WASHINGTON—Demand charges and competition from utility companies make it unprofitable and unappealing for convenience stores to invest in electric-vehicle charging infrastructure, reports CNN.
Despite available federal funding from the bipartisan infrastructure bill, which is allocating $7.5 billion to build out EV charging infrastructure across the U.S., extremely high electricity fees, along with competition from utilities and infrequent adoption of EVs, have convenience stores hesitating to dive in to the EV-charging realm.
As detailed in NACS Magazine, convenience retailers are hit with demand charges from electric companies because they are considered commercial users of electricity when a customer uses their EV charger to juice a battery. A demand charge is not just based on how much electricity convenience retailers use but the highest consumption they have over a short period of time. CNN reports that demand charges can make up 90% of a charging station’s electric costs.
NACS believes that EV charging should be an open, competitive market. Convenience and fuel retailers should have the option to sell any legal source of transportation energy in a competitive market with a level playing field.
Also, many electrical utilities have received approval to raise consumers’ electricity bills in order to pay for not only their own installation of chargers but also the operation of those chargers.
“That’s subsidized competition, which appears to make the cost of electricity much lower than it really is. It undercuts the rest of the private market and makes it very difficult to make money on it,” said Doug Kantor, NACS general counsel, on a recent NACS podcast episode. He pointed out that electric utilities also don’t have to bill themselves for a demand charge.
“These things disadvantage local retailers [and] make it very difficult to invest, and unless those two things are dealt with, it will stunt the growth of investment over time,” he said.
Earlier this year, Trevor Walter, vice president of petroleum supply management for Sheetz Inc., testified on Capitol Hill on the “threat of regulated utilities making use of their status as monopolies to gain a competitive edge over private businesses.”
Many utilities have a monopoly on the market, reports CNN, and a lack of competition in their core business gives them an advantage over most private companies they may compete with on electric chargers. Utility companies also may not have an incentive to reduce their demand charges if they are building their own EV chargers.
Some utilities have begun doing this. Xcel, a utility operating in Minnesota, has said it plans to build hundreds of chargers in the state. Georgia Power is also investing in EV chargers, claiming its investment as supplemental to other businesses and that the chargers are primarily in places that are unlikely to see private investment. Ohio legislators are seeking to pass a bill to promote the use of electric vehicles in the state by allowing power companies to charge ratepayers for the cost of building and operating new EV charging stations.
“No private business is going to risk thousands of dollars of buying and installing and maintaining and operating EV charging stations if there’s the risk or reality of Georgia Power or Xcel or Dominion [Power] doing the exact same thing down the street for half the price,” Ryan McKinnon, a spokesman for the Charge Ahead Partnership, told CNN. NACS is a founding member of the Charge Ahead Partnership, a coalition of businesses, associations and individuals who share the same goal of creating a competitive EV charging market nationwide.
CNN reports that Kum & Go is being careful and strategic about which of its stores receive EV charging installation. The Iowa-based c-store retailer installed its first charger in 2008 and its first fast charger in 2017. The company has chargers at 35 of its 400 locations; however, even a single charger operating at the speeds required by the Biden Administration’s charging grants could lead to large fees.
Jacob Maass, commercial fuels manager at Kum & Go, told CNN that the retailer is interested in how to get people out of their cars during electric vehicle charging and into its convenience stores, as that’s where margins are higher and where c-stores make their profits.
Kum & Go is working with utility companies to ensure the company can handle the high rates. Some offer special rates for electric vehicle charging.
“They knock them down to where we’re not losing everything that we have, or everything we’re making just to have an EV charger on site,” Maass told CNN.
Fuels Market News Magazine recently interviewed Brad Petersen, Kum & Go’s director of retail fuels, about the convenience retailer’s EV charging strategy. Read the interview in the fall issue.
Ramzey Smith, a spokesman for the Department of Energy, told CNN that demand charges can be mitigated through solutions like on-site battery storage, solar generation, energy management strategies and regulatory approaches.
Chargepoint says 36 states have addressed or begun to address demand charges. New York’s utility regulator proposed last month that the state’s utilities should offer lower rates to public EV chargers that are used sparingly. These fees would gradually increase the more chargers are used.
CNN reports that convenience stores could try to work around demand charges by installing battery back-ups at their chargers. The battery back-ups would enable convenience stores to slowly draw power throughout the day, especially at times of lower demand, accumulating the energy in the batteries, and then discharging it quickly when an EV needs to charge up. That way the convenience stores aren’t pulling a huge amount of power from the grid at once.
However, John DeBoer, who leads electric mobility efforts at Siemens, said that these battery back-ups can increase the cost of a charging station by several times.
Despite hurdles, many convenience stores are still investing in EV charging infrastructure, including 7-Eleven, Sheetz and Circle K, among many others.
“We’ve been very early adopters of EV charging,” said Sheetz’s Walter in a Bloomberg article. “We installed our ﬁrst EV chargers in Pennsylvania in 2012.”
Sheetz has worked closely with Tesla to install Tesla-branded chargers at its locations, and when Tesla users charge up at a Sheetz location, they pay Tesla for the charge, not Sheetz. The company is betting that during the half hour or so it takes to charge an EV, customers will come into the store and buy a drink or order food.
Because these EV owners will have time on their hands to spend at c-stores while their vehicles recharge, some retail experts say that c-stores may be required to change their formats.
The NACS EV Charging Calculator allows retailers to assess the cost and profitability of offering EV chargers at their sites. The calculator focuses on what retailer utility costs associated with EV recharging are and what the corresponding revenue must be to recover those costs after allowing for potential ancillary in-store visits and purchase profitability.