Does Electric Need A Recharge?

Electric vehicle sales have not met analyst estimates, but there are reasons to be optimistic

Exactly one year ago,CSNews proclaimed in a story titled "It's Electric" that "2012 could be the year of the electric car." This year, some great strides have been made, such as 7-Eleven Inc. opening electric vehicle (EV) charging stations at four Illinois Tollway Oasis locations, Murphy USA opening Indiana's first Level 3 quick-charge EV station and Aloha Petroleum Ltd. opening fast-charging EV stations at three of its Hawaii Aloha Island Mart stores.

However, while most experts CSNews spoke to believe electric vehicles will have their place in the fuel marketplace, few feel they are the petroleum alternative of the future.

Several reasons were cited, but two things best zone in on the problem: the higher cost for consumers to purchase electric vehicles vs. their traditional counterparts, and "range anxiety," which perhaps presents the larger challenge. Range anxiety refers to customer concerns about purchasing an all-electric vehicle and being stranded en route when traveling from point A to point B.

Dan Gilligan, president of the Petroleum Marketers Association of America (PMAA) is one industry insider who believes all-electric vehicles have a limited future. "I can see some interest in large cities for electric vehicles," he told CSNews."But what happens when people in other areas of the country get stuck and run out their electric charge? You don't have emergency service vehicles equipped with electric charging stations to help motorists."

Gilligan did say that hybrid vehicles running on electric and gas have a brighter future than their all-electric counterparts, but he still doesn't believe those vehicles will take a huge market share from traditional petroleum.

That doesn't mean all is lost for electric vehicles. In total, there are currently 10,286 EV charging stations in the United States, according to the U.S. Department of Energy. Although that figure pales in comparison to the 160,000 U.S. stations for gasoline-powered vehicles, EV charging stations outnumber ethanol and natural gas pumps by more than three-fold, according to the data.

Mike Calise, director of electric vehicles at Schneider Electric's North American Power division, admitted that the goal set forth by President Obama in his January 2011 State of the Union Address to have one million electric vehicles on the road by 2015 is not reachable. Hence, there's been a media focus on how EV sales have failed to meet aggressive analyst estimates.

However, the director at the Palatine, Ill.-based manufacturer of EVlink electric charging solutions said much more attention should be directed toward the massive growth that EV sales have experienced year over year.

"If you look at the numbers, in 2010, the only electric vehicle was the Tesla Roadster, a handcrafted car for a tiny part of the market," he noted. "In 2011, the Nissan Leaf and Chevy Volt were introduced. In that one-year period, we went from 2,000 U.S. electric vehicles being sold to 20,000 being sold. That's a 10-time jump. I think that's pretty darn good."

According to Calise, another 20,000 electric vehicles were sold in the first six months of 2012 in the U.S. "Even more electric vehicles would have been sold if not for production problems," he said, alluding to reports surfacing last year that General Motors Co.'s Chevrolet Volt experienced fires involving its lithium-ion batteries. "The problem has been production, not demand."

Despite Chevy Volt's alleged production snafu, Calise said EV production problems are dissipating. "The Ford Focus Electric has now been introduced," he said, "[as well as] the [Toyota] Prius Plug-In Electric, the Toyota RAV4 EV, the Mitsubishi MiEV, the Tesla Model S, the BMW ActiveE — a predecessor to its i series — the Honda Fit and basically every other automobile manufacturer that has announced plans for an electric vehicle or a plug-in hybrid."

Consumers need a place to charge their EVs, though. Calise noted that Schneider Electric has a rule of thumb that suggests that for every EV that comes out, there should be 1.3 to 1.4 electric chargers to support the growth.

"Overall, we're pleased with the growth of the electric vehicle industry," the director of electric vehicles said. "I like to look at it as a nine-inning ballgame. We're in the bottom of the second inning. Frankly, we're doubling sales [in this market] so we're feeling good about the overall numbers, contrary to some very lofty expectations."

Eaton Corp. is another supplier that is on board regarding the future of EVs. The Cleveland-based company manufactures the EV chargers that were installed at the three Murphy USA sites.

"It's an emerging market," noted John Wirtz, Eaton's business unit manager for electrical transportation infrastructure. "Electric vehicles will be needed due to CAFE [corporate average fuel economy] standards. The government has set those standards at 35.5 miles per gallon in 2016 and 54.5 miles per gallon by 2025."

Wirtz added that automobile manufacturers have stated it will be difficult to achieve those standards with traditional petroleum-fueled vehicles, making fuel alternatives such as electric necessary.

THE PLUSES

Clearly, there are diverging opinions about electric vehicles. Experts do mostly agree about the advantages of owning an electric vehicle, though. Refueling is cheaper than petroleum. In addition, EV chargers continue to get faster and could some day match the speed of gas pumps. Also, EVs are considered more environmentally friendly compared to petroleum.

And then there's the simple fact that several retailers believe in building EV charging stations. Providing the most staunch support is drug and home beauty aid retailer Walgreens, which thus far has built approximately 800 electric charging stations nationwide.

Another possible future home to EV chargers could be McDonald's Corp. The quick-service restaurant giant teamed with power company CEZ AS to open its first EV charging station in the Czech Republic on Aug. 22. It's too soon to say if McDonald's will follow suit in the United States, but it is something worth watching.

Returning to the present, several c-store chains have already entered the electric game by at least testing EV chargers, including Aloha Petroleum. It opened DC fast chargers at three of its Aloha Island Mart Oahu stores in July. The fast chargers are named as such because they can recharge an electric vehicle in less than 30 minutes.

Richard Parry, CEO of Aloha Petroleum, told CSNews that installing the chargers was a test with little risk because the state of Hawaii, progressive by nature, offers plenty of tax incentives to consumers who purchase EVs, as well as to gas station owners to help pay for the costs of the electric charger infrastructure. Federal funding and assistance from utility companies also are available in the 50th state.

"The state has begun to offer free parking at metered parking spots for people with electric cars," said Parry. "For us, the incentives are so good that the costs to install electric chargers were minimal. We had been looking into the potential for electric and figured out that the best way to figure it out was to be a part of it."

Since the three EV chargers opened, consumers have taken advantage of the alternative fueling option, Parry relayed. "It varies by station, but we've been getting quite a lot of usage," he said. "That's especially true at one of our stores."

Alex Alexandrou, Murphy USA's senior manager of retail programs and business development, reported that customers are using its quick chargers as well. "There has been significant use of the infrastructure for those customers who have electric vehicles," he said. "We're trying to understand consumer habits better…We're all about providing our customers with another option."

In addition to installing Indiana's first Level 3 quick charger adjacent to a Walmart, Murphy USA has another EV charger in Chattanooga, Tenn., connected to a Murphy Express c-store, and the chain added a third charger, also near a Walmart in Indiana. According to Alexandrou, each location chosen based on a sophisticated equation that took into account such factors as demographics, future trends and feedback from auto manufacturers Mitsubishi and Nissan.

One challenge Aloha Island Marts continue to face is what to charge — if anything — for the electric recharging. Currently, its three EV stations charge nothing for the service. "We haven't quite figured out how to charge people for [EV charging]," said Parry. "Do we say it costs $5 or $10 to charge a vehicle each time? Or do we put people on a monthly plan where, for example, we charge them $20 a month and they receive two free [electric] charges?"

Murphy USA does not yet charge for the right to charge an electric vehicle either. "You can't look at the kilowatt charge a store has for electric and decide to add a premium and charge it to the consumer," said Alexandrou. "That's not sustainable. You have to incorporate your non-fuel SKUs to the charging offer if you are to have a sustainable revenue model moving forward."

However, electric charging does provide other benefits to the stores. According to Parry, consumers rarely seek an electric charge when their battery is empty. Instead, they often look to charge about 50 percent to 60 percent of the vehicle, which takes about 20 minutes.

During that time, consumers need something to do. While charging their EVs, Parry said customers often enter the Aloha Island Mart convenience stores and purchase merchandise. "I definitely think it will help our in-store merchandise sales," he said. "We're definitely bringing in customers who wouldn't have come [into] our [parking] lot otherwise."

Alexandrou noted that there are only 17,000 electric vehicles on the road in the U.S. today, simply not enough to impact Murphy USA's in-store merchandise bottom line at any significant level. But he did agree that EV charging stations open up other revenue possibilities.

"Today, you don't have enough traffic flow at the charging location to impact revenues," he said. "But in the future, we will. Successful retailers will be the ones who implement additional sources of revenue at the charging station. For example, being able to advertise at the charging station can provide a significant advantage compared to those just providing a charging experience."

More specifically, Alexandrou said there are many cross-merchandising or cross-marketing opportunities available to retailers at EV charging stations, such as point-of-sale offers.

According to Parry, Aloha Island Mart has no current plans to expand EV charging to more locations. But he said the c-store chain was certainly "open to the possibility."

For Murphy USA, Alexandrou said the company will look to add more EV stations in the future. "We're confident we'll be able to identify the next locations [to place EV chargers] in the next six to nine months," he noted. "But that's predicated on where the marketplace is headed."

Looking ahead, larger electric batteries and improved technology could combine to significantly reduce EV charging time, which stands at about 30 minutes for a Level 3 fast charger now. In fact, according to Wirtz of Eaton, his company is testing technologies that could make EV charging faster.

In the future, Wirtz believes the majority of EV fast charging will be done at c-stores. "Today, many consumers go get gas and then go into a convenience store to get milk, eggs, a candy bar, coffee, etc. We believe that tomorrow, that consumer will go into a convenience store to get milk, eggs, candy bar, coffee and fuel."