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13 March 2020

Centrica predicts £12bn fleet investment in two years, up 50%

Centrica Business Solutions predicts that corporate fleets will invest over £12bn in electric vehicles over the coming two years, up from the £8.2bn that has been invested in the two years since the UK government announced its cutoff date for the sale of internal combustion engine vehicles in the country.

The 46% increase is an encouraging uptick, but given the scale of the problem that we explored last week, governments are going to need to encourage businesses to increase these investments further. With European CO2 emissions from the automotive sector creeping upwards, thanks to the popularity of SUVs and consumers buying petrol vehicles instead of diesel ones following Dieselgate, corporate fleets could help combat some of the most polluting vehicles on the road.

All this investment is good news for a new crop of startups, looking to be a part of this transformation. The volume of EV charger deals seems to have ramped up significantly, in the past quarter, and there has been considerable M&A activity as larger firms look to expand by acquiring the most promising minnows.

Automakers are beginning to choose their preferred providers, as a way to help encourage sales of their EVs, by being able to fit a charger into a prospective buyer’s home within days of the EV purchase. There is still a lot of regional variation, with the large automakers having to rely on different charging firms in different markets, and no sign that this will change in the next few years.

It’s a similar story in the public charging networks too, with several years left until the market has settled down into something more predictable than these nascent early years. Here too, governments will want to help grow these public networks, using tax credits and finance schemes to lay the groundwork to enable mass adoption of EVs among consumers.

But in the business world, where the daily distances driven are often much higher than the average consumer figure, the investments need to target fast charging networks. Businesses won’t tolerate a trickle-charge, as it puts the vehicle out of commission for hours. Fast charging is something that can be accommodated in a lunch break or the turnover period between shifts, and so it should be an imperative focus for government initiatives.

Alan Barlow, director UK & Ireland at Centrica Business Solutions, said “there is clear recognition among UK businesses of the increasingly important operational role electric vehicles can play for them in meeting their decarbonization goals. But concern is still widespread over how to finance this significant change, particularly for those with large petrol and diesel fleets. Vehicle charging is inevitably going to increase the amount of electricity businesses consume.”

According to Centrica’s findings, which it gathered by interviewing UK businesses, the sector is collectively going to accelerate. It says that UK firms will spend 4.5% of their revenue, on average, on EV adoption, in the next two years. Some 27% believe that EVs will represent more than 20% of their fleet by 2022.

However, the most cited drawback for EVs is still the costs of the EVs, according to the survey, with 44% of businesses saying this was a problem. Some 42% said range anxiety was a primary concern, but strangely, 37% said increased energy costs from on-premises charging were too. This is very odd, considering that EVs would help to avoid the cost of petrol and diesel fuel bills.

As for drivers of EV adoption, 37% pointed at pressure to meet government emissions targets, with the same figure saying that they wanted to be able to operate freely in low-emission zones. Some 33% pointed to the lower maintenance costs of EVs compared to ICE vehicles, as the main driver, but this only makes the previous point about on-premises charging more confusing.

The respondents were also asked what areas governments should prioritize. Some 68% pointed to extending EV grants, and the same proportion called for tax credits. There was a considerable gap between these two and the next most oft-cited suggestion, which was 48% saying to focus on public charging infrastructure.

So while 48% of businesses also report plans to install EV chargers in the next two years, and therefore seem intent to charge on-premises, governments should not ditch plans to invest in public infrastructure, as those networks are what will help drive increases in consumer demand for EVs.

Centrica also asked firms if they had adopted ‘energy technology,’ a category that seems to have included solar panels, battery storage, and EV chargers, and found that some 28% had not. That’s a lot lower than we would have anticipated, and an encouraging sign in the UK, however, solar panels don’t have anywhere near the generation capacity to charge a fleet of EVs reliably. Batteries are more useful in that regard, able to store cheaper electricity to charge during peak demand when prices are higher.

Centrica’s Barlow said, however, that “it’s our view that onsite generation from solar panels, allied with battery storage and smart charging are the right option for many businesses to enable them to provide charging facilities without facing large increases to power costs and upgrades to their incoming supply.”

In response to Centrica’s collected findings, UK transport minister Rachael Maclean said “it is encouraging to see UK businesses investing in electric vehicles and embracing greener technology to decarbonize our transport network. Businesses having confidence in electric vehicles is crucial to end the UK’s contribution to climate change and improve air quality for all. This is why we are investing nearly £1.5bn‎ for plug in vehicle grants, as well schemes to support charge point infrastructure across the UK.”