EVgo Gets Ready for ‘Tsunami’ of Electric Transport: Q&A

By Richard Stubbe, Bloomberg NEF editor. This article first appeared on the Bloomberg Terminal

EVgo, which operates more than 1,000 electric-vehicle chargers in 66 U.S. markets, is preparing for “the tsunami we’re about to see in the electrification of transportation,” CEO Cathy Zoi said, as automakers, utilities, regulators and private charge-point operators gear up for millions of EVs to hit the road in the next decade.

The company made a big move in August when it agreed to build and operate a network of charging stations in Virginia in a partnership with the state. Virginia is using 15 percent of its share of the $15 billion from a legal settlement with Volkswagen for EV charging infrastructure.

On a smaller scale, it launched a commercial installation of second-life battery storage at a public DC fast charging station. The system in Union City, California, integrates two BMW i3 battery packs into a single housing. It began operating this summer, offering a potential use for batteries that outlive their cars.

Zoi and Jonathan Levy, EVgo’s vice president of strategic initiatives, answered questions from Bloomberg NEF in a late August phone interview.

Q: How many of the second-life battery stations are in the works?

Jonathan Levy: We started with a pilot at University of California San Diego, where we integrated solar and storage with our second-life batteries as well as the fast chargers. We have the one out in Union City, and we have about five more that we’re expecting to deploy by the end of the year. We want to see how it works in terms of footprint, economics and customer experience, and then we’ll be looking to ramp those up elsewhere in 2019.

Q: Where did the idea come from?

Cathy Zoi: It’s economics. There are places in the country where demand charges are high and where we can actually consume electricity at times when it makes sense, store it on site, and then use it to charge at times when it makes sense.

Q: What does the general decline in the cost of batteries mean for you?

Levy: That cost curve has already been so dramatic in helping reduce the cost of electric vehicles. That continued innovation on the supply chain, especially with scale happening in China and elsewhere, is going to put downward price pressure in a way that makes these longer-range, lower-priced vehicles even more affordable, which is one of those major accelerants, in addition to public fast charging, that helps mass penetration of electric vehicles.

Zoi: I’ve been in this sector for 30 years, and for the longest time, people looked at batteries and wondered, “When is something going to improve and change?” Fast forward to 2009, when I was at the Department of Energy and I had all the battery research programs in my purview, and the price of batteries per kilowatt-hour was about $1,200. Within two years, it was down in the $500s. Now we’re talking about well under $100. Seemingly little substitutions in battery chemistry are accelerating the pace of this change.

It’s happening in part because the sector has scaled up so much. The amount of investment, the seriousness with which the car companies are taking this, is driving money into all of those improvements to continue that cost optimization.

Q: Do you project car sales?

Zoi: We use the best available research on car sales. But one of the biggest telling factors for us is that the car companies have announced $100 billion that they’re investing between now and 2022 to tool up factories to get EVs out into the marketplace. And that’s real money. Those aren’t airy-fairy announcements.

We’re estimating that by 2022, at least 2.5 million EVs are going to be on the road in the U.S. Those are going to need to get charged. They’re going to get charged at home, at work, and on the go, quickly. We are guessing that there will need to be 25,000 fast chargers to keep those cars going by 2022.

Q: How does ride-sharing fit into your plans?

Zoi: The rise of ride-share in the economy is a big accelerant for us. We have a number of ride-share drivers that drive EVs who use our stations. They charge seven times more than the average personal EV driver does. That’s a really big reason that we’re going to see a lot more gigawatt-hour throughput on DC fast, because we’ve got that increase in ride-share, we’ve got that increase in electrification of delivery trucks and that sort of thing.

Q: How big is it going to get?

Zoi: The best analysis that we’ve seen forecasts that ride-share will account for 25 percent of vehicle miles traveled by 2030, up from 1 percent today. There’s a generational thing happening with ride share. We have a lovely partnership with General Motors Maven (an on-demand car-sharing service). When Maven puts Chevrolet Bolts into a market, the utilization on our assets skyrockets. Those ride-share drivers, every minute they’re not driving around, they’re not making money, so they need DC fast. So we see that in our own data and we see it growing.

Q: How much does it matter to you who’s driving the cars?

Zoi: It doesn’t matter. When things are fully autonomous, we’ll be able to pack our charging infrastructure more densely.

Q: You recently won a contract from the state of Virginia, which is going to use money from the Volkswagen settlement to pay for the network that you’re going to build. Is the Virginia scenario going to be repeated in other states?

Zoi: We sure hope so. It’s a wonderful public-private partnership because the state of Virginia has decided to allocate the 15 percent allowable amount of the settlement money to charging infrastructure. I often talk about (hockey star) Wayne Gretzky and his famous quote that you need to skate to where the puck’s going to be. What we’re trying to do is skate slightly ahead of where the puck’s going to be, which is to build the infrastructure so that there’s no way the availability of infrastructure is an inhibitor to somebody making a car-purchasing decision.

Q: What other regulatory changes are you hoping to see?

Zoi: Mostly, we want regulation to not get in the way of building fast. My biggest worry is that we can’t build fast enough to meet the tsunami we’re about to see in the electrification of transportation. We are happy to be partners with utilities and want to make sure that we have rate designs that actually recognize the benefits that electric vehicle charging infrastructure brings to the grid. Making sure that regulations don’t unwittingly provide an obstacle is a key area.

Q: How are utilities preparing for the tsunami?

Levy: We have a huge interest from utilities in electric vehicles in part because it’s a new customer load that they’ve been chasing for a long time, but it also provides both challenges and opportunities to the entire grid system. With that comes a need for really strong education and engagement with regulators.

Zoi: With the rise of distributed generation and distributed everything, the possibility exists that not only do we have batteries at stations for our own economic benefit, but also that those can become a resource that puts power back into the grid. You need a regulatory structure that allows for that. I’m trying to create a one-plus-one-equals-three scenario, where we’re helping EV drivers charge their cars and providing a benefit to the grid so that in the modern world, where there’s lots of distributed generation, the whole system operates more efficiently.

Q: What’s the case for a retailer to have a charging station? Do retailers come to you or do you go to them?

Zoi: There’s a benefit for both. Every single brick-and-mortar retailer in the U.S. right now is losing business to online shopping. They need to create more reasons to come to the store. Any additional amenity that they can provide attracts more foot traffic.

Levy: Those chargers are in the ground today at Walmart and Whole Foods and Save Marts and Lucky’s. So they already have that experience and can see that their customers are benefiting from it. We’re seeing increases in utilization, and it continues to be a good recipe for all sorts of brick-and-mortar retailers to attract customers.

Q: How does long-haul driving fit into the mix? How ready is the system for that?

Levy: We need more of everything. More needs to be done. EVgo has more than 1,000 public fast-charging stations across the country. We tend to focus on the urban and suburban, but we also have a number of stations right along corridors. That’s one of the things we’re doing with Virginia.

Frankly, the economics of corridors are sometimes more challenging because you often have to overbuild to reduce queuing, and the peak travel times are the only time you see high utilization. We need to have that high utilization, so sometimes a corridor is not optimal. That’s why partnerships like the one that we have with Virginia are so important to make sure that we can support those corridors as well as the urban build.

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