Volkswagen’s EV Infrastructure Plan Fraught With Tensions Over Competition, Equity Issues

With a ruling expected from California any day, some stakeholders worry the entire deal could be derailed if regulators make too many changes.

One of the greatest scandals in automotive history is about to result in the single largest investment in electric-vehicle infrastructure the nation has ever seen. Assuming the deal doesn’t get derailed, that is.

As part of a court settlement over the “Dieselgate” emissions test fiasco, Volkswagen agreed to invest $2 billion in EV infrastructure across the U.S. through its new subsidiary Electrify America. In April, the EPA approved the first phase of VW’s national plan, which outlines $250 million in charging station investments between now and mid-2019. Overall, Volkswagen Group of America will invest $1.2 billion over the next 10 years in zero-emissions vehicle “infrastructure, education and access” outside of California.

Within California, the automaker is required to spend $800 million on EV-related investments to support broader adoption of zero-emissions vehicles over the next decade. The first phase of the California plan includes a “Green City Showcase” and several public awareness initiatives. It also calls for investing $120 million in 2,000 to 3,000 EV chargers installed at 400 or more sites around the state by mid-2019.

Volkswagen is managing the rollout of those stations, but they will not be proprietary to the German automaker; rather, they’re “designed to provide access by supporting many existing and anticipated charging technology needs,” the plan states. That includes Level 2 charging, traditional 50-kilowatt DC fast chargers up to 320-kilowatt DC fast chargers, both the CHAdeMO and Combined Charging System, and will use open standards like Open Charge Point Protocol.

But there’s some concern that the plan -- which the California Air Resources Board (CARB) is expected to approve or deny, in whole or in part, any day now -- could end up back on EPA Administrator Scott Pruitt’s desk if regulators decide to make too many changes.

“Generally, I’m worried about calls for changes that go beyond the four corners of the deal,” said Max Baumhefner, clean vehicles and fuels attorney at the Natural Resources Defense Council. “This time, with Trump’s EPA as a counterparty to the negotiation, I’m not confident that California would get a better deal with Trump at the table than CARB got for us the first time.”

Many stakeholders have argued that the California plan does not do enough to serve disadvantaged communities, and some have said the plan will disproportionately benefit Volkswagen as the implementer of EV infrastructure deployments. Many of these complaints have merit, said Baumhefner, but some companies choosing to vigorously pursue their business interests could threaten the entire deal.

“We expect CARB to exercise their oversight over Volkswagen’s plan to ensure that it maximizes benefits for Californians,” he said. “It’s not perfect and we want it to be improved -- but we don’t want it to be blown up.”

Conflict over equity and open standards

Several California politicians have raised concerns about the VW deal, mostly that it doesn’t do enough to support communities worst affected by diesel emissions. The plan currently states that 25 percent of first-round charging stations will be built on freeways in disadvantaged areas. It also calls for initially focusing investments on areas where utilization is the highest, which means wealthier places like the Bay Area could see preferential treatment.

“Volkswagen should modify its plan to comport with the Board's Guidelines that at least 35 percent of the funds go toward investment in disadvantaged communities,” a group of lawmakers wrote to CARB in April.

Board members have said that reaching low-income areas is a priority. “We are mesmerized by the money so much, we aren’t really thinking about where the money is going,” said Dean Florez, a former state senator and CARB member, the Los Angeles Times reports. “And that’s alarming.”

ChargePoint, which operates one of the nation’s largest EV charging networks, has also voiced concerns over the California plan. The company provided comments to CARB on the proposal, arguing that regulators must require VW to boost investments in disadvantaged areas. ChargePoint also asked for greater oversight of the deal from CARB and for the board to ensure VW’s investments do not “interfere with or undermine established and emerging businesses in the market place.”

All of that sounds fair, but it may also hint at an underlying conflict. Last fall, ChargePoint raised similar concerns before the Justice Department, stating that the funding will allow VW "literally to drown out all other participants in the ZEV infrastructure market through enormous spending, made at its unfettered discretion, that is untethered to the normal constraints and financial metrics by which all other market participants must operate," the company said in a court filing, according to Reuters. ChargePoint asked a judge to order changes to the deal, but the Justice Department rejected ChargePoint's arguments in a September 30 decision.

According to Brett Hauser, CEO of Greenlots -- a provider of open-standards-based technology solutions for EV networks and grid management -- ChargePoint’s concerns are really about protecting the company’s proprietary network management system. In order to facilitate driver roaming and make EV charging easy, Electrify America is required to invest in charging hardware and charging networks (the backend software systems that manage usage and payments) that comply with open standards. Interoperability between networks ensures that drivers can use any charging station at any time without having to be a member. This runs counter to ChargePoint’s business model, which is based on a closed system that allows site owners to individually determine the rates they want to set for EV charging.

An obligation to "do what's best for the entire industry"

ChargePoint refused a request for an interview, but did offer a link to public comments submitted to CARB (referenced above). GTM could not independently confirm that ChargePoint is concerned the VW plan will undermine the company’s proprietary technology-based business model; however, several different sources referenced tensions over competitiveness issues.

Also, ChargePoint has filed comments in several states requesting that incentives for charging stations in the VW deal be structured through rebates, vouchers or open grants, and that site hosts have the ability to own and choose equipment and services and set pricing and access controls. The request implies, according to ChargePoint’s critics, that the company wants VW to write a check to state governments and have them administer the program, rather than allow VW to manage the infrastructure rollout. 

But if that happens, “it could be difficult to get to a truly open and royalty-free standard...that allows access to anyone in the system," said Hauser. That’s because the current deal specifies the need for interoperability.

"I can’t fault other companies for looking out for their own business interests, but we also have an obligation to do what's best for the entire industry," he added.

Hauser said he’s speaking out to highlight that the EV service providers are not in lockstep on the California settlement. Greenlots and five other EV service providers support the settlement plan in its current form, and have become proactive in ensuring it gets the approval needed to move forward. “We are concerned that some have raised objections and proposed delays to implementing the settlement,” the coalition wrote in a letter to CARB. “We firmly believe that our state, our industry and our planet, cannot afford any unnecessary delay and we urge you to move forward as quickly as possible under the existing terms” related to VW’s charging station investments.

The fear is that if CARB makes too many revisions, and they’re believed to alter the fundamental pillars of the deal, the settlement could end up before a judge again -- with a far less sympathetic EPA defending the EV investment.

“I think we would be, as an industry, very foolish to be thinking about the short term [and making] a concession to a particular company when we’ve got a greater opportunity in front of us,” Hauser said. “Now is the time to take action.”

Ford, BMW and EVgo weigh in

While some stakeholders have identified ChargePoint’s concerns as a roadblock, it is hardly the only company to criticize the California VW deal.

Angela Konert, vice president of government and external affairs at BMW Group, raised similar concerns over the level of control the settlement gives VW. “[A] single OEM controlling areas of deployment and customer experience should not be afforded an implicit comparative advantage through its ability to control day-to-day operations of consumer charging events (queuing, reservation, pricing, billing and payment or integration into mobility platforms). Instead, VW should work directly with other OEMs to ensure a mutually beneficial customer process that will support the goals of the other OEMs as well as a supported customer experience," she wrote to CARB.

John Viera, global director of sustainability and vehicle environmental matters at Ford, expressed hesitation over VW’s control of freeway chargers. “There is concern that critical components of the inter-city travel network design will be in the hands of a single automaker (e.g., configuration of charge point, network capacity, locations, etc.). A multi-OEM framework would...eliminate the ability of a single OEM to control these areas of network design and deployment and customer experience, providing an implicit advantage,” according to comments filed by Viera.

“Even if multiple OEM input is received and open industry standards are incorporated into settlement controlled planning, there are no assurances possible under the governing consent decree that could guarantee that input on network planning (capacity, queuing, station locations and configuration, etc.), technology considerations (IT, data handling methods, network systems integration into Ford mobility platforms, etc.) and customer needs will be incorporated or accommodated,” Viera wrote.

Not all VW competitors are critical of the deal, however. EVgo, which currently operates the world’s largest public fast-charging network, stands to cede that title to VW in the coming years. But the benefits the settlement deal will provide to the overall EV market outweigh the near-term market shuffles, said Terry O’Day, vice president of product strategy and market development at EVgo.

“With VW coming in, they’ll be largest fast-charger provider…so potentially our biggest competitor,” O’Day said. “But we see value to the industry as more important than any of those impacts. We think the kind of investment VW is making will sell more cars, and with more cars on the road, we’ll all do better. So this is a time to hold hands and jump, rather than put up fists.”

EVgo is typically opposed to utilities being allowed to own and rate-base EV charging equipment, because it has significant impacts on market competition. But the VW deal is different because of the scale and scope of the investment, and the fact that it’s a national program.

As more and more long-range EVs come to market, the need for high-powered EV charging stations of 150 kilowatts to 350 kilowatts will multiply. And that will come at a great expense, said O’Day. The VW deal carves out investments in high-powered EV chargers, which are essential if EV service providers are to keep up with new vehicle offerings. The focus on community-based charging is also critical, said O’Day, because it allows the market to reach renters and those who can’t plug in their EVs at home. These are areas where EVgo has expertise, and wants to work with Electrify America.

Furthermore, as a nationwide effort, the VW deal will help create consistency so that there aren’t hundreds of different utility and private-sector charging programs, an outcome which benefits everyone. “Customers need to know EV charging is ubiquitous, affordable and reliable, and with a national program, you can communicate that through traditional marketing channels,” O'Day said.

“We do fear that if we renegotiate this deal, we’re not going to get a better one"

As CARB makes its final deliberations, stakeholders on all sides are eagerly waiting to see how the board addresses concerns over competitiveness issues raised by ChargePoint, Ford, BMW and others -- and whether or not the open standards provision is affected in some way. How CARB chooses to address investments in disadvantaged communities is another topic that will be closely watched. Plus, there could be some controversy over how much VW is required to invest in hydrogen stations for fuel cell vehicles.

On the equity issue, Joel Espino, legal counsel at the Greenlining Institute, said community groups were not at the table when the VW deal was struck, which resulted in the funding shortfall for low-income communities. VW’s proposal to spend 25 percent of its first-round investment on charging stations in low-income areas only refers to installing physical stations along highways. That money is not designated for charging stations within communities, nor does it include spending on public education.

“Only about 10 percent of this plan will actually be spent in disadvantaged communities,” said Espino. “That, to me, is an injustice.” At a minimum, VW must invest 35 percent of settlement funds in disadvantaged and low-income communities, which is the requirement the State of California sets for other climate-related investments, he said.

Espino added that he’s sympathetic to concerns raised by other groups like NRDC and Greenlots. “We do fear that if we renegotiate this deal, we’re not going to get a better one, because it has to get approval from the EPA, and they’re not keen on California or the environment right now,” he said.

But there is still an opportunity for VW to provide additional information to CARB on how it plans to boost investments in low-income areas, without having to go back and redo the entire deal, Espino added. This could take place through changes to the methodology or a supplemental letter detailing VW’s commitments.

Baumhefner at NRDC echoed that VW’s proposed California plan isn’t perfect, and investments in disadvantaged communities need to be a priority. “I think it could be improved in significant ways to better align with the guidance that CARB provided them,” he said. “That would include being more explicit about how their proposed investments will benefit those in disadvantaged communities who are disproportionately exposed to the type of air pollution that resulted from their diesel vehicles.”

Hauser also said that in order to see widespread adoption of EVs, the industry has to achieve widespread infrastructure deployment, adding that there are mechanisms included in VW’s California deal to ensure the agreement is fair.

“It is a 10-year process,” he said. “There should be no delay.”

Read the full VW EV infrastructure proposal for California: 

vwinvestplan1_031317 by Electrek's Fred Lamert on Scribd