Charging Stations – Yes or No?

March, 2012

I Love Baby Seals, Whales, and Polar Bears

On my Parking Today Blog, I have posited that being “green” is reasonable when it is also good business. Garages with green components usually have them because they benefit the parking business that resides in the garage.
I also have noted that appearing to be “green for green’s sake” may be good for PR, but I preferred the “we were ‘green’ back when it was just a color” approach, because many of the items that gain “green” awards these days have been part of garage construction for decades.
However, can someone give me the wisdom of installing electric vehicle (EV) charging stations in garages? I understand the need to look green; however, will they ever be used to any great extent?
Robert Bryce, writing in National Review Online (NRO), talks about companies that make batteries for EVs and their current troubles. The money quotes are as follows:
Sure, GM may be able to resolve the problems with the Volt. But the big hurdle … remains lackluster demand. Why would a car buyer choose a Volt, which gets 40 miles per gallon on the highway and costs $41,000, when he could get a Chevy Cruze, which is nearly identical in size, gets better mileage, and costs less than half as much?
Back in 2009, Johan de Nysschen, President of Audi of America, cannily predicted the Volt’s future: “No one is going to pay a $15,000 premium for a car that competes with a Corolla. … There are not enough idiots who will buy it.”
De Nysschen may be a tad outspoken, but if the vehicles don’t make economic sense to the buyer, will people buy them? The numbers are devastating. In October, GM sold more than 186,000 vehicles, of which 1,100 were Volts; and Nissan sold more than 86,000 cars, of which about 800 were Leafs.
GM had targeted to sell 15,000 Volts, but through October, they had sold about one-third that number. When you sell about 2 million cars a year, 15,000 is a pretty small number.
I know that people say charging stations need to be in place to get people thinking about EVs; however, the Volt doesn’t need the charging station.
Are we attempting to create a market where none exists? Would we make an investment in charging stations for their business model? Do we think cars are going to flock to parking garages because they are there?
Charging folks, and others, respond …
Jim Burness, Director of Business Development, ClearEnergy Inc.:
The reason any parking operator would want to install charging stations can be summed up in one word: inevitability. Whether you believe we have already reached “peak oil” or you think that is still many years out, it’s indisputable that one day we will run out of oil, and before that happens, it will get much more expensive.
Unfortunately, no matter how much we drill in this country, our reserves are nowhere near what they need to be in order to be self-sufficient (or cheap). In contrast, any fuel for an electric vehicle is virtually guaranteed to be produced domestically. As a result, few actions an American citizen can take are more patriotic than driving an electric vehicle.
But, JVH, your main point was about the lack of demand in this nascent market. Declaring EVs a failure at this point is no different from a pundit declaring the mobile phone a failure in 1984. It’s easy to forget that the first cellphone, released in 1983, cost $3,995, had a 20-minute talk-time, and the only feature was that it could hold 30 numbers in memory. There were many critics back then who questioned if anyone would ever waste their money on such a luxury.
For a more recent example, 10 years ago, a 42” flat screen TV cost $10,000. Today, you can buy one for 10% of that cost at any big box store.
Given the research being performed worldwide on battery technology, there is no reason to think we won’t see the same dynamic for electric vehicles.
Not long ago, I read a quote that said, “We think that by 2050, roughly 40% of those 2 billion cars [worldwide] will be electric.” This was not a quote from the Sierra Club or even Tesla Motors, but from the CEO of Royal Dutch Shell. Every major automaker has an EV either on the road or on the drawing board for release in the next few years.
While battery costs are high today, they will fall sooner rather than later, and battery capacity will increase. As these developments roll out, millions will flock to electric vehicles for both economic and aesthetic reasons. Not only do EVs cost about 10% of the cost per mile to run as gas-powered cars, but there are huge additional maintenance savings (no oil changes, timing belts, etc. over the life of the car adds up).
More important, however, is the fact that an EV provides a superior driving experience. I have never experienced a bigger thrill behind the wheel than when I finally got to drive a Tesla Roadster this past summer. Even the compact Leaf is a delight to drive. Those of us who have had these experiences know well of what is referred to as the “EV grin.”
In summary, no, there are not many electric vehicles on the road today, but this will be changing in the not-too-distant future as the market for EVs evolves just like it has for countless electronic devices before them.
The big question is whether any individual parking operator is going to be ahead of the curve or behind it. Not every EV driver will have the ability to charge at home (think of NYC or San Francisco), so the workplace or public parking will be the next venues of choice. EV charging will be an additional revenue opportunity for parking operators in the very near future, if not today already.
Says JVH: Jim, we are mostly in agreement, with the exception of the issues of maintenance, battery replacement and the like. (How much will it cost to replace a burned-out motor? Dunno, time will tell.) Electric cars are great, and fun, and cheaper to run.
There is only one issue. If cars being produced today are, in effect, hybrids (except the Tesla and the Leaf), they don’t need charging stations. “Range anxiety” is history, unless you have a totally electric vehicle. Does that make any real sense?
Explain to me the sense of buying a car that has no on-board charger, unless you are a millionaire and can afford a $100,000 vehicle, or unless you drive a very short distance.
Just consider why someone would pay more for a vehicle with a limited range, when they could pay the same amount for one that has an on-board charger, unlimited range, and get the same quiver up their leg when they step on the “gas.”
About all that money we send to the Middle East for oil – Technology has unleashed a 50- to 100-year supply of energy right here at home. Pennsylvania, New York, Ohio, Colorado, South Dakota and Alaska and Alberta, Canada, all have huge supplies of energy. And we have the technology to get it. Now, politics may stop that, but it’s there, and it’s a decision away from putting the Saudis and their pals out of our business.
Comment from Forest Williams, VP Sales and Marketing, Liberty PlugIns:
I think [NRO writer] Bryce (and JVH) miss an essential point. Parking lot owners are not in the business of dictating to their customers what their vehicle choices should be. They will never be able to determine if the person driving an Escalade today is considering buying an EV, but that person will surely notice which parking lots have chargers and which ones don’t. In our intensely competitive industry, can any of us afford to be wrong?
I am intentionally resisting the temptation to participate in the debate as to whether EVs will succeed in the marketplace. I will, however, make the observation that people buy things for a variety of reasons, many of them emotional rather than rational, and this is especially true when it comes to automobiles.
Follow-up from Jim Burness:
1) Virtually all of the original RAV4 EVs from 10 years ago are still running around on their original batteries, so longevity is far beyond what was predicted.
2) Pure battery EVs (like the Nissan Leaf) satisfy the daily needs of about 95% of the American commute. It’s predicted the most families with one EV will also have either a conventional car or hybrid for the 5% of the trips that are outside an EV’s range.
3) All tax incentives targeting EV charging stations expired at the end of 2011.
4) Our company sells the most popular commercial Level 2 charging station, and the most common model has a list price of $6,800, plus installation, so about half of what you estimate.
Adds Seamus Wilmot, Parking and Transportation Director at UC Berkeley: Also, if we expand on Jim’s example of the cellphone in 1983, back then it went for $3,995 and had a 20-minute talk-time, but now, 29 years later, you can get a smartphone for 10% the price and a few more features.
If a charging station costs $20,000 now and can take up to 8 hours to slow-charge a vehicle, a parking operator should wait for the learning curve to bring price down and the functionality up. Would you want to be using that 1983 cellphone today?
JVH gets the final word:
Let me set the record straight. I love my environment, I love clean air. I love animals; I have a cat and a dog. I separate my trash. I recycle. All that being said, I think that if being environmentally sound is not a good business model, then we should rethink the model, and what we are trying to accomplish.
I question whether putting EV charging stations in parking garages is a good business model, everything else being equal.
I recently got a call from a parking manager at the Port of Seattle’s Sea-Tac airport. He had read my piece on charging stations and wanted to comment. Seems they had installed six for customers in their garages and he had some problems. Folks would park in the spaces, plug in their cars, and then leave for Hong Kong. This was causing consternation for other EV drivers who couldn’t get to the taken spaces.
I recommended that the parking manager put them in his valet area (as they have done successfully in Minneapolis) and then require that people who wanted to charge had to valet. (He said they didn’t have valet but had been considering it, and adding the charging stations there was a great idea.) They would, by definition, pay more for the parking service and he could take on a surcharge for the charging service.
Herein lies the problem.
This manager told me he had received complaints from customers because they couldn’t charge, even though charging stations were located at the airport. So what was at first thought to be a great PR coup became a PR problem. (That law of unintended consequences had not been repealed.) He is located in Seattle, a ground zero for EV sales.
It seems that if you want charging stations to work, you have to have an e-valet in place to jockey cars around. If you already have a valet, it may make sense to add the charging station in that part of the facility. If you don’t, does it make sense to add the valet?
I have done considerable research on this and am told that in major cities, adding a valet operation 16 hours a day, 7 days a week, including additional insurance costs, is about $125,000 a year or, in round figures, $350 a day. So assuming you park what, 20 cars a day, you have to recoup $17.50 per car to cover labor and insurance costs.
Assuming it costs $2 in electricity to charge each car, that means to squeak by, you have to charge $20 per car to cover your costs. If you park more than 20 a day, you are in hay; less, you are losing money. All this assumes that the cost of purchasing and installing charging stations is free.
Does anyone know a garage where they re-charge more than 20 EVs a day? My guess is that they will have to sell a lot of pure EVs to get to that point. In the meantime, is the parking lot owner/operator supposed to foot the cost? Is the operator going to surcharge $20 a day to those who charge up, or $20 plus the parking rate?
These are business decisions you have to make. Think you will get more business? An operator in New York City told me he would have to get 53 new monthlies that he didn’t have to break even (not charging a surcharge). He says that is a big number.
Does the Leaf driver realize that after all the hype shakes out and the good business models kick in, he or she will have to pay upwards of $25 for a charge when they do so away from home, plus the cost of the parking space? Charging electric cars away from home is a tad more complex than simply plugging them in for an hour or two.
So the basic question – polar bears, the Middle East and tax subsidies aside – what is the true cost of charging EVs, and while we wait for technology to catch up, who is going to pay for it? If it continues to be the government, I say an emphatic no.
Products can and will stand on their own. Seamus Wilmot may be right. Should we jump in or wait?
This is not a conundrum for the charger companies. They simply need to adjust their pitch and show owner/operators where they need to be to profit from charging stations.
The rubber is beginning to meet the road here. How much is an operator willing to spend to appear greener? The cost of the charging station is only the beginning.
Each garage owner will make that business decision.

Sidebar:
Save Fuel – Carpool
“rta,” in response to the Jan. 12, 2012, PT Blog post “… I Love Baby Seals …,” comments:
I’ve seen estimates that electric vehicles (EVs) reduce anywhere from 30% to 65% in greenhouse gases, compared with a vehicle using an internal combustion engine. However, I can fit five people comfortably in my Tahoe, and if we carpool to work, then we’ve reduced greenhouse gases by 400% by taking four cars off the road.
Technology is advancing at a pace where what is the latest and greatest today will be obsolete in a couple of years. Thinking that a wholesale change to some new technology is the answer is to ignore what we’ve all seen happen in just the past decade.
The real answer to reducing pollution and saving the environment is to use what you have more efficiently, not to just throw it away and simply replace it with something else.
I have yet to see a smart car with more than one person in it during my commute. I have yet to see any electric vehicles in one of my parking garages (I have seen a couple around town). And I have yet to have had a single request or inquiry about charging stations from a customer or visitor.
Bottom line is that if demand requires charging stations, then the market will respond. But I’d be willing to bet that within the next three years, something else is going to come along that will cause the electric vehicle to go the way of the 8-track tape.
Having our entire transportation system reliant on the power grid is ridiculous and foolhardy, even more so than having a reliance on foreign oil supplies.