Why convenience stores aren’t rushing to replace gas pumps with EV chargers

washington d.c.

Gas stations with convenience stores seem like an obvious place for EV chargers. Drivers could grab a drink or snack while waiting for their vehicle to load. But despite the federal funding available to build EV chargers, many stores aren’t biting. The reason? High electric utility charges on charging stations make them unattractive — and unprofitable — for convenience store owners.

The bipartisan infrastructure bill provides $7.5 billion to help pay for electric vehicle chargers that could help phase out gas pumps. But exorbitant fees combined with competition from utilities and uneven adoption of electric vehicles have dampened convenience stores’ interest in building this critical infrastructure.

According to Jigar Shah, energy services manager at Electrify America, which operates the largest network of public chargers in the United States, charging four vehicles at a time at a station could cost the operator $250,000 a year in additional fees, called application fees.

Electric utilities, whose operations and fees vary from state to state, charge a demand fee, which applies when businesses use a lot of electricity at once, even if it doesn’t. is only for a short time. Residential customers generally do not pay them.

Application fees can represent 90% of a charging station’s electricity costs, according to a study. These charges can vary widely and are triggered by consuming a lot of energy at once, which is needed to quickly charge even a single electric vehicle.

Retailers with high sales volume can pass these costs on to customers without them feeling a marked increase in billing costs.

Jacob Maass, commercial fuels manager at Iowa-based Kum and Go, said the convenience store has become more careful and strategic about the location of electric vehicle chargers since installing its first charger in 2008. In 2017, he installed his first fast charger, which charges vehicles faster, but can incur those huge charges due to how quickly it guzzles power. Kum and Go has chargers in 35 of its 400 locations. Even a single charger operating at the speeds required by the Biden charging subsidies could incur significant charges.

Maass said Kum and Go wanted to know how to get people out of their cars while charging electric vehicles and at its convenience stores. Companies like Kum and Go depend on their gas pumps to attract customers who shop at their stores. Convenience stores with gas pumps account for 80% of fuel purchased in the United States, according to the industry trade group.

But despite all that revenue, the real money is found when customers walk into a convenience store for an additional purchase. Most of the profits don’t come from fuel, but from convenience store sales.

Some electrification experts say convenience stores could seize a huge opportunity. Customers who charge electric vehicles need to stay longer, so they may be more likely to purchase food and other goods.

But the risk that the chargers will not be profitable may slow the construction of fast chargers and the adoption of electric vehicles.

Ramzey Smith, spokesman for the Department of Energy, told CNN Business that demand charges can be mitigated through solutions such as on-site battery storage, solar generation, energy management strategies energy and regulatory approaches.

Some states and utilities have already taken steps to reduce fees so that charger installation is not hampered. New York’s utility regulator proposed last month that state utilities offer lower rates for public electric vehicle chargers that are used sparingly. These charges would gradually increase as the chargers are used.

To date, 36 states have addressed or started addressing application fees, according to Chargepoint, which helps businesses set up chargers.

For now, convenience stores like Kum and Go risk thousands of dollars in application fees in many states, depending on how customers use their chargers.

For EV charger operators with a high volume of customers, these fees may be lower. They can be evenly distributed among a large pool of customers. But for businesses in areas where EV adoption is light, the fees are too high to pass on to a customer who won’t be willing to pay extra to charge their vehicle.

“While adoption of electric vehicles will be low, usage will also be low and electricity costs will be high,” warned Minnesota, one of several states to identify demand charges as a challenge. in its electric vehicle charging plan.

Maass says Kum and Go is now working with utility companies to ensure they will be able to afford the rates. Some offer preferential rates for charging electric vehicles.

“They drop them where we don’t lose everything we have, or everything we make just to have an EV charger there,” Maass told CNN Business.

Convenience stores might try to circumvent demand charges by installing backup batteries on their chargers. Backup batteries would allow convenience stores to slowly draw power throughout the day, especially during periods of low demand, by accumulating the energy in the batteries and then quickly discharging it when an electric vehicle needs to recharge. That way, convenience stores don’t draw a huge amount of power from the grid all at once.

A driver stops at a Tesla charging station at a Sheetz.

The infrastructure bill sends federal money to states, which can allocate it as grants to entities that want to install electric chargers. But those grant applicants, who could be businesses, city governments or nonprofits, will have to provide 20% of the funds for the chargers.

Federal funds can be used to cover batteries, according to Smith of the Department of Energy. Some charger operators have already turned to batteries. Electrify America has installed storage batteries in more than 140 of its fast-charging stations.

But battery backup can make a charging station cost several times more, according to John DeBoer, who leads electric mobility efforts at Siemens, which installs chargers for companies like Amazon.

Some convenience stores are also concerned about direct competition from utilities.

Trevor Walter, a Sheetz executive testifying for the National Association of Convenience Stores on Capitol Hill earlier this year, warned of the “threat of regulated utilities using their monopoly status to gain competitive advantage over private companies.” .

Many utilities effectively have monopolies in their markets because the costs of entering their markets are exorbitant. This lack of competition in their core business gives them an edge over most private companies they can compete with on electric chargers.

Utilities also may not have the incentive to adjust their demand charges if they build their own electric vehicle chargers. Most utilities don’t build electric vehicle chargers, but some have started to.

Xcel, a utility operating in Minnesota, announced plans to build hundreds of chargers in the state. Xcel declined to comment for this story.

Georgia Power is also investing in electric vehicle charging. He characterized his investment as complementary to other ventures. He said the chargers were mostly in places unlikely to see private investment.

“No private company will risk thousands of dollars to buy, install, maintain and operate electric vehicle charging stations if there is the risk or the reality of Georgia Power, Xcel or Dominion. [Power] do the exact same thing on the street for half the price,” said Ryan McKinnon, spokesperson for the Charge Ahead Partnership, which represents businesses.

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