THE TD COWEN INSIGHT
Since our 2021 launch in the EV charging sector, plenty has transpired. Supportive policies, new technology, new business models, M&A, and general stock weakness have occurred over the last several years.
The sector is now at a crossroads. A vast and reliable network of chargers is necessary to keep up with the growing EV fleet. Questions around funding availability, installation cadence, and competition remain.
EV CHARGING INFRASTRUCTURE REQUIREMENTS
A ubiquitous and reliable network of public EV charging infrastructure remains critical in driving further adoption to curtail CO2 emissions from the transportation sector (~25% of all emissions). Our updated analysis suggests the need for 1.7MM public charging ports installed by 2030. This would be +13% higher vs our 2022 estimate and +60%, +39%, +44%, and -20% relative to industry sources such as ICCT, NREL, McKinsey, and BNEF, respectively. However, what’s needed and what realistically gets installed are vastly different given installation and permitting delays alongside funding constraints.
EV CHARGING FUNDING CURRENTLY FALLS SHORT
EV Charging funding comes from 3 main sources: governments, utilities, and enterprises. Currently only $24B in funding has been announced which is below our estimate of $91B required through 2030.
Tepid macro conditions have made Fortune 500 companies reticent to deploy additional capital for build-out despite an increase in utilization suggesting they should. If this pattern persists, governments and utilities could be looked upon to do more. However, an increase in government support is unlikely given significant funding already provided.
WHAT WOULD BE REQUIRED TO REACH 1.7 MILLION PUBLIC CHARGERS 2023?
Ultimately, more market-driven solutions, particularly within the fleet segment, will be required to hit the $91B goal. Our estimate of 1.7MM public chargers would require an acceleration in installations from the 2022 pace. If this does manifest, we think the industry would be a healthy one with several winners. The U.S. is currently on pace to reach President Biden’s 500K port goal. If the number of ports falls short there charging hardware and services TAM would be less and increases the risk that EV adoption cools.
UNIQUE PERSPECTIVE ON THE EV CHARGING INDUSTRY
We believe this document contains several proprietary analyses not likely done by others across the Street. We analyze the following:
- Port forecast
- Station economics
- Vehicle charge curves
- Temperature implications on charging
- Fleet charging
- Transformer shortage implications
Our updated proprietary infrastructure model results in distinct TAMs for hardware, energy, and software services as a bevy of industry participants look to take advantage of the various needs of this nascent sector. We also dive into charging station economics to forecast the return profile of a public DC fast charging station and highlight how federal policy initiatives can augment returns via lower capex.
EV CHARGING MARKET FORECAST
We see $91B in investment required for publicly available U.S. EV charging hardware and installations for passenger vehicles with another $14B required for commercial vehicles through 2030. Our estimates are supported by a U.S. EV fleet of 43.5MM (passenger + commercial) by 2030, growing at a +37% CAGR from 3.4MM EVs in 2022. Ultimately, this results in 20.8MM passenger vehicle charging ports installed by 2030. Of those charging ports, 83% (17.3MM) will be installed at home.
We forecast approximately 1.7MM public passenger charging ports by 2030 delivering 43 terawatts of electricity. This would equate to an $18.2B energy sales TAM. As for station economics, we find by leveraging federal programs, four 150kW DC fast chargers can generate a robust 91% IRR with a 3-year payback. However, no matter the incentive, economic returns are generally dependent upon utilization.
Overall, auto OEMs, which collectively have announced nearly $600B in EV investments, are beginning to do more with the DC fast charging JVs. Investments like these serve as recent examples of what appears to us as a renewed sense of urgency to fill the infrastructure gap. This gives us hope that the situation can improve.
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