German Plan For Charging Infrastructure Turns Capitalism On Its Head

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A Great Plan

First, a little history: about two years ago, the German federal government realized that the growth of charging infrastructure was not keeping up with the growth of battery electric vehicles on the road. In particular, the growth of high-performance charging (HPC) stations was lacking. The incentives made available to charge point operators (CPO) did not result in the building of the charging stations that were needed.

Germany decided to do it differently. The federal government was going to prepare 1,000 sites and start the groundwork for the charging stations. These locations are now called the “Deutschlandnetz.” These locations were going to be sold or leased in an auction to the charge point operators. The companies would be tasked with building and exploiting the charging stations. This sounded like a great plan.

Reality Sucks

Now, we are nearly two years later. The charging companies have not been sitting on their behinds twiddling their thumbs, but the announcement of the 1,000 sites to be developed with government support did slow down search and development by the industry.

The proposal of the government is not what it was suggested it would be. The government has not started to prepare 1,000 sites to build fast charging stations on. The government does not have a thousand sites. It has 200 locations along the Autobahn that it owns and can lease to charging companies. It has also defined 900 “search areas” where it thinks the CPO companies should build a supercharging station. These 900 search areas are divided into 23 lots that are auctioned.

After winning the auction for a lot, a CPO can do the heavy lifting of searching for a location, getting through all the red tape before all the permits are awarded, getting connected to the 10kV distribution grid, building the substation for the charging station, building the charging station with commodities like bathrooms, and waiting for customers. The government provides a big sack of money for establishing and operating the stations, expecting nearly all revenue in return.

Capitalism Upside Down

This proposal of the German government to build the charging infrastructure puts the capitalist economical structure upside down. Companies are supposed to invest in risky but profitable endeavors. Government is supposed to regulate and facilitate new, economically important developments. In the proposed structure, the private companies bid for the privilege to have their name on a public charging station. They also operate the stations for minimal compensation. The reason (excuse) for this is that the companies are not taking a financial risk and should not make a profit.

This is not making sites available to private companies to build and exploit charging stations, like they pretend it is. In reality, this is building a public charging network with taxpayer money and hiring private companies to do all the work associated with building and operating the net. The companies are paid for their work by a small portion of the revenue of the station. If there is not enough revenue, the company does not get completely paid. With competition, they can lower prices, but not below the fixed amount that is for the government. They are left with tiny margins once the revenue is big enough.

This is the kind of public–private partnership that companies will try to avoid at all costs. The contribution of the companies is their expertise and manpower. Their reward is possibly eight years down the road and a place in the market. The alternative is not participating in the German HPC charging market. It is a catch-22 situation.

Crime Against Capitalism

This is not even the worst part of the Deutschlandnetz proposal. The government has mandated a maximum price per kWh that is substantially below what is now common in the market. So, they want to create over a thousand stations, paid for by tax money, that ask for a lower price than the not-yet-profitable stations of real private companies are asking for? This is a crime against the basic principles of capitalism. Governments should not compete with subsidized companies against non-subsidized companies. It is not only stupid and unethical, it is also highly illegal in the EU.

The consequence of this kind of competition is that many private charging stations have to close. This Deutschlandnetz will not improve the barely adequate charging infrastructure in Germany. It will destroy it.

Good Intentions, Wrong Approach

The companies that were supposed to stay in line for the opportunity offered have some doubts. They have hired a law firm to write a clear letter to the minister, with a copy to the EU competition bureau. The signatories of the letter are all the big charging companies active in Germany. They are asking for a very serious discussion before more good intentions result in unintended consequences.

The government states that “Funding is the Federation’s instrument of choice to ensure that the project is implemented effectively.” But lack of funding was not the problem that slowed down charging infrastructure construction. Lack of locations and an abundance of red tape were the hurdles. Anybody who has followed the Tesla quest in Brandenburg, fighting the dragon of European bureaucracy, has learned that Europe has a problematic relation with regulations. It turns out that the federal government is as powerless as the private companies in securing good sites in a short time.

What is needed is a liberal dose of eminent domain as the federal instrument of choice to create the sites the charging companies need. That is far more effective than the €2 billion that is now offered. It is an offer they cannot refuse, but also cannot accept.