Some general answers this week — In part 2 we’ll look at the situation in Newfoundland and Labrador
Explainer: Why should non-EV owners help pay for an EV charging network? (Part 1)
How do all Canadian taxpayers and utility customers gain from a fast EV charging network? And why can’t EV owners cover all the costs?
A discussion we helped initiate about whether the rollout of EV charging stations in Newfoundland and Labrador might not be moving fast enough brought into the open a long-running behind-the-scenes debate about who should pay to install and maintain the EV charging network there. More pointedly — why should someone with no immediate intention to buy an electric car be expected to contribute to it?
Of course there’s no “one size fits all” answer for any community — it depends on local economics, geography, existing and future EV takeup and other factors. We will first outline some principles which apply to much of Canada. The next article will address issues specific to Newfoundland and Labrador in more detail and will offer some suggestions for when government support can reasonably be withdrawn. Note: when we talk about the charging “network” here we mean primarily the fast chargers — usually on highways or in major shopping areas—which are necessary for vehicles to be able to travel conveniently for more than a few hundred km in a single day. Other chargers are important but those that form a regional network are absolutely necessary.
Why should all Canadians be supporting EV adoption?
- To do our part to fight climate change
We won’t belabour this point — you can find plenty of deeper dives on it elsewhere — but Canada has set targets for CO2 emissions cuts, and transportation is one of the biggest emissions sources in our economy. - To reduce and help stabilize the cost of living for car-using Canadians long term
While there will always be exceptions and a number of people for whom owning an EV is not practical, a recent Clean Energy Canada study suggests that they are already significantly cheaper for most drivers overall, thanks to lower running costs and maintenance. That price difference is set to drop further in the coming years, both because of the reduced cost of batteries and because of economies of scale as EVs become mass market, even if inflation and supply chain issues are complicating things at the moment.
The federal government is gradually making gas more expensive to reduce our use for climate reasons but even if it were not, electricity prices usually fluctuate less than oil does, and the cost of “filling up” is a much lower part of the total cost of an EV anyway, which means long term, owners can better predict their overall costs. Cost savings don’t just help private car owners — they can help reduce costs for vehicles in the public sector, too, which saves taxpayers money. - To increase our energy security and help foster new businesses and employment
Canada does make and export oil, of course, but much of it is also a producer of electricity, which can be harder to export (this is a particular issue for Newfoundland and Labrador, as we’ll explain in my next piece). As noted above, events beyond our control can cause big and sudden oil price hikes because it’s part of a world market. Moreover, car manufacturing is a large part of the Canadian economy — the more the public and businesses understand how EVs work through owning them or knowing those who do, the better prepared they will be to build and maintain them — The Globe and Mail noted in February there is already a shortage of skilled workers to take up jobs making and supporting EVs. It doesn’t hurt that we are also potentially a supplier of many of the critical minerals that go into EVs. While there may be disagreement about the pace of change or the reasons for it, it is clear that a shift towards EVs is inevitable, and the market for them will grow dramatically in the next three decades. - To reduce the cost of electricity for everyone
This seems counter-intuitive to some — won’t we need to build more (and more expensive) power plants to feed all these new EVs, raising costs for everyone? Well, we will certainly need to be building more power plants anyway, since cars are not the only things that need to be electrically powered in order to reduce emissions. And we are a long, long way away from reaching the number of EVs that will make a big difference one way or another to utility companies — Bloomberg estimated by the end of 2022, global electric vehicle charging would use 60 terawatt-hours. Seems like a lot perhaps, but that’s a fifth of 1% of electricity use! - What really raises utilities’ costs is increases in peak electricity demand (which has to be met consistently even if most of the time people need much less power). Fortunately, EVs mostly charge in off-peak hours, when it costs utilities a lot less to supply than they can charge customers for it. Better still, once EVs are fully integrated into utilities’ power systems (with users’ permission and suitable incentives) they will be able to pause charging when demand rises and even use their batteries to feed power back if power demand spikes suddenly or if power generation falls unexpectedly (eg the wind drops sharply). This would help reduce costs and make using cheap renewable energy more practical. McKinsey’s short report on EVs and energy demand which uses Germany as an example is pretty clear if you want a little more depth. More on the benefits to utilities will come in Part 2.
EVs may be a good thing for others, but I don’t want/can’t use one — why should I pay to support EV charging?
- No charging network = no EVs
It’s true (and inevitable) that initially the benefits of support for EVs will largely go to EV owners like myself, and that because of the higher up-front costs of the cars, we are often wealthier than average, so in the short term this is regressive spending. We have great sympathy for those who argue we should reduce or eliminate subsidies for individuals’ car purchases and their private chargers. But the initial subsidies arguably were necessary at the start to get the industry large enough for economies of scale to emerge. The case for initial public support for a public EV charging network is even clearer if (for the reasons above) you want people to be able to choose to buy them and you can see that Canada will be better off the more we can shift from gas powered cars to EVs. We should also be putting a lot more energy into helping people reduce or eliminate their car use (but that’s a different story). But without a charging network the decision for a business or individual to “go electric” becomes much more difficult.
EV owners are well-off — can’t they just pay enough that the network is profitable without state aid?
Eventually, and in more densely populated areas of Canada, certainly. There are plenty of reasons why installing and maintaining a fast charger could be profitable for private businesses… but the business models are different to those of gas stations today, we will need more charging stations per KM of highway than we need gas stations today, and there are areas where it’s likely that they will never be enough usage to make them profitable on their own. There’s a separate argument to be made that for utilities it is in their long-term interest to support EV charging infrastructure as well — we’ll cover that in the next piece we do, as utilities’ role is at the heart of the debate in NL.
The government requires cellphone providers to offer a minimum level of service in unprofitable locations in the areas they serve, but no such deal is on offer in Canada for charging station providers, and if there were it’s hard to tell when there would be enough profit from charging stations in popular locations to subsidize them in unpopular ones.
Fortunately, the cost to establish a charging station is lower than that of a gas station and in principle, once set up, they can operate without staff on site full time (payment can be taken and the state of repair can be monitored remotely). But there are still reasons why the market alone won’t guarantee an adequate inter-community fast charging network.
It seems most gas stations don’t make money on the gas they sell — they make it on the rest of the “convenience” items available. Even then, rural gas stations have been on the decline for years. On the upside, an individual EV owner getting a charge will usually stay longer than someone getting a fill-up. But of course there are many fewer EVs on the road — even if the federal government hits its EV adoption targets, 95% of “light duty” cars will still be gas-powered in 2026 and 65% by the time they are banned altogether in 2035. And many of those may go weeks between visits to a highway charger, charging at home or at work where it is much cheaper. And there are provinces (like Newfoundland and Labrador) where at least at present there are many fewer EVs than the Canadian average, making the short term profitability argument in those places even harder to make.
What a minimum network looks like is a matter for debate but according to this detailed report for the federal government on Canadian charging needs the emerging standard is stations every 65km along our major highways — and as of 2021, each stop should have two fast chargers (costing around $150,000 each). The new US standard agreed by the federal government calls for four fast charging ports every 80km. This is needed regardless of the number of EVs on the road just to ensure that a driver can be reasonably confident they can make a long distance journey to most of the populated areas of Canada (and still would exclude a lot of important places, like Trinity or Twillingate here in Newfoundland and Labrador).
For the national highway system (including so-called feeder routes and “northern and remote routes”) this report estimates that would mean at least 585 sites and 1,170 fast charging ports. Put another way, it’s an initial investment of roughly $4,600 per km of highway.
The core routes in Quebec, Ontario and BC are likely already meeting or exceeding this target with a mix of public and private money, and as EV volumes rise, private investment may pick up any slack.
But here in the Atlantic Canadian provinces at least, even the core routes often don’t yet meet this minimum standard. Sometimes this is because of larger gaps between chargers, but more often also because these areas generally have only one DC fast charger port and one, much slower, AC one. If the DC fast charger at one of those stations is broken (or operating at half speed), drivers have to continue 70km or more — possibly out of their way — to find a substitute. As the report noted, “This may mean that lower traffic volume corridors will be oversized in terms of charging capacity”… but is necessary to, “maximize redundancy and reliability”.
Moreover, finding a way to serve more remote areas can be difficult, as you can’t truck in electricity as easily as you can oil — though with the creative use of batteries and solar and/or wind power this can be solved — at a price.
Newfoundland and Labrador is in many ways an extreme case in Canada for the necessity for public funding of EV infrastructure. It has unusually high barriers to private investment and benefits to be gained from public and utility investment, but leaving those aside, a back-of the-envelope calculation suggests that EV owners here can’t reasonably be expected to bear the entire cost of to complete and expand adequate charging network.
Excluding northern and remote routes, we have 1300km of the national highway system, which would imply about 20 stops with two fast chargers apiece. We presently have 18 along those routes but with one fast charger apiece (plus three chargers in Labrador covering our 1,163 km of Northern and Remote highway). Adding needed redundancy on the existing national highway alone looks like a $3m+ capital project. Spread out among the province’s existing EV owners, that would be $5,000 apiece on top of the $15 per hour we already pay when we charge — or a $2,500 per vehicle provincial EV surcharge instead of the existing $2,500 rebate. On the other hand, if you see the network as a small part of the province’s role in providing transportation options to all of its citizens, that’s less than 3% of this year’s highway construction budget (and the federal government would likely provide half the cost).
Utilities stand to benefit from increased electricity demand because of EVs - shouldn’t they pay part of the cost to build the infrastructure they need for that market to grow?
Well, at present many of them see this logic and are doing just that. But here in Newfoundland and Labrador and in Nova Scotia (to my knowledge), some continue to argue that the link between this (presently unprofitable) network building and future lower costs for utilities is too tenuous to justify funding by electricity customers alone, and that utility company provision of charging services crowds out private sector investment. More on that argument and how it relates to Newfoundland and Labrador in a future piece!
