10 minute read
How the energy crisis could unplug the EV revolution
COULD THE SOARING COST OF ENERGY PUT THE brakes on the electric car revolution? The Government is still working out how to help businesses, but we know the impact on household electricity bills will be significant.
And as most private hire operations still rely on self-employed drivers being responsible for their own vehicles, increased electricity tariffs will result in increased costs for those charging electric vehicles at home.
From October 1, a typical household’s energy bill will rise from £1,971 to £2,500. This price is guaranteed to be frozen for two years, and will be sweetened by a oneoff £400 fuel bill discount payment for every household. So the increase should be around 10% – a lot better than the neardoubling originally proposed, which would have seen energy bills soar to £3,549 a year. Taxi and private hire businesses are less likely to be hit by cost rises than, say, pubs, restaurants, engineering firms or businesses with larger office premises that require heating and lighting. But for those that have installed charge points at operating bases, there are bound to be increases.
The crucial figure is the cost per kilowatt-hour of electricity. From October 1, dual-fuel customers on a standard variable tariff will pay 34p per kWh, according to estimates. This is better than the previously-mooted 52p/kWh, but a sizeable rise on the 2021 average of 18.9p/kWh, according to Department for Business, Energy & Industrial Strategy.
The price cap certainly cushions the blow for home charging costs. From October 1, the cost of charging an EV with a 64kWh battery, such as a Kia e-Niro or Hyundai Kona, from 0-100% via a home charger will rise from £18.37 under the current cap to £22.22 – a lot less than the £33.80 it would have cost at 52p/kWh.
But that is still a steep rise over the price cap in force 12 months ago, when a similar car would have cost £13.69 to charge from 0-100%. So the cost of home charging has risen around 63% in the past 12 months if basic tariffs are used. For a high-mileage user recharging every other day, that’s an increase of £1,556 per year.
Of course, there are ways to mitigate this. Most recharging takes place overnight, when tariffs are much lower. Some energy suppliers offer off-peak EV tariffs as low as 7p per kWh. At this rate, the overnight recharge cost of a typica Kia e-Niro would be as low as around £4.50. However, these tariffs may be an endangered species. Some energy suppliers, including British Gas and EDF, have suspended sales of these tariffs to new customers, and they are likely to rise significantly as the new prices start to bite.
None of this takes into account the cost of using on-street charging, or worse, motorway hubs. We know these are significantly more pricey than home charging – speed and convenience carries a premium.
At the full “rack rate”, chargers such as the superfast 350kW devices that Ionity provides are not cheap. Earlier this year, we used an Ionity charger to give a 200-mile recharge a Mercedes-Benz EQS saloon. Ionity’s basic tariff is 69p/kWh. So our refill cost £50.53, adding precisely 200 miles of range. However, on test, the EQS only actually gave us 77% of the range quoted at the start of the journey, so that 200-mile electric splash and dash would equate to 154 miles, or about 30p a mile.
By way of comparison, we also tested a Mercedes-Benz S580e petrol-electric hybrid around the same time. The S-Class returned 32.8mpg, and current typical petrol price of £1.68 per litre equates to £7.64 per gallon. So 154 miles of petrol range at 32.8mpg would cost about £35 at the pumps – a lot cheaper than Ionity’s basic rate electricity.
Again, of course, there are ways to mitigate the blow. An Ionity Unlimited subscription comes with the EQS, as Mercedes-Benz is part-owner of the Ionity network. This means free rapid charging for one year at all Ionity stations.
Other manufacturers offer discounted programmes with the networks. Kia’s subscription-based Kia Charge scheme provides access to more than 20,000 UK connectors and more than 200,000 connectors across Europe. It provides access to several major charging networks, including BP Pulse, Pod Point, Ionity, Source London, Instavolt, Shell NewMotion, Osprey, Char-gy, and ESB.
Kia Charge offers different levels of service. The Plus package costs £2.99 per month tariff, and offers a 15% per cent discount per kWh from most networks (except BP Pulse, Pod Point and Ionity)
Users can also add a BP Pulse bolt-on subscription to their Kia Charge account, costing an additional £7.85 per month, which gives a discount of up to 40% when charging within the BP Pulse network. And an Ionity bolt-on, which costs £11.25 per month, cuts the standard charging rate by 64% from 69p per kWh to 25p. It also eliminates the £0.49 session fee, meaning a 10-80% recharge on a Kia EV6, which can handle the 350kW chargers, costs just £13.55.
A combination of home charging and discounted on-road charging via subscription schemes can maintain the advantages in fuel costs that EVs enjoy over petrol or diesel cars – for the time being. But the ongoing uncertainty is likely to be a discouragement to many looking to go electric.
Emily Seymour, energy and sustainability editor at consumer group Which?, said: “A big part of the electric vehicle appeal has always been lower running costs, but these price rises could jeopardise more people making the switch to electric cars. In a recent survey, we found that the upfront cost of buying an EV is the biggest barrier preventing drivers from considering an electric vehicle – and this latest energy price rise could further prevent people from making the switch.”
The RAC is calling for price controls at public chargers, including a cut in VAT. Current legislation levies 20% VAT on electricity from a public EV charger, compared to 5% charging at home. In a statement, it said: “The RAC continues to support FairCharge’s campaign for the Government to cut the VAT rate levied on electricity from public charge points to 5%, to mirror the rate charged on domestic electricity.”
FairCharge spokesman Quentin Willson, the former Top Gear presenter, said: “We know that most of the early adopter EV drivers charge at home, but over 30% of the population don’t have driveways, so if they have an EV or aspire to own one, have no choice but to use public chargers and pay the higher VAT. But having no driveway also means they can’t access the lower night-time electricity tariffs offered by some electricity providers. No home charging means they’re being unfairly penalised – twice.”
Chargepoint operator Instavolt, which recently put its prices up to 66p/kWh, said that if the Government were to cut VAT to 5%, its costs would fall to 58p/kWh. The Government has previously ruled out any such change in VAT rates.
But FairCharge believes that charge point prices will continue to rise. “With wholesale electricity prices – that’s what charge point operators pay for their electricity before adding VAT and their profit margin – soon rising to 75p per kWh, it means that those without driveways will be paying over £1.00 per kWh to charge an EV – which is perilously close to filling up with diesel,” Willson said.
FairCharge believes the unintended consequences of the higher VAT on public chargers could be extremely serious. “If by continuing to enforce the higher rate of VAT on public charging, the Treasury unintentionally sabotages the growth in EV adoption, then the whole UK transition to electrification, cleaner urban air and energy security could be put at risk.”
He continued: “If EV adoption stalls, then car makers may alter their EV production targets, charge point operators can’t make a profit and won’t invest in more infrastructure and all those battery factories that the UK needs won’t get built and we won’t benefit from new jobs, investment, and exports. And that’s an enormous concern.”
One of the big problems here is Brexit. Rules of Origin dictate that a percentage of a car’s parts must be locally sourced to escape trade tariffs of up to 10%. With the battery pack representing at least 50% of the parts in an EV, it’s vital that batteries are built in Britain if established manufacturers such as Nissan, Toyota, Vauxhall, JLR and BMW are to switch their UK plants fully to EV manufacturing.
“No UK built batteries mean the car industry will move their factories somewhere else where they won’t have to face extra trade tariffs. That’s a potential loss of £8 billion to the economy and at least a million jobs,” Willson warned.
Could the Government do more? Absolutely. Windfall taxes have been proposed by opposition parties, but rejected by the Tories. And the energy companies’ profits on gas and oil extracted from the North Sea is not capped. This has meant oil companies have profited excessively from selling fossil fuels on the global energy market.
Dale Vince, the owner of energy retailer Ecotricity, has called for Ofgem’s 1.9% cap on oil companies’ retail profits to be extended to the profits oil and gas extractors make in the North Sea. He said this could save households up to £1,000 a year and would avoid the need for a windfall tax. Vince told the BBC: “It’s illogical to cap the retail profits and not the wholesale profits.”
He says the idea would cost the government nothing. But critics think by taking away much of their profits it would deter investment by these firms. The Green Party has proposed the permanent nationalisation of the big five UK energy suppliers. The Greens claim this would cost £2.85bn and would allow the price cap to return to last autumn’s level. It points to the French approach, where energy provider EDF is being nationalised, allowing France to limit a rise in consumer electricity prices to just 4%.
Others are calling for a decoupling of electricity and gas prices, as the increasing switch to renewable sources for electricity should mean electricity prices are not affected by rising global gas prices. In 2020, more than 43% of the UK’s electricity came from renewable sources, such as wind and solar power.
However, the UK also relies on burning gas to generate electricity, so wholesale gas prices are used to set all electricity prices. The UK Energy Research Centre wants to see electricity from green sources to be “decoupled” in order to give consumers lower prices at some times of the year. The research body estimates that households could save between £70 to £300 a year if this were to happen.
