This guide provides an overview of the different business models available for electric vehicle charging and costs to be aware of.
Summary
There are a range of business models that can be applied to electric vehicle charging points, each suited to a different business objective.
They include:
- Loss leader model; offer free charging to attract drivers.
- Cost recovery; set a usage fee to cover the cost of your chargepoints.
- Profit making; set a usage fee that covers your costs and generates profit.
- Fully funded; a network operator funds the installation of your chargepoints, with conditions on their operation.
When considering an EV charging business model, it’s important to understand which models will be most effective for the type of visiting driver and the type of location/business where the charging stations will be installed, as well as the typical costs incurred.
Whatever approach you are looking to take, flexibility and scalability are absolutely critical for such a young and fast paced industry.
It’s key to work with a charging provider who will take the time to understand your location and make a tailored recommendation on what chargepoints and business model will be most effective.
Tip: Pod Point offer all business models mentioned in this guide and a range of chargepoints, including Solo, Twin, Media and Rapid chargers, all of which offer flexibility to our customers. Our team are always on hand to discuss the options available to you.
What business/monetisation models are available for commercial EV charging?
Loss leader model
With this model, EV charging is provided free to grow market share by attracting and retaining customers, with the costs offset by the increased revenue gained through existing business activities.
A free top up charge can be the deciding factor for a driver choosing where to offer their custom and the costs of offering, for example, 7kW charging to attract these drivers can be relatively modest.
As such, your first consideration as a business should be whether you can offer charging for free to maximise the number of drivers you attract to your location, grow brand loyalty and encourage on-site spending.
| Pros | Cons | Typically suited to |
|
✔ Attract and retain more electric vehicle charging customers than with paid for models. ✔ More suitable for media chargers |
✘ Liability for the costs of the electricity and the chargepoints. ✘ Less suitable for rapid charging points. |
Businesses who make more than c.£1 an hour of margin from customer attendance. Businesses with typical c.45+ minute customer dwell time. |
Analysis: For many businesses that rely on customers arriving by car, the revenue earned from EV driving customers using their business dwarfs the costs of electricity. It can therefore be sensible to absorb these costs rather than levy a fee that may deter drivers from visiting.
Tip: To make the most of your chargepoint provision Pod Point recommend ensuring the installation is reliably available for your customers (numerous chargepoints, clearly signed), smart (so as to be scalable and future proofed) and easy to use.
To optimise our customer’s public installations, Pod Point have established the “EV Zone” concept. For more details speak to our team.
Operational cost or total cost recovery
With this model, a fee is levied on drivers to use the chargepoints. This matches the operational costs and, if total cost recovery is sought, an additional margin is added to pay back hardware and installation costs.
EV drivers are increasingly acceptant of paying a fee to charge their car, though most will judge the value of the price against their home electricity rates. So long as prices are set within the window of what drivers find acceptable, it can be possible for chargepoint hosts to collect a revenue.
| Pros | Cons | Typically suited to |
|
✔ Attract and retain more electric vehicle charging customers than with profit making models. ✔ Enable your chargepoint to pay for its own electricity and/or capital cost ✔ More suitable for rapid chargers. |
✘ Less customer attraction than with loss leader model. | Businesses whose customers will need or want to charge and are willing to pay something for the service. |
Analysis: In general, the more competitive the price levied, the more drivers you will attract with EV charging stations. But it is also worth considering the need state of your driver. For example, a driver on a short journey will be less willing to pay to charge than one who has done more mileage and will have a long onwards journey.
If a tariff is set, it’s imperative to make the billing method easy to understand, access and use (e.g. apps and contactless payment cards for rapid chargers).
Tip: Make sure you choose a provider who gives you flexibility to control the tariffs you set, like with Pod Point’s Smart Reporting Platform.
Profit making
With this model, a higher fee is levied on drivers to use the chargepoints. This fee covers operational, hardware and installation costs and provides a profitable revenue stream on top.
| Pros | Cons | Typically suited to |
|
✔ Still attract and retain some electric vehicle charging customers. ✔ Enable your chargepoint to pay for itself and generate profit. ✔ More suitable for rapid chargers. |
✘ Less customer attraction than more competitively priced offers. | Businesseses whose customers have limited choice on where they can charge. |
Analysis: Profit making models have broadly the same constraints as the cost recovery models, albeit with preferential financials for those locations where there is no alternative for drivers to charge. However, the disincentive for drivers to opportunity charge gets more acute as the price increases.
There can also be concern over reputational damage if your business is seen to be unfairly exploiting drivers by setting too high a tariff.
Tip: Customers will be willing to pay over the cost of electricity in some circumstances, typically when they have limited option but to charge at that location and/or when they need to charge quickly.
Fully funded
In some circumstances, charging infrastructure providers will offer to provide and install chargepoints free of charge to a business. This can work very effectively, but it is important to take a long term view to ensure that what is offered is of mutual benefit to you and your customers.
| Pros | Cons | Typically suited to |
|
✔ Still attract and retain some electric vehicle charging customers. ✔ No capital or operational cost to your business. |
✘ Potential loss of control over pricing. ✘ Loss of control over charging experience. ✘ Proposed charging solution may be inappropriate for your site/business. |
Businesses that are less concerned about their brand experience or ability to control pricing or revenue from their chargepoints. |
Analysis:
Whilst the benefits of a fully funded model are clear, it is important to understand the constraints. Avoiding the risk of short term capital expenditure, may incur longer term risks.
Pricing: A third party may set expensive pricing that negatively affects customer perception of your business. It could even deter drivers from visiting your location altogether.
Chargepoint suitability: Third parties may install chargepoints that aren’t appropriate for your business. For example installing a single rapid charger at a hotel would consume a lot of the available electrical capacity, which may be better used to power multiple, lower cost 7kW chargers allowing more guests to charge simultaneously overnight.
A single rapid charger risks serving only one guest per night (unless they and other guests were prepared to wake up in the middle of the night to unplug so the next person could plug-in). With 7kW chargers, multiple guests could leave their cars plugged-in all night, waking up to full batteries.
Charging experience: It’s also worth considering that the charging point will often become the first thing a customer experiences when visiting your business. Relinquishing control of the look and feel, ease of use and pricing of this represents a cost to a business. Ensure you are comfortable with that and/or are comfortable that your branding aligns well with the chargepoint operator’s approach.
Find out how we’ve helped UK businesses provide EV charging for their customers, visitors, and employees with our Case Studies.
Tip: Flexibility is critical to all charging business models, but none more than fully funded models. Careful consideration of term lengths of contractual obligations and opportunities to make changes is imperative.
What are the costs associated with commercial EV charging?
When planning the installation of charging infrastructure, it is first important to understand the likely costs. These split between:
Chargepoint hardware costs
Hardware costs vary depending on the power that chargepoints can deliver, the features that they offer and their build quality.
Chargepoint installation costs
Installation costs vary depending on:
- The power required for the chargepoints.
- How the chargepoints are to be installed (e.g. wall mounting is cheaper than concreting in bases).
- The distance between the chargepoint and the connection point.
- How the supply cable is to be fixed en route to the chargepoint (e.g. trenching through hardstanding to bury cable is much more expensive than clipping to a wall).
Grid reinforcement costs
It will always be less expensive to install charging points without having to upgrade the supply to the site. At the least expensive it can be possible to arrange for your District Network Operator (DNO) to install a larger fuse to increase capacity at a site, but the costs of increasing capacity up-stream (e.g. uprating the local substation) are usually very significant.
Tip: When it comes to the cost of installing commercial EV chargepoints, every install is different, but as a rule of thumb it costs from >£1,000 to £4,000 for an installed 7kW chargepoint and ~£20,000 to £40,000 for a straightforward installed 50kW chargepoint. Electrical upgrades, major groundworks, signage etc will increase these costs.
Ongoing electrical costs
The electrical costs are defined by whatever price you pay per kWh (these can range from about 10p-15p) multiplied by the total number of kWh going through a unit. Average costs will likely be as follows:
| Charger power rating | kWh added per 30 minutes charging | Approx miles of range added per 30 minutes charging for a hypothetical 80kWh BEV | Electrical cost (assuming business paying 12p per kWh) |
| 7kW top-up charging | 3.5kWh | 12.5 | £0.42 |
| 50kW rapid charging | 25kWh | 87.5 | £3.00 |
| 150kW en route charging | 75kWh | 262.5 | £9.00 |
In addition to the electricity used for charging vehicles, EV chargepoints have a standby draw (powering LEDs etc). The standby draw will be much lower than power delivered for charging, but it is worth ensuring the standby draw is sensibly low (For example, the standby draw of the Pod Point Solo 3 is ~0.003kW and the Pod Point Twin ~0.006kW).
Ongoing maintenance costs
To ensure the charging infrastructure remains operable, some maintenance will likely be required. Most reputable providers will offer some combination of maintenance and/or extended warranties.
Tip: When choosing which charging infrastructure is right for your business, it is imperative to understand the fundamentals of where and when cars charge and how your chargepoints will fit into drivers’ charging ecosystem. Your chargepoint provider should provide you with information on this when advising which chargepoints best suit your use case.
