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Speech: Leading the charge towards a competitive EV infrastructure market

Competition Markets Authority

October 20
10:10 2022

Introduction

Im honoured to contribute to this storied lecture series. Im a past attendee of many Beesleys, and one of the nice traditions of the Beesley lectures has been that those who knew and worked with Michael Beesley take a moment to recall him before diving into their lectures. Ive listened to those accounts over the years. As well as his warmth and collegiality and his loyalty to Birmingham, what shines through was his appetite for debate, fascination with markets and conviction that good economics had a lot to offer policymaking. That this lecture series is going strong into its fourth decade seems a fitting legacy.

My topic tonight is EV charging infrastructure, and the UKs efforts to secure the investment needed to electrify road transport. It is a case study illustrating how markets can contribute not only to economic growth but to a societal goal like de-carbonisation. All the major themes of competition and consumer policy in 2022 arise: the need for markets to operate alongside government policy; the economics of a consumer necessity, the car, in a cost-of-living crisis; the backdrop of rising energy prices; how to foster innovation; how to deploy infrastructure widely, minimising the risk of enclaves or deserts, whilst preserving competition.

I am speaking this evening in a personal capacity. The views are mine and not necessarily those of the CMA or my colleagues (Endnote 1). That said, I want to acknowledge that almost all the work Ill discuss was done by others especially my colleagues in the CMAs Markets team, led by Daniel Gordon, and the EV charging market study team, directed by Emily Chissell and Sabrina Basran, supported by the CMAs economists, lawyers and financial analysts. Im also grateful to many colleagues and practitioners inside and outside the CMA who offered comments or insights as I prepared a full list is in the published version. (Endnote 2)

My focus is the system in which competition authorities and regulators act to make markets work better. How well do we identify market failures? Are we designing practical and effective solutions to mitigate those problems? How do we make space for other objectives, that arent about markets or competition specifically, in a principled and predictable way?

With that in mind, my plan for the next 45 minutes or so is:

First, to briefly survey the problem: why we are going to need a lot more EV charging infrastructure to meet the Governments Net Zero ambition.

Second, to consider the policy framework supporting investment in public charging infrastructure.

Third, to consider the lessons to be drawn from other sectors or parts of the competition and consumer policy toolkit that might be helpful.

The nature of the problem

EVs are not new but petrol vehicles have long-standing benefits

Electric vehicles are not new. The first electric vehicle was launched in 1884, but petrol vehicles rapidly displaced them.

The advantage of electric over petrol has always been that EVs are quiet and efficient, without emissions at the tailpipe.

The disadvantage of EVs is energy storage: fuel tanks contain far more energy in a much smaller space than any battery yet invented, and pumping petrol is faster than charging a battery. So petrol vehicles have greater range, and refill much more quickly, than EVs.

EVs in climate change policy

The case for EVs or more accurately, the case against petrol is grounded in our need to de-carbonise our economy. (Endnote 3)

Everyone here knows the backdrop of the UKs 2050 net zero commitment. Today, transport constitutes around a quarter (23%) of UKs CO2 emissions the biggest single source - almost all of it from road transport, mostly cars (Endnote 4). Coupled with a move to low carbon or carbon free generation, electrification is on the critical path to Net Zero.

To achieve this, the UK is phasing out new petrol vehicle sales from 2030, with hybrids not sold after 2035. Emissions from cars, commercial vehicles and trains are targeted to reduce to a quarter of 2019 levels by 2035 just under a quarter of the UKs de-carbonisation commitment. Rapid take-up of electric vehicles isnt the only element; petrol vehicles will use more biofuels and the Government aims to scrap older, dirtier vehicles more quickly (Endnote 5). Theres also work underway getting people to walk, cycle and scoot more, and drive less.

But EVs are set to take centre stage.

Types of EV charging

The time to charge an EV depends on power output. Overnight charging at home only needs a trickle of power, drawn from the existing grid at off-peak times; charging en route on a long journey in less than half an hour takes very significant power, specialised equipment and often major upgrades to the electricity network.

We can distinguish between private charging (in a driveway or garage, or the workplace), and public charging, where charging is offered to the public.

Home-charging is generally a one-off purchase and installation. It relies on the users home energy contract. This works well: most EV buyers with space to do so buy a home charging point. A government scheme (Endnote 6) has helped promote this (Endnote 7). Workplace chargepoints are also growing quickly (Endnote 8).

Public EV charging raises a chicken and egg problem: buying an EV is only attractive if you expect public charging to be available where and when you need it. And building EV infrastructure only makes sense if there are lots of EVs on the road to be your customers.

This is not an unusual problem it often arises in technology markets (getting two groups of users interested in a new digital platform), or in industries like payments, in the business of bringing together buyers and sellers.

In practice, the challenge in EVs is even more complex, since consumers need a mix of charging options if you buy an EV, you will regret it if you cant charge at home, or locally, or at work, or you cant undertake the longest journey your family plans that year. Consumers are acutely aware of this constraint. Thats why the National Infrastructure Commission, for example, concluded this year that the big barrier for expanding EVs ownership and the transition to a net zero transport sector remains the rollout of charging infrastructure (Endnote 9).

A critical element in solving this problem for EVs was the governments decision to set a date for the end of sales of petrol vehicles in 2030. That has had a big impact: awareness of EVs is high and more consumers expect to go electric for their next car than petrol (Endnote 10). Given that impact - and recognising that it carries some risk - it is worth noting that this intervention has very little direct cost. It shapes the market trajectory, effectively firing the starting gun in a race to deploy charging infrastructure in a way that will support that switchover.

Business/operating models

With charging largely outside the scope of retail energy regulation, various business models have been adopted in response (Endnote 11). One EV manufacturer, Tesla, offers its own network for charging almost exclusively for Tesla EVs; other networks can generally be used by any EV. Amongst chargepoint operators, in some cases a full operator funds the infrastructure and sells charging directly to the public; a service provider might provide a chargepoint to a site for a fee, with the site owner then deciding how to offer charging (which might be free, to encourage visits or as a benefit to employees). Some sites operate as concessions like a full operator but funded through grants widely used by LAs to achieve rapid roll-out of new sites. Chargepoint operators are typically owned by car manufacturers (Endnote 12), investment funds (Endnote 13), forecourt operators (Endnote 14), or major oil companies (Endnote 15). We have seen new entry and innovation across the value chain.

There is great uncertainty associated with many of these business models. Petrol-like consumer expectations drive up, charge, drive away - are the hardest and most expensive to fulfil. For en-route charging, that model seems inescapable, but for most driving, given time, and provided there are price signals, new consumer behaviours may develop as EVs become prevalent.

Predicted utilisation is sometimes low, especially in areas where the density of EVs remains low. Some operators are betting on forecast increases in usage as EVs become the norm. Some low utilisation installations may help adoption even if they arent used very much people want to know that there is a wide network of chargers before they buy an EV, even if they only ever drive locally. Building these may only occur if they are subsidised.

Scale of the challenge

So how are we doing? The Climate Change Committee tracks overall progress towards net zero targets and sets benchmarks for progress on a range of metrics.

Their view was that the UK needed 12 times more public charge points than it had in 2021 to be ready for 2030 27k new charge points per year with especially strong growth needed in mid to high power range charge points, for example 50kW plus (where the number of chargepoints forecast to be needed was more than 40x the number then installed).

In their 2022 assessment, the Committees conclusion is that the number of charging devices is off-track and the rate at which they are installed needs to increase by a factor of four (En

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