Revenue issues, Part 3: A kWh is not a measure of service

This time around I want to discuss a topic that may be obvious to some people, but is still worthy of discussion and debate, namely the use of kWhs as the basis for pricing of an EV charging service. As we all know, the traditional business model of charging for the energy consumed has been the de facto business model in the utility business. Whilst also this is likely to change in the future, I wanted to make the point of why an EV charging business should not even be launched with purely this earnings model.

The first set of reasons is related to the nature of the EV charging business. The customers will use different types of charging based on their needs at the time and whilst the amount of kWhs charged may be exactly the same the value of the service is entirely different. For example, consider the acceptable charging service along a major highway versus charging overnight at your house. The 15 minute DC charge of 15 kWh commands a premium along the highway, but has no particular value (nor practical application) in a residential environment. Therefore alternative pricing options need to be presented to the consumers for various use case scenarios and they have nothing to do with the amount of energy charged.

The second set of reasons is perhaps more interesting, but less obvious. Measuring and pricing for kWhs is relevant for as long as there is a current flowing into the EV battery. However, one of the key issues for the profitability of the EV charging infra investment is the utilization rate of the equipment. If you base the business on kWhs only the equipment maybe reserved, but not utilized, when the battery is fully charged and the car parked at the charging pole therefore reserving it. This is a very common phenomenon in practice and cannot be tackled unless there is an incentive for the customer to move the car (or the service provider continues to earn money even though no charging is taking place).

For example, time-based pricing schemes provide a way for billing the customer for the time spent rather than kWhs. In practice this means either that the customer continues to pay for the service (not purely the kWhs) or that the equipment is freed for other customers to use the service. Either way, the end result is beneficial for the service provider and just as importantly the pricing is also fair for the consumers.

I am not suggesting that kWhs are completely meaningless in the EV charging service business, but I am suggesting that other issues need to be considered as well. Finding the right pricing model and parameters may just be the most important decision for the EV charging service provider in the early stages of the business. We have ideas (and software) for helping with the pricing, but not the right answers. However, we do know what the wrong answer is no matter how well the kWh-based model may have worked in the past. We can also suggest a number of alternatives for service pricing.

Get in touch with us and hear what options could be made available for the service pricing.

One response to “Revenue issues, Part 3: A kWh is not a measure of service

  1. Pingback: Revenue issues, Part 4: It is not worth replicating the “pumping gas” service | AC2SG Software - IT Solutions for Smart Grids·

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