4 Key investment strategies for DC fast charging

The Need for DC Fast-Charging Investment Strategies

If you’ve noticed the explosive proliferation of electric vehicles (EVs) on the road in recent years, you’re not alone. The industry is enjoying a 35% year-on-year growth in sales at present, with this trend expected to continue throughout the 2020s in tandem with the global shift toward a carbon-neutral economy.

Naturally, there is an accompanying need for investment in a dependably fast charging solution – namely: DC, or Level 3, fast charging stations. As investment groups, entrepreneurs, and private businesses alike recognize the potential in e-mobility investment, the question arises: what are the challenges and advantages of investing in DC fast charging, and where would you begin?

In essence, investment in DC fast charging would be an investment on the ground floor of an industry set to continue growing exponentially over the coming years.

Nevertheless, the significant amount of start-up capital required to purchase, or invest in, DC charging stations does necessitate a comprehensive investment strategy to be viable.

This article discusses the pros and cons of DC fast-charging investment, before breaking down the four most common investment strategies – to help you decide which, if any, might be right for you.

Why Invest in DC Fast Charging Stations?

Where a maximum power output of 50 kW impressed many early adopters only a few years ago, times have changed. Today, Level 3 charging stations are able to deliver much higher maximum power outputs, some up to 400kW of power, allowing drivers to replenish up to 300km of range after just 15 minutes of charging.

Such a leap in charging times goes a long way to eliminating ‘range anxiety,’ one of the most significant barriers to widescale EV adoption. And businesses that invest in fast-charging equipment can supply a service that’s in high demand in a quickly growing market.

Pros to DC Investment

• Level 3 charging is the future of public EV charging.
• The market for DC charging is young and yet to consolidate, providing early investors with an advantage over their competitors.
• Opportunities to create and grow additional revenue streams linked to fast charging are numerous – e.g., placing DC chargers in restaurant parking lots, by cafés, or next to retail outlets.
• The speed of DC fast chargers is more attractive to the end-user than AC slow chargers, carrying the potential for increased brand loyalty and attracting new customers.
• Linked inextricably to the global transition toward a green society, the growth of the e-mobility industry (and thus Level 3 charging) is unlikely to slow any time soon.

Cons to DC Investment

• DC charging station units are more expensive (between $50,000-$100,000 per unit excluding installation cost) when compared with their slower-charging AC counterparts.
• ROI will take longer with DC than with AC, due to the higher initial costs.
• Payback from an investment into a ‘typical’ EV charging station could take as long as 10 years.

Decoding the Jargon

One last point of housekeeping before diving into the 4 key investment strategies for Level 3 charging. There are a few terms – CPO, EMSP, charge point owner – which could do to be explained, as these are the three most common roles an investor would take on, or engage with when entering the fast-charging market.

What is a Charge Point Operator (CPO)?

A charge point operator (CPO) could be a manufacturer or trader of charge points, in charge of the planning, installation, grid integration, and operation of the units you invest in. Additionally, they may also be responsible for hardware maintenance and software management.

What is an Electric Mobility Service Provider (EMSP)?

An Electric Mobility Service Provider (EMSP) is a company set up to offer a wide range of EV support services, including the roles typically filled by a CPO. However, an EMSP would tend also to provide services to the end-user as well, such as payment and subscription services, and network solutions.

What is a Charge Point Owner?

A charge point owner (rather than an operator) is the investor whose capital has procured the DC fast charging stations and financed their installation on-site. Their responsibilities include ownership and oversight of the charging infrastructure, though they may well choose to outsource all practical management of the stations to a CPO or EMSP.

The Four Main Investment Strategies for Entry into the DC Fast-Charging Market

DC Charging Investment Strategy #1 – Direct Ownership

The most straightforward of the four main investment strategies (at least in terms of its definition) is direct ownership. This refers to the process of purchasing DC charging units outright, purchasing or leasing the land for your charging infrastructure, planning installation and preparing the site, bankrolling installation of the units, and financing their upkeep.

DC Charging Investment Strategy #2 – Leasing

Leasing offers a welcome alternative to direct ownership for those without “deep pockets.” It operates in a similar fashion to the leasing of an electric car: the investor avoids high upfront costs by agreeing to a long-term leasing contract with a CPO or EMSP, paid in monthly or yearly installments.

DC Charging Investment Strategy #3 – Charging as a Service (CaaS)

Our penultimate investment strategy for DC fast charging is, like leasing, also tailored toward investors without the capital required for direct ownership. Charging as a Service (CaaS) is a subscription-based model in which investors pay a CaaS provider a monthly fee in exchange for a DC fast charging service that suits their needs.

DC Charging Investment Strategy #4 – Partnered Shareholding

Partnered shareholding, or the shared revenue model, is the final investment strategy on our list. It shares a lot of similarities with direct ownership, with one major difference – ownership is shared among one or several additional parties, in lieu of a proportional share in revenue from the fast-charging site.

Wrapping-Up: Choosing the Right Investment Strategy

Investment into the DC fast charging sector of the e-mobility industry could produce significant ROI in the long term. Its possibilities for investors have even been likened to the gold rush era of the Wild West.

Nevertheless, there is no avoiding the fact that entrance into DC charging sector will always be costly. Coupled with a delayed ROI (until EV adoption surpasses a threshold that makes fast charging more financially viable), it becomes evident that success as an investor will require a detailed investment strategy.

We hope readers will have come away with a firmer understanding of the investment opportunities open to them as potential backers of a young and promising market.