The years ahead will bring significant changes to one of the core aspects of modern civilization: mobility. With the imminent and devastating effects of climate change being felt around the globe, significant policy pressure and changes in consumer behavior have led to an explosion of household EV purchases in recent years, with over 20 million passenger EVs now on the road. Electrification has also spread to other segments of the transportation landscape, including commercial fleets of vocational trucks, and busses and two and three wheelers.
Substantial investments in electric vehicle charging infrastructure will be required to service this rapidly growing number of zero-emissions vehicles.
*Source: Bloomberg New Energy Finance
The state of California has emerged as the leader of the electric vehicle revolution in the United States, with over 40% of the total US sales of plug-in electric vehicles taking place in California through 05/22 requiring infrastructure to charge. EVSE1 and Alco Charging Solutions are addressing this problem head-on by installing Level II and DC Fast Chargers in Sacramento and Los Angeles.
Background: Types of EV Chargers
Chargers are assessed in five main groups: home, public, workplace, direct current (DC) fast, and multiunit dwelling. Home chargers are chargers at private residences, typically single-family homes with garages or on-street parking. Multiunit dwelling chargers are home chargers at residential locations with several tenants. Public chargers and DC fast chargers are those with some public access, including those with membership-constrained usage. Workplace chargers are intended primarily for employees that commute to work. There is some overlap in usage between the categories: for example, workplace chargers are sometimes accessible to the public, whereas public chargers are often used by people charging during work hours. Roughly 80% of employers provide some form of parking at their workplace (Winters & Hendricks, 2003), suggesting that public charging usage during work hours will fall if adequate workplace charging is provided.
The home, multiunit dwelling, workplace, and public chargers can be classified as Level 1 or Level 2, which are electrical standards corresponding to voltages and charging speeds. Level 1 charging is typically done with a standard 120-volt outlet and provides roughly five miles of battery range per hour of charging, whereas Level 2 charging is done with a 240-volt outlet and provides roughly 20 miles of range per hour, though it is possible to supply more than twice that if the vehicle allows for it. DC fast chargers are normally rated to powers of at least 50 kilowatts (kW), up to over 300 kW, with voltages of 400 to 800 volts, providing anywhere from 50 to 300 miles of charge in 20 minutes. These chargers require specialized and expensive equipment, and are suitable for corridor charging along major highways, as well as charging depots analogous to gas stations in and around cities.
Precise delineation of chargers by location and use can be more complex. In some cases, curbside public chargers located in residential areas will be used overnight by people without access to home charging. The International Clean Council on Transportation (“ICCT”) defines public Level 2 charging as any station not located at a workplace that is open to all EV owners, including destination charging at supermarket parking lots and parking garages, and curbside charging stations owned by local or state governments. Public chargers can include chargers at government buildings’ parking garages, and commercial or recreational destinations like grocery stores, movie theaters, and parks.
DC fast charging includes both stations in urban areas and along highway corridors to serve long-distance travel. (Adapted and presented from information on the ICCT White Paper). EVSE1 will acquire 47 Level II Chargers and 7 DC Fast Chargers as part of this program.
Investors fund EVSE1 with up to $2.215MM for the acquisition of the Existing Chargers and the financing of the construction of the New Chargers. (Total 47 Level II Chargers, and 12 DC Fast Chargers).
The Existing Chargers continue operations overseen by ACS. Proceeds from utilization and any grants or credits earned by EVSE1 are now attributable pari passu to the Investors.
The New Chargers are built by Alco Charging Solutions, on behalf of EVSE1 and similarly, all profit and loss is now attributable pari passu to Investors.
The profitability of EVSE1 is based on two key criteria: the utilization rate of the chargers and government incentives provided by the California Air Resources Board (“CARB”).
Over the twenty-year projected period, annual revenue grows from the ~$200,000 in 2021 (actuals) to nearly $1.8MM based on increasing utilization and corresponding government incentives. Similarly, EBITDA grows to nearly $1MM annually by 2032.
In the first years post investment, the contribution to revenue from government vouchers and credits represents greater than 50% of the revenues of EVSE1 (description of how the CARB incentives work below). As utilization increases, this contribution stabilizes at ~30%.
To incentivize the construction of EV charging infrastructure, the government of California provides two vouchers based on certain criteria. The Existing Chargers, acquired by EVSE1, received revenue from the voucher program in calendar years 2021 & 2022.
The “Voucher”, represented above in blue, of $0.16 per kWh sold is only earned when the EV Chargers are utilized. This works similarly to a matching 401(k), where per kWh sold to a customer for $0.16/kWh, CARB will pay EVSE1 an additional $0.16/kWh.
The “Capacity Voucher”, represented above in orange, is reserved for DC Fast Chargers only, and is intended to incentivize investment in the latest technology. An amount of $0.16 per kWh AVAILABLE is paid to EVSE1.
Importantly, the amount generated by the Capacity Vouchers, will be received by EVSE1 for providing availability to the DC Fast Chargers. In essence, this means a projected amount of $852,000 will be paid to EVSE1 for the construction and operation of its DC Fast Chargers.
An additional $30,000 in tax credits are available per site installed; these are currently not modeled into EVSE1 projections.
The utilization rate of the EV chargers is a key driver of economic performance, and the assumptions used are based on a limited set of historical data, market trends for electric vehicle purchases, and government legislation and mandates to move to zero emissions.
Utilization rates for EV chargers were substantially negatively affected by COVID as there was less travel and fewer people working at offices. These rates have steadily increased since the effects of COVID have dissipated.
EVSE1 is conservatively modeling utilization rates at the actuals for the first-year post investment (~8%) with a modest growth curve on forward utilization, spurred by the large increase in demand for electric vehicles.
Location: Go, No-Go Analysis
Like real estate, the profitability of an investment in EV charging infrastructure is highly dependent on its location, a key driver of utilization. Alco Charging Solutions (more information on “ACS” below) does a detailed analysis of multiple criteria prior to assigning a final “score”, guiding selection of an appropriate site for charging infrastructure. Analyzed criteria include, but are not limited to:
After this analysis a score between 0-100 is assigned to the location:
Only sites which are above 70% are considered in the go no-go analysis phase, after which substantial further research, including site visits and engineering studies are done to derisk the economic opportunity.
Alco Charging Solutions (“ACS” or the “Operator”)
Alco Charging Solutions, LLC. (ACS), founded in October 2019, is a wholly owned subsidiary of Alco Building Solutions founded in February 1995. ACS was founded as a division of the parent company to specifically target third-party ownership electric vehicle charging infrastructure opportunities on behalf of the parent company and its partners.
ACS’ approach to the market has been concentrated on multi-site location portfolios of both retail and commercial properties, evaluating the aggregate value proposition with an internal set of proprietary metrics for financial forecasting.
The third-party owner approach is unique in nature relative to other competitors within the charging space, allowing for the syndication of said assets to qualified interested parties. On behalf of its partners and property owners, ACS manages the following activities within their work:
- site evalution/revenue forecasting;
- design, professional engineering (multi-discipline);
- permitting and regulatory;
- material procurement;
- startup/commissioning; and,
- equipment operations/maintenance.
These activities are governed by a Master Services Agreement between EVSE1 and ACS.
History of Operations
Alco Charging Solutions, LLC. (ACS) signed its first operations & maintenance contract in November 2019, which remains in effect to date. The firm operates the Maintenance & Operations (M&O) component of the business for both third-party ownership contracts and for ownership of their EV Charging equipment that is installed at their properties as well.
Since its inception, ACS has nearly 100 EV Charging ports that the company has both installed and currently manages M&O activities in the State of California. ACS has experience implementing and maintaining electric vehicle charging stations for several household names, as seen below.
EV Infrastructure Experience
Alco Charging Solutions, LLC. has successfully implemented EV Charging equipment installations with partners, including but not limited to, the following: