Just as battery-powered vehicles hit a tipping point where their cost plunges below that of conventional cars, a fresh hurdle risks holding back the EV revolution: charging networks.
The Biden administration’s $7.5 billion plan to build a chain of electric filling stations across the US has yet to connect a single socket, Politico reported last week. China, home to nearly two-thirds of the world’s public charging points, is still struggling to connect them in rural areas, making long cross-country drives in EVs an anxiety-inducing proposition.
Across the world, networks can barely keep pace with the uptake of vehicles themselves. At the COP28 climate summit in Dubai, the UK government saw fit to boast about its latest investment in boosting highway rapid chargers — but the spending in question was a paltry £70 million ($88 million).
That’s a profound problem. Poor availability of charging is one of the main reasons potential EV buyers cite in holding them back from a purchase. Those consumer doubts, in turn, have encouraged a widening group of automakers to slow down their targets for going electric. This could
become a vicious circle, as a smaller-than-expected fleet of battery cars shrinks the future revenue pool for charging companies, which in turn pull back investment and exacerbate car-buyers’ worries about finding a plug socket.
It’s a classic example of the 80-20 principle. At a guesstimate, 80 percent of the costs of EV charging are incurred in places that make 20 percent of the revenue. To fix drivers’ range anxiety, the most pressing need is for a robust network out on the highways. The expense of building in such places is far higher, though, given the additional cost of transmission lines, transformers and back-up batteries in remote areas that aren’t used to such intensive grid demand.
Some of these problems are baked into fuel retail. If gas station owners
want to avoid horrendous queues at peak times, they need to install so many pumps that the forecourt is deserted most of the day, leading to poor returns on investment. It’s rare for big downstream oil companies to do much better than cover their costs of capital. The majority of money is often made from the big markups for snacks at the on-site convenience store. Those problems are likely to be identical whether the fuel is electricity or gasoline.
There are some unique problems for EVs, however. Drivers of conventional cars can only buy their fuel at a gas station, originally built by monopolistic integrated giants such as Shell Plc and Standard Oil Co. that could make their money upstream at their oil wells and refineries. EV drivers, on the other hand, can refill at home with electricity far cheaper than a charger could afford to sell.
These challenges are not so very different to some of the coordination problems transport networks have faced for hundreds of years. The solution has always been for the government to recognise the importance of such infrastructure for national unity and security, and use its budget and influence to force a solution.
The US Transcontinental Railroad was first mapped out by the Secretary of War as a defense project. Funding came from government loans, bond sales and land grants in the midst of the American Civil War. The state-built Trans-Siberian railway, similarly, was essential in the emergence of Russia as a power in Asia as well as Europe.
Or consider the US Interstate Highway System. As a young officer in 1919, the future President Dwight Eisenhower had taken part in a military convoy that took two months to drive across the US. Decades later, as commander of Allied military forces in Europe, he had noticed how the Nazis’ newly built autobahns made it far easier to move his troops through Germany. The ultimate price tag for the Interstate that he signed off on came to more than half a trillion dollars in current money, orders of magnitude more than Washington is now spending on EV chargers. The economic benefits of the network, however, mean that it pays for itself every year.
Electrification of road transport is a national security issue, too — something China, with its vast dependence on imported fuel and strongly pro-EV government incentives, intuitively understands.
It’s considered jejune to remark on it too loudly, but oil prices give Moscow and Riyadh a tool to meddle in the politics of car-driving democracies. Former President Donald Trump spent months before the 2018 US midterms nagging the Organization of the Petroleum Exporting Countries over Twitter to increase production, and was rewarded with a Saudi supply and export boost that helped ease crude prices by about 16 percent in the month before the poll. Saudi Arabia’s Crown Prince Mohammed bin Salman threatened “major economic consequences” for the US amid a dispute over production levels last year, the Washington Post reported in June.
The world’s three-biggest democracies — the US, India and Indonesia — go to the polls next year, and fuel prices are likely to be an issue in each election. If governments want to diminish the influence of foreign tyrants over voters’ household budgets, that’s good reason for the politicians gathered in Dubai to power up more robust charging networks.
David Fickling is a Bloomberg Opinion columnist. Views do not represent the stand of this publication.
Credit: Bloomberg
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
