People, Get Ready for the EV Rollout

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With the nation’s biggest carmakers—not to mention the country’s brightest startups—readying their electric vehicles for the road, an even greater push is going on behind the scenes to ensure a smooth road for electric vehicle (EV) owners.

Much of the media attention in 2010 has been on the EV manufacturers; meanwhile millions of dollars of investment and years of R&D are fueling an overhaul of the nation’s auto infrastructure, creting huge business opportunities for technology companies, especially up and down the West Coast, where California, Washington and Oregon are among the states expected to see the first EV rollouts.

With its first electric car, the Leaf, going on sale in December 2010, Nissan (Nasdaq: NSANY) says it plans to sell 20,000 of the cars over the next two years. In 2013, it hopes to sell 150,000. The Chevy Volt is likewise slated to go on sale this year in select markets, and GM plans to sell about 10,000 of the Volt in 2011. In addition to younger companies like Tesla (Nasdaq: TSLA), Fisker and Coda, other big automakers including Ford (NYSE: F), Toyota (NYSE: TM), Mitsubishi (NYSE: MTU) and Honda (Nasdaq: HMC) are also releasing electric models.

Ease and accessibility of charging is foremost among consumer concerns and could make or break EV purchasing decisions, according to surveys. But chargers and associated software tools are more than just accessories for the next generation of vehicles: They represent a burgeoning and competitive market of their own, one that has implications—not just for EVs—but for utilities and the future of the smart grid.

In the next five years, 4.7 million charging stations are expected to be installed worldwide, with about 3.1 million electric vehicles being sold by 2015, according to a 2010 report by Pike Research. That market for electric vehicle management, including charging, is expected to be worth $1.5 billion globally by 2015, and about $300 million in the United States, according to the same report.

Despite the promise of the fledging EV infrastructure market, there’s still much to figure out—such as how to secure a sustainable revenue stream. And while it’s unclear what the future of the market will look like and which company, if any, may become synonymous with EV charging in the minds of U.S. drivers, companies in the meantime are developing strategies to plug in to the market, from teaming up with automakers, utilities and smart grid companies, to eyeing other sources of income from subscriptions and retail partnerships.

When it comes to EVs and the associated infrastructure, “everybody seems to be pretty excited by how they can improve their value propositions,” says Chris Bowler, general manager of GE Energy Industrial Solutions.

That includes GE (NYSE: GE), which unveiled its sleek new charger in San Francisco in mid-2010. Created by designer Yves Behar, the WattStation charger is expected to be available for commercial customers next year, selling for between $3,000 and $7,000. GE also plans to release a residential version in late 2010. The company views the smart grid-enabled charger as an extension of its electrical distribution systems, GE’s Michael Mahan says. It debuted WattStation in conjunction with a new home energy device and the announcement of a $200 million competition to find new smart grid innovations.

In unveiling the WattStation, CEO Jeff Immelt pointed to the company’s 50,000-member sales force and commercialization prowess as factors that could offer GE an advantage over its competition. But while GE’s size and resources make it a formidable player in any new market, some smaller companies have secured the support of another big name—the U.S. government.

“The economics of selling a few kilowatt hours per charge are very challenging, senior analyst John Gartner says in Pike Research’s report, “and as such we anticipate that public charging station deployments will be driven mainly by government initiatives over the next several years.”

Overall, the feds are pouring $5 billion into electric vehicle technologies, including batteries and charging stations. Two Bay Area companies, ECOtality (Nasdaq: ECTY) and Coulomb Technologies, have received big helpings of stimulus funds to drive the development of their networks of smart chargers.

ECOtality, which recently moved its headquarters from Arizona to San Francisco, unveiled its commercial and residential Blink charging stations in July. Designed by San Francisco’s frog design, the first of the chargers are slated for installation in Fall 2010 as part of The EV Project, a $230 million initiative backed by $114.8 million in federal stimulus funds from the U.S. Department of Energy. The project aims to put 15,000 chargers in 16 cities in six states, collecting and analyzing data from early small-scale rollouts to prepare for widespread EV launches.

Beyond federal support, ECOtality, which reported $8.6 million in revenue last year, is working to figure out what the long-term business plan is for charging stations, CEO Jonathan Read says. The company plans to offer subscription-based charging, but it has also set its sights on retail. Though the company is linked to Chevy and Nissan through the EV project—some early buyers of those companies’ EVs will get a free residential charger and installation support through the program—ultimately, automaker partnerships are not as important ones with retail businesses, Read says. The company’s vision is that its charging stations would be a first point of contact, displaying ads and coupons, linking retailers to a customer demographic that he calls “A-plus-plus.”

“[That] offers a sustainable long-term business plan,” Read says. Coulomb Technologies, meanwhile, received $15 million in stimulus funds to pay for part of its $37 million ChargePoint America program. Through the initiative, Coulomb plans to install 5,000 of its charging stations in nine U.S. markets, including the San Francisco Bay Area and Redmond, Wash.

In looking at the charging landscape, Coloumb CEO Richard Lowenthal says it’s “very competitive” for charging stations without networking capabilities, with increasing numbers of companies unveiling their own chargers. As a result, he sees network capabilities as a key differentiation for charging stations.

That’s because EVs, with their huge electrical load demands, pose grid management challenges for utilities, even as they present opportunities for increased energy sales and operational efficiencies. For utilities, “there’s nothing that comes close to this since the invention of the air conditioner,” says Matt Smith of Silver Spring Networks, which is working on an electric vehicle pilot project with charger maker Clipper Creek, Pacific Gas and Electric (NYSE:PCG) and the Electric Power Research Institute.

Coulomb’s ChargePoint Network is an open-network platform that provides authentication and management of charging stations. In 2009, it announced a partnership with smart grid software company GridPoint, whose software tools allow utilities to manage electric vehicle charging loads. The company also unveiled a residential charging station in mid-2010.

The company’s revenue is expected to come from sales and installation of the charging stations, plus user subscription fees. So far, Coulomb’s customers include municipalities and businesses such as McDonald’s (NYSE: MCD), Dell (Nasdaq: DELL) and Element Hotels. Meanwhile, the company is also forming partnerships with other hardware makers. In July, Coulomb, which raised $14 million in a Series B funding round in early 2010, announced agreements with charging station manufacturers Siemens (NYSE: SI), Leviton and Aker Wade, through which those companies will distribute chargers under their own brand names built specifically to be work with Coulomb’s ChargePoint Network. But Lowenthal says Coloumb has no plans to abandon the hardware side of its business.

“We’re always trying to figure out if we’re Apple (Nasdaq: AAPL) or Microsoft (Nasdaq: MSFT). Right now we need to be Apple,” Lowenthal says, marketing both hardware and software.

For other hardware manufacturers duking it out in an increasingly crowded field, partnerships may hold the key to success, says Matt Mattila, head of vehicle electrification initiatives for Rocky Mountain Institute. “Everyone wants to differentiate, but at the end of the day it’s less about differentiating than it is relationships with automakers and utilities,” Mattila says.

One of those companies is Evatran, a Virginia firm that until recently focused on making transformers for specialty markets. It jumped into the electric vehicle fray with plans to release a hands-free proximity charging station. Called Plugless Power, Evatran’s charging system powers up an electric vehicle via an inductive charge sent from a ground-mounted charging block to a unit installed beneath the vehicle. The company started researching electric vehicle charging about a year and a half ago, and decided to develop a charging system after seeing how positive the [electric vehicle] industry is, says Rebecca Hough, director of sales and marketing.

“We’re extremely bullish on the industry,” Hough says, though she stressed the importance of teaming up with vehicle manufacturers and other niche players.

That’s what AeroVironment (Nasdaq: AVAV) is doing. After working on GM’s EV-1 electric vehicle decades ago, the Southern Calif.–based company, which also makes unmanned aircraft systems, continued to develop EV equipment.

In early 2010, Nissan tapped the company to supply home charging stations and installation for its initial Leaf rollout. So far, most of the customers placing orders for the car—about two-thirds—live in single-family homes, and will rely on in-home charging stations, according to Nissan.

For now, it’s unknown how all these early partnerships may translate into future market shares. But as electric vehicles begin to trickle onto U.S. streets, a lot of questions could be answered in the next few years about what works and what doesn’t as a new infrastructure emerges. “It’s no longer just off in the distance,” Mattila says of the integration of EVs. “It’s not a test.”