Utility Company Demand Charges Could Hobble EV Charging Infrastructure


Utility companies routinely charge commercial and industrial companies extra money for using big chunks of electricity during periods of high demand. Such charges help pay the cost of bringing extra generating capacity online and encourage companies to shift their electrical usage to periods of lower demand to save money. But a new report by the Rocky Mountain Institute finds that many utility companies are adding demand charges to individual EV chargers, a practice that is hobbling companies trying to make a profit by providing EV charging infrastructure.

EVgo EV charging infrastructure

RMI examined the charging and billing data from 230 public fast charging stations operated by EVgo, the largest public electric car charging company in the U.S. The report, which was funded by EVgo, found that utility demand charges are “a significant barrier to the development of viable business models for public DCFC [direct current fast charger] network operators.” Chris Nelder of RMI says that “fast public chargers basically don’t have a real business case.” In one example included in the report, a charging station in the EVgo network had a monthly bill of $1,938 — $1,362 of which was demand charges.

In order to compete with the cost of gasoline, EV charging companies need to be able to sell electricity to EV customers for around 9 cents per mile or less says RMI but demand chargers can drive the cost of electricity up so much that making a profit becomes impossible.

An EV charger could deliver relatively little electricity in a given month, but could still get hit with an exorbitant demand charge if just one customer plugged in for 30 minutes during that month.

To address the issue, regulators at the California Public Utilities Commission have asked California utilities like Southern California Edison and San Diego Gas & Electric to propose new rate designs that significantly reduce the burden of the demand charges on public fast-chargers. SCE and SDG&E submitted their EV charger rate proposals in January. Pacific Gas & Electric has not yet submitted a proposal.

RMI is encouraging other utilities to take a fresh look at their rate structures and adopt new policies that eliminate or reduce demand charges in order to improve the business case for public fast charging. If public charging infrastructure cannot be made profitable for companies like EVgo, the transition to electric cars will suffer a setback. “It’s like telling everyone to drive, but none of the gas stations can turn a profit,” says RMI’s  Nelder.

Source: Green Tech Media

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  • MikeM

    And the answer is . . . ta da . . Storage!

    • bioburner

      Storage is a good idea. just depends on how much it costs to buy the storage media (batteries) and how much you can save by eliminating or reducing the demand fees.

  • Jim Smith

    So these charging companies want subsidies for their power use? No. They should pay what other companies pay.

    • Steve Hanley

      I think they don’t want to be penalized by utility companies, Jim, not subsidies.

      • Jim Smith

        Aren’t they being charged the same rates as every other commercial user?

        • bioburner

          No. The demand fees for DCFC make the cost of electricity at this type of “Commercial Use” much higher. Same rate plan just higher cost electricity. Other commercial users don’t use power like a DCFC station.

          • Jim Smith

            Every other commercial user pays demand fees so why should they get a free ride?

          • Other commercial users complain about the demand fees too. Demand charges have tripled over 10 years in PG&E territory so now 25-40% of a commercial building’s monthly bill can be driven by single day of usage. It’s a very unpopular program.

          • Jim Smith

            is PG&E a monopoly backed by force of government?

          • Yes, it is.

        • Steve Hanley

          As I understand it, the answer to your question is no, they are not. The demand chargers are intended for industrial applications that use enormous amounts of electricity, like the auto recycling business near me that has a monthly utility bill of $1 million or more.

          Demand charges for individual EV chargers seem to be more about greed. The utility is not firing up a peaker plant to meet the needs of one EV charger.

          If someone who is knowledgeable about the utility industry would like to educate me further on this, I would be happy to listen.