Cross-subsidy solution to EV charging problem

I would suggest a simple (although ideologically fraught) answer to the question posed by Brooke Masters in her column “How to crack the economics of EV charging” (Opinion, May 16). At least for the US the answer is to put the investment into utility “rate base”.

Rate base is the investment in plant and equipment upon which utilities are allowed to earn a return. If charging station infrastructure were included in rate base, utilities would have an incentive to invest in charging. They could build the stations ahead of demand and earn a return while waiting. In effect, all electric customers would support the charging investment during the early days.

I estimate that 1.5mn EVs need about 50,000 charge stations (given current usage) which will cost somewhere between $2.5bn and $5bn, depending on what infrastructure gets into the calculation.

This would add about 2 per cent to industry spending and maybe 0.5 per cent to the average electricity bill at first, until more EVs come on the road. Is this a cross-subsidy? Yes, it is. But do we want EVs or not? Or do we really expect entrepreneurs to put up that money and wait out the losses?

Money no longer costs nothing. Those days are over. Electricity utility executives may not recognise opportunity when it comes along, but they know what rate base looks like.

Leonard Hyman
Author, ‘America’s Electric Utilities: Past, Present and Future’
Sleepy Hollow, NY, US