The price isn't right

Charging your EV away from home will get easier, but as things stand now, it won't be cheap

Charging an electric vehicle while away from home will become a lot more convenient over the next several years. But unless the government takes steps to lower the price of electricity at public charging stations, a lot of people, especially those in the bottom half of the income distribution, will remain reluctant to ditch their gasoline-powered vehicles.

That would be a huge setback for the Biden administration’s climate agenda, which wants EVs to constitute 50% of all new vehicle sales by 2030, not to mention environmental activists, who are pushing for total decarbonization of the transportation sector by mid-century, which will require sales of all new cars and trucks be 100% emission-free by 2035. It would also confound the plans of most auto manufacturers, which are betting heavily on a system-wide switch to battery-powered vehicles.

In pursuit of those goals, the infrastructure bill signed into law last fall earmarked $5 billion for building 500,000 fast charging stations along interstate highways and other high-traffic corridors over the next five years. There are about 30,000 today. Unless road-traveling Americans can take to the highway with confidence they’ll find places to “fill ‘er up,” most car consumers will remain reluctant to buy an EV.

The Biden administration also created a $2.5 billion grant program with the goal of locating 40% of those stations in low-income urban neighborhoods and rural communities, which have a disproportionate number of people who either rent or can’t afford to install home-based charging units. It is part of the White House’s Justice40 initiative, which promises to deliver at least 40% of the benefits from clean energy investments to disadvantaged communities.

But once they build it, will low-and-moderate income drivers come? Not if the electricity price isn’t right.

EVs are closing the car cost gap

On the positive side, the sticker prices of EVs with 200-plus miles range – sufficient for daily commutes and in-town driving – are becoming much less of a roadblock for less well-off consumers. Low-end, all-electric vehicles like the Chevrolet Bolt or the Hyundai Kona are now priced about $10,000 above a comparably-sized gasoline-powered vehicle, three-quarters of which is offset by a $7,500 federal tax credit.

Fuel cost savings over the life of the vehicle more than make up the difference – by a lot. But only if you can charge at home, where the average kilowatt-hour cost nationwide is about 14 cents.

Ah, there’s the rub. A third of the population, disproportionately in the bottom half of the income distribution, won’t be able to charge their vehicles at home.

They include most renters; homeowners who don’t have garages or can’t afford the $1,000 to install the 240-volt line and charging portal needed for home charging; and many high-rise buildings, whose owners (whether landlords, co-op boards or condo associations) are unwilling to make the far larger investments needed to install an adequate number of chargers. Those living situations will force people to rely on public charging stations if they buy EVs, just as they rely on gas stations today.

Unfortunately, the limited national charging station networks already in place (owned by Tesla, EVgo, Chargepoint, Electrify America and a few others) are currently charging two to three times the price of home-based electricity. I recently experienced this during my first road trip in my new EV, a 600-mile roundtrip between Chicago and Cincinnati.

Given the car’s 240-mile range, I had to stop three times: once at an Electrify America station that charged by the kilowatt hour and twice at an EVgo station that charged by the minute. I paid 37 cents per kWh at the former and 49 cents per kWh at the latter. At home I pay on average 17 cents per kWh and can get much cheaper rates if I charge late at night, which is when most people with home chargers will refuel their EVs.

How does that compare to gasoline? At the 37-49 cents per kWh charged at the public stations, the fuel cost for driving EVs, which currently get 112 to 140 miles per gallon energy equivalence depending on the model, is roughly comparable to what most drivers pay today at $4 a gallon. Drop that to 14 cents, the nationwide per kWh average, and the comparable gasoline cost is $1.33 a gallon.

The high prices being charged by the private firms – far above the electricity acquisition price from local utilities – eliminates any financial incentive for switching to an EV if the consumer can’t charge at home.

States will make the call

State transportation plans for spending the $7.5 billion are due this summer. The U.S. Department of Transportation’s request for comments on its guidance made no mention of pricing. Given that states must pony up 20% of the tab (the grants are modeled on the highway trust fund), the guidance “anticipates that in most instances States will elect to contract with private entities for the installation, operation and maintenance of EV charging infrastructure.”

When I asked a spokesperson to comment on the pricing issue, I received this reply:  “The FHWA is currently coordinating with the Joint Office of Energy and Transportation and the Department of Energy to develop minimum standards and requirements, as required by the Bipartisan Infrastructure Law within 180 days of enactment, and will address payment and pricing.”

They hopefully will give states leeway to oversee pricing decisions, similar to the way they regulate public utilities. However, in their anxiousness to expand local charging networks, states on the forefront of EV promotion – including California, Colorado, Florida, Illinois, Maryland, Massachusetts, Minnesota, New York, Oregon, Pennsylvania, Utah, Virginia and Washington – have eschewed rate setting for their charging stations.

EVgo, a publicly-traded company that has aggressively pursued state grant programs to build its network, said in its most recent 10-K filing with the Securities and Exchange Commission that “the determination not to regulate the company as a utility generally provides the company with greater flexibility to set rates and frees the company from being subject to more burdensome regulatory requirements.”

Sadly, most leading environmental groups, their eyes focused on CO2 emissions, ignored the price question in their comments to the USDOT during the guidance-writing process, even though excessive prices could undermine their goals.

Even many consumer groups shied away from the question. The only one I found that offered a potential solution was Plug In America, a non-profit with 70,000 members that advocates for EV vehicle owners.

The group called for capping what the government pays for setting up the stations to the total cost of construction plus a fixed percent for profit, similar to how the Defense Department contracts for military hardware. It also called for capping corporate mark-ups on the ongoing cost of electricity, maintenance and data and networking contracts. “The USDOT should use a consumer-focused lens when implementing the EV charging program,” wrote Peter Chipman, senior policy director for Plug In America.

Electricity is a much cleaner and more efficient way to power vehicles compared to fossil fuels. It is already lower cost. Those economic realities need to be reflected in the price people pay at the electron pump, wherever it is located.