Paving the way for high-power fast-charging in Germany

Paving the way for high-power fast-charging in Germany

How public tendering can speed the roll-out of charging points

In February 2023 the European Commission gave its approval of Germany’s €1.8bn tender scheme to support the development of a nationwide fast-charging network.

The availability of public charging infrastructure, fast-charging points in particular, has a significant influence on the decision of consumers whether or not to purchase an electric vehicle.

The German Federal Ministry of Transport and Digital Infrastructure (BMDV) aims to increase the number of charging points and build a seamless nationwide network, something which is considered vital to achieve the government’s ambitious climate targets in the transport sector.

Overcoming the chicken-and-egg problem of electromobility

The limited availability of a nationwide charging network is a fundamental obstacle to EVs carving out a higher share of the vehicle market. However, charging point operators are waiting for greater EV uptake before investing in additional area-wide charging infrastructure. In short, there is a classic chicken-and-egg problem (see figure below).

Source: Frontier Economics

To solve this chicken-and-egg problem, the German government has put in place a range of funding measures to promote public and private EV charging. The biggest standalone chunk of money, around €1.8bn, is for the expansion of a high-power charging (HPC) network for cars to be allocated under a tender process. Frontier Economics, in cooperation with the law firm BBH, has advised the ministry on economic questions regarding the design of the tender.

Germany’s tender design

The German government has taken a new approach to promoting the domestic charging network:

  • To identify where fast-charging coverage was insufficient, the country was divided into areas of varying size and population density. Multiple locations were then identified for future fast-charging points, taking into account existing charging infrastructure in relation to expected demand in 2025.
  • To strengthen competition in the operation of HPC sites, the country was divided into six areas, with multiple overlapping regional lots (23 in total nationwide across all areas).
  • To avoid the formation of local monopolies, each bidder could be awarded a maximum of three of these 23 regional lots.
  • To enhance cost efficiency, winning bids were awarded based primarily on price (65%) and only secondarily on quality (35%).

Figure 2 Planned German public fast-charging network


Note: The different colours on the map indicate the split into six areas, while the differently coloured dots mark the locations of charging points of the 23 overlapping regional lots. 

In September 2023 the BMDV successfully completed a Europe-wide tender and awarded contracts to a total of ten different companies to build and operate around 8,000 new HPC points for EVs at 900 different locations across the country.

Using public funds efficiently and minimising distortions to competition

In order to ensure the efficient use of public funds, Frontier helped to design a tender process which ensures that:

  • prices at subsidised charging points do not distort market prices at other fast-charging points that receive no 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 through mandatory price monitoring that identifies excessive pricing.

In particular, our proposals include a price abuse control mechanism. The aim is to check regularly that prices correspond to the outcome of competitive market forces and that the new charging infrastructure, supported by the tender, is spurring competition.

To prevent price dumping, we have proposed to return part of the revenue from the charge points to the federal government based on sales, i.e. the sum repaid increases in tandem with the amount of HPC power purchased. The repayment is based on estimated investment premiums included in observable market prices, taking the difference between the revenues and variable costs of charge-point operators.

Lessons learned from the German tender

Auctions, as a market-based instrument, offer the potential for faster network development with higher realisation rates than would be delivered through fixed capex subsidies. Nationwide coverage can be achieved by bundling various site types in a single lot. Additionally, auctions can enhance cost efficiency when there is significant competition among participants, driving down costs and promoting innovation in the process. The success of a market-based strategy relies on a customised tender design that is tailored to prevailing market conditions to attract a sufficient number of bidders.

The main challenges, namely to prevent the crowding out of private investment and to foster competition, are not unique to a market-based approach; they are inherent in all state-aided funding. But state aid that covers only a portion of the capital expenditure can help maintain market-driven investment incentives by preventing price dumping. Successful bidders nonetheless may temporarily have local market power, particularly during the initial ramp-up phase.