Navigant Research Blog

With Charging Network, Tesla Takes the Road Untraveled

Scott Shepard — October 3, 2012

Last week Tesla CEO Elon Musk debuted his company’s latest EV tech offering, the Supercharger Network.  The network, like all things Tesla, far outpaces anything on the market.  The Supercharger boasts the highest power output of any fast charging EV charging system on the market today at just below 100 kilowatts (kW).  The energy for the system is all solar, provided by a Solar City carport, and it’s all free for Tesla Model S owners (who are also the only people who can use the system).  At first glance it makes the higher end Model S even more appealing to those who can afford it; however, the strategy behind the offering is questionable.

First, how exactly does the system work? If the chargers can supply near 100 kW of power to a vehicle for 30 minutes, then the solar array must be able to produce 100 kW.  That’s a big solar array.  Solar is not always available, so it can be assumed that the station will draw from the non-renewable grid at night or on cloudy days. The company states that the stations’ solar arrays will produce more energy than will be used at the stations; therefore, Tesla also clarifies that the marginal energy costs of the system will be near zero.

That theory, however, is dependent upon some big assumptions about Tesla owners’ vehicle charging behavior. Assuming that a vehicle or vehicles will charge when the sun does not shine, then the charger will be drawing power from the grid at an incredibly high rate. That will incur high monthly demand charges ($4-$10 per kW) on top of the standard energy charge measured in cents per kWh. Tesla hopes to avoid demand charges through special rate plans with utilities and pay back any kWh charges by selling solar from the stations back onto the grid. However, this model only works if the stations produce more power in the 4 to 7 hours of daily solar availability than what may be taken from the stations over the course of the 24 hour day.

Second, why is Tesla making this system only for the Tesla owners and not for the greater population of EV owners? The Tesla outlet and inlet are not compatible with either CHAdeMO or SAE fast charge plugs, so Tesla drivers will be unable to charge at locations not in the Supercharger network.  Perhaps this strategy is meant to make Tesla vehicles more desirable, but Tesla’s problem is making vehicles, not selling them.  So why not also install other chargers at the Supercharger locations so that other EV owners can charge their vehicles for a fee?  Exclusivity increases desirability, but not necessarily revenue.

Which leads to the third and most important question: Why is this service free? Unlike most EV makers, Tesla does not need an additional reason for people to want the Model S.  The vehicle is not overpriced for its class and technology, and its range is far longer than any other EV on the market.  Further, if it is true that marginal costs for the charging systems will be low, Tesla is still taking a big hit on installation costs that include property, fast chargers, and 100+kW solar arrays; all not cheap in the least.  To be clear, the technology sounds great (hopefully the battery can handle near 100 kW of power), but unfortunately it does not appear profitable for Tesla.  Considering Tesla recently announced it is slashing revenue forecasts, charging a fee may be a wise move.

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