Sale, Lease, or License?
As discussed above, some residential and smaller commercial property owners may opt for a “plug and play” approach to charging stations, using the Self-Service Model. In those cases, the property owner must be sure to comply with local regulations and other requirements concerning installation and maintenance of the selected charging station, but the sale, lease, or licensing of the real property upon which the charging station is located is not a consideration. For larger commercial property owners, however, some variation of the Service Provider Model is more likely to be desirable, and property owners must consider whether to sell, lease, or license the property upon which the charging stations will be located.
Outright sale of the land upon which the charging station will be located is feasible only when working with providers interested in such an arrangement (and many providers are not). Providers most interested in a purchase of property include some OEMs, some oil and gas companies, and a few providers interested in establishing free-standing service stations. Sale of a portion of an existing parcel of land can be troublesome, however, as resubdivision of existing land can be time-consuming. A sale of the land does have the virtue of making the provider wholly responsible for the charging station, from installation to maintenance to use-related liabilities, but a sale of land usually results in the original landowner having very little control over the new parcel, usually severely limiting the owner’s ability to assure that the new landowner provides the promised charging stations and maintains them in good working order. As a practical matter, most shopping center, office, apartment, or hotel owners are not going to find this option desirable.
Leasing a portion of property has several advantages for property owners and some providers. Leasing generally provides a tenant with exclusive possession of a specific area of property, usually in exchange for payment of rent—though rent can include a percentage of sales at the site. Under most leases, the tenant is responsible for most utility and insurance charges associated with the use of the leased premises and bears responsibility for keeping the leased premises safe for those who enter therein. Because of the tenant’s exclusive possession of the leased premises, the provider usually would be responsible for maintenance and operation of the equipment located on the leased property. Therefore, leasing is advantageous for many landowners who do not want responsibility for installation, operation, and maintenance of the charging stations but who do want the benefits of the charging stations on their properties.
Licensing, or site hosting, in contrast, is a more limited right of use. Most licenses for use of property are revocable and nonexclusive—that is, they have no set term and the use of the land is typically shared with others. A fee may or may not be charged for the right of use. Under most licenses, the property owner retains the primary responsibility for the property and its safety, and, therefore, the property owner most often pays for utilities and insurance and would have at least some share of responsibility for liabilities arising out of the use of the licensed area.
Naturally, both leases and licenses can be negotiated to fit the parameters of a particular situation, but being aware of the differences, and structuring a transaction accordingly, will avoid trouble down the road.
Checklist of Issues to Consider
Number and Availability of Charging Stations Needed
Charging stations may consist of a few enhanced parking spaces or a free-standing station similar to a gas station, complete with restrooms, convenience foods and drinks, and other amenities, or options in-between. A property owner should consider not only the desirable number and location of charging stations, but the hours that charging stations may be used, and the potential burden associated with policing competing users and providing security for theft and vandalism deterrence (for example, for vehicles left to charge overnight). Expansion areas for future needs also may be a consideration. The needs of a small multifamily or office property may be drastically different from a hotel, shopping center, or entertainment venue.
Infrastructure
Charging station installations must comply with state and local codes and regulations, and typically must be completed by a licensed electrical contractor. Especially if L2 or DC fast charging stations will be installed, relocation or amplification of electrical services may be required, necessitating coordination with the local utility company.
Providers can offer experience and proficiency to streamline installation, but those services may come with later trade-offs in terms of profit-sharing or long-term relationships that become less desirable over time. Property owners should carefully consider which business model fits best to maintain appropriate autonomy and the ability to continue to innovate.
Tax Incentives
More appropriately a topic for an entirely separate article, tax and other incentives can play a role in the manner in which charging stations are constructed. Utilities, as well as local, state, and federal governments, and even private companies and foundations are offering a multitude of incentives to develop EV charging station infrastructure. These incentives can provide motivation for a particular deal structure, for both the landowner and provider.
Expenses and Expense Recovery
Charging equipment and supporting amenities will vary based on the number and type of connectors offered, but also existing conditions, such as existing electrical services available and local labor costs. The Department of Energy notes that public and workplace installation of L2 chargers costs about $2,500 on average, while DC fast charger installation costs range from $20,000 to $60,000 per connector, depending on the charging power and number of connectors installed. These expenses will continue to evolve as more competitors enter the market and construction standards become more uniform, but property owners and providers may want to adjust the price for access to the charging station to help recover installation costs if that cost recovery does not compromise incentives received for charging equipment installation.
There is also the obvious ongoing electrical energy expense, which may be provided as a courtesy to visitors or tenants of an office building, for example, but metered and charged to individual users, either at cost or at a markup for other property types. Rates for electricity may vary by time of year, time of day, or overall volume of usage. Charging units may be equipped with credit card readers, require use of a proprietary network membership, or be accessed through an attendant who monitors use—or a combination of these methods, with varied pricing.
Charging Station Type and Speed
Although efforts are being made to render various differing charging technologies more compatible between various brands of vehicles, differences remain. Choosing one protocol over another may limit the utility of a charging station. Currently, there are four connectors in use in the United States for consumer vehicles: (i) the SAE J1772 standard connector (often referred to as a J1772), a round connector that can convey an L1 or L2 charge; (ii) SAE Combined Charging System (CCS) (the same round connectors as the J1772, plus an additional two-prong receptacle, which permits use of L1, L2, and DC fast charging equipment), which is increasingly common in the United States and Europe; (iii) North American Charging Standard (NACS), currently used only on Tesla vehicles, but likely expanding to other brands through announced and future partnerships, which can convey an L2 or DC fast charge (Teslas also come with a J1772 adapter and limited adapters for CCS or CHAdeMO use, which allows them to use non-Tesla L2 and some DC fast charging equipment); and (iv) CHAdeMO, a DC fast connector type used by some Japanese automakers, and the prevalent standard in Asian markets, but not widely adopted in the United States. Other standards, such as the SAE J3068, extreme fast chargers (XFC), and various forms of inductive (cordless) charging are currently available for industrial and fleet uses and in some aftermarket products and may become more widely available.
For commercial property owners offering charging stations to the public or other visitors to their properties, a combination CCS or NACS charger is probably the way to go—for today—but in some cases, it may be more cost-effective to choose one over the other. Given the ever-changing nature of the EV market, however, the key negotiating point is to maintain the ability to change the charging station type (including the ability to require a provider to upgrade or change the charging station type).
Insurance
Installation of charging stations not only involves changes to electrical services, often necessitating changes to fire safety equipment and protocols, possible strains to a local power grid (particularly in areas of extreme weather), and attendant business interruptions, but also is likely to require changes to property management because of modified access to the property and related security considerations. All these changes, in turn, require thoughtful planning for appropriate insurance coverage. Although a property owner’s general liability and property insurance may cover many risks, and providers may have insurance to cover risks arising directly from the use of the charging station, negotiation of a lease or license must address insurance responsibilities—including allocation of risk if available insurance policies change.
Maintenance
Ongoing maintenance of charging stations is a significant issue, both from general wear and from vandalism or misuse of equipment. Failure to properly maintain equipment can convert an attractive property amenity into a source of frustration for stranded EV drivers. Property owners may be able to adequately clean and monitor charging station equipment but are unlikely to have the expertise necessary to repair damaged or malfunctioning equipment. Working with the provider to assure responsive, expert service at a palatable cost is an essential part of any charging station installation plan. While some malfunctions may be covered by manufacturer warranty, negotiation of “always up, always on” service requires a separate maintenance agreement, potentially at a relatively significant cost.
Branding, User Experience, and Networking
The federal government is increasing efforts to make all public charging stations readily identifiable to EV users, but many proprietary networks formed by providers and other parties also offer paid and unpaid subscriptions to software applications that deliver detailed information about charging stations within their network, including general hours of availability or up-to-the-minute availability reporting, charging speeds, comments on security and other amenities, user ratings, and other information. Networks also may provide property owners with useful data concerning the consumers using the charging stations, and even offer marketing opportunities to those users—perhaps particularly interesting for shopping center owners and entertainment venues.
When selecting a provider, a property owner may perceive a benefit or detriment in such a network or want the flexibility to be associated with more than one network, or to reserve certain branding opportunities to itself, and negotiate the lease or license accordingly.
Upgrade and Termination Rights
No matter what deal structure is selected, it is advisable to limit the deal term or allow for termination or modification rights, given the rapidly evolving technology in the charging station industry. Property owners who are early adopters today will not want to tolerate outdated equipment in a year or two, and providers (or at least some of them) will want rights to change their network configuration or update equipment.
All of the foregoing issues (and more) should be addressed in a thoughtful, well-negotiated process between the property owner and Provider. Not every Provider will be a good fit for every property owner, and vice versa.
Levelling Up the Chargers
Level 1 (L1): Level 1 equipment provides charging through residential-type 120-volt AC outlets. Level 1 chargers can take more than 40-50 hours to charge a Battery Electric Vehicle (BEV) from empty to 80 percent* and five to six hours to charge a Plug-In Hybrid Electric Vehicle (PHEV). These chargers are typically used for residential installations and constitute less than 1 percent of public EV charging ports.
Level 2 (L2): Level 2 equipment offers higher-rate AC charging through 240-volt (in residential applications) or 208-volt (in commercial applications) electrical service. Level 2 chargers can take four to ten hours to charge a BEV from empty to 80 percent and can charge a PHEV in one to two hours. Per the US Department of Energy, in 2022, approximately 80 percent of public EV charging ports in the United States were Level 2.
Direct Current Fast Charging (DCFC or DC Fast): DC Fast requires a more expensive, specialized installation and is generally reserved for higher-traffic installations. There are currently three different types of DC Fast charging systems available in the United States, though efforts are being made to make at least some of the systems more compatible with one another. DC Fast equipment can charge a BEV from empty to 80 percent in just 20 minutes to one hour. Most PHEVs currently on the market do not work with DC Fast chargers. In 2022, approximately 20 percent of public EV charging ports in the United States were DC Fast chargers, with this number expected to increase because of state and federal funding earmarked to create a national EV charging network, as well as private fleet installations (including Uber, Lyft, and other private companies).
*Charging speed slows as an EV battery gets closer to full to prevent damage to the battery. In many instances, it is more cost- and time-efficient for EV drivers to charge to 80 percent, then proceed. It can take as long to charge the last 10 percent of an EV battery as the first 90 percent, with some variation among vehicle manufacturer, age of the vehicle, vehicle battery capacity, manufacturer, condition, age of the charging equipment, and even air temperature.
Sources
US Department of Transportation, “Charger Types and Speeds,” available at https://tinyurl.com/bpz67c8n.
US Department of Energy, “Developing Infrastructure to Charge Electric Vehicles,” available at https://tinyurl.com/5cvym9pn.
