As part of the UK's commitment to reach net zero by 2050 under the Climate Change Act 2008 (2050 Target Amendment) Order 2019, the UK Government has announced plans to launch the Rapid Charging Fund to invest in electric vehicle (EV) infrastructure.
The Rapid Charging Fund (RCF) provides a £500 million commitment to ensure that there is a rapid-charging network ready to meet the long-term consumer demand for EV chargepoints ahead of need. The fund will be available to meet a 'portion' of electricity connection and upgrade costs at strategic sites across the road network where these would otherwise be 'prohibitively expensive and uncommercial'. As at 1 January 2020, there were 809 open-access rapid (50kW) chargepoints across the UK road network with an average of 2 chargepoints per motorway service area (MSA). The aim is to increase this to at least 6 high powered open access chargepoints at every MSA and 2500 high-powered chargepoints across the road network by 2030.
Current challenges to the deployment of chargepoints
A key factor in the relatively poor uptake of EVs in the UK compared to our European neighbours (such as Scandinavia), is customers' anxiety over the lack of reliable and available chargepoints and the time it takes to 'fill the tank' compared to petrol and diesel cars.
Clearly there is an element of chicken and egg here; consumers are delaying their purchase of an EV because they are concerned about the availability of places to charge whilst landowners and other 'hosts' are reluctant to invest significant amounts in EV charging infrastructure and potentially restrict land use because they are concerned that there is still insufficient demand to give them a reliable and immediate return on investment.
The Government vision is for chargepoints on motorways to be openly available 99% of the time, drivers to have 24/7 customer care and the chargepoints to be able to support all EV models – a vision which, if delivered, would go a significant way to address potential EV uptakers' concerns. This Government fund is intended to address such concerns.
How the fund may help
Given the relatively high costs of installing high-powered electric charging points and of upgrading the electricity grid infrastructure, the availability of the fund will certainly be welcomed. Currently, some stakeholders are struggling to make the economics of chargepoints work. With unreliable demand at some sites, concerns for landlords over potential constraints on development of the wider site (unless lift and shift provisions are included which chargepoint operators generally resist without payment of compensation for their abortive, high capital expenditure) and the cost of installation and connection (which depending on location, can be high), investing in EV chargepoints has always been a risk. Having readily available Government backed funds can attract more infrastructure investors into the sector, which should be a catalyst for more innovation, greater confidence and increased deployment especially in locations where the initial investment costs are high. The fund seeks to address (at least in part) the key availability challenge: more chargepoints will mean more customer confidence when it comes to considering purchasing EVs and the consequent increase in usage will mean landowners/chargepoint operators start to see a return on their investments sooner. It may also open the market to new entrants which could help drive further efficiencies and accelerate progress in the sector.
MSAs and EV charging hubs
National Grid has predicted 11 million EVs will be on UK roads by 2030. If the predictions are correct, there will be a significant uptake in usage of chargepoints over the coming years and investors are already considering how they can best take advantage of this. As we have already started to see, MSAs and EV charging 'destination' hubs will be a key area of investment.
Even with high-powered chargepoints, it takes 15 minutes for a full charge which is comparatively much longer than an average petrol or diesel refill. That means that topping up an EV requires a shift change in attitude by the EV driver. However, unlike petrol and diesel cars, EV drivers do not have to be present at the vehicle during the charge which means that drivers can use other facilities during the charge. So for MSA operators, that means EV drivers can be using their facilities whilst they top up perhaps making drivers more likely than before to use those facilities. But it also means that smaller EV charging hubs in the right locations could use the presence of multiple chargepoints to attract other tenants (such as food and beverage retailers) as it will provide a captive market. In the right locations, with the right facilities available, the expectation is that a portion of EV drivers will plan their charging around coffee and lunch breaks.
In the case of MSAs, there will be a single host and, typically, already a framework in place for the roll out of chargepoints at most MSA sites. The path to mass roll out at MSAs and the financial business case is quite clear in those instances given the vehicle traffic that is guaranteed to be passing. But the economics of developing an EV charging hub are less clear – particularly if this involves installing new retail outlets alongside new chargepoints where neither of those currently exist. Location will be critical. There is no point developing an EV charging hub where the lack of 'tyre fall' would make this unviable and that puts landlords or other potential hosts of good sites in a strong position. Not all hosts will have the risk appetite. But the old adage applies – "no pain; no gain". If the predicted surge in EVs does happen, the winners will be those that have decided to take on some of that risk. For landowners or other hosts that may involve: developing sites themselves (or with other investors/chargepoint operators); agreeing to lower fixed base rents but with variable profit sharing arrangements akin to a turnover rent lease; or agreeing break points or ratchet arrangements to ensure that they continue to benefit from the anticipated ongoing upturn in demand.
Clearly more detail is required on how the fund will be managed; owners and operators will in particular be interested in what level of funding is available (what constitutes a 'portion'?) and what level of connection upgrade cost qualifies as 'prohibitively expensive and uncommercial'. If there are significant hoops to jump through to demonstrate this, it might discourage potential investors.
Nevertheless, the road to zero continues and the RCF is a positive step in the right direction. It is the latest example of the Government putting its money where its mouth is to meet the UK's CO2 reduction targets. The hope of course is that the fund further stimulates market activity where it is most needed so that the market is able to meet those targets without significant Government intervention. However Government has also stressed that if the industry does not go far enough to meet its vision for a national network of chargepoints, it will use its powers under the Automated and Electric Vehicles Act 2018 to bring in regulations to achieve this.
How Addleshaw Goddard can help
We have been tracking legal developments in this area for some time. See our Road to Net Zero article where we discuss legislation in force that brings the UK closer to the electric revolution. Addleshaw Goddard has specialist experience in the EV sector from advising local authorities such as Transport for Greater Manchester and West Yorkshire Combined Authority on its procurement of a partner to roll out charge points backed by government funds; Engie and Zouk on its acquisitions of key rapid chargers and technology; VW on its high profile electric vehicle global alliance with Ford; and Engenie on the roll out of charging points across multiple sites including the Marston's Pubs portfolio.