Closing the EV Infrastructure Gap Through Regulatory Architecture
Written by Kfir Kedem
Being in Brussels gives me the opportunity to attend official EU discussions with MEP’s and other officials as speakers. Given my educational and professional background, it was a no-brainer to join the discussion regarding electromobility. One topic that was truly striking was the need of €260 billion in investment that was needed to develop a comprehensive EV charger network across the continent. A great point that was brought up was that even the smallest village in France has a fuel pump and that we can expect a slow and steady adoption in the same style that fueling was adopted continent-wide with the increasing popularity and affordability of the passenger car.
For such a business to be attractive to investors there must be one of two things, although having both would be dramatically more attractive:
Stable long-term cash flows
Exit opportunity
A utilization rate of at least 15% is needed in order for a charger to be profitable according to AMPPAL. Additionally, it was discussed on the panel that royalties are not charged by CPO’s. This keeps the use of chargers affordable and lowers the barriers for the customers to adopt the technology. Instead, they rely on income from energy purchase and markup, selling the infrastructure, selling their proprietary software as services, and advertising space on the charging screen. So the utilization rate needs to be 15% and/ or the income from their SaaS or advertising must pay back their investment in the costly R&D, charger production, and installation on existing real estate while ensuring a return that compensates for long-term capital deployment.
Furthermore, the current reality is perfectly displayed by the map below which shows that over 60% of the EV chargers in Europe are installed in 3 countries: Germany, France, and the Netherlands.
The countries that are currently red are moving at a significantly slower pace to install this infrastructure. This leads to believe that deployment is highly concentrated in core markets, while other Member States are progressing at a slower rate. This suggests that future expansion will increasingly need to address geographic imbalance rather than purely aggregate volume. As such, the challenge is not only scaling infrastructure, but ensuring that capital flows to regions where utilization may initially be lower and risk perception higher.
When it comes to an exit, it is widely known that these chargers have gone from an innovative technology to a mature commodity. As a result, their price eroded and an exit that reaches desirable multiples on investment is probably not achievable at the same scale as it may have been a few years ago. Public market corrections in the broader EV ecosystem have also influenced investor sentiment, reinforcing the importance of regulatory stability in long-duration infrastructure assets.
As stated earlier in the article though, the EU is able to increase the incentive for such investments through regulations. From my own research and to emphasize not from the discussion, it seems that regulation could be done through these means:
Guaranteeing a minimum revenue floor, for example by guaranteeing revenue based on charger availability as opposed to utilization thereby improving revenue predictability without distorting consumer pricing
Standardize grid connection by mandated capped costs and clearer timelines to reduce administrative uncertainty
Harmonize EU-wide rules for demand response and frequency regulation to enable cross-border consistency in ancillary service participation
Reform retail electricity pricing for CPO’s by reducing peak-demand charges so that tariff structures better reflect system optimization objectives
Use public funds to absorb initial losses on charging portfolios as a catalytic mechanism to crowd in institutional capital
Such regulations have been implemented across other industries and have led to the attraction of private investment. Applying them to this case would not replace private capital, but rather recalibrate the incentive structure so that private capital can participate at the scale required by European climate and mobility objectives.
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