SEVERANCE — Two large electric vehicle charging kiosks sit in the gravel parking lot outside the Severance Town Hall, emblazoned with the Xcel Energy logo and the motto “We power the EV charging future.”
The future has yet to arrive as technical problems have plagued the chargers since they were substantially completed last December.
Meanwhile about 20 miles north, at a Kum & Go service plaza, just off Interstate 25 in Wellington, four chargers have been up and running since the summer of 2021.
And Starbucks, in cooperation with Volvo Cars, is building a 1,350-mile charging corridor from Seattle to Denver — the Glenwood Springs charger is already in operation and the one in Broomfield is waiting for Xcel Energy to connect it to the grid.
An EV charging station in the parking lot of Starbucks in Glenwood Springs, July 20, 2023. (Hugh Carey, The Colorado Sun)The Xcel Energy chargers and those being erected by private enterprises and charging networks, like EVgo, raise questions about who should build and who should pay for this infrastructure vital to growing the electric vehicle market.
There is a tug-of-war over the answer between Xcel Energy, Colorado’s monopoly utility, and the private charging companies and retailers. It is a clash that will be played out before the Colorado Public Utilities Commission, with hearings tentatively scheduled for early next year.
Which came first? The EV or the charging station?
Charging companies Tesla and EVgo have filed to intervene in the case, as has Walmart, which in April announced plans to build a coast-to-coast charging network at its stores. The company already has 1,300 chargers in operation.
The battle in Colorado is part of a national debate as an array of states from New York to Georgia to Texas to California have wrestled with the question of whether investors or electric customers should foot the bill
Private charging companies and retailers say the build-out should be left to the private market, which has already put up the lion’s share of dollars and chargers. The entry of a monopoly utility, they say, would have a chilling effect on private investment.
“Private companies can’t risk competition from utility which is using ratepayer funds,” said Ryan McKinnon, a spokesman for the Charge Ahead Partnership, a lobbying group for businesses, including convenience store and gasoline station chains.
By 2030, Colorado will need more than 25,000 public Level 2 chargers, which can give a 12-mile to 80-mile charge in an hour, and 2,500 Level 3 or fast chargers, powering up a car at 20 miles each minute, according to a National Renewable Energy Laboratory analysis.
The Colorado Energy Office estimates the price tag for chargers to meet Gov. Jared Polis’ goal of having 940,000 EVs on the state’s roads by 2030 is $850 million.
There are currently 883 fast charging ports in the state and until there are enough to assuage drivers’ worries about their batteries running low, so-called range anxiety, it will be hard to boost EV sales.
“We really believe this is an all-hands-on-deck moment,” said Nadia El Mallakh, Xcel Energy’s vice president for clean transportation. “We are trying to deal with the chicken and egg problem.”
In 2020, Xcel Energy got the greenlight for a pilot to build chargers and selected six locations — Breckenridge, Severance, Eaton, Lakewood, Monte Vista and Central City — as their sites.
As of April, Xcel Energy reported to the PUC that only the Severance chargers had been built, though they were not in service.
“The Severance site is not currently open to the public due to a number of unresolved items impacting the customer experience such as inadequate charger power output, lack of power sharing, and issues with pricing and payment,” the company reported.
Xcel Energy is now proposing to build another 460 chargers at a cost of $145 million. “We’ve looked at the state’s goal and what is needed to get there and there is a gap,” El Mallakh said.
The chargers are part of a comprehensive $440 million transportation electrification plan, to be paid for by customers and includes programs to promote EV sales, installation of home chargers and electrifying commercial fleets.
“Xcel-owned chargers would take charging revenue on which the private market relies to sustain its economics,” Christopher Villarreal, a consultant for some of the country’s biggest charging companies, said in testimony to the Minnesota PUC, where Xcel Energy had a similar proposal.
Public vs. private business model
So, at its core this is a contest between business models.
As a regulated monopoly Xcel Energy is the sole source of electricity in its service area, serving 1.5 million customers, and it makes its money by building new infrastructure, such as power plants and high tension lines, and putting those investments into the rates its customers pay with a guaranteed return set by the PUC.
The basic idea is that it would be redundant and expensive to have companies competing at this scale so a regulated monopoly is a more efficient and economical solution.
But EV chargers are more like rooftop solar, which is largely the domain of private installers, said Frank Lacey, an energy market consultant and co-author of a study supporting private charging.
“There is no natural monopoly in EV charging so why give it to a monopoly?” Lacey said. “Where the wires end the monopoly should end.”
Namaste Solar workers install solar panels on a home in southeast Boulder May 23, 2023. (Olivia Sun, The Colorado Sun via Report for America)Like a power plant, once Xcel Energy builds and operates their chargers they go into rates and the utility starts making money. “The utility gets its money upfront. If the charger is broken, or unused it doesn’t really matter,” McKinnon said.
All Xcel Energy customers pay an add-on fee or rider on their bills to fund the utility’s transportation electrification plans. Under the 2024-26 plan, it would be 77 cents a month. The actual amount could be offset by as much as $29 million in charging sales, the company estimates.
An existential crisis looms for filling stations
By contrast private charging companies or retail chains raise cash through stock, bonds and loans to build their chargers and then recoup their money only when they are used.
The Kum & Go chargers in Wellington are part of a $10.3 million Colorado Energy Office program to develop 34 fast charger locations along I-25 and I-70.
“We partner with local governments where we can, but the goal is to place chargers at all 400 of our sites,” said Ken Kleemeier, the company’s vice president for fuels.
Kleemeier said that a four-port fast charging station costs about $1 million and even though the investment may not yield a quick return it is necessary for the company.
On a recent summer afternoon, the Wellington EV ports stood idle while six to 10 of the 20 gasoline pumps were always in use — but BloombergNEF, an energy analyst, is forecasting sales of gasoline to peak in 2027 and then decline.
“It is important to be ahead of the curve on the EV space,” Kleemeier said. “We want to have a good grasp of the EV charging business before the inflection point.”
A bank of electric vehicle chargers in Wellington is one of the first to be included at a Colorado Kum & Go gas station and convenience store in in Colorado. (Olivia Sun, The Colorado Sun via Report for America)El Mallakh said that Xcel Energy’s proposal represents less than 10% of the 6,000 chargers that are needed in the company’s service area, leaving plenty of room for private initiatives.
But letting the monopoly utility in will roil the market, opponents say. Xcel Energy’s plan is to partner with retail stores, grocers and restaurants, placing chargers in their parking lots for free and also providing maintenance. Other chargers would go along major highways and in rural areas.
Xcel Energy’s plans to install 460 chargers, with about 580 charging ports, across 130 charging hubs.
“Xcel would be picking winners and losers,” Lacey said. “If Xcel puts a charger in a Target that pretty much rules out putting a charger in the Walmart across the street.”
Discouraging private investment
The utility also controls when chargers get connected to the grid and the investments for lines and transformers to service them.
“Xcel’s government-granted monopoly structure — lays at the heart of Xcel’s ability to exercise market power if it is allowed to compete in unregulated markets,” said Villarreal, who represented major private charging networks including Electrify America and EVgo Services, in the Minnesota case.
The private market, however, comes with its own drawbacks, Erich J. Muehlegger, a University of California Davis economics professor and an Xcel Energy expert witness, testified in the Minnesota case.
“The private sector’s singular focus on profits creates two potential challenges,” Muehlegger said. Private companies will build at their own pace based on their business needs and will only build in the areas that are most profitable.
The result, Muehlegger said, is that the private sector alone will not build a charger network at the speed or scope needed to meet the growing EV market.
The demand is indeed great and the financial challenge is huge. Nationally, $40 billion is needed to build out the charging network by 2030, according to Atlas Public Policy, a clean energy consulting group.
Curtis Claar charges his Nissan Leaf electric vehicle at the EV Trail fast-charging station in Walsenburg, near Interstate 25. It took Claar nearly three years to make the Walsenburg station a reality. (Mike Sweeney, Special to The Colorado Sun)The private sector has already made $13 billion in charger investments and the federal government has committed $6 billion, while electric utilities have allocated $2 billion to charging, according to an Atlas report.
The prospects for raising funds for private charging networks are good, according to Anne Smart, vice president for public policy at charger equipment maker and network operator ChargePoint.
“Over the course of the last couple of years, we’ve seen automakers make commitments to go 100% electric,” Smart said in an email. “We are seeing the private market for electric vehicles increase and so I think there’s a lot more opportunity for private capital to be able to go out, install charging stations and provide competitive charging services.”
In Colorado, state initiatives will provide $400 million of the needed $850 million over the next decade, according to Will Toor, executive director of the Colorado Energy Office.
The state is also in line for $57 million in federal aid for chargers over the next five years from the federal Investment and Jobs Act.
“I think it’s really going to be a combination of state and federal government funding, funding from utilities and investment by the private sector,” Toor said. “We think really all of those sources of funding are critical to achieving the level of investment required.”
Other states, however, have been wary of letting utilities have a free hand in the charger market.
In New York, regulators ruled that chargers are comparable to distributed energy sources, such as rooftop solar, and that “concerns over discouraging potential competitive investment through utility ownership are very similar,” James Denn, a spokesman for the state Department of Service, said in an email.
The state policy is that “utility ownership should only be allowed in cases of market failure,” such as in low-traffic, rural areas.
Utilities can’t own charging networks in California
This spring Georgia, Texas and Oklahoma all passed laws limiting the utility operations in the charging market. In all three, a utility can only operate charging stations in a company separate from its regulated electricity business so that electricity customers are not impacted.
The Texas law also has some siting limitations and “prohibitions on market power abuse, cross-subsidization, co-branding and preferential treatment between regulated and competitive activities.”
After charger pilot programs by investor-owned utilities were deemed too “piecemeal,” the California Public Utilities Commission in December voted to put the development of the charger network under a $1.8 billion state-directed plan.
“The utilities will not be permitted to own any of this infrastructure and the rationale for that is that will mean lower costs for ratepayers because the chargers and any other equipment will not be in rate base,” then CPUC Commissioner Clifford Rechtschaffen said in presenting the plan.
By contrast in 2019, Colorado passed a bill giving the state’s two investor-owned utilities, Xcel Energy and Black Hills Energy, the power to build chargers using customer dollars, with the sweeteners of getting accelerated cost recovery on investments, performance bonuses and a guaranteed return.
“It is settled law in Colorado,” El Mallakh said. A similar law was passed in Minnesota, another large Xcel Energy market.
One criticism leveled at utility-financed chargers is that customers who don’t have EVs and may never have one are paying something they don’t use, but El Mallakh said “everyone gets clean air and downward pressure on rates.”
In filings with the PUC, Xcel Energy estimates its three-year transportation electrification plan will remove a net 28 million tons of carbon dioxide emissions, the principal greenhouse gas, with a social benefit of $2 billion.
In addition, there would be $7.6 billion in fuel savings and $1 billion in rate impacts as increased electricity sales generate more revenue and ease the pressure for rate hikes.
“Everyone has a role to play here”
While there may be a dispute over who builds the chargers, everyone agrees that both utilities and private companies have a part in the build out.
“Everybody has a role to play here,” said Ellen Kennedy, a principle in the carbon-free transportation program at energy consultant RMI. “There is no single side that is going to be able to do this on their own.”
“I don’t see utility ownership as necessary for unlocking the EV charger market,” Kennedy said, “but there are a lot of opportunities for utilities on the make-ready side.”
The make-ready side is all the generation, wires, transformers and planning that has to go into accommodating a fast growing charger network.
“An important element of the utility’s role has been in providing the make-ready infrastructure in many cases, at a very localized level,” Toor said. “There may be a need for larger transformers on the actual site where the charger is going to be installed.”
Both Xcel Energy and the private charging companies are focusing on installing “fast chargers,” which can recharge a battery in less than an hour. They require a short but large burst of electricity.
“EVs are not the same as other loads because the usage pattern is very different, much less predictable,” said Ed Gilliland, senior director at the nonprofit Interstate Renewable Energy Council. “You are having dozens and dozens of mini-factories coming on the grid all over the place.”
RMI’s Kennedy said “more complex analyses of electricity demand and capital planning to meet projected needs has to be done and utilities are the ones that have to do that.”
In Minnesota, Xcel Energy had proposed a $197 million program to install 700 high-speed charging stations, but in June withdrew the proposal after the state PUC cut a proposed electricity rate increase in half, to $302 million.
“The commission’s decision on our recent electric rate case will limit our ability to continue to lead the clean energy transition,” the company said in a statement.
The company is revising its transportation electrification plan and will resubmit it in November, according to Michelle Aguayo, a company spokeswoman.
The Minnesota Department of Commerce, representing ratepayers before the PUC, supported Xcel Energy’s withdrawal of the charging plan, but not because the cut in the electricity rate increase.
The department noted, in a PUC filing, that as of March the company had no operating fast chargers even though pilot programs were approved in Colorado in December 2020, in New Mexico in 2021 and Minnesota in April 2022.
“In its withdrawal request, Xcel fails to acknowledge recent developments that call into question its aptitude at operating in the EV space,” the commerce department said. “Xcel should reassess how it can best support transportation electrification.”
It is, however, unlikely that the private market alone will address the equity and diversity needs of building a charging network, El Mallakh said. “Private companies need very high utilization to make it work,” she said.
The private market will not meet the needs of low-income or rural communities and that is one reason the state gave utilities the ability to build chargers, El Mallakh said. “This is the path Colorado has chosen and we are trying to do our part.”
The Xcel Energy charger in Severance should be up and running sometime later this year, the company said.
A Chevy Bolt gets a charge at an Electrify America fueling station outside the I-70 Diner in Flagler on Sept. 27, 2020. (Dana Coffield, The Colorado Sun)
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