How the supply of electricity to EVs is regulated in the UK

Introduction

The UK has a binding target under the revised Climate Change Act 2008 to reduce its carbon emissions to 'net zero' by 2050. The transport sector is the UK's largest source of greenhouse gases (and still growing). Decarbonising the transport sector is essential to meet emissions targets. Electric Vehicles ("EVs") have been a disruptive technology in this sense - new registrations increased from 2,254 in 2012 to nearly 50,000 in 2017. With no combustion engine, there is no emission of CO2, NOx or PM10 from the EV itself.  So there are clear benefits for air quality from the drive to EVs. 

The Department for Transport reports that 15,116 public chargepoints are now installed across the UK and the UK now has the largest rapid chargepoint network in Europe . This rapid introduction of EVs has however meant the UK's regulatory regime has struggled to maintain pace. In order to supply, generate, transmit or distribute electricity a person must obtain a licence from Ofgem under the Electricity Act 1989 (the "Act"). Supplying electricity to any "premises" (land, building or structure) without a licence is a criminal offence under the Act, unless an exemption applies. So, "does supplying electricity to an EV constitute a supply which requires a licence?"

Ofgem Guidance

Whilst no legislative changes have been made (yet), Ofgem has now issued guidance to help clarify the position  (the "Guidance"). Essentially, whether a supply licence is needed depends on what is considered to be the "premises". An EV is not considered to be a premises and so the supply of electricity to an EV is not currently a supply requiring a licence. The supply of electricity to a chargepoint is however likely to need a licence.

There are currently four methods for charging an EV:

• at home or at a place of business for an organisation with a fleet of EVs (both slow charging typically between 3-11kWh, but different times of use);
• on the street;
• at the destination; and
• en route. 

Charging at home is likely to remain the most common way we will charge our EVs.  Supply of electricity to a home to charge an EV is no different to supplying electricity to a home for boiling a kettle. A home, whether a house or apartment, fits neatly within the definition of a "premises" in the Act. It is up to the homeowner how they use the electricity supplied. The same applies to supplying electricity to a work premises. In the same way companies in office buildings and factories would take a licensed supply of electricity to light the building and power computers or machinery, using its electricity supply to charge an EV in its fleet would simply be another use for the electricity. In each case, the supply of electricity to the building constitutes a licensed supply to premises – no change to current regulation.  The onward use of that electricity is not a licensed supply.  

Charging on the street (at a public charging point) is likely to be the next most common way to charge an EV – particularly in urbanised areas where people do not have their own off-street parking. On-street charging involves supply of electricity to a dedicated charging point or adapted street furniture such as lampposts. As such street furniture are 'structures', they too fall neatly into the definition of premises for the purposes of the Act, and the supply of electricity to these structures will require a licence. But what of the supply from these structures to the EV? Onward supply of electricity from the charging point to the EV is not a 'supply activity' because the EV is not caught by the definition of "premises" and so is not caught by the Act. Instead, this supply of electricity for charging to an EV user will be subject to consumer protection laws and there is currently no legal limit on what price this electricity can be sold to an EV user.   

Destination charging is, as it sounds, charging an EV at the user's destination. This might be a supermarket or workplace. It might involve the destination business offering free charging, or onward selling such electricity supply to EV users. Similar to on-street charging, the supply of the electricity to the destination premises would constitute a licensable supply. If the destination then on-sold this to the EV user, this would not be a licensable supply. If the destination, however, on-sold the electricity to a business which rented the car parking spaces then this would be caught by the Act, but a Class B exemption could apply.  For re-sale under a Class B exemption between two corporate entities, there is no restriction on the re-sale price. The final sale of electricity to the EV would not be a licensable supply and so again, in theory there is no limit on the price charged to the EV user (in practice of course, it will depend on prevailing market rates). 

En-route charging, similar to the common concept of re-fuelling at a petrol station forecourt, would involve EV users plugging in to rapid charging points at designated locations. Supply of electricity to the EV will not be a licensed activity, but supply of electricity to the forecourt premises will. As for destination charging, where the corporate structure is complicated enough to involve multiple entities between the forecourt/charging point and the EV user, then there may be a combination of licensed supply, or reliance on the Class B exemption. It is important to take legal advice for your specific situation.

In summary: 

• the selling of electricity by a chargepoint operator to an EV user will not require a supply licence as an EV does not constitute a "premises" under the Act; and 
• the selling of electricity to a chargepoint by an electricity supplier will require a supply licence as a chargepoint constitutes a "premises" under the Act. A Class B exemption may apply.

Revenue from supplying electricity for EVs

At the moment, supplying electricity from a chargepoint to EV users can be a useful source of revenue for a chargepoint operator, given that there is generally no restriction on the maximum resale price that they can charge (unless it is a Class B exempt supply to a consumer, but this will not normally be the case).  Particularly for rapid chargepoints where speed and convenience of charge is at a premium, consumers normally expect to pay more, around 30-50 pence per kWh.

Licensed electricity suppliers who supply electricity to chargepoints can also claim extra revenue if they are supplying low-carbon electricity to a chargepoint operator who also supplies other transport fuels (such as petrol or diesel) – such as Shell or BP. This is because such operators have an obligation under the EU Fuel Quality Directive to reduce the average greenhouse gas intensity of transport fuels, and supplying 'green' electricity to EVs is a way of doing this. The reward is a GHG credit which suppliers can trade in a similar way to a ROC. Our article, A new revenue stream for electricity as a transport fuel, explains in more detail how this works.

The extent to which general consumer protection laws need to be updated is under review by Government. The Guidance will need to be kept under review, particularly as technology advancements such as Vehicle to Grid supply complicate the picture further. Whether the existing transmission and distribution networks need to be upgraded by their operators in order to support the increased demand for connections will be under continual assessment. 

As Ofgem stresses, every project is different and legal advice should be sought to clarify that EV charging projects are set up within the law. For more information on the work we're doing in relation to electric vehicles and related charging infrastructure and how we can help you, please contact: