Sector focus: Electrification

EVs charge towards new opportunities, despite inherent risks.

If public transport has been one of the big losers from covid-19, electric vehicles potentially stand to be one of the big winners.

The onset of the pandemic, and the drastic disruption to normal life that came with the lockdown orders issued around the world, inevitably caused some bumps in the road for companies rolling out EV charging infrastructure. But, more than a year later, the sector is increasingly bullish about its prospects.

In the UK, Zouk Capital is on the brink of reaching its target for the country’s first EV charging infrastructure fund. The firm announced in January that it had raised £380 million ($526 million; €445 million) at its third close, just £20 million short of its target. The UK government is matching investments up to £200 million. “Investors are attracted by the opportunity to be part of a mega-trend as the world moves away from fossil-fuelled vehicles,” George Ridd, partner at Zouk, tells Infrastructure Investor.

Nevertheless, Ridd acknowledges the sector faces a long road to profitability. “Nobody should be thinking you put a charger into the ground and it’s profitable from day one,” he says. “You need the mass of electric vehicles, a user base behind you and a charging network with sufficient scale to make it work.”

Indeed, the scale of the investment required is unquestionably vast. Marco van Daele, co-CEO and chief investment officer at SUSI Partners, told us last year that he estimated up to €100 billion was needed to fund the build-out of EV charging infrastructure up to 2030.

Not all fund managers are enthusiastic about jumping on the EV bandwagon. “Charging infrastructure has too much embedded traffic and obsolescence risk for an infrastructure deal we would like,” says Raphaël Lance, head of energy transition infrastructure funds at Mirova. The French renewables fund manager has preferred to invest in companies that install charging infrastructure, rather than operating the infrastructure itself.

Opportunities for EVs

But even as covid brought unprecedented turmoil and raised existential questions for public transport operators, it was also creating opportunities for the EV industry to make the case for investment. “Millions of conventional internal combustion engine vehicles were taken off the road,” says Anthony Hadley, head of clean energy for the Americas at AMP Capital. “People got a glimpse of what a clean energy future might actually look like.”

As a result, “the e-mobility space today looks not at all dissimilar to solar generation 10 or 15 years ago”.

Joe Biden’s inauguration in January brought further momentum to the sector. The US president is aiming for all American-built buses, including its iconic fleet of 500,000 school buses, to be zero-emission by 2030.

Stories of the year

Investors put EVs in the fast lane

August 2020 SDCL Energy Efficiency Trust acquires 112 ultra-fast EV charging stations in the UK for up to £50m

January 2021 Zouk Capital completes its third close and announces £380m in commitments

February Mirova launches a €1bn renewable energy vehicle and pledges to ramp up investments in non-generating energy assets. Paris-based Andera Partners launches a €200m smart infra fund and targets EV charging