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

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.