In a recent article at FleetNews, they discuss UK retailer Tesco’s plans to start charging for Level 2 EV charging at its stores. The policy went into effect on November 1st. Let’s take a look at what happened with Tesco and then look at what other businesses could learn from this.
In 2019, the supermarket chain Tesco announced that it would be installing free electric vehicle (EV) chargers at 100 of its stores. Just a few months later in March 2020, Tesco expanded this to 500 stores. These EV charging stations were a joint effort by Tesco and Volkswagen with Pod Point; their goal was to install 2,400 charge points across all ofTesco’s locations. So far, these freecharge points have enabled drivers go 86 million miles without having to spend any money on gas!
Currently Tesco has a mix of Level 3 DC fast chargers and Level 2 AC chargers. Before the policy change, only 50kW DC chargers cost drivers anything, with a fee of 28p/kWh. Now, EV drivers will have to pay 28p/kWh for the slowest 7kW connections. This will rise to 40p for the 22kW AC and 50p for the 50kW rapid chargers.
“The new tariffs are some of the most competitive in the market and will enable us to continue investing in our network.” PodPoint said in a statement. “It’s hoped that by making these changes customers will only top up when they need to, ensuring that they make way for others once their cars are charged.”
The revenues expected will help fund and expand the network, with PodPoint planning to meet its goal of installing charging at 600 Tesco stores within the next two years.
Why Raise Prices Like This?
That last statement and sentence explain most of this, but I want to expand on that a bit. While electricity is cheap (at least for L2 charging), charging infrastructure isn’t free. It costs something to maintain existing charging equipment, and it costs something to build more stations. Initially, it seemed like a good idea to make the slower charging free and recover the costs of high-powered charging a bit, but Tesco and their partners seem to think that they’d rather the network pay for itself more now.
But, figuring out what to charge isn’t easy.
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On the other hand, seeing businesses move away from free charging and toward trying to build a self-sustaining charging network at their stores could signal that the early adopter phase is ending. With enough EVs, there could be enough demand for charging services that they’re worth paying for. Plus, it could be a better situation for EV drivers going forward because charging networks will see better maintenance.
The Challenge Of Pricing Level 2 EV Charging Stations
When it comes to Level 2 charging (240-volt charging), many places offer a charge for free to attract customers. After all, the few kilowatt-hours of electricity a car would use charging slow for an hour or two just doesn’t cost much. Spending a buck or two to attract customers makes a lot of sense.
But, eventually something breaks. They call out the charging station installer, and get some bad news. It’s going to cost hundreds of dollars to fix the busted charging station, or worse. Unless every EV owner came in and made a big production out of thanking the business for the charge and mentioning how it brought them there to spend money, the business owner might not have any idea whether it’s even helpful to the business. So, it either gets left broken or gets removed entirely in many cases.
Even with paid charging, the situation isn’t always better. As people have become less dependent on Level 2 charging, there just hasn’t been much in the way of stations being used in many places. So, when the repair bill comes in, the business owner can pretty easily see that they’re not turning a profit on the EV charging. Once again, the station owner often decides to not repair the station.
What about businesses that charge way too much for charging? Oddly enough, it’s even worse for them. Because they priced Level 2 charging too high, hardly anybody used it. So, once again, the broken station doesn’t get repaired.
I know this can’t be universally true, but I suspect that most Level 2 charging stations haven’t been directly profitable at any price point. Early on, there weren’t enough EV drivers. Later on, with more drivers, there was also more infrastructure, leading to a lot less Level 2 usage. But, this isn’t counting any secondary spending by EV owners attracted to a business, but that’s hard to quantify.
Different Businesses Will Have To Strike Different Balances on This
The hard truth is that there’s no “one size fits all” answer here. I’d love to be able to tell businesses that there’s a specific price for different charging rates that covers the cost while still attracting customers, but it’s just not that simple. The complex reality is that businesses are going to have to look at their own goals and their customer bases to arrive at a price (which may be free in some cases).
One thing I’d recommend businesses look at first is whether they think free charging is a good fit. I’ve advocated for this in the past, but I understand that host businesses are probably skeptical. There’d either need to be a real way to track customer spending and determine whether it’s profitable to attract EV drivers, ask EV drivers to complete surveys, or otherwise collect data that justifies free charging. Or, a company may decide that their corporate environmental goals, green image to the public, or other non-monetary considerations could be worth giving people some free juice.
If a business decides that free power isn’t for them, they need to make sure they don’t charge so much for Level 2 charging that it discourages it. Charging 2-3 times the local utility rate (which EV drivers will probably know) both covers costs, leaves something for maintenance/expansion and stays cheaper than DC fast charging. Charging more than that just isn’t going to result in profitability or even a break-even.
Finally, the business itself needs to think about whether they’re a good fit for L2 charging at all, and decide whether it would attract anybody. Places where customers come and go fast isn’t a good fit at any price, even free, because there’s no time for L2 to be useful. Places where customers spend at least 2-3 hours makes for a good fit. Places where customers stay overnight (usually hotels) can charge a little more for the convenience of drivers taking road trips, but definitely not more than DC fast charging costs.
Featured image provided by Tesco and PodPoint.
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