EV infrastructure ‘unprofitable and unproven’, says S&P

Technology risks, costs and a lack of standardisation have been flagged as obstacles to making the sector profitable for investors and utilities.

Investments in electric vehicle charging infrastructure are “unprofitable and therefore unproven”, according to a report from ratings agency Standard and Poor’s.

Despite a worldwide electric vehicle sales increase last year of more than 60 percent, S&P believes investment in the associated infrastructure “will most likely be loss-making for the next few years”. This is predicated on the unregulated nature of the assets and exposed to free-market consumption, as well as an oversizing of the market by installation companies.

S&P said industry experts have estimated a current ratio in Europe of one charging station for every five EVs, which it described as “well below profitable levels”, meaning a rapid increase in the use of EVs is key, despite only four countries currently accounting for 76 percent of charging stations in Europe.

“There is not yet a track record or reliable data into consumer demand for charging stations,” the report noted. “. As a result, companies are hard put to define the best sites to install charging stations or how many to develop. Right-sizing the infrastructure for electric vehicles isn’t a given.”

The report also questioned the suitability of charging stations as an infrastructure asset, given the current business model.

“The dominant business model currently consists of manufacturing, selling, or installing the charging devices. This is far from establishing the typical long-term cash flow streams of an infrastructure asset,” it stated. “An alternative model would consist in selling energy services with easy-to-use mobile applications for finding charging points and proposing universal billing solutions – with a subscription fee.”

The UK government recently designated Zouk Capital to run its Charging Infrastructure Investment Fund, which will see at least £200 million ($264.1 million; €232.9 million) raised by Zouk and matched with £200 million from the government.

“Today there are about 30,000 EVs in the UK but in the future all cars will be electric. We are talking about a market that will grow by 1,000 times,” Colin Campbell, partner at Zouk, told Infrastructure Investor, responding to the report.”It is not surprising that today a fleet of ‘merchant’ chargers are likely to be unprofitable today.

“Of course, as an infrastructure investor, you are not building for today, you are building for a couple of years in the future when we predict our merchant fleet will be profitable. That said, our best sited early chargers are already making a small positive contribution today.

Other fund managers investing in the space include France-based Meridiam, which last year acquired  charging solution provider Allego; and UK-based Downing, which partnered with Pivot Power last year to create a network of charging stations across the UK.