Why electric car charging stations are expensive in South Africa

The tariffs for charging an electric vehicle (EV) on a public charger are expensive due to the involvement of several parties in the larger charging ecosystem, each of which must take a percentage to be a viable business.

The industry’s relative infancy also means it has yet to get an independent player to manage a key component in the ecosystem, which could bring down costs and increase competition over time.

Most public EV charging stations must have higher per-kWh fees than regular tariffs to be commercially viable — unless they are used with the sole intention of drawing customers to a particular area of commerce.

Charge point operators (CPOs) or e-mobility providers (EMPs) must cover the cost of their station rollouts, which can be very expensive due to the high cost of fast-charging equipment.

They must also continuously sell electricity with a profit margin to be sustainable.

In South Africa, public DC charging tariffs typically charge upwards of R7.00 per kWh, while AC charging stations cost R5.88 per unit.

That is around twice to three times the price of residential electricity but comes with the convenience of a faster charging rate.

In South Africa, public DC charger speeds range from around 50kW to 200kW, while public AC chargers typically have outputs of 7kW, 11kW, or 22kW.

The fastest speed at which most South African households can charge at home is 3.7kW.

That being said, disgruntled EV owners could argue that the 100% or 200% mark-up is unreasonable, with the speed increase being the only real benefit.

However, there are several parties in the EV charging ecosystem that customers may be unaware of, all of which need to get a share of the revenue for the system to be viable.

Firstly, the owner of the property on which a charger is located buys their power from an electricity utility like Eskom or a municipal distributor.

The charging station owner — which may in some cases also be the CPO — buys electricity from the property owner.

Depending on the agreement between the property and station owners, that property owner may already have added a margin to their electricity price to benefit from the station’s presence.

In their turn, the charging station owner adds a margin in their tariff charged to the CPO, who manages the charger’s operations.

The CPO sells the energy at its own wholesale price into an “exchange” known as the roaming registry, which runs on the Open Charge Point Interface (OCPI) standard.

The registry helps ensure interoperability between different CPOs and EMPs, making it easier for EV drivers to access as many chargers as possible with just one account.

From the OCPI, the energy is sold at the end-user price, which can vary depending on their chosen EMP.

A CPO may charge customers more when paying for their charging session using an EMP wallet or account other than its own.

The chart below shows the basics of the flow of energy and flow of money in the public EV charging ecosystem.

Dominant charging station provider also managing the roaming registry

In South Africa, the country’s biggest CPO and EMP — GridCars — also manages the OCPI registry.

GridCars has over 400 stations in the country, around four times more than the second-largest CPO and EMP — Rubicon.

The company had a significant headstart in the industry, having rolled out its first public charging stations in 2014. It has needed to invest substantially to become the dominant player.

GridCars charges other CPOs a 15% commission for the energy they dispense to customers from any of their own stations when the customers use the GridCars EMP platform.

Some question whether this fee is too high, given that GridCars’ customers are also benefitting from the additional chargers provided by the newer CPO.

However, the counterargument would be that such a commission is fair, considering users of the newcomer CPO can also use GridCars’ vast network without the new CPO having to roll out any infrastructure.

The imbalance comes in when other CPOs cannot add their own margins to the retail electricity prices charged to GridCars EMP holders because they have no control over the roaming registry.

The other CPOs must first discount their wholesale prices sold into the roaming registry so that the addition of GridCars’ 15% retail margin for customers on its own EMP keeps their tariffs the same as when they are using a GridCars charger.

If they do not lower their wholesale prices, their retail price will be higher, giving GridCars an advantage in the customer’s mind.

Not a simple matter

GridCars CEO Winstone Jordaan told MyBroadband that the issue was even more complex than summarised above.

“It’s similar to how a card payment seems straightforward — you swipe a card, and the payment is processed,” Jordaan said.

“Most users of banking or retail systems are unaware of the intricate processes happening behind the scenes.”

“This simplicity overlooks the billions of dollars invested in making it work, including security systems, infrastructure, insurance, platform interoperability, and more.”

Jordaan insisted there was effectively no ‘commission’ in this context.

“Selling a charge is very much like the typical retail industry, where the product you are making is sold to customers via a retail network, and each retailer has different base costs,” Jordaan said.

“Each role player assesses their costs and presents them on the retail side of their transaction,” he said.

“This varies among role players and depends on the contracts between them. Since the industry is still developing, I am not aware of any role-player within this space who is currently covering their costs.”

A smaller CPO told MyBroadband it fully understands why GridCars became the registry manager in its early years.

“Now that the market is growing, we need some independence in the registry’s operation,” the company said.

The issue could make a good case for adding wallet-neutral bank card payment terminals to EV charging stations, which would allow them to bypass the roaming registry.

Mastercard and Visa charge merchants between 0.3% and 2% commission on the value of a transaction — far lower than the 15% levied by GridCars.

If newer CPOs currently on GridCars’ network switched to regular card terminals, they would be able to increase their profit margins if they kept prices the same.

Alternatively, they could maintain margins and reduce prices to make their stations more attractive to EV owners.