by Julia Pyper
March 04, 2019

There’s no denying that China is beginning to own the global electric vehicle market. Chinese EV sales are growing exponentially, as we covered in the previous Electric Avenue column.

So it’s no surprise that the availability of EV charging infrastructure is also rapidly increasing. 

According to Bloomberg New Energy Finance, China reached 300,000 public EV chargers in the second half of 2018, representing more than 50 percent of the global public EV charger market.

In January 2019, the Chinese Electric Vehicle Charging Infrastructure Promotion Agency (EVCIPA) reported the number of public chargers had climbed to around 330,000 stations (which compares to 67,500 public chargers in the U.S. at the end of 2018). The organization also reported a total of 480,000 home chargers, for a combined total of 808,000 EV chargers tallied across the country.

A recent report by Columbia University Center for Global Energy Policy, Electric Vehicle Charging in China and the United States, notes that the total number of chargers could actually be higher. According to EVCIPA and other sources, most EVs sold for personal use in China come with a home-charging unit. Given that more than 1 million personal EVs were sold in China last year alone, the home EV charger number could be much higher than 480,000.  

But there are issues with home charging beyond having a charging unit. While most home EV charging in China takes place with chargers distributed by carmakers at the time of purchase, it is not unusual to see informal “fly-line” charging in some Chinese cities where extension cords are passed from a house to cars parked at the curb. So it’s hard to know where charging is coming from, and, increasingly, how to prevent it from affecting the power grid.

“Fly-line charging to the curb reflects a shortage of private parking and lack of access to charging even when private parking is available,” the Columbia report states. “Such practices, if left uncontrolled, could create distribution grid reliability issues, as many older Chinese urban neighborhoods have insufficient distribution capacity for heavy volumes of EV charging.”

This research paints a disjointed picture of China’s EV charging market — where infrastructure is being deployed at a breakneck pace and yet there isn’t nearly enough to keep up with demand. The remainder of this column will look at various dynamics of China’s rapidly evolving EV charging market, including business models and relevant policy support, key stakeholders and future growth projections. 

High demand for public charging

China has a “chicken and egg” issue when it comes to public EV charging infrastructure, such that public EV charging infrastructure is needed to boost growth in EV sales and more EV sales are required to justify investing in public EV charging infrastructure. This is also a problem in the U.S., but even more so in China, because home charging is such a challenge — as the fly-line image above shows.

One problem is that many Chinese households don’t have a dedicated parking spot. According to the Columbia University report, “Beijing-area EV dealers responsible for installing home EV chargers report that as few as 40 percent of households have such access.” Installation time is another roadblock. The report states that installing a home charger can take up to eight months, requiring multiple filings and meetings with the grid company, district management department and the civil preparedness bureau. As a result, the availability of public charging is especially important to potential Chinese EV purchasers.

China’s first-tier cities have led the charge in deploying EV infrastructure. This stems in part from early government policies, such as the EV pilots that began in 2009 under the Ten Cities, Thousand Vehicles program. At the end of 2018, Beijing, Shanghai and Guangdong Province (home to Shenzhen and Guangzhou) accounted for just under 40 percent of charging posts in the country, the Columbia report states.

Other cities and provinces are now following suit. The majority of provinces added over 1,000 new charging posts in 2018, according to the report. Most provinces in China now have more than 2,000 public charging posts, according to EVCIPA.

Charging is also expanding quickly between cities. Highway corridors for EV charging have already been installed between Beijing and Shanghai, as well as other major metro areas.

Highway fueling stations at rest areas in China are tightly controlled by state-owned entities, which has given China’s grid companies — State Grid Corporation of China and China Southern Grid — a near monopoly on charging equipment along highways. To work around this, independent charging networks are looking to deploy mobile charging units at highway fueling stations and rest areas, the report notes.

Source: State Grid Corporation of China 2018; colors indicate east-west, north-south, and urban cluster routes

While there’s a strong emphasis placed on public infrastructure in China, most EV charging in the country currently takes place at home or work, according to the Columbia report.

But that may not be the case for much longer. A recent McKinsey analysis finds that public charging in China will dominate and increase in importance over time, going from 55 to 60 percent in 2020 to approximately 80 percent by 2030. “The structural limitations of highly dense urban cities, which have larger proportions of on-street and large-commercial-garage parking, are the catalysts for increased public-charging demand,” the report states.

This raises a question about what kinds of charging stations will be deployed in China. The broad categories of EV charging infrastructure that exist today are Level 1 alternate-current (AC) charging (equivalent to a U.S. household outlet); Level 2 AC charging (240 volts); and direct current fast charging (DCFC), used almost exclusively in public infrastructure settings, like along highway corridors.

Across all major markets, AC Level 1 and Level 2 stations are expected to remain the dominant charging technology through 2030, according to McKinsey. DCFC will likely play an outsized role in China, however, because of the reliance on public-charging infrastructure. And that raises a new question about who will pay for it.

“Currently, the business cases for home or workplace Level 2 chargers are straightforward, given low upfront capital and operating expenses. Making the business case work for public DCFCs is more difficult. The reasons include higher upfront capital, higher operating costs, and currently low utilization,” McKinsey states.

“In the near term, this raises a critical question: Who will provide the necessary capital for public charging while utilization rates remain low, particularly in China where the need for public charging is higher?”

A plethora of government policies 

Government subsidies, adopted as part of China’s industrial policy, have been a key driver of EV market expansion in the country.

Federal level rebates, quotas for vehicle manufacturers and tax exemptions have played an important role in promoting EV adoption. Many provincial and local governments offer similar incentives. City policies that make it easier for EVs to obtain license plates have been particularly effective.  

EV charging in China also benefits greatly from government programs. The Columbia University report outlines several central government policies supporting the rollout of EV infrastructure:

  • The State Council’s 2015 Guidance on Accelerating the Construction of Electric Vehicle Charging Infrastructure, which calls for charging infrastructure sufficient for 5 million EVs by 2020, all new residential construction to be equipped EV charging, 10 percent of parking spaces in large public buildings to be available for EV charging and at least one public charging station for every 2,000 EVs.
  • The Chinese National Development and Reform Commission’s Guidelines for Developing Electric Vehicle Charging Infrastructure (2015-2020), which call for at least 120,000 EV charging stations and 4.8 million EV charging posts by 2020.
  • National Energy Administration’s 2016 notice summarizing five new national standards for electric vehicle charging interfaces and communications protocols.
  • The Ministry of Finance, Ministry of Science and Technology, Ministry of Industry & Information Technology, the National Energy Administration and the NDRC’s 13th Five-Year Plan for New Energy Vehicle Infrastructure Incentive Policies, which includes RMB 90 million in funding for the installation of charging infrastructure. The plan specifies that charging stations should have a minimum number of charging posts, chargers would be installed at government buildings and the procurement of chargers must be open to any charging manufacturer.
  • A 2016 NDRC notice on Accelerating Residential EV Charging Infrastructure Construction, setting out standards and procedures for residential charging, as well as designating the Jing-Jin-Ji, Yangtze River Delta and Pearl River Delta regions as demonstration zones for residential charging infrastructure development.

Cities and local governments also offer charging incentives. The city of Shenzhen, for instance, offers subsidies of up to RMB 20,000 for EV insurance and the installation of charging equipment. More than 30 other cities offer some form of subsidy for home or public EV charging.

China’s electric utilities, which are overseen by central government regulatory officials, have also established favorable EV charging policies. In general, these policies are aimed at keeping charging prices low.

The Columbia report notes, however, that the Beijing municipal government removed caps on EV charging tariffs in 2018 in order to ensure public EV charging becomes a viable business.

“The shift responds to complaints from some EV charging stations owners, who report that EV charging rates are too low for them to make money in light of high land prices and low utilization,” the report states. The problem is that EV drivers have proven to be highly price-sensitive, and so raising the rates also drew criticism.

Authors of the Columbia University report, Anders Hove and David Sandalow, summarized and compared U.S. and Chinese EV-related policies in their paper.

One other policy worth mentioning is that it is mandatory for all new electric vehicles sold in China to use the country’s one, nationwide fast charging standard: GB/T. The U.S., for comparison, has three EV fast charging standards.

Tesla, Nissan, BMW and other international automakers have adopted the GB/T standard for their EVs sold in China. The current GB/T standard allows for fast charging at a maximum of 237.5 kilowatts of output. A new GB/T standard is scheduled to be released in the coming years that will reportedly enable charging up to 900 kilowatts for larger commercial vehicles.

Because EVs are an important part of Chinese industrial policy, the country is also starting to look at charging opportunities outside of its borders. In August 2018, the China Electricity Council announced a memorandum of understanding with Japan’s CHAdeMO network to jointly develop ultra-fast charging, and to bring that standard to countries beyond China and Japan.

Who owns China's EV chargers?

While government support for EV charging in China is very strong, it’s a myth that the Chinese government owns all of the country’s public EV infrastructure, Colin McKerracher, the head of advanced transport at Bloomberg New Energy Finance, said in a recent presentation.

It’s true that State Grid, the government-owned monopoly power distribution and retailing company, was the primary charging station provider from 2012 to 2015, he said. But by late 2018, State Grid was bumped to the second-largest public-charging system operator in the country behind the private firm TGood.

According to Bloomberg NEF, charging equipment manufacturers now own more than half of all public charging stations in China, while state-owned entities own only 20 percent.

So to address the earlier McKinsey question about who will pay for public charging in China, the answer is a mix of public and private entities, with an increasing amount of money coming from the private camp.

The problem is that these companies are losing money, as noted above. Charging stations are being built to meet government targets and capture market share, but usage is still relatively low.

“Companies are just installing charging as a kind of land grab, even though they will lose money,” one China EV industry expert told the authors of the Columbia report.

Looking ahead

According to Wood Mackenzie Power & Renewables, there will be an estimated 25 million EVs on the road in China by 2030. Based on government policies, the firm expects there to be nearly 3 million public charging points by the same year.

Consulting firm McKinsey believes that EV sales in China will accelerate much faster, reaching a total of 74 million by 2030 — although it’s unclear if this number refers to full-sized passenger EVs only, or if it also includes smaller “low-speed” EVs, which are not included in other research firm forecasts.

Under the McKinsey scenario, energy demand from EV charging in China is expected to grow from roughly 8 billion kilowatt-hours in 2020 to about 139 billion kilowatt-hours in 2030.

That estimate reflects assumed EV adoption, total miles driven per year, and the average kilowatt-hours required per mile (the mpg equivalent). The 139 billion kilowatt-hours figure for China dwarfs the charging related energy demand forecasted for the U.S. and EU. But while that number sounds big, it represents less than 5 percent of current U.S. energy demand, according to McKinsey.

Even so, charging is expected to be a challenge for China’s power grid. Generating enough electricity to charge up EVs is far less of a challenge than upgrading the grid network to allow for EV charging.

China’s grid companies are responsible for investing in distribution-level infrastructure for both public and private charging. “These investments can be expensive and time-consuming and are paid for as part of the grid company’s social responsibility budget,” according to the Columbia report. Through interviews with grid company experts and charging network providers, the authors found that the slow pace of grid upgrades has been an issue in China.

In one interview, a grid expert explained that utility incentives are part of the problem: “Distribution upgrades for EV charging do not earn profit. Instead, they are considered as a societal responsibility,” the report states.

Even with strong government support, China’s EV charging market has several challenges, from needed grid upgrades to a lack of charging profits for private companies to an overall shortage of charging stations. While the U.S. EV charging market is much smaller and growing slower, authors of the Columbia report conclude that China and the U.S. could learn a lot from each other on how to set up sustainable charging industries and promote even faster deployment of all EV charging types.

Because, as many experts told authors Hove and Sandalow: “Right now, we need more of everything.”