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Choosing the right funding and operational model
Identifying the right funding and operational model for each local authority isn’t easy and there is no single right answer. Balancing the need to limit any significant capital invested by the council or central government against developing models which will be commercially attractive by suppliers is challenging and becoming increasingly difficult. These factors need careful consideration when developing the strategic plan. Once the delivery model and funding is decided, either a tender document will need to be drawn up or the local authority can decide on a direct award.
There are three different sources of funding: local authority funds, private sector funding or central government funding. Government grants such as LEVI, OZEV and ORCS are regularly updated in line with government policy.
The funding of the project influences the operational approach to an EV charging network: ownership and operation by the local authority, private operator ownership, or a public-private partnership.
1. Own and Operate Models
Here a local authority takes full ownership of the charging infrastructure network, chooses the changepoint locations, sets charging tariffs and retains a large share of the revenue generated.
The local authority remains responsible for the commercial risks and the operating costs, negotiating the operation and maintenance contracts with the charge point supplier.
The local authority will need an install, operate, and maintain agreement, with clearly written expectations of what the CPO needs to deliver and over what time frame. Penalties for late or non-delivery along with termination clauses in the contract will need to be included.
Typically, this model is used for small-scale, low-cost projects where grants can fund most of the initial capital expenditure.
2. Private Ownership
In this model a privately owned charge point operator will take ownership of and fund the project themselves. For the local authority this offers a zero-cost, future proof option with capital costs, future liabilities, and the responsibility to upgrade charge points to meet future standards of information and physical connectivity, transferred to the operator.
An experienced operator will have the expertise to assist a local authority with grant applications, consultations with residents and ensuring new charge point sites comply with regulations. It is, for this reason one, of the fastest and least difficult ways to roll out an EV charging infrastructure.
The operator will achieve a return on its investment through its charging fees. Consequently, it will help the local authority choose locations which are convenient for users and have lots of passing traffic to optimise the use of EV charging network and the revenues generated. Once installed the operator will also be highly motivated to keep the charge points operational at all times.
The local authority will need to perform due diligence on the company to ensure the business has the right long-term financial backing in place and understands the commercial responsibilities.
If an operator is providing a fully funded model, they will have standard contract terms which they would likely prefer to use. Often this will include a lease/licence to provide services in that specific location for an agreed period, often for 10+ years and longer, and is aligned to the higher speed of charger being installed. The contract will also detail the risks and liabilities for each party, and the conditions for termination of the contract.
3. Public-Private Partnerships
Partnerships between the local authorities and private operators offer flexibility in funding and shared revenues. The local authority can request funding from the charge point operator, although the shared revenues will change the economic feasibility for an operator.
Contract terms between CPOs and the local authority will need to be carefully negotiated and include clauses around profit share and contract length to reflect the balance of risk and reward for the local authority and the company.
This video provides an overview of the three different approaches and an outline of what a local authority can expect from a charge point operator.
Whichever model is to be used, any contract must outline the financial and legal responsibilities of each party. An important part of the contract negotiations is the clearly defined financial and public liability responsibilities for both the local authority and the charge point operator. The terms will need to cover what happens if a member of the public is injured (or worse) by the EV charging equipment. Injury may occur though using the charger or, for instance by tripping and falling in a public space making the liability issue a concern for most local authorities.
Drawing up the contract
Once the contractual approach or delivery model has been decided, local authorities need to consider the frameworks available and develop the tender documentation or decide on a direct award.
Most CPOs have template agreements which they will share with local authorities only once they have been selected as a prime bidder. This is to protect any intellectual property contained within the contract and the local authority may be asked to sign a non-disclosure agreement as part of the process. Many will also provide a ‘plain English guide’ that outlines the key points and mechanisms.
Several CPOs are seeking a standard form of agreement that can be used by any local authority which is similar to the model developed in London with the GULCS framework.