and what this means for utilities, brick and mortar retail, the hospitality sector, and digital marketing

By: Peter Winters, Senior Research Consultant

The price for EV charging is complicated

Buying gas is typically one of the most price-informed decisions that consumers make.

Consumers are easily able to compare gas prices between gas stations whilst driving. When they are running low on fuel, they will take account of these price signals to make their choice of which station to use. They can judge how much they want to pay by the amount they fill their tanks, and for which they need to make immediate payment. Consumers may be price-inelastic to gas as a category, yet they are highly price-elastic relative to the ‘going rate’ for gas. Any savings, such as choosing a slightly cheaper station, or taking advantage of a 3% promotion, is money directly in their pockets.

It is not so simple for EV drivers. There is just not the same level of transparency in the price of electricity charging and what you get for your money. And how much an individual EV driver pays for electricity depends on their own personal circumstances, the deals that are offered by the EV car manufacturer, how they use their car, and the charging choices they make. Given these specific characteristics of EV charging, in this article I am going to includes my experience of driving an electric car in Canada and compare it with how this might be different to the US and the UK.

I have been driving a Tesla Model 3 SR+ since July 2019. Until very recently, I knew very little about prices for EV charging. I had been shielded from thinking about the price of electricity since initially I had use of time-limited free supercharging that came with the purchase of the car, and then another period of free supercharging that came with a referral. As regards home charging, whilst I could tell I was not spending much money on charging the Tesla, I had not made a calculation about how much that would be. It is a possibility to imagine a future where electric usage and pricing are available for EVs using Smart Technology, but that is not happening yet, at least not yet where I live in Quebec, Canada.

To write this article, I needed to do some research!

EV charging at home sets an anchor price

Charging an EV is usually done at home. The price that an EV owner pays for home charging can act as a key anchor price for what is reasonable for the price of mobile charging.

A formula to calculate the price of ‘filling-up’ an EV from empty is to multiply the size of the battery (such as 50 kWh for the Tesla Model 3 SR+), by the efficiency of conversion (85% seems to be an accepted and validated figure) by the average price for home electricity that would be used for charging the car (I pay an average CAN$0.085 per kWh in Quebec). Using this calculation, at home, it would cost me CAN$5 to charge-up my Tesla Model 3 from empty. In the US, a Tesla Model 3 SR+ owner would face higher home electricity costs and might expect to pay from $6 to $12 to charge-up their car. In the UK, where home electricity costs are higher still, the figure would be closer to £10.

This full battery charge in the Tesla Model 3 SR+, should provide a range of around 350 km. On a 120v home charge, this trickle charge rate is around 8 km/hour, which means that a full charge of 350 km would take nearly 2 days.

So, how do EV fuel costs compare with a gas car?

My last car with a reasonably fuel-efficient car; a Toyota Camry hybrid. Based on data I collected on fuel costs using this Camry, on average I estimate that 350 km would cost me CAN$32 in gas. This is more than 6 times as much as I am paying with the Tesla Model 3 SR+ using home charging (CAN$5 using electricity at CAN$0.085 per kWh). For the fuel price of the Tesla to be the same as the Camry, this analysis indicates that, in Canada, the “gas cost-equivalent price of electricity” would be CAN$0.55 per kWh.

During the very cold Quebec winters, fuel economy is less in winter for both gas cars and EVs. This includes the fuel used to warm the cars up before driving. The Toyota Camry hybrid fuel economy dropped by around 25% in winter (from 40 mpg to 30 mpg). I do not have good data for the Tesla Model 3, but I would estimate that it would be a similar 25% drop in fuel efficiency.

“Free mobile charging” is the “Free shipping” of EV cars

Home-fueling is a key benefit of owning an EV car. Indeed, one of the ways that EV cars are fundamentally different from gas cars is that the use of outside fueling stations is optional. No more late-night trips to the gas station for emergency fill-ups when you prefer to be doing something else!

Consequently, EV owners need a reason to fuel-up using away-from-home mobile charging. Price plays into this decision-making, with charging options split into the premium price, standard price, and free.

Premium price – ‘Fast-Charge’ mobile charging

The value proposition of the Tesla Supercharging network is that a Tesla driver can charge up their car at high speed, close to desirable amenities and that the price is “less than gasoline”. So, in each market, Tesla needs to keep their electricity price below the “gas cost-equivalent price of electricity”, whilst high enough to capture the value delivered. Tesla Superchargers only work with Tesla cars.

In Quebec, the main alternative to Tesla Superchargers are the fast-charge Electric Circuit stations run by Hydro Quebec. Petro-Canada also has a small number of fast-charge stations in Quebec as part of their Electric Highway network which spans across Canada.

All these fast-charge networks in Quebec charge have a standard rate of charging at around CAN$0.20 / minute. What is curious is that this is a price metric of charge-time, rather than the amount of electricity used (in kWh). This can have a substantial impact on the cost-of-charge as the speed at which a Tesla car charges can vary enormously. I have found the Supercharge rate of my Model 3 can be as low as 120 km/hour, to typically around 400 or 500 km/hour, or even more. I have logged the charging speed as high as 879 km/hour. From personal experience of these high-speed chargers, the Tesla Model 3 seems slower to charge when the battery is cold at the start of a journey, and when the battery gets closer to the default 90% charge setting limit.

Taking this variability into account, in Quebec, the fast-charge networks may cost from CAN$0.35 to CAN$0.50 per kWh (see Appendix for calculations based on tests). As a rule of thumb, this is from about two-thirds to nearly equivalent of the cost of fueling a gas car, such as a Camry hybrid.

As a guideline, for a road trip in a Tesla Model 3 SR+ using fast-chargers, drivers should think about stopping every 200 to 250 km and allow up to an hour for each charging stop.

Standard price – ‘Level 2’ mobile charging

The most common mobile charger in Quebec is the 240-volt ‘level 2’ charger, which is offered by Electric Circuit and Flo. These chargers consistently deliver a charge of 6 kW / hour, which would add a range of 40 km/hour to a Tesla Model 3. The great majority of these chargers are billed at CAN$1 per hour, which means that the cost of electricity is CAN$0.165 per kWh. Although this is a little more expensive than home electricity, it is still quite inexpensive and considerably cheaper than fast-charge stations. Level 2 charging is also kinder to the car battery than the use of fast charging.

Free mobile charging – for Fast-Charge and Level 2

EV drivers can think about how they could organize their lives to take account of free charging, which is a tax-free saving of their disposable income. Free charging can be a nudge for EV drivers to leave their homes.

Tesla offers free Supercharging deals, typically for a period of 6 months, for sales referrals. It means that those who are effective in promoting Tesla, such as our Tesla Sales Rep, never have to pay for Supercharging. Tesla also has free Tesla Destination chargers, which charge at a slower rate than Superchargers. The electricity is paid for by the sponsor of the charger, such as at a hotel or restaurant.

I also have experience with a free Electric Circuit Level 2 charger, which was sponsored by a local city council.

Petro-Canada is currently running a promotion for free fast-charging on their Electric Highway, with the use of an RBC Visa card.

EV drivers can also consider whether their company offers free EV charging, as a tax-free benefit, for their employees.

Opportunities for utilities, brick and mortar retail, the hospitality sector, and digital marketing

Utilities

Utilities are facing a world of change.

In their May 2021 “Net Zero by 2050” report, the International Energy Authority (IEA), anticipates that electricity becomes the core of the energy system. The IEA estimate that annual investment in electricity grids needs to increase to $820 billion in 2030 compared to a current figure of $260 billion. The IEA also projects that the number of public charging points for EVs needs to reach 40 million in 2030, from around 1 million today.

For utilities, this growing demand for electricity is being met in new ways; with an increasing contribution made by renewable energy sources and distributed power generation. In this dynamic environment, utilities need to plan how to balance the supply and demand of electricity; and EVs have a crucial role to play.

Price is a key lever for utilities to use to guide how consumers charge their EVs at home, with different tariff levels for electricity. In Quebec, we have signed up for the Hydro Quebec ‘Flex Plan D’ tariff where we would pay the extremely high price of CAN$0.58 per kWh during Peak Demand periods. This would be for mornings and early evenings during unusually cold weather during the winter. To save money, we would never charge Tesla during these Peak Demand times.

With the growing numbers of EVs, a new opportunity for utilities is to consider how consumers use electricity outside of the home. Utilities can encourage EV drivers to charge at specific times of day, and at specific places.

In the UK, the utility company Good Energy has launched a Time of Use tariff for mobile EV charging. In April 2021, they announced that this will include free-charging periods of 4-hours during the day, based on when there is an abundance of solar and wind power. With 24 hours notice, EV drivers will be alerted of free mobile charging, available between 11 am and 3 pm during summer months, and 11 pm and 3 am from October to March.

Brick-and-Mortar retail

I confess that I have developed a habit for clothes shopping at one of the Supercharging locations that I use, which is next to the Montreal Fairview shopping centre. In many ways, I do find the clothes shopping experience so much better in-store than online. I can feel the quality of the clothes and see how they look on me, and I can make unexpected discoveries. Earlier this year I bought a new winter coat, which I did not realize I needed until I tried it on.

EV charging is an opportunity for Brick-and-Mortar retail to encourage EV drivers to visit their stores. How EV charging is priced can guide the flow of customers. If the retail business offers free charging, this could be available during certain times of day, or for the length of charging time.

Retail outlets could collaborate with utilities in the location and electricity price of the EV stations. Indeed, as with the Good Energy free electricity tariff, perhaps the retail outlets and utility could collaborate on the timings on the offer, given that utilities need to be able to balance the grid.

The chargers need only be Level 2, 240-volt chargers rather than fast-charge. This would mean that customers would consider staying longer, there would be less electricity expense for the retailers and does not reduce battery-life as much as fast charging. Indeed, for this reason, even EV drivers who have access to free fast charging may wish to use Level 2 charging, if they have the time, to protect their car battery.

The pull towards siting stations could also have a push away from traditional service stations. Given the much longer refueling times for EVs compared to gas cars and the much lower throughput of customers per fueling point, are traditional fueling stations going to be able to maintain a sustainable business model with EVs? Should we anticipate the end of traditional service stations?

Hospitality sector

To make use of the best mobile charging stations, it really helps if EV drivers are organized in their trip planning. In Quebec, essential resources are the maps showing charging stations offered by Tesla, Electric Circuit, and Petro-Canada .

These maps show hotels and restaurants which offer free charging. It can make sense to stagger a trip, especially around meals and overnight stops. With more long-range EV cars becoming available, it becomes more possible to go on trips when the major charging events are done overnight, for free, using destination chargers at your hotel.

EV charging deployment and digital marketing

The world is on the cusp of a massive expansion of EV charging stations.

These stations are anticipated to be quick to install in a plug-and-play manner, employ leading-edge balancing (EBOS) technologies (such as in development by Shoals Technologies), and scale well to demand.

Slide 30

Expect a very different role out for EV charging stations to how gas stations are currently arranged. EV stations will be sited in a distributed way according to customer experiences and guided by digital mapping technologies. This approach is aligned with the vision of car manufacturers to develop EV cars as mobile digital devices.

Being able to nudge people to travel to specific places at specific times, with the prospect of free EV charging, is a potentially powerful selling tool that utilities could offer Brick-and-Mortar retail and the hospitality sector. Utilities should plan how to capture a slice of the marketing and advertising budgets of these target customers.

To make the most of this opportunity, utilities should consider themselves as tech companies, and build their digital capabilities for the real world, like the way that Google and Facebook have managed to do for the online world.