Today CPO pricing strategies are relatively simple. The majority of CPOs do not vary their prices to reflect either the time of day or the underlying cost of electricity. Some operators are now starting to experiment with more sophisticated offers, and we believe the timing is now right for customer offers to evolve. The growth of renewables in many markets is increasing the number of low/negative electricity price periods, creating the opportunity to pass on some of these savings to the customer. While many sites are suffering from low utilization levels that can be improved by a more sophisticated pricing strategy.
The CPO business model is inherently conducive to a dynamic pricing model. The majority of costs, beyond the underlying electricity price are fixed, i.e. do not vary with utilization level. While recovery of these fixed costs is a major (>60%) contributor to the sales price, unlike in traditional fuels retailing where it is only a small percentage of the sale price. Charge point utilization is highly dependent on the time of day and day of the week. Hence, CPOs have an economic incentive to seek to increase utilization during off peak periods. Industries, such as air travel and hotels, which have similar cost structures have adopted dynamic yield management pricing for many years.
Underlying electricity prices are becoming increasingly volatile. On summer weekends with low demand and strong renewables generation prices can be very low if not negative, while winter evenings with low wind resources can cause prices to rise to above €0.3/kWh in many markets These price differentials are material for a consumer, hence there is real potential to create tiered pricing structures to attract custom during off peak periods , “Summer Sunday sale”.
As EV penetration increases, we believe the value of adopting more strategic pricing strategies will increase. Consumers will have the choice of more charging points, hence convenience will become less critical when selecting a site and price will become more important in site selection. This creates the opportunity for:
- Adopting different strategic pricing strategies by brand/location/charger type: For example, low price / higher volume sites in cheaper / less convenient locations versus higher priced offers in more convenient premium locations.
- Dynamic Pricing strategies: Initially offering tiered pricing structures, e.g. Peak, Base, Offpeak, before moving to more dynamic pricing offers based on forward electricity prices and typical utilization patterns.
These developments have the potential to be particularly attractive to households without access to home charging. For those with home charging, use of public charging is more of a top up activity that is used infrequently with typically smaller charges. In these circumstances, price is less of an important criterion in selecting a charging point. For those without access to charging at home, the average charge size will be that much higher and the influence of price therefore will increase. For a 40 kWh charge a €0.40/kWh saving, or €16 is a material saving, that has the potential to change behaviors. Longer-term, the ability to charge at public charge points at prices closer to those achievable with a home charger may also encourage EV adoption for those without access to home charging.
There are many factors that need to be considered when evolving a pricing strategy, including:
- Marketing and public perception. In particular, how do you maintain trust and keep things simple
- Piloting and customer testing of elasticity
- Operational delivery (internal and with your partners)
- Implications for your energy supply contract and optimization
The opportunity will vary depending on the nature of competition in the market, the specific assets and the local evolution of the power markets.
E-CUBE has developed strong expertise on the topic of Gas Infrastructures through its recent projects and the experience of its consultants. We would be delighted to discuss these market perspectives and opportunities with you. Please feel free to contact the experts below to schedule a conversation on the topic.
