Kum & Go Prepares for the EV Revolution

Retailer makes room for charging stations as it attempts to stay ahead of disruption

CHICAGO -- Dwell time. Levels 2 and 3. CHAdeMo and SAE Combo. This is the new vocabulary for fuel retailers in the future, if growth projections for electric vehicles (EV) come to pass.

At a panel on capitalizing on the EV market at the 2017 NACS Show, Derek Nelson, manager of sustainability for Kum & Go L.C., West Des Moines, Iowa, cited the 455,000 preorders of Tesla’s Model 3 mass-market EV—which has just started coming off the assembly line—as a sign of the disruptive power of the transportation technology. Overnight, Tesla captured 2.5% of the of the projected 17.1 million in automotive sales for 2017. It also nearly doubled the 584,000 EVs sold to date in the United States.

“That’s disruption,” Nelson said. “Over the next 10 to 20 years, we’re going to see more transformation in this space when it accounts for our transportation than we’ve seen in the last 20 years.”

While he acknowledged that some may be skeptical that EVs will ever disrupt the transportation infrastructure—at least in the near term—Nelson urged fuel retailers to factor in charging stations as they plan new sites.

“If you build it, they will come. If you don’t, they won’t,” said Nelson. “If you have a traditional fueling station and you don’t offer this alternative fuel, they’re not going to come to your store if they’re driving an EV today.”

Kum & Go, which has more than 400 stores in 11 states, is piloting EV charging in partnership with charging-station provider ChargePoint at two sites under construction in Colorado. The installation, which will go online in February 2018, will include a Level 2 charger, which can charge a battery in four to six hours, and a Level 3 Fast Charger, which can provide close to a full charge in 20 to 30 minutes. The stations will offer the two main charging standards—CHAdeMO and SAE Combo—to accommodate a range of EV models.

The cost of installing the EV chargers was around $100,000, Nelson said. State incentives helped defray some of the expense. Even so, the chargers represent only about 10% of the cost of installing the tanks, dispensers, pumps and the other pieces of fueling equipment required for gasoline or diesel, he said.

A return on this investment can be tough to calculate. According to ChargePoint, about 70% to 80% of charging at public charging stations today is subsidized to the point that it is free. But as the market grows, this percentage will undoubtedly shrink. Kum & Go plans to charge for usage of its charging stations, but this can be a complicated decision. In Iowa, where Kum & Go is based, state law forbids reselling electricity. In Colorado, the retailer can charge for it. It is still finalizing its pricing, but it estimates it will make a 45% to 50% margin on charging.

“That looks a little better than your CPG (cents per gallon) of today, doesn’t it?” Nelson said.

In Front of the Curve

Economics will drive the rise of EVs; Nelson pointed to their lower fuel and maintenance costs. Assuming an average fuel price of $2.50 per gallon, a consumer could see savings of more than $1,000 per year after they pay the current premium on an EV. This gives a 12-year payback. With the $7,500 federal incentive and some state rebates on EV purchases, the premium gap can completely disappear.

Even if the incentives dry up, rapidly declining battery costs should soon erase the difference in the price between an EV and a conventional, gasoline- or diesel-powered vehicle. Nelson cited one study projecting that the cost to produce an EV will drop below that of a conventional vehicle by 2030, while another study suggests a 2020 dateline for disruption.

Kum & Go is attempting to stay in front of the curve. Its new Marketplace store format should match up with the 20- to 30-minute EV charging occasion—or dwell time—by offering indoor and outdoor seating, fresh and healthful food options, free Wi-Fi, and charging outlets for smartphones and laptops in the store.

“You could plug in your car, walk into our store, grab a breakfast sandwich and fresh cup of coffee, sit down, hammer out a few e-mails, business as usual, get on your merry way, and it’s no disruption to your daily lifestyle,” said Nelson.

Now some perspective: EV market analysts expect about 80% of charging to take place at home or the workplace. “That gives us a 20% opportunity,” said Nelson. “It not be that much or a big piece of the pie, but you think about that infrastructure investment—you can make a good return on investment case for this infrastructure.

“Get comfortable with it. Know what’s out there. And make sure you know what your company’s strategy is,” he continued. “Because if your strategy is not to be in this EV space—that’s fine—there’s no harm or foul there. But this market is coming.”

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