Economics of rapid charging for depots

The economics of rapid charging 

Paua was recently asked to review the economics of installing chargers at a depot for a fleet that was considering this approach.

The underlying question was this; what is the best economic approach to consider; use Paua’s network of public rapid charger partners or pay for the installation and operation of a rapid charger at the fleets depot?

Before we go far within this answer here is a short spoiler alert; “it depends.”

Outline investment case

However, Paua generally concluded that in most scenarios, today, the use of public charging makes more sense even for an operationally sensitive fleet. Here are some key points to consider:

• Installation of high powered (150kW+) chargers is a capital-intensive approach.
  • Paua assumes £150,000 as an average installation fee (including civil works and grid connections)
• The economics of installing high powered rapid chargers include an assumption around high utilisation rates by all operators.
  • Paua assumes an average 17kWh charge and 8 sessions per day (every day, 365 days of the year) which is higher than that being achieved by an average public rapid charger
• Operation, maintenance and all the associated insurance and software fee’s which
  • Paua assumed is around 7% of capex (per year).
• Electricity costs can vary between operators
  • Paua assumed c. 29p/kWh (achievable by a medium sized business).

Importantly Paua only assumed a ten-year period to payback this investment. Longer periods can be considered but capital replacement cycles for older chargers may need to be considered.

This investment case see’s a 3% IRR when the sales price of 85p/kWh is considered.

Initially the following conclusion can be made for the fleet operator

• A business could consider the installation of a high powered charger if
  • They need to guarantee access for operational reasons
  • They can see a case for high utilisation (greater than the 8 x 17kWh sessions a day)
  • There are genuinely not viable alternative rapid charging locations in the local area

The kinds of business that may make this investment decision could be

• Operationally sensitive fleets in remote areas
• HGV or truck fleets that have differing physical size requirements and operational constraints
• Very large fleets (c. 50 EV in one site) where there is a guarantee of high utilisation throughout the day

Improving the investment case

Whether this investment takes place at a depot or in public will impact a number of the base costs and assumptions. Improvement to this IRR can be achieved with

• Lower energy cost assumptions (challenging since the post Ukraine war period) and not-reflective of the future energy price risk that developers now consider
• Higher utilisation rates (not seen that widely yet with national utilisation still below 8 sessions on a rapid charger per day)
• Lower capital costs which could be achievable with locations with higher available power capacity and lower civil installation requirements

Throughout this analysis Paua assumed 20% VAT remains in place (Most businesses recover this anyhow).

What this means for rapid charger businesses

Arguments that we believe the rapid charging networks should make to explain their pricing

• High powered charging sites are expensive to build and operate. When you use a high powered charger you pay for a number of things that most home charging customers ignore
  • The hardware cost
  • The grid connection
  • The land and parking
  • The insurance and maintenance of a site
  • The software to operate the sit, set the tariffs, manage the charger and any associated payment fees for credit card use
  • The electricity (the one direct comparison to a home charger fee)
  • 20% VAT (recoverable for most business drivers)
• Drivers also benefit from the significantly reduced time to charge and often in convenient on route locations – this is a convenience factor
• Drivers who charge at home often forget to make a complete comparison with rapid charging. They often cite the marginal cost of electricity only and ignore capex and opex of their home charger (more on that another time)

In this particular case Paua worked with the fleet customer to conduct a free simple desktop consultancy exercise to identify where the local rapid chargers to the depot locations were to be found.

Client conclusion 

Paua used our data tools to assess the depot locations for available public rapid chargers that the client could use on the Paua EV charge card. The criteria used for the assessment was based on being less than a 5 minute drive and having (ideally) more than one available connector. In each location we looked for a second and third back-up location meeting these criteria. 

Of the depots assessed in detail Paua only identified about 10% where there was not a reliable rapid charger and these were the more rural locations. 

In this instance the client intends not to roll out rapid chargers. 

Contact us if you would like to discuss your own depot charging business case and whether Paua can help you avoid this investment case with a national EV charging network.

We’ve put together a handy ‘Fleet Manager Guide covering our ‘13 Insider Tips To Help You Transition To EVs’ that covers the basics and more to help you decide. Get it HERE for free.