Financing the Electric Transportation Future

This project analyzed investment opportunities in North America’s electric vehicle (EV) infrastructure sector for Sumitomo Mitsui Banking Corporation (SMBC), a financial institution interested in catalyzing a low-carbon economy. The team identified challenges pertaining to 8 EV charging business models and recommended how SMBC can overcome them. Methods included a literature review, case studies, site visits, interviews with different organizations such as think tanks, charging companies, public sector and utilities, and financial institutions, as well as discounted cash flow financial modeling of example investments. Findings show that, despite growing EV penetration, charging infrastructure investments remain risky because of poor financial performance as recent charging companies have been sold for pennies on the dollar, over-reliance on subsidies, fragmentation of EV fleets, grid interconnection constraints, and unpredictable demand charges. Bureaucratic hurdles have also contributed to the fraught investment landscape as the grid interconnection process is lengthy and the grants under the Inflation Reduction Act and the NEVI program have strict requirements along with slow processing times.

However, there are opportunities on the horizon, as there are promising trends such as strategic partnerships, growing EV fleet commitments, blended finance opportunities and new revenue models (e.g., Vehicle-to-Grid) created by innovative market and technology trends. The recommendations of the team were that SMBC achieve adequate investment size by bundling related investments, using offtake partnerships as a cost leader strategy, and layering of federal, state, and utility policy support.