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USA: Governments pump money into charging stations

CHICAGO — When politicians tout the benefits of public subsidies for electric vehicles, the argument inevitably comes down to two words: Chicken. Egg.

It works like this: Consumers won’t buy electric vehicles without somewhere to charge them. But no one will build charging stations without electric vehicles to use them.

To solve this quandary, local governments and the federal government have pumped millions of dollars of public subsidies into building charging stations.

“These charging stations will encourage car manufacturers to sell electric vehicles in Chicago,” Suzanne Malec-McKenna, commissioner of Chicago’s Department of Environment, said last month in announcing a public-private partnership that will install 280 charging stations in the Chicago area.

350Green, a San Diego-based company building the stations, cut its costs in half for the $8.9-million project by cobbling together a package of $2 million in federal and state grants along with federal tax credits.

At the same time, 350Green expects to wean itself off such subsidies.

“You can’t live on government subsidies,” said Mariana Gerzanych, chief executive of 350Green. “And building a business model that depends on government subsidies will never work. And when government subsidies ago away, your business goes away. So you really have to think through the financial side and how this will work. If people will charge. If the business will actually survive long-term.”

350Green’s business model relies on consumers, especially renters without garages, paying $50 to $60 per month to charge at its stations. Relying on data from Nissan, 350Green projects that 7%, or 334,188 vehicles, in the Chicago metro area will be plug-ins by 2020.

The company expects to share the revenue it collects from these customers with partners that allow the stations to be installed on their properties. Most likely these partners will be retailers or the owners of parking lots that serve large retailers.

In the interim, experts say, local governments have little choice but to help fund the charging infrastructure.

“These are not intended to be permanent incentives, but really to sort of bridge the gap during this period when this technology is nascent. The idea here is that someday this will be an economically viable industry,” said John Gimigliano, principal-in-charge of KPMG’s energy-sustainability tax practice and former senior tax counsel for the House Ways and Means Committee.

So far, electric vehicles are rolling out at a trickle, though manufacturer ECOTality is preparing to install 15,000 charging stations by midyear in cities across the country. By next year, a nationwide electric car rollout is expected to be in full swing.

Still, without significant contributions from taxpayers, there would be no rollout, contend tax experts. And whether the market becomes self-sustaining will be determined by consumer acceptance.

“I think probably some of the justification for (public subsidies) is on the grounds that these things are just starting out, and they’re not produced to scale, and when they get produced to scale, they’ll be more economical and, perhaps, become viable,” said Eric Toder, co-director at the Urban-Brookings Tax Policy Center in Washington.
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