EV Charging Costs Explained and Fee Model Benefits

Written by Team NovaCHARGE | Dec 27, 2023 4:45:00 PM

It’s the infamous “bottom line.” It’s the question every business, whether B2B or B2C, eventually comes to: “What’s it cost?” And, when it comes to EV charging, those costs are changing daily. From dropping EV prices to financing EV charging stations, everyone from drivers to station owners want to better understand what potential costs are and how, in the future, those costs may be covered through fee models. Let’s take a closer look at the costs for drivers and owners as well as how the two primary fee models benefit both parties.

What are EV Charging Costs?

The conversation is inevitable. Regardless of whether you’re an EV driver or an EV charging station owner, much like charging time, cost will come up when discussing the advantages (or disadvantages) of electric vehicles.

EV Charging Station Owner Costs

For EV charging station owners, the initial investment includes expenses for purchasing the charging equipment, installation, and any necessary electrical infrastructure upgrades. Thankfully, there are ways to optimize your space and use power load management to minimize infrastructure upgrades. Also, with incentives, rebates, and grants, there are opportunities for those looking to implement EV charging stations to recoup some of these costs.

In addition to the initial investment, EV charging stations are also responsible for ongoing operational costs. Among those costs is electricity charges, which, in some cases, may include demand charges from utility providers. However, as utilities prepare for and invest in EV infrastructure and as the industry expands and technology advances to meet those demands, these costs will likely decrease.

Beyond the cost of electricity, additional costs may include network connectivity fees and maintenance, which is why warranty and support are so vital in EVSE providers. Additionally, there may be regulatory compliance costs, to ensure safety standards and ADA compliances are met.

Finally, from municipalities and businesses with EV fleets to retail locations and apartments or condos, EV charging station owners may wish to promote and advertise their EV charging; there are, of course, resources required for that effort as well.

Electric Vehicle Owner Costs

Obviously, the first expense for EV owners is the cost of the vehicle itself. Thankfully, as the technology improves, infrastructure grows, and consumer demand increases, the cost of electric vehicles will continue to decrease. In fact, the EV prices dropped by nearly a quarter (22.4%) or $15,000 in just one year.

While this is, likely, a primary concern for EV owners, charging expenses must be factored in as well. EV drivers have two options: home charging and public charging. Home charging is often considered the more cost-effective option, but that depends largely upon what type of home EV charging station has been installed. Both Level 1 and Level 2 chargers are available for home charging installation. And, if a driver is mindful, they can schedule charging during off-peak hours, when electricity costs are typically lower.

Public EV charging, on the other hand, is variable, depending on any number of factors including, but not limited to, the EV charging station owner, its location, charging speed, demand, and energy costs. In fact, this is one of the reasons why a robust EV charging app can help drivers get the best charging rates.

But still, understanding those rates and how they work is a key component of the charging ecosystem.

Understanding EV Charging Costs and Fee Models

The first big question for EV charging costs is the location and access to the charger. Understanding and managing the costs associated with EV charging is essential for station owners to optimize their charging strategies and reap the benefits. So, what are the options?

EV charging station owners have a few options when it comes to determining their charging structure: free, fee, and hybrid. While the vast majority of public charging stations are fee based, there are reasons for the other models as well.

Free charging, as one might suspect, assigns no fees and is limited in use. A hybrid model would include a mix of free and fee based charging. Both of these options might be used if EV charging is being used as a benefit, perk, or even part of business operations.

For example, fleet vehicles may be able to charge freely at some chargers during business hours, but if that car is used after business hours, a fee might be assessed. Similarly, workplaces, retail locations, and residential buildings may want to use free charging as a reward or incentive.

Because EV charging platform management systems can create flexibility in pricing and fee options, charging station owners and hosts can adjust and apply rules as needed. Fee structures can be controlled by time, date, location and even by user or vehicle.

Understanding how the fees are determined can vary from charging station to charging station. More specifically, EV charging stations owners can charge based on a flat fee or kilowatt-hour rate.

Flat Fee Models

Flat fee models means charging per charging session, regardless of power usage or time at the charger. When it comes to flat fee models, there are some distinctive benefits.

1. Predictable Revenue for Charging Station Owners
Perhaps the biggest benefit for EV station owners is the opportunity to generate predictable revenue. Because users pay a set amount for each charging session, regardless of the duration or amount of energy consumed, owners can, potentially, gauge their revenue in a predictable way which can be advantageous for financial planning.

2. Simplicity and Transparency
Flat fee models are straightforward and easy to understand for all parties. This simplicity enhances transparency, reducing confusion about the cost of charging. Users know exactly what it costs each time they use the station. Because of this fixed cost (vs the variable of KwH), drivers may be more likely to use a flat-fee charging station.

3. Driver Convenience
For users, a flat fee model provides convenience. They don't need to calculate charging costs based on time or energy consumption, making the charging process more user-friendly. This simplicity can encourage more EV adoption as it removes potential barriers associated with complex pricing structures.

4. Competitive Advantage
Another advantage to a simple and predictable charge is it can help differentiate in a competitive market. In a competitive EV charging market, this pricing structure can attract more customers, especially those who like the transparency and predictability.

5. Regulatory Compliance
In some states, EV charging regulations may favor or require a flat fee model for public charging stations. This could be part of government efforts to standardize pricing, ensure fairness, and, in some cases, make up for lost gas tax revenue.

While a flat fee model has its advantages, pay-per-kilowatt-hour (kWh) offers some advantages as well.

Kilowatt-hour Rates

kWh, short for kilowatt-hour, is the unit of measurement for the energy EVs consume. So, when drivers plug in, it's not just about the time an EV spends charging but it’s the actual energy it consumes during the charging process. That energy consumption is measured in kilowatts (kW), and that combo of kW and time gives us the magic kWh number. Why might a charging station want to charge by kWh? Truth be told, there’s a few great reasons:

1. Fair and Transparent Billing
Charging by kWh creates a clear and transparent billing system. Because EV drivers are paying for the actual amount of energy used during the charging session, charging station owners can eliminate both uncertainty and discomfort associated with fixed or time-based fees. In short, it builds trust which is great for branded EV charging stations.

2. Encourages Mindful Charging
kWh pricing encourages EV owners to be mindful of their energy consumption. Rather than leaving vehicles at stations when they’re fully charged or opting for DC fast charging, kWh charging means drivers might pay closer attention to their usage and charging sessions.

Similarly, this fee model allows EV drivers to be aware of the costs upfront and make choices about where and when to charge, such as during off-peak hours.

3. Aligns with Electricity Costs
It just makes simple financial sense. EV charging stations incur costs based on the electricity they consume, so charging by kWh allows the station owner to pass on the actual cost of electricity to EV users. As noted in above, this also helps ensure a fair and economically sustainable fee model.

4. Flexibility for Level 2 and DC Fast Chargers
EV charging stations come in various power levels. When it comes to public charging, that means Level 2 and DC fast chargers. Charging by kWh accommodates the different charging speeds, enabling stations to cater to both fast-charging and standard-charging needs while maintaining a consistent pricing model.

5. Promotes Competition
As EV charging station density increases, so will competition for drivers. kWh pricing fosters healthy competition as owners can adjust rates based on market conditions, encouraging more competitive prices and better services.

6. Future-Proofing Business Models
As the EV landscape evolves, and technology advances, ensuring you have a future proof EV charging solution. kWh charging provides a scalable and future-proof business model, adapting easily to changes in charging infrastructure as well as new developments in EV technology.

Charging by kilowatt-hour aligns the interests of both EV and charging station owners by promoting fairness, efficiency, and flexibility. It's a win-win approach.

Ultimately, the choices are up to both EV charging station owners, and drivers, regarding the type of fee model that works best for them.

For EV charging station owners, the best, and smartest model, is one that not only helps you recoup costs associated with your EV charging program, but also deliver sustainable and ongoing ROI. The specific market you’re in may help determine which fee model works best for you.

Whether you’re just considering an EV charging program or ready to help power up your local green community while building a future focused revenue stream, get in touch with the experts at NovaCHARGE. We’re helping everyone from municipalities to condos to airports get plugged into the infrastructure that will power the rEVolution.

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