Global EV adoption is accelerating thanks to cost efficiencies, government support programmes, and technological advancement improving vehicle performance.
[Keep up with Investment Monitor: Click here to subscribe to our weekly newsletter]
The International Energy Agency (IEA) expects EVs to account for 3% of the global car market in 2020, with the customer profile moving from early adopters through technophiles and on to the mass market.
A lot of people assume that it is just going to be the large oil majors who will be providing electric charging on existing forecourts, but that is not going to be the case Mark Henderson
Limited charging infrastructure is a drag on consumer demand, however, and EV users lack the convenience in refuelling that petrol car users currently enjoy. According to the IEA, the UK had fewer than 5,000 publicly accessible fast chargers and 22,000 slow chargers in 2019.
Mark Henderson, chief investment officer of Gridserve, says the company has firm plans in place to roll out an initial 100 forecourts around the UK to meet growing demand – and this is just the beginning of its ambitions.
“We are making plans for overseas expansion and have shortlisted a couple of target markets, with an aim to launch in them in 2022,” says Henderson. “A lot of critical strategic planning has been going on during lockdown, which has proved a good time for us to pause and get our ducks in a row.”
UK roll-out of EV forecourts
Gridserve describes itself as a vertically integrated clean energy company. Henderson calls this integration “sun-to-wheel”, with Gridserve’s services running from solar power generation through storage and supply with its batteries, and on to leasing of the EVs being charged.
As well as investing £1bn in additional UK forecourts in the next four to five years, Gridserve intends to invest a further £1bn in solar and battery power projects over the same period. The company has also developed an off-grid mini solar and storage unit for export.
The selection of Braintree for its first forecourt site was largely due to how supportive the local authorities were to the project, according to Henderson. “It would be nice to speed up the planning process, but some local authorities have really embraced the idea that this is increasingly an essential service that they should be providing to their residents,” he says.
Site selection is a challenge, given the need for grid connection, local roads with sufficient traffic volumes, and nearby urban centres increasing the volume of customers able to quickly visit the forecourts. Not all forecourts will be the size of Braintree, and Gridserve has a number of different configurations ready to be deployed.
Henderson says it is unsurprising that the first fully electric forecourt would emerge in the UK. “The UK has a fantastic legacy of car manufacturing and there is lots of innovation and creation around anything to do with the automobile industry here. It is also densely populated and we have a very good road network,” he adds.
He says the development of EV charging in the UK has not yet kept pace with the uptake in EVs, and with a national petrol station network of more than 8,000 sites there is plenty of catching up to do.
Henderson adds that the UK government’s announcement in November 2020 that it would ban sales of combustion engine vehicles by 2030 and hybrids by 2035 should act as a major catalyst for investment in the EV market.
The UK government supported the development of the Braintree site with a grant through its Innovate UK funding programme.
Seeking investment and partners
Henderson sees the forecourts as a core-plus infrastructure asset that should strongly appeal to infrastructure funds and other investors, although he concedes many potential investors had wanted to see proof of concept.
“Having diversity of revenues has been central to making this a compelling investment opportunity,” says Henderson. The unknown in the model is the volume of charging customers, but he says that Gridserve’s model only relies on an “extremely low number” to ensure return on investment.
As well as retail revenues, Gridserve sites will benefit from generating their own power, which will be stored by its batteries, with excess generation sold into the grid or directly to third-party customers such as corporates or local authorities. Ideally these power generation assets will be sited near the forecourts, but can exist at a different location, with power supplied via sleeved power purchase agreements.
Hitachi Capital has been an early partner for Gridserve, providing funding for the Braintree site and synergies through its large car leasing business. Henderson says that Gridserve “hopes to be able to expand that relationship further”.
Infrastructure investors typically look for volume and revenue certainty, but the range of assets they invest in has expanded vastly over the past decade. As Henderson points out, several service station portfolios with similar revenue models have now been acquired and refinanced successfully by infrastructure funds.
“Now we have one site operational, we will hopefully next year be able to use the data from Braintree to unlock some of this investment,” says Henderson. “The whole sector needs further debt, equity and everything in-between.”
Once a UK portfolio has been established, Gridserve wants to take the model to countries with similar driving cultures and road usage. Henderson says a few countries have been identified as potential locations for expansion, although this will likely lead to the formation of a partnership.
“We have been speaking to potential partners because that will speed the process,” he adds. “Ideally we can bring our knowledge, templates, experience, and work with an assistant firm already in that country with relevant experience with local grid networks and regulations.”
Other EV charging companies
If the electric forecourt model proves popular, and more importantly profitable, other companies will be tempted to replicate it. Henderson say this is not something that worries him.
“A lot of people assume that it is just going to be the large oil majors who will be providing electric charging on existing forecourts, but that is not going to be the case,” he says. “Their sites don’t have grid connections and sit on potential explosive hydrocarbons. They would need to completely redesign their forecourts, and actually this is really a whole new infrastructure asset class.”
Some local authorities have really embraced the idea that this is increasingly an essential service that they should be providing to their residents Mark Henderson
Henderson highlights how there are already many companies in the UK providing different forms of EV charging and that different models providing power at home, on route and at destinations will all be developed.
Osprey Charging has been rolling out charging points across Marstons’s chain of pubs. Pod Point, acquired in 2020 by EDF, provides smaller charging points at homes and businesses, while InstaVolt is rolling out a network of rapid charging points and is backed by Zouk Capital.
“These are all different models and I don’t see anyone doing the same as us right now,” says Henderson. “It has taken a lot of work, logistics, time and modelling to get to this stage and that is not to be underestimated. We don’t really feel the need to be competing head-on with other companies for sites or strategy.”
Charging an EV enough to travel 320km takes 20 minutes at the Gridserve forecourt. Although this is more than double the time taken to fill a petrol engine, once vehicle batteries have advanced further, Braintree’s 350kW superchargers will be able to fully charge them in just ten minutes.
The Braintree site is clearly a major advancement in convenience of EV charging. If Gridserve achieves its expansion plans, that convenience could be coming to a sleepy location near you very soon.
For more articles on environmentally friendly vehicles, visit our sister site Energy Monitor.
Jon Whiteaker is a senior editor at Investment Monitor focusing on FDI in the energy sector.