The EV Boom is Coming, and Your Investors Don’t Want You to Wait Any Longer.Posted to innogy Consulting US
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- Oct 7, 2019 9:42 pm GMT
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You’ve heard it before, we know. Utilities have spent the past several years being told that the electric vehicle boom is coming. EV demand is growing and exceeding expectations and will only continue to do so as states and cities work to include ambitious EV targets into their equally ambitious renewable energy commitments.
As demand grows, over and over again utilities in the US are asked: “Are you ready?”
We have even posed the question ourselves.
And yet, many utilities have been reactive at best in both preparing themselves for and capitalizing on the acceleration of electrical vehicle adoption, waiting for the boom to arrive before diving in, much to some stakeholders’ dismay.
But what happens once the boom arrives, and utilities are nowhere near prepared to act?
They get left behind by both the investors that are key to keeping them uniquely competitive and the customers that will help them thrive in the dynamic, growing opportunity market presented by electric vehicle demand.
Ultimately, investor capital will move just as fast as the customers buying new electric vehicles, shifting practically overnight to the utilities that are active players in the EV market and away from those that failed to proactively prepare for the boom.
Getting left behind at a time when customer values and expectations shift constantly and when investor capital moves as quickly as the number of new electric vehicles hitting the market, ready and waiting for customers to purchase, is as close to a business death sentence as it gets.
This is exactly what happened when German utilities we have consulted with sat out on the opportunity to become an active player in the solar boom in 2010. Instead of an enthusiastic commitment, there was hesitation at the high costs of the new solar technology and reluctance to fully dive into a rapidly growing market.
The result? For RWE, one such utility, share prices plummeted year over year as cumulative installed renewables—solar capacity in particular—grew almost nine times over 10 years.
Investors will simply not accept a utility’s failure to move fast enough, especially given that these very same investors have been providing significant cash flow for many of the progressive utilities in Texas, California and Europe that have more mature EV programs already in place.
Identify Opportunities for Success
A utility seeking to get in on the EV boom should prioritize the opportunities that make the most financial sense. These should be opportunities that offer the least risk in the short term and allow the greatest potential for short and long-term profitability and attractiveness to investors.
Right now, the biggest opportunity from this perspective is fleet electrification. The function and requirements of fleet vehicles lend themselves well to current EV product offerings. Recognizing the easy business case that fleet electrification makes, many companies—such as UPS and Amazon—have already begun integrating electrification into their fleet maintenance and modernization plans. Speaking of which, as fleet vehicles are often used for short trips, have a regular renewal cycle and fall under operational expenses, the business case for transitioning to electric—significant cost savings, low maintenance requirements, carbon footprint reduction, and less fuel reliance—practically speaks for itself.
From there, utilities will simply need to decide just how big of a role they want to play in facilitating fleet vehicle transitions. Whether that role is funding the initial assessment required to begin the transition to electric; supplying the infrastructure necessary to keep fleet vehicles running; supplying the vehicles themselves or offering services that span the entire spectrum of adoption, participation here conveys to investors the utility’s willingness to participate in the EV boom at a deeper, longer-term level than where it currently resides. This reduces the risk of the utility getting left behind by investors in favor of more active players in the EV market.
Beyond fleet electrification, there are several other ways to assess the maturity of your EV program in a way that engages your investors: Are you offering special rates and infrastructure support to help encourage EV adoption for commercial customers? Do you already have a commercial incentive program for EV charging stations?