at present, which was especially timely given Zouk’s nomination for the management of the UK’s Charging Infrastructure Investment Fund (CIIF) earlier this year.

“The opportunities are varied, from street charging to hubs in all their varieties, to the interaction with fleets in all their versions as well,” said Zouk’s Campbell.

“We’re seeing a lot of requests and having serious discussion with a number of credible counterparties on these dedicated solutions. Hubs with retail, hubs with battery solutions, hubs dedicated to electric mass transport and E-mobility operators or with co-located fleets,” continued Campbell, who added that the first deals from CIIF will come soon after closing.

Hubs

As highlighted, the hub model – with charge point installations anchored by one or more dedicated users or suppliers – is one that is attracting a sizeable amount of attention as developers and investors strive to optimise their commercial propositions. But hubs can come in several shapes and sizes, as Drake Star’s Houde went onto describe, reflecting on the increasing volume of EV owners who have no access to off-street charging.

“You see people congregating and charging once a week, paying a convenience fee for it, which is potentially attractive for infrastructure owners to operate such hubs.

“And then you have the multi-modal hub that maybe requires a bit more development in the market to be fully formed and exist in a mainstream way,” said Houde, referring to hubs that could include facilities for electric buses, taxis, fleets and park-and-ride options.

Supermarkets could also be a natural home for the development of charging hubs, possessing vast amounts of adaptable land, while being both prime consumer destinations as well as operating huge logistics and delivery fleets.

In the UK alone, ChargePoint Services recently coupled with supermarket chain Morrisons to supply hundreds of rapid chargers at stores across the country, following a larger partnership between Pod Point and Tesco to install an array of different speed chargers at the latter group’s outlets. 

“We’ve seen a lot of interest in supermarkets,” said Pinsent Masons’ Feehan. “Particularly in home delivery and last mile, where EVs can be rolled out at fleet level. A lot of business-to-home operators are beginning to pick up on the EV track and a greater requirement of their fleet to have a lower carbon footprint.”

Fleets

As Feehan highlighted, supermarkets could lead the openings for investors in facilitating the switch over of large fleet operators to electric mobility, although as a sector it was sometimes lagging in ambitions initially.

“Supermarkets were probably slightly slow to react and a bit reactionary and ponderous, and not really coming to the party with the models that really made sense doing volume from day one,” said Campbell.

However, the picture is now beginning to change. Campbell continued, “Because a lot of their drivers and ESG requirements they are seriously investing in their fleets. That has got them suddenly having to take an interest in EVs and how they charge and what infrastructure to use to charge those EVs; do they need rapids, do they need slow, is it overnight?”

Furthermore, if a business is beginning to ask the sorts of questions Campbell highlights, then it would also naturally begin to eye up additional benefits of capitalising on any investment in charging facilities by making them available to the public or other EV users.

But one of the strongest influences behind fleets switching to EVs is the cold, hard economics of it, as Feehan was keen to stress.

“The big fleet operators have identified that the average cost of a 7.5 tonne vehicle is about £130-140 thousand a year to operate, of which an enormous percentage of that is the diesel cost,” he said.

“One of the things we’re beginning to see is the drivers for this has genuinely been the ability to take out that diesel cost.”

Know your segment

The recent past has witnessed a succession of new entrants to the EV charging market as they eye a share of an ever-growing market. Many of these groups have come from related sectors, such as energy or car manufacturing.

“There’s a lot of very innovative and creative thinking out there and for energy players who potentially could be a significant part of a future market, they don’t quite have the agility to move very quickly and so being able to work in collaboration in an alliance – or indeed actually acquiring these businesses – is a trend which will continue for some time,” said Feehan.

However, EV charging infrastructure is an increasingly segmented sector, with different groups pursuing business models featuring varying charging speeds, specific types of location, as well as hubs featuring co-location of batteries or fleet operators.

In this kind of landscape, it is therefore crucial that investors undertake thorough due diligence before getting involved, as nascent sectors such as this can be blown off course by high-profile failures and a swell of negative press.

Houde was keen to stress this point. He said, “I would emphasise that it is really important in this new class of asset to really do your analysis right. We need to keep developing the tools in terms of the variable that will affect traffic risk and revenues, such as location and network planning.

“You have to really look carefully at the analytics more than in more traditional and established infrastructure sectors. It’s important to factor in what segment and charging environment you are in, whether it’s hubs, or fast or slow chargers,” concluded Houde.

Check back next week for part two of the conversation, covering government intervention in the EV charging sector, international comparisons, and more. In the meantime, sign up to join us at EVS Whistler in November to delve even further into this exciting sector