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EV Infrastructure – not a chicken and egg

8 September 2014

Electric car charging infrastructure is often said to be a chicken and egg problem.  People don’t buy enough electric cars because there isn’t sufficient charging infrastructure, and there isn’t sufficient charging infrastructure because people don’t buy enough electric cars.

As a result, the infrastructure does not get built, and there isn’t a significant increase in the uptake of electric vehicles.  It’s a stalemate.

Not just private companies

We think that this stalemate is the result of a false assumption: that private companies should be the sole actor in establishing EV infrastructure around the country.

There’s no doubt that the return on investment time horizon for setting up EV infrastructure is a long one, if it exists at all.  That’s why companies like Tesla and Ecotricity, who have been very active in rolling out infrastructure, don’t see it as a revenue measure, but rather as a “revenue generating cost centre” (our term).  These are cost centres that are there to help drive revenue, even if they don’t generate any revenue themselves.  By setting up Superchargers, as Tesla have, they are helping to sell their cars.

Similarly with Ecotricity, by setting up free charging infrastructure, they are promoting their company effectively, and making sure they remain a key part of the UK’s electrical future.

But this is not a story that VCs or Angel Investors want to hear.  These investors typically chase a 3-5 year investment return, and they probably won’t get that from EV infrastructure companies.  As EV News said today:

EV news twitter.png

Who thinks about the social good?

The social conversion from driving internal combustion engine cars, which run purely on fossil fuels, to electric vehicles, which have the POTENTIAL to run on 100% renewable energy, is what we would consider to be a “social good”.

If we take companies out of the equation for a moment, we think most people would agree that given the choice, a move towards predominantly renewable energy as our electricity source is a good thing.  Regardless of whether you believe in man made global warming, the fact that renewable energy emits less pollution, is cleaner, better for the local landscape, and has the potential to last the human race a lot longer, should be obvious.

So if we agree with that, then it naturally follows that government, being the primary means in which we enact projects to serve the “social good”, should view electric car charging infrastructure not in the context of market competition, but rather as an investment in the future of our society.

Governments are not companies.  They can invest in projects that they consider worthwhile for society, even if they don’t bring a net financial benefit.

However, even if the current day government decided they DID need to see some financial benefit, we would argue that the rapid uptake of electric vehicles would result in lower health costs, more jobs in the renewable sector (such jobs being secure in the long term due to the renewable nature of the source), more innovation and the natural next step of high tech manufacturing in the automotive industry.

So what’s the next step?

We think Government should quash the chicken and egg argument around charging infrastructure.  We think there should be

  • a nationwide program to subsidise the installation of public electric car chargers (compatible with all car types)
  • A mandated 30% target for government vehicles to be electric by 2020
  • An incentive for the purchase of electric vehicles (eg almost every other 1st world country)
  • A tax incentive via the R&D credit system for innovation around electric cars

One only needs to look at China, who are contemplating a $16 billion dollar fund to increase electric car charging infrastructure.  They have also mandated that 30% of government vehicles must be electric by 2016.

The Chinese Government has said that such initiatives are a “win-win” for industrial development and environmental protection (see Bloomberg).

They are only the latest in a string of governments, including the US, UK and EU who have committed themselves to improving access to electric vehicles.  It’s about time the Australian government did the same, for the sake of our social good.