Encouraging the uptake of electric vehicles (EV) has become a key part of the government’s plans for a “green industrial revolution” and for meeting its Net Zero targets. The sale of new petrol and diesel cars and vans is due to end by 2030, by which time all new vehicles will be required to have “significant zero emission capability”. By 2035, the government plans that all new vehicles will be zero emission.
WA will shortly be launching consumer polling looking into the priorities of the public in relation to EVs, focusing on the barriers to greater uptake and on charging infrastructure in particular. The government has taken the view that expanding and improving the UK’s network of EV charging points will be key to achieving this transition. It is expected that many will regularly charge their vehicles at home or work, but sufficient provision of public charging points – including rapid charging stations on motorways and kerbside charging for those without a driveway – will be particularly important.
There is considerable regional variation in the availability of charging infrastructure. Only 1,000 of the roughly 6,000 on-street chargers, for example, are outside London, and the total number of chargepoints per head in Yorkshire and the Humber is a quarter of those in London. At motorway and A-road services, there are 145 public charging stations at motorways and A-road services, providing around 300 individual chargers across the UK.
Stimulating investment in charging infrastructure is seen as a priority for regulators and the government
In order to promote the development of charging infrastructure, regulators have been keen to encourage increased investment in the sector. In May 2021, for example, the UK energy regulator Ofcom approved a £300 million investment round for regional network companies across more than 200 low-carbon projects over the next two years. This is expected to include the installation of 1,800 new rapid charging points at motorway service stations and a further 1,750 charging points in towns and cities.
These new installations will go towards the government’s vision for the rapid chargepoint network in England, for which the Department for Transport has set the targets of having:
- At least 6 high-powered, open-access chargepoints (150-350 kW capable) at motorway service stations in England by 2023;
- Around 2,500 high-powered, open-access chargepoints across England’s motorways and major A roads by 2030; and
- Around 6,000 high-powered, open-access chargepoints across England’s motorways and major A roads by 2035.
In pursuit of these targets, the government has allocated £950 million to the Rapid Charge Fund (RCF), designed to “future-proof electrical capacity at motorway and major A road service areas”. While the government has stated that it expects the private sector to deliver chargepoints where they are commercially viable, the RCF may provide a potential source of funds for businesses seeking to expand the charging network in areas where they can make the case for what the government calls “a clear market failure”.
Concerns over competition in the charging sector are likely to inform the government’s approach to regulation as the sector expands
Alongside efforts to stimulate further investment in the sector, the regulatory framework for chargepoints – particularly in relation to ensuring adequate competition – remains a subject of active debate, liable to evolve rapidly as more infrastructure is installed.
In July 2021, the Competition and Markets Authority (CMA) published its report – Building a comprehensive and competitive electric vehicle charging sector that works for all drivers – outlining challenges to effective competition in the market in relation to rolling-out charging along motorways, in remote locations, and on-street. As a result, the CMA recommended a number of “targeted interventions” to “kickstart more investment and unlock competition”.
For chargepoints along motorways, where one chargepoint operator holds a market share of 80%, the CMA found that constraints on the capacity of the electricity grid and long-term exclusive contracts prevent entry by competitors at many sites. It recommended that the government use its commitment to fund upgrades to the grid as a means of opening up competition and facilitating market entry.
For on-street charging, the CMA highlighted that the roll-out is slow, and suggested that local monopolies could arise if the market is left unchecked. It recommended that local authorities play an active role in overseeing the market in their areas, and suggested that they could require fresh powers to ensure that they were adequately equipped to do so.
In response to these recommendations, the government has confirmed that it is considering regulatory changes with a view to enhancing competition in the sector. This includes considering requiring service area operators and large fuel retailers to tender charge point service contracts openly and have a minimum of two – and at some sites more than two – different charge point operators at any particular site. The Department for Transport has also suggested requiring existing providers of charge point services at motorway service areas to make their charge points open-access rather than available only to an exclusive network or group of networks or manufacturers. The Office for Zero Emission vehicles’ consultation on the Future of Transport regulatory review closed in November 2021, and its findings will feed into legislation which may feature in the next Queen’s Speech.
The regulatory environment for chargepoint providers is thus likely to evolve rapidly as the UK’s road charging network expands over the next few years. With changes likely to impact established players in the sector as well as providing potential means of market entry for challenger firms, investors will want to monitor these developments closely in evaluating opportunities for their target or portfolio companies.