Preparing for the Mobility Revolution
Utilities and Oil Majors Join the EV Wave
In 2018, about 2.1M plug-in electric vehicles (EVs) were sold, i.e., plug-in hybrid and 100% electric vehicles. This may represent only 2.2% of all light vehicles sold globally last year, but it increased almost 80% vs. 2017. EV sales growth will remain strong thanks to both a wave of new EVs (about 200 models by 2020 and 300-500 by 2025) and incentives, whether financial or operational such as limited city access. This should be enough for all forward-thinking utilities and oil majors to prepare to break from the status quo.
Bloomberg New Energy Finance predicts that EVs will reach 19% of light vehicles sales in China by 2025, 14% in Europe and 11% in the USA, vs. respectively 4%, 2% and 2% in 2018. Looking further out to 2040, BNEF anticipates that EVs will reach 55% of global vehicle sales and 33% of the fleet. Even Porsche foresees 50% of their sales going to EVs by 2025.
Not all regions are alike regarding the charging network. In Europe, 79% of the public charging infrastructure is operated by utilities and oil companies. In the USA, 62% is managed by pure-play EV charging operators, and a majority of the Chinese charging network is controlled by equipment manufacturers (link). However, utilities and European oil majors are increasingly investing in this space. The former companies see this as a natural extension of their generation and distribution infrastructure, and the latter (at least some) feel the need to reposition in order to secure their long term sustainability. What is really happening? What actions are the key players taking?
European Utilities Are the Most Active in EV Charging
Utilities’ expertise lies in power generation and distribution. These companies also have strong customer relationship management and huge balance sheets. In addition, they are used to investing with a very long outlook. This combination puts them in a good position to develop and operate charging infrastructures. Some have already expressed their intention to play a major role in EV charging and have invested significantly, others are starting to build a position. For reference, there are about 120k public charge points in the EU.
French utility EDF has clearly stated their objective: become the uncontested leader in electric mobility in Europe, aiming for 30% market share in EV charging in France, Belgium, Italy and the UK by 2022. The company’s subsidiary Izivia (ex-Sodetrel) already operates 5k charge points and has access to 50k more. EDF has also invested in vehicle-to-grid (V2G) startup Nuvve. The French utility and the San Diego-based startup intend to roll out 1,500 V2G-capable chargers in the UK. Lastly, the utility is a partner of European EV roaming platform GIREVE.
EDF, along with Germany’s E.ON and Italy’s Enel (both major electric utilities) collaborate with Nuvve and Nissan on V2G pilots in Europe — the Leaf is reportedly the only V2G-capable EV today. E.ON is also partnering with Danish EV charging network operator Clever with the objective to deploy 150-350 kW stations in Europe. Similarly, Enel acquired eMotorWorks, a Californian startup offering an energy management platform which the utility will deploy in its charging network.
Other European utilities are active in the charging space: UK’s Centrica invested in Israeli EV software charging firm Driivz in 2018. The same year, Ørsted, the Danish utility (formerly DONG) invested in Volta Charging, the US-based network which offers charging paid for by advertising (see below).
In 2016, Engie, the largest independent power producer in the world, invested in PowerDale, a Belgian operator of charging stations. Two years ago, the French company acquired Dutch charging network operator EVBox.
Whereas there is a lot going on in Europe, US utilities are rather inactive when it comes to investing in mobility companies. However, they are deploying charging stations. It should be noted though that about 80% of EV charging takes place at home in the US. Among others, San Francisco-based PG&E is engaged in a program to install 7,500 chargers at apartment buildings and workplaces in California, where half of all US EVs are sold. Southern California Edison plans on spending $760M to add 48k charge points in the state over the next 4 years. Similarly, Duke Energy plans 530 new EV chargers in Florida through 2019 and New York State regulators recently authorized utilities to install over 1,000 EV chargers. This compares with a current inventory of about 60k public charging points in the USA of which about half are located in California.
Being headquartered right next to Silicon Valley, PG&E is well positioned to go beyond installing charge stations. In 2015-2016, the utility was involved in a pilot program with BMW aimed at testing how managed charging of customer-owned EVs can benefit the grid during times of high demand. Charging optimization (when, how many kWh) should lower both charging cost for EV owners and investment in electricity generation capacity.
European Oil Majors Prepare for the ICE-to-EV Transition
Key players in the oil industry do not all share the same vision re. the deployment of EVs. The graph below was assembled by BNEF with data from BP, ExxonMobile, OPEC, and the International Energy Agency. BP foresees twice as many EVs (320M) in 2040 as ExxonMobile (160M). BNEF updated their forecast in 2018, with 560M EVs by 2040. This gap between the two oil majors explains their very significantly different approach towards EV charging. Given Shell’s streak of investments, I suspect their vision of the market is similar to BP’s.
Whereas European oil majors such as BP, Shell and to a lesser extent Total, are investing in the EV charging business, their American counterparts clearly lag, ExxonMobile being the least engaged in this tidal transformation. The Paris Climate Accord certainly explains this differentiated approach, as the USA decided to withdraw. As a consequence, I expect American majors to lose ground in the long run.
Shell is investing $1B annually in renewable energy and EV charging (~5% of their CAPEX), through Shell New Energies. In 2017, they acquired NewMotion, an EV charging network operator, and gained immediate access to 30k stations throughout Europe. Last year, the Dutch major led a $31M investment round in Ample, which develops a swappable battery solution. Recently, the company also acquired GreenLots, the US-based EV charging operation platform which was selected by the $2B Electrify America initiative to support its back-end. Along the same line, Shell just acquired Germany's Sonnen, a company offering solutions combining home energy storage and EV charging. Lastly, it is interesting to note that Shell is considering buying Dutch sustainable energy provider Eneco, which would turn the oil major into a full fledged energy provider.
In a similar move, UK-based BP invested last year in FreeWire Technologies, a provider of mobile charging solutions, and plans to roll out the startups’s 50 kW ‘Mobi Charger’ at a few BP refueling stations. The major also invested $20M in battery tech startup StoreDot, and paid $170M to acquire Chargemaster, UK’s largest EV charging network with 6500 charge points. Recently, BP invested in Chinese start-up PowerShare, which connects EV drivers, charging operators and power suppliers.
Likewise, last year Total acquired G2mobility, a French charging network operator with 10k charge points. As part of its strategy to green its sources of energy, Total also acquired private electric utility Direct Energie. When combined with Total’s existing business, this allows the French major to sell electricity to over 4M customers. This position can turn into a strong foundation for Total to organically expend its business scope to EV charging.
By comparison, not much is happening at US oil majors. The most active is Chevron, though only just recently. In late 2018, the company participated in the $240M round raised by Chargepoint, the US leading charging network operator. Chevron invested more recently in Natron Energy, an energy storage company developing stationary energy storage systems for EV charging stations.
Conversely, the only visible investment ExxonMobil has made in a mobility startup was related to fossil fuel! Last year, the major put money in Yoshi, which delivers fuel on-demand to vehicles, mainly for fleets. It seems ExxonMobile is shortsightedly ignoring the electrification wave!
Are oil majors well positioned to grab a significant share of EV charging? They can monitor consumers’ behavior closely through their credit card activity. They also have direct access to customers in their loyalty programs, which are more likely fleets than individuals. These companies can build on this close relationship when fleets go electric, and therefore will be well positioned to address their charging needs. Some big oils are also becoming electricity distributors. Single billing for home and charging is then possible when these customers buy EVs.
How about the gas stations, of which there are about 150k in the US alone? As the shift towards EVs builds momentum, more and more stations will close. Since charging is something one does mainly while engaged in something else (working, shopping or at home) at current charging speeds, I do not see a future where gas stations massively convert into charging stations, except on freeways, between cities, where the most powerful charging solutions are installed to minimize waiting time.
It should be noted also that the retail outlet typically generates a majority of the profit of most gas stations. Today, customers go to a gas station to refuel, and shop as a side benefit. Tomorrow, would these customers go to the same station to shop, and charge as a side benefit? The only way for urban gas stations to avoid a gloomy future is for oil majors to significantly overhaul them by developing new businesses to make them attractive destinations. As gas stations disappear, Yoshi (see above) will be an alternative fueling solution for vehicles fitted with combustion engines, i.e., still over 65% of the fleet by 2040 according to BNEF.
Utilities and Oil Majors Could Get Involved in EV Fleets
A whole new space with electric, eventually autonomous, fleets is emerging. Can those who sell electricity or fuel today expand their scope downstream and become mobility providers, operating fleets of electric, autonomous vehicles? Such fleets would not only become captive customers for the terawatt hours these companies generate, but would also give them access to a wealth of valuable data.
This path may be what the most active players in the space are pursuing. BP just invested in Zubie, a connected fleet technology startup. Similarly, E.ON just put money in Vinli, a vehicle data platform. Shell’s angle is somewhat different but seemingly aiming in the same direction. The Dutch oil major just took part in the $530M round raised by highly qualified autonomous vehicle startup Aurora Innovation.
In conclusion, US oil majors and utilities should look at their European (and probably Asian, not covered here) counterparts. The clear risk is for the former to face a future like that of Kodak.
Managing Director, Orsay Consulting
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