According to a report issued by EVgo and Rocky Mountain Institute, today’s electric utility rate structures generally present major, if not insurmountable, challenges to the commercial viability of Direct Current (DC) fast charging of electric vehicles. To solve the problem, utility tariffs must be amended to recognize the rapidly evolving grid and provide a framework that accommodates this unique and critical infrastructure (as generally illustrated by the following video).
The biggest financial challenge for DC fast chargers is the demand charge. Demand charges are determined by the maximum rate at which energy is used, typically during peak hours of a billing period. Generally speaking, once the peak demand is established, the customer must pay for that capacity for the entire year, 24/7/365. While usually not transparent to (nor avoidable by) residential customers, demand charges are a significant and sometimes manageable cost for commercial and industrial customers. In fact, customers who have the ability to curtail their load during peak events do curtail so that they can enjoy the benefit of a reduced demand charge over the course of the year.
DC fast chargers draw a large quantity of electricity (thereby triggering high demand charges), but generally do so only intermittently and for relatively short periods. Because usage on the vast majority of DC fast chargers is relatively light, these units usually do not consume enough electricity over the course of a year to average out the demand charges to a cost-effective level. And companies such as EVgo cannot feasibly avoid or mitigate demand charges by curtailing or spreading load because the units spike by design and customers must be able to charge at any time.
RMI’s study found that, under certain electricity tariffs, demand charges can make up as much as 90 percent of the monthly bill of operational public DC fast chargers, driving the cost of delivered electricity as high as $1.96 per kilowatt-hour (kWh) during summer months in some locations. These charges are nearly seven times as high as the current gasoline equivalent cost of $0.29/kWh, meaning it is difficult for DC Fast charging providers like EVgo to remain competitive with the costs of operating petroleum-fueled vehicles.
“As EV adoption increases, it’s important that drivers have access to affordable charging options outside their homes,” said Terry O’Day, Vice President, Product Strategy and Market Development, at EVgo. “Public fast charging is critical to EV deployment, and the more chargers installed will affect the amount of EVs deployed, which, in turn, will drive utilization and revenue.”
The report recommended the following approaches to promote a competitive business environment for public DC fast charging stations and to facilitate future infrastructure investment:
- Low fixed charges, which primarily reflect routine costs for items such as maintenance and billing.
- The opportunity to earn credit for providing grid services, perhaps along the lines of a solar net-metering design.
- Rates that vary by location—for example, offering low rates for DC fast chargers installed in overbuilt and underutilized areas of the grid. This strategy can increase the efficiency of existing infrastructure and help build new EV charging infrastructure at a low cost.
- Limited or no demand charges. If demand charges are necessary, it’s essential that they do not capture upstream costs of distribution circuits, transmission or generation.
- Time-varying volumetric rates, such as those proposed for San Diego Gas & Electric’s Public Charging Grid Integration Rate (GIR). These volumetric charges would recover all, or nearly all, of the cost of providing energy and system capacity.
“As more and more Californians embrace the many benefits of EVs—reduced carbon and air emissions, lower per-mile usage costs compared with gasoline-powered vehicles and increasing operating ranges— now is the time for California to ensure that the support infrastructure for EVs keeps pace,” said Jeruld Weiland, a Managing Director at RMI. “We hope this research helps inform California’s electricity-sector stakeholders on constructive approaches to best position the state to meet its ambitious carbon-reduction goals.”