One of the questions that is increasingly asked of ACAPMA is ‘what will happen to service stations when EVs take hold?’ Will, for instance, all service station sites be converted into residential units by 2030 as Australian motorists rapidly shift out of their petrol and diesel cars into battery electric vehicles?

In a conversation with Ellen Fanning and her panel on ABC’s The Drum this week, ACAPMA CEO Mark McKenzie shared a perspective on how the Australia’s fuel retail industry is approaching this issue.

Mark opened by suggesting that the popular notion that service stations will be replaced by multi-storey developments in a decade was just ‘plain wrong’, for two reasons.  The first is that, as service stations continued to expand their retail offerings beyond fuel (to include a broad range of non-fuel products and food offerings), these retail sites are now too valuable to simply be ‘converted’ to residential developments.

The value of the average service station site has nearly tripled over the last 10-15 years, with the average service station valued in Australian now valued at around $7M. That price tag, coupled with the fact that these sites have proven to be commercially resilient in the face of the COVID19 downturn (and vitally important in supporting the early recovery of communities affected by natural disasters), means that service stations are more valuable to Australian local communities than ever before.

The second reason is that the transition to EVs is not going to happen in a decade – or as quickly as many EV advocates are suggesting. The pace of the EV transition will ultimately be dictated consumers – not government and not industry. Therefore the annual rate of sales of EVs, and the rate of retirement of conventionally fuelled vehicles over the next decade, will ultimately define the period over which the transition to a fully electric national light vehicle fleet will occur.

“If we think about last year, we sold 40,000 EVs. We sold 970,000 petrol and diesel vehicles”, said Mark.

“Each of those new vehicles (petrol and diesel) will stay in the fleet typically for 17 or 18 years, which means that last year we added nearly a million petrol and diesel vehicles that will still be operating in the national fleet in 2040”, added Mark.

“So the challenge for our industry is to diversify our businesses – not to make a wholesale change, where we instantly go from petrol and diesel to electric – but to slowly change”, said Mark.

“We talk about demand destruction in our industry. What we are going to see is that our petrol and diesel volumes will slowly drop year on year and service station businesses will need to respond by developing alternative sources of revenue to remain viable”, added Mark

Mark went on to explain that the businesses in the industry are approaching this challenge in one of two ways. The first involves installation of EV Charging infrastructure in an effort to capture revenues lost from petrol and diesel by providing commercial fast charging services at service stations (and perhaps some additional convenience store sales as people wait for their vehicles to be charged).

There are, however, some significant challenges to this strategy at the moment given the high cost of installing EV charging infrastructure and the relatively high cost of wholesale electricity supply.

The second response involves growing revenue from non-fuel retail sales – both products and services – to offset the reduction in fuel revenues. Mark noted that there have been two big moves in the industry over the past 2 weeks – namely the Viva acquisition of OTR and the decision of the owners of 7 Eleven to put the business on the market – that are tangible examples of businesses pursuing this second response. While this second response does not carry the inherent infrastructure risk (and business timing uncertainty) of the first strategy, it does require the business to make a wholesale change from a services culture to a full retail/hospitality culture. The change required is as complex to deliver in practice, as the first strategy.

During the latter part of the conversation, Mark spent some time responding to panellist Noel Towell (Economic Editor of The Age) who challenged the notion that EV infrastructure was expensive. Noel suggested that local councils in Melbourne were installing chargers for a fraction of the average $500,000 bill that Mark had cited.

Mark responded by pointing to the fact that ‘all EV infrastructure was not the same”.

He drew a distinction between the low relative cost of chargers with slow charging rates (50kW) that require average charging times of 4 to 5 hours to realise a 400km range and the Fast (>150kW) and Superfast charging (350kW) infrastructure that is being installed at service stations.

The chargers being installed at service stations are much more expensive because the grid in the vicinity of the site is not capable of supporting the high electricity supply rates that are needed. This is an issue that cannot be ignored. All Australian Governments need to better in the design of their grant programs for EV charging infrastructure – ARENA’s Future Fuels

Fund is a case in point – to provide the seed funding needed by the Australian fuel industry to expand Tier 3 recharging infrastructure.

Australia will need a hierarchy of EV charging comprising three ‘tiers’ of charging infrastructure. The first tier incorporates home charging, which is likely to account for around 80% of EV recharging activity. This national home charging network will need to be supported by a second tier of medium speed recharging infrastructure located in public areas (shopping centres and workplaces), where vehicles are typically left for long periods of time (i.e. 4 hours or more). The third tier involves the provision of a national networks of fast/ultra-fast charging, primarily located at service stations to support charging in cities (for consumers in high density dwellings), business travellers and the interstate/recreational travel needs of everyday motorists.

Service stations are best placed to support this third tier of infrastructure. They are conveniently located. They already have the services needed for motorists to use during the recharging process and they are staffed by personnel that can provide the level of supervision needed to ensure that vehicles are recharged safely at these high transfer rates.

Unless, and until, all Australian Governments (and government agencies including AEMO and ARENA) tackle this issue properly, Australia’s aspiration to achieve an electrified fleet in line with its Net Zero 2050 ambitions might reasonably be described as a ‘pipe dream’.

“While it is great that our politicians have finally agreed a position in respect of Australia’s greenhouse ambitions and Australia’s EV target, you can’t just ‘wish it’ to happen”, said Mark.

“There is a lot of serious work that now needs to be done by economists and engineers to prepare a viable plan for Australia’s transition to EV fleet operation – one that makes both economic and social sense, concluded Mark.

ACAPMA (and the rest of the fuel industry) stands ready to work with EV suppliers, the Nation’s energy providers, electrical market regulators, and all Australian Governments to develop such a plan. But work needs to begin now.

See the whole segment here:

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