EV Infra in focus: Charging into the future
Infra Bank in Focus
EV Infra in focus: Charging into the future
19 October 2022
By Ian Brown, Head of Banking
Growing EV infrastructure is key in the drive toward net zero. In his first blog, Ian Brown, Head of Banking at UK Infrastructure Bank, explains why we are ready, willing and perfectly placed to support public and private investors to help boost the EV charge into the future.
Picture the scene: You are driving down a gloomy road, late at night. You are tired, hungry. It’s late. You need to get home. The car is alarmingly low on power and you are driving an unfamiliar route. You locate the nearest charge point. It is broken. The next one is close but is it close enough? You turn down the heat and switch off the radio to conserve power. Will you make it?
This is the ‘range anxiety’ that every driver dreads when they think about buying an Electric Vehicle (EV). It is characteristic of the challenges of growing the EV sector which creates a chicken and egg conundrum: for consumers to buy an EV, there needs to be sufficient availability of charge points to give them confidence that they can charge up their cars as reliably as they can fill a tank with fuel. Conversely, charge point operators need reassurance that there will be enough demand to achieve a satisfactory return on investment.
To meet that challenge, private investors need to take a calculated risk. We at the Bank are ready to join you. The EV sector strongly aligns with our mission to deploy public money into Infrastructure projects to help tackle climate change and boost regional and local economic growth. We want to hear from companies and Local Authorities with investible charge point projects.
But if there is ‘range anxiety’ for consumers, there are corresponding uncertainties for investors. There is a strong need for data on utilisation rates and, because of the immaturity of the sector, there is still limited historical performance data to give confidence to investors. Some geographies – for instance, rural areas or areas with more economic deprivation - are less commercially viable. So the UK is in danger of an inequitable rollout on the current trajectory. Scale is also key: EV projects for on-street parking tend to be small and focused on a local area which limits the commercial opportunity. And projects require a strong partnership between local authorities and commercial operators where there can be difficulties aligning objectives.
The Bank is uniquely placed to help. We operate at the intersection of the private and public sectors. We have both private and public financing arms with up to £4 billion of capital dedicated to local authority lending. That means we have an understanding of the Local Authority and commercial perspectives, which is pertinent to many charge point infrastructure projects where collaboration is vital.
We are already actively engaged in support for the EV sector. One way we are doing this is by continuing to support the Charging Infrastructure Investment Fund (CIIF). CIIF is the Bank’s equity investment fund, managed by Zouk on our behalf, which is scaling open-access, public EV charging networks in the UK. It started in 2019 with an initial £200m cornerstone investment and has attracted a further £220m of private sector capital. During the last three years, CIIF has deployed capital to support the scaling up of several EV charge point operators. With the Bank's ongoing financial support, CIIF will continue to invest to scale its portfolio companies and is projected to fund the installation of over 100,000 electric vehicle charge points by 2026, offering a major contribution to the Government’s central ambition for 2030.
Alongside our continued support of ongoing investment at CIIF, we would also like to hear directly from companies or Local Authorities with investible EV projects. There are some important criteria that must be satisfied in order to access our capital. Where we invest in private sector projects, we want to crowd in private capital. We aren’t interested in taking the place of other banks so where the market is working well, we won’t get involved. But where there is a market reluctance we are able to take more risk and can offer flexibility of financial products and tenor, tailoring our investments to the circumstances of a project.
CIIF invests equity as a bridge to those companies growing towards a more mature debt capital requirement, and we are looking to invest in the development of companies mature enough to start to tap into debt markets. It is critical for these businesses to have a ready supply of capital if they are going to deploy chargers at the scale required over the next decade. We want to engage with EV charging operators to finance the scale-up and accelerate their rollouts. We will be looking for evidence of a strong track record, backed by an experienced management team, utilisation data and with supply chain arrangements in place so that we can assure ourselves that they can deliver.
We also welcome engagement with Local Authority projects where there is a strategy in place and where sufficient scale of investment is needed (above £5m of borrowing). In some cases, this might mean aggregation of projects across geographies or collaboration between several Local Authorities. Investment from the Bank enables Local Authorities to access our financing expertise and networks. And at 20bp cheaper than the Public Works Loans Board the Bank is well placed to support Local Authorities who have identified their preferred business models and who are partnering with commercial organisations.
The chicken or the egg question is one we still can’t answer but, either way, we want to work with you to nurture the flock…. For further details or to get in touch with UKIB about investible projects please go to the enquiries page on our website.