The European Commission has published its approval of the German 1.8 billion Euro tender scheme to support the development of a nationwide fast charging network. The availability of charging infrastructure, fast charging points in particular, has a significant influence on the decision of consumers regarding whether or not to purchase an electric vehicle.
In Germany, the Federal Ministry of Transport and Digital Infrastructure (BMDV) aims to increase the number of fast charging points and ensure a seamless network is in place.
Overcoming the chicken-and-egg problem of electromobility
A fundamental obstacle to higher market shares of EVs is the limited availability of a nationwide charging network that meets demand. However, charging point operators wait for higher EV registration numbers before investing in additional area-wide charging infrastructure.
To solve this chicken-and-egg problem, the federal government is providing around 1.8 billion Euros for the expansion of a High power charger (HPC) fast-charging network as part of a tender. Frontier Economics, in cooperation with the law firm BBH, has advised the Ministry on economic questions regarding tariff design of the tender. In a Europe-wide tender and the award will be made in a multi-stage process consisting of the submission of an initial bid, a subsequent negotiation phase and the final bid submission.
Using public funds efficiently and minimising distortions on competition
In order to ensure an efficient use of public funds, Frontier Economics helped to design a tender which ensures that:
- charging prices at subsidised charging points do not distort market prices at other fast charging points without funding from the scheme;
- market-based investment incentives remain in place and are not crowded out by subsidised HPC infrastructure;
- there is non-discriminatory access to subsidised charging stations;
- exploitation of any potential local market power is prevented.
In particular, our proposals include a price abuse control, which regularly checks that prices correspond to the results of the competitive market, focussing on the competitive effects of the new charging infrastructure, supported by the tender.
To prevent dumping prices below the market price level, we have proposed to return part of the revenue to the federal government based on sales, i.e. the amount of the repayment increases with volumes purchased at the charging pole. The repayment is based on estimated investment premiums included in observable market prices, using the difference between revenues and variable costs of CPOs.
We will keep a close eye on the developments on Germany’s fast-charging market as the Federal Government looks to further spur infrastructure investments into a seamless national network.