The Economic Upside to Installing EV Chargers Now Versus Later
There is no denying that the transportation industry is moving toward electrification. In September, President Biden announced the approval of a $900 million investment in EV charging infrastructure across 35 states. This is the latest step the federal government has taken to push US infrastructure into the EV era. In December, Biden signed an executive order directing the federal government to purchase nearly all EV or plug-in hybrid electric models by 2027.
Despite this push from the federal government, massive infrastructure buildouts in the US are primarily driven by private enterprise. Just as the construction of a national network of gas stations in the early-mid 1900s, and more recently, the nationwide cell tower buildout in the 1990s, when demand means dollars, construction accelerates. While federal and state grants and tax incentives are catalysts for private sector involvement, the private sector is ultimately motivated by economic opportunity.
Challenges of Updating Properties with EV Charging Infrastructure
The economic upside of updating a property with EV charging stations is clear at a surface level. A private business can turn a non-revenue generating asset, such as a parking lot, into one that generates revenue while attracting a new user base and preparing their properties for a fundamental shift in transportation. Even if it is public charging, there is a clear economic benefit for businesses, especially retailers. Public EV charging stations can attract EV drivers to frequent their establishments and spend more time and money with their companies. Beyond that, due to the connected nature of EV charging infrastructure, EV chargers can be a point of advertising for a business with numerous apps available to show the location of chargers in a network.
However, building charging stations is complicated and more expensive than one would think. For instance, to build and connect an EV charging station, you need to install the necessary hardware and update the make-ready infrastructure, e.g., the transformers, breaker panels and associated conduit runs. This means coordinating with local jurisdictions, construction companies, EVSE providers, and electric utility companies just to name a few of the many parties necessary to bring a charger into operation. A single level-2 (J1772) charging station costs approximately $5,000 each pretty regularly to install, while a pair of level-3 DC Fast Chargers (DCFC) can easily cost upwards of $150,000 when you account for the investment in make-ready infrastructure to actually get them operational. Property developers need to ensure accessibility as well as traffic flow and plan to future-proof the installation, all while meeting current and expected consumer demand.
With property managers currently having only 5-7% of their tenants driving EVs, the economic upsides may seem less appealing immediately. However, this view is narrowcast and may leave a majority of property owners missing out on grant assistance and current tax credits for a critical piece of infrastructure they can use to meet the impending consumer demand.
Why Now is the Time to Invest in EV Charging
Today property owners can take advantage of the massive amount of federal and state grant assistance to implement EV charging infrastructure, as well as the numerous tax credits available to offset the cost of construction, maintenance, and management. The federal government offers a tax credit for EV charger hardware, EV charger installation costs, and a $30,000 federal tax credit for commercial installs. Put simply, the ROI is greatest when businesses aren’t required to shoulder the total cost of construction and implementation. As we have learned from past infrastructure buildouts, government grant assistance and tax credit incentives available now will most likely not be as abundant or easy to obtain later as the market matures.
Government incentives and legislation also drive consumers to purchase EVs at an increasing rate. The combination of increasing EV purchases and subsidies for charging infrastructure presents commercial and multi-family property owners with an opportunity to offer EV charging as an amenity and additional revenue stream. For example, UBS Asset Management’s Real Estate & Private Markets business recently announced a plan to update over 70 commercial and multi-family housing properties with over 1,000 EV charging stations. They are among the first of many who will set in motion an unprecedented shift in how we view transportation as a whole.
EV charging stations will be a critical piece of infrastructure, and property owners will eventually need to invest in them over the next 10 years. Investing now is more economically advantageous than waiting. A significant first step is to visit: NATSO, US Dept. Of Transportation, the IRS for tax credits, or a state-by-state rebate checker like this one by Enel X to investigate the funding incentives available for your business. Once that is done, property owners need to figure out who is going to ultimately implement this technology. Lucky for them, MD7 happens to deploy EV charging assets nationwide. Check us out.
Lew Cox MD7 Director of Business Development Bio