Stephen C. Lynch, CFA, CPA, Director and John T.Mickelinc, CFA, Associate
Downstream Energy & Convenience Retail Investment Banking Group

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Introduction
As we introduced in Part II of this series, the lack of charging infrastructure is a top concern for consumers. In fact, a recent Deloitte survey [1] of over 3,000 participants ranked this as their second highest concern just behind EV driving range. As we also established in Part II, concerns surrounding EV driving ranges and the overall charging infrastructure are highly linked and, together, constitute the top concerns for 53% of the respondents to this survey.

With a more established charging network, range anxiety subsides greatly; conversely, a less well-developed charging infrastructure requires EVs to have greater range capabilities, ceteris paribus. A perfect illustration of this is the current network of retail fuel outlets across the United States. Unless one is acting recklessly, running out of fuel is not of grave concern for the overwhelming majority of the motoring public, and thus, most drivers of ICE vehicles would not rank the total range of their vehicle as one of their top priorities.

The interplay between EVs and the supporting network of chargers is a classic ‘chicken-and-egg’ dilemma. Certain consumers may be leery of purchasing an EV until they feel they can reliably charge their vehicle. At the same time, those making investments in public EV chargers, unless they have different motivations, are often highly interested in how utilized and profitable an EV charger will be given the material upfront investment cost. If the EV fleet itself begins to greatly exceed the EV charging network, then EV drivers may ultimately become frustrated and begin to re-evaluate their vehicle choice. This is occurring in California where approximately one out of every five EV drivers switch back to a traditional ICE vehicle, primarily citing the hassle and inconvenience of charging their EV [1].

In this paper, the EV charging network within the United States will be evaluated as far as where it stands today and what needs may exist now or into the future.

Types of EV Chargers
EV chargers are often classified by the electrical service they utilize, which has a large bearing on the speed in which they can charge the battery of an EV. A number of factors can impact the exact amount of time it takes to recharge an EV battery, but the time required to fully recharge an EV battery from empty can range from several hours to multiple days depending on the charging equipment begin used [2].

As noted above in Figure 1, Level 1 chargers work off of a standard 120 volt alternating current (“AC”) connection, which is the ubiquitous wall power outlet that is present in most, if not all, homes and businesses in the United States. These chargers, while cheap and oftentimes coming with an EV free-of-charge, only add approximately 2-5 miles of range for each hour of charging. Level 2 chargers work off of another standard electrical service, 220 volt or 240 volt AC, which is also very common throughout the United States, although it does require dedicated circuitry and wiring. Most individuals are likely familiar with 220/240v electrical service as these outlets are typically required for refrigerators, clothes washers and dryers, and other large appliances. Level 2 chargers can charge EVs at a rate of 10-20 miles of range per hour of charging, but, while relatively easy to install, are more expensive than Level 1 chargers.

The final type of charger is a so-called ‘fast charger’ that works off of direct current (“DC”) rather than AC. Due to the technology involved, these DC fast chargers (“DCFC”) are considerably more expensive than Level 1 and Level 2 chargers, but can add 60-80 miles of range with only 20 minutes of charging.

Current Public EV Charging Network in the United States
As of November 2021, the United States had approximately 90,000 public Level 2 charging ports (approximately 41,000 charging stations) and 21,000 public DCFC ports (approximately 5,600 charging stations) [4]. It will likely not come as a surprise given the uneven distribution of EV market share across the United States (as discussed in Part I of this series) that the overall EV charging network also varies greatly on a state-by-state basis.

As can be seen in Figure 2, public Level 2 and DCFC chargers are highly concentrated around certain population centers, particularly in states with higher EV market share. However, by studying Figure 2 for only a few moments, one may notice the results of both public policy and private industry initiatives.

For example, Oklahoma, which has traditionally lagged in terms of EV market share, ranks significantly higher (25th) when looking at total public EV charging ports. Even more interesting, DCFC chargers blanket Oklahoma more evenly than most other states in the continental United States. Oklahoma’s broad spread of DCFC chargers can be seen in Figure 3 (dark blue dots) and contrasts most other states where DCFC chargers are primarily clustered around high-population areas. This is largely a result of the ChargeOK state grant program [5], which reimburses up to 80% of the installation costs of a public EV charger. Additionally, this program featured two rounds of funding – the first focused on single point chargers located on transportation corridors while the second round had the goal of filling in Oklahoma’s charging network. Evidence of ChargeOK’s second round of funding can certainly be seen in Figure 3.

Along the same vein of providing drivers with thoughtful charging infrastructure options, strings of DCFCs can be seen east-to-west along I-94, I-90, and I-80 that cross North Dakota, South Dakota, and Nebraska, respectively. While these chargers were primarily installed by private enterprise – Tesla as part of their Supercharger network – they paint a clear picture that EV chargers need to be placed strategically in order to facilitate the ease of movement of EVs across longer distances.

Conversely, in addition to seeing where EV chargers are generally located, Figures 2 and 3 also help convey where EV chargers are not located. This is often for valid reasons (e.g., low population density, low EV market share, etc.), but it illustrates that there are significant weaknesses in the United States’ charging network and highlights that there is potentially a plethora of market opportunities as well.

How Reliable is the EV Charging Network in the United States?
One negative characteristic of EV charging infrastructure is the need to have near continuous connectivity to the electrical grid. EV charging station uptime is difficult to quantify, if it is even recorded at all, and EV chargers both literally and figuratively rely on ‘the lights being on’ in order to work. Unlike traditional ICE vehicles, EVs must rely on a power source that cannot be stored at scale in a meaningful enough way to refuel/recharge EVs en masse.

EVs have not yet become a large enough component of the United States’ vehicle fleet for this to be a significant concern for the public, but questions still remain as to what would occur during times where the constant stream of electricity is compromised. Obvious examples of this include natural disasters, particularly those necessitating evacuations, as well as more benign situations such as brownouts or when there is not enough sun, wind, or water to power electricity generation facilities that are reliant on renewable energy sources.

While long-term interruptions or reductions in renewable energy sources may seem unfathomable to some, this is exactly what occurred in Europe in the fall of 2021. In recent years, Europe has become heavily-reliant on renewable energy, and a significant wind drought, particularly in the North Sea region, reduced the output of wind-generated power by as much as 20%. This subsequently caused blackouts, near-blackouts, and skyrocketing electricity prices across much of Europe6. While we will not be debating the overall energy policies of the United States in this paper, it is apparent that reliability of the electrical grid is not just a local issue as certain events can have widespread and even continent-wide impact.

According to the U.S. Department of Energy [7], there has been an average of 228 major disturbances in the electrical grid over the last ten years. There has also been an increase in major disturbances over the last several years due in large part to severe weather and natural disasters. In 2021 alone, there were 387 major grid disturbances that caused more than 23 hours of downtime and impacted almost 68,000 customers on average per event. During this same time period, there were 55 events that averaged more than 48 hours of downtime, 32 events that averaged more than 72 hours of downtime, and 25 events that averaged more than 96 hours of downtime. When looking at both the number and magnitude of disruptions to the electrical grid, one can easily see the possible implications on the mobility of EVs, which are heavily reliant on a constant stream of electrons for their recharging needs.

In response to the reliability of the electrical grid and also in an attempt to reduce charging times, there have been attempts to solve this problem by swapping an EV’s battery with a fresh, fully charged battery. However, most of the attempts have not achieved commercial success. As a result, the overall EV ecosystem does not have an easy way to address the reliability of the electrical grid – at least, not in the same way the current ICE refueling infrastructure provides. Though somewhat simple, motor fuel outlets can operate fairly autonomously off the grid, and, so long as these fuel outlets have liquid product in their tanks and a backup or portable generator, they can continue providing a valuable and essential service to the public, even when other businesses or services are offline.

Despite what Figure 4 may depict, the vast majority of the American public likely views electricity as always-on and available when that is not necessarily the case. If EVs continue to become a larger percentage of the vehicle fleet in the United States, we anticipate a larger emphasis to be placed on the overall reliability of the EV charging network, particularly as the public’s overall mobility begins to rely more-and-more on the constant need for up-time of the electrical grid.

How Many EV Chargers are Currently Needed?
Since there are many variables to consider when evaluating how many EV chargers are needed to support the current EV fleet, there is no simple one-size-fits all answer that applies to all parts of the United States. Clearly, population density and average drive times have a large bearing on the need for public EV chargers, but so does (i) the number of individuals who own or have access to a Level 2 charger at home, (ii) the overall range of the local EV fleet, (iii) the ratio of BEVs to PHEVs, and (iv) how much support PHEVs need from the charging infrastructure (i.e., balancing PHEVs’ battery and fuel driving modes).

The main organization within the United States that helps analyze this issue is the National Renewable Energy Laboratory (“NREL”), which is a laboratory of the U.S. Department of Energy. To aid in assisting various regional planners across the United States, the NREL has developed a model – the Electric Vehicle Infrastructure – Projection (“EVI-Pro”) – that uses detailed data on personal vehicle travel patterns, EV attributes, and charging station characteristics in bottom-up simulations to estimate the quantity and type of charging infrastructure necessary to support EVs. The NREL has made a simplified version of this tool publicly available (“EVI-Pro Lite”) [6], and we encourage our readers to review this simplified model to help in their own independent research or scenario analysis.

In addition to providing a broader summary of the public charging network, Figure 5 (Column J) on the preceding page includes the output from the EVI-Pro Lite model of the total EV charging ports that are needed to support our estimate of the total number of EVs that were on the road as of December 31, 2021 (~2.2 million EVs) [i].

The EVI-Pro Lite model estimates that approximately 69,000 Level 2 and DCFC ports are needed across the United States if 100% of all EV drivers have home Level 2 EV chargers. Although this is the default assumption of the EVI-Pro Lite model, we do not feel this is the best real-world assumption to use. In fact, the National Association of Convenience Stores (“NACS”) found within their 2020 Consumer Fuels Survey [9] that only 42% of drivers have a home that is suitable for EV charging. As such, we have also included the output of the model if it is assumed that either 75% or 50% of EV drivers have access to a Level 2 charger at home. Under these two scenarios, a total of approximately 150,000 and 227,000 public Level 2 and DCFC charging ports are needed, respectively, to support the existing EV fleet.

To put this into perspective, the EVI-Pro Lite model implies that there should be one public EV charging port for every ~15 EVs under the 75% home charging scenario and one port per every ~10 EVs under the 50% home charging scenario. As another data point for potential guidance, the Alternative Fuel Infrastructure Directive (“AFID”) [10], which is the key policy regulating the infrastructure supporting EVs in the European Union, recommends that its members aim for one public charger per 10 EVs.

Given all of the variables in play, it is difficult to perfectly assess where the United States currently stands in terms of its EV charging network. However, if we simply focus on the scenario where it is assumed that 75% of EV drivers have access to a home Level 2 charger, we can see in Figure 5 that the Unites States currently only has approximately 75% of the projected EV chargers that are needed to support the current domestic EV fleet (110,647 versus a projected need of 149,661).

Additionally, we can see that there are many states that are also behind their projected EV charging needs while there are other states that are ahead. With the exception of the District of Columbia, the top five states in terms of EV market share all lag behind what the EVI-Pro Lite model projects as the charging infrastructure that is needed to support the current EV fleet in each of these markets. On the opposite end of the spectrum, the states with the lowest EV market share are all generally ahead – and in some cases, well-ahead – in terms of their EV charging network.

Initially, this may seem to be a bit of a mis-match, but the primary reason behind this situation is likely that the states with the highest EV market shares are finding it challenging to build out their EV charging network in lockstep with the expanding EV fleet. Because of this, many EV drivers have already expressed frustration with the existing charging infrastructure. A recent study performed by University of Davis researchers1 found that approximately one out of five EV owners who live in California switched back to ICE vehicles, principally citing the hassle and inconvenience of charging their EV. While this is just one example, these frustrations occurred in the state that is currently leading the country in EV adoption and has aggressive mandates in place to continue shifting drivers towards EVs.

[i] Based on EV registrations reported by IHS Markit and the Alliance of Auto Manufacturers over the last eight years. An eight year total was used as U.S. federal law requires automakers to warranty EV batteries for eight years or 100,000 miles, whichever comes first.

Based on our analysis, there is a need to add approximately 39,000 charging ports across the United States just to provide a minimum level of support to the fleet that is currently on our roadways. This doesn’t yet factor in the infrastructure buildout that is needed to support new EVs hitting our roadways in coming periods. If the pace of EV sales is similar to what was observed during Q4 2021, approximately 745,000 new EVs will be added to the domestic EV fleet each year. As this significantly pales in comparison to the older EVs that are coming off the road, these new EVs effectively need to be fully supported with new EV charging infrastructure.

Assuming that 75% of drivers have access to EV chargers at home, this would imply that 52,000 charging ports and approximately 23,300 charging stations need to be added across the United States each year to keep up with the demand from the expanding EV fleet. However, given the downward trajectory of upfront EV prices, which was discussed in Part II, it is likely that ownership of EVs by consumers with lower household incomes is expected to increase in the coming years as well. As this occurs, the percentage of drivers who have access to home Level 2 chargers will likely also decrease, implying a greater relative need for public EV charging infrastructure. If we assume that only 50% of drivers have access to home EV chargers, the incremental EV charging ports that need to be added each year increases to 78,000 and the incremental station need increases to 34,700.

There were only 111,000 public EV charging ports in the United States as of November 2021, and as such, the future investment needed to expand the existing EV charging infrastructure is significant. As Figure 6 suggests, the total cost of this infrastructure investment just to support new EVs entering the market each year could range from approximately $333 million to more than $507 million per year. Again, this analysis is based on the Q4 2021 run rate continuing into the future and does not contemplate any growth or additional EV market penetration. These statistics also do not factor in any upgrades to our nation’s electricity generation and distribution network, which, by many accounts, are needed in order to facilitate a material increase in the EV charging network.

According to one estimate, the cost to upgrade and modernize the United States’ electrical grid to support incremental demand from the transportation sector is between $7-8 trillion [11]. While this number is staggering, the cost would likely be spread out over the next 20 years. Even then, this would imply a total annual spend of $350-400 billion. As approximately $150 billion is spent on maintaining and upgrading our nation’s electrical grid each year, it remains unclear as to how and when – or even, if – these grid investments will be made in order to support a larger EV charging network.

Planning Perspectives
As the focus begins to shift forward, what opportunities – if any – may exist associated with EV charging infrastructure? As the charge times for EVs are significantly longer than the time it takes to refuel an equivalent ICE vehicle, does installing an EV charger attract potential customers or otherwise add value to an already planned trip?

Even though we established that the future need for the overall EV charging network is significant, we are not suggesting that the United States is currently in a Field of Dreams scenario either – that is: “if you build it, they will come.” Reports of lackluster EV charger utilization rates are currently far too common, and the underlying EV backdrop varies too greatly across the United States. What works in California may not work in North Dakota and vice versa.

Unfortunately, we also cannot help our readers understand what needs to come first, EVs or EV chargers, as that is a difficult code to crack and is also somewhat circular in nature. Instead, we hope to equip our readers with tools that can help them better understand and assess the potential opportunity in their local market(s).

One of the largest and most recent advancements in regard to the United States’ EV charging network is the enactment of the Infrastructure Investment and Jobs Act (“IIJA”) [12], which was signed into law on November 15, 2021. The IIJA authorized a total of $7.5 billion to be used for building out EV charging infrastructure and developing alternative fuel corridors across the United States.

Of the $7.5 billion dedicated to EVs in the IIJA, $5 billion is allocated over 2022 – 2027 to be dispersed to states, local governments, and other public transportation entities for developing the EV charging infrastructure through the so-called National Electric Vehicle Formula Program (“EV Program”). While this program is specific to EVs, these funds will be distributed to states on a proportionate basis similarly to how other federal highway funding is allocated. The federal cost-share for a project funded under the EV Program cannot exceed 80%, and the applicable state must fund the balance of the project. However, states may work with private entities for the acquisition and installation of EV charging infrastructure under the EV Program, including having the private entity pay the state’s applicable share of the overall project. Finally, 10% of the EV Program is also set-aside for the Joint Office of Energy and Transportation, which was created under the IIJA, to provide grants to states to help fill gaps in the EV charging network.

The other $2.5 billion is allocated to the Alternative Fuel Corridor grant program (“AF Corridor Program”) to support the deployment of publicly accessible alternative fuel charging infrastructure along designated Alternative Fuel Corridors (“AFC”). These AFC’s are intended to facilitate long-distance, electric-powered travel by installing accessible charging stations along heavily traveled corridors. Despite that mandate, 50% of this $2.5 billion in funding is also reserved for community grants with a priority on building charging infrastructure in rural areas or low- and moderate-income neighborhoods and in communities with low ratios of parking spaces to households or high ratios of multi-unit houses to single family households.

It remains to be seen just how the $7.5 billion in funding under the IIJA will be spent, but we are hopeful that much of it will take the form of public-private initiatives that put project execution and decision making in the hands of private enterprise. Administration of the EV Program will largely rest with the states while the AF Corridor Program will be administered by the DOT/Joint Office of Energy and Transportation. As such, we encourage our readers to explore what options or programs their state and/or the DOT may make available under each of these programs.

Outside of exploring what federal or state funding may exist to help defray or completely pay for building out EV chargers, we suggest our readers review the data and tools available through the DOE’s Alternative Fuels Data Center (“AFDC”). We believe our readers could find the AFDC’s data and tools, particularly the Alternative Fueling Station Locator [4] and the EVI-Pro Lite [6] model, extremely helpful in identifying what market opportunities may be available to them.

Conclusion
Based on our analysis, we believe the existing EV fleet is underserved in terms of charging infrastructure and that a meaningful investment in EV charging stations needs to be made in order to adequately support the current EVs on our roadways. If the current sales pace of EVs continues, then significant and continual investment needs to be made to further bolster the United States’ charging network.

However, EVs and the associated charging network is a classic ‘chicken-and-egg’ dilemma. If these infrastructure investments are not made, does this limit further increases in EV market share? Are more EVs needed in order for investments in the EV infrastructure to be justified or made?

We are not here to speculate on exactly how that situation may unfold, but we do believe that the EV charging network is one of the biggest concerns for consumers and is likely one of the largest gating items pertaining to continued EV market penetration.

Statistics, such as EVs per public charging port or the average distance between EV chargers, are very important to understanding the current EV infrastructure needs, but so is studying more qualitative information, such as the shape and distribution of the existing EV charging network. Hopefully, after reading this paper, our readers are better equipped to understand the dynamics of the overall EV market and the EV charging network in their area.

About Matrix Capital Markets Group, Inc.
Founded in 1988, Matrix Capital Markets Group, Inc. is an independent, advisory focused, privately-held investment bank headquartered in Richmond, VA, with an additional office in Baltimore, MD. Matrix provides merger & acquisition and financial advisory services for privately-held, private-equity owned, not-for-profit and publicly traded companies. Matrix’s advisory services include company sales, recapitalizations, capital raises of debt & equity, corporate carve outs, special situations, management buyouts, corporate valuations and fairness opinions. Matrix serves clients in a wide range of industries, including automotive aftermarket, building products, business services, consumer products, convenience retail, downstream energy, healthcare and industrial products.

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SOURCES

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2. Deloitte Touche Tohmatsu Limited. 2021 Global Automotive Consumer Study. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/manufacturing/us-2021-global-automotive-consumer-study-global-focus-countries.pdf

3. Alternative Fuels Data Center (DOE). Developing Infrastructure to Charge Plug-In Electric Vehicles. https://afdc.energy.gov/fuels/electricity_infrastructure.html

4. Alternative Fuels Data Center (DOE). Electric Vehicle Charging Station Locations. https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC

5. ChargeOK – Oklahoma Electric Vehicle Charging Program. (2021, February 25). https://www.deq.ok.gov/air-quality-division/volkswagen-settlement/chargeok-oklahoma-electric-vehicle-charging-program/

6. Forbes (2021, October 13). Europe’s Energy Crisis Underscores The Dangers Of The Proposed Clean Electricity Performance Program. https://www.forbes.com/sites/robertbryce/2021/10/13/europes-energy-crisis-underscores-the-dangers-of-the-proposed-clean-electricity-performance-program/?sh=4c472d3f473a

7. Office of Cybersecurity, Energy Security, & Emergency Response (DOE). Electric Disturbance Events (OE-417) Annual Summaries. https://www.oe.netl.doe.gov/OE417_annual_summary.aspx

8. National Renewable Energy Laboratory. Electric Vehicle Infrastructure Projection Tool (EVI-Pro) Lite. https://afdc.energy.gov/evi-pro-lite

9. National Association of Convenience Stores (2020, March). The 2020 NACS Consumer Fuels Survey. https://www.nacsmagazine.com/issues/march-2020/2020-nacs-consumer-fuels-survey

10. Directive 2014/94/EU of the European Parliament and of the Council of 22 October 2014 on the Deployment of Alternative Fuels Infrastructure Text with EEA Relevance. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32014L0094

11. Hyman, Leonard & Tiles, William. The $7 Trillion Cost Of Upgrading The U.S. Power Grid. https://oilprice.com/Energy/Energy-General/The-7-Trillion-Cost-Of-Upgrading-The-US-Power-Grid.html

12. H.R.3684 – Infrastructure Investment and Jobs Act. https://www.congress.gov/bill/117th-congress/house-bill/3684

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