Electric vehicle charging stations are essential to cleaning up the transportation sector, and a new study from MIT researchers suggests they could also be good for business.
According to the study, in California, the opening of charging stations increased annual spending per nearby business by an average of about $1,500 in 2019 and about $400 between January 2021 and June 2023. The increased spending equates to thousands of additional dollars per year for nearby businesses, with the increases being particularly pronounced for businesses in resource-poor areas.
The study authors hope that their research will paint a more holistic picture of the benefits of EV charging stations, beyond environmental factors.
“These price increases represent a significant portion of the cost of installing EV chargers, and we hope this study will shed light on these economic benefits,” said lead author Yunhan Zheng (MCP ’21, SM ’21, PhD ’24), a postdoctoral researcher at the Singapore-MIT Alliance for Research and Technology (SMART). “Our findings may also help diversify revenue streams for charger providers and site hosts, leading to more informed business models for EV charging stations.”
Zheng’s co-authors on the paper, published today in Nature Communications, are David Keith, senior lecturer at MIT Sloan School of Management; Jinhua Zhao, MIT professor of urban transportation; and alumni Shenhao Wang (MCP ’17, SM ’17, PhD ’20) and Mi Diao (MCP ’06, PhD ’10).
Understanding the EV Effect
Increasing the number of electric vehicle charging stations is seen as a key prerequisite for the transition to a cleaner, electrified transportation sector, which is why the American Infrastructure Investment and Jobs Act of 2021 provides $7.5 billion to build a national network of public electric vehicle chargers across the United States.
But installing charging stations everywhere would also require significant private investment.
“The US has invested heavily in EV chargers and is actively promoting the adoption of EVs, but many EV charging providers are unable to make sufficient profits at this stage and ensuring profitability is a major challenge,” Zheng said.
EV advocates have long argued that charging stations bring economic benefits to surrounding areas, but Zheng says previous studies of their impact have relied on surveys or been small-scale. She and her team of collaborators wanted to provide more empirical evidence for those advocates’ claims.
For their study, the researchers collected data from more than 4,000 charging stations and 140,000 businesses in California, measuring changes in consumer spending through anonymized credit and debit card transaction data. They used data from 2019 through June 2023, excluding 2020, to minimize the impact of the pandemic.
To determine whether the charging stations led to increased customer spending, the researchers compared data from businesses located within 500 meters of a new charging station before and after it was installed. They also analyzed transactions from similar businesses that weren’t near a charging station during the same period.
Revitalizing nearby businesses
The researchers found that the installation of charging stations increased annual spending at nearby facilities by an average of 1.4% in 2019 and 0.8% from January 2021 to June 2023.
While this may seem like a small amount per business, it represents thousands of dollars in increased consumer spending overall. Specifically, these percentages equate to a cumulative spending increase of approximately $23,000 in 2019 and an annualized spending increase of approximately $3,400 from 2021 through June 2023.
Cheng said the lower spending growth rate between the two periods could be due to lower utilization rates due to saturation of EV chargers, as well as an overall decrease in spending per business following the COVID-19 pandemic, and a decrease in the number of businesses served by each EV charging station in the second period. Despite this decrease, the annual impact of a charging station on all surrounding businesses would cover about 11.2% of the average infrastructure and installation costs for a standard charging station.
Across both periods, the largest increases in spending were seen by businesses located within a football field’s distance of the new stations, and spending increases were also most pronounced for businesses in disadvantaged and low-income areas identified by the state of California and the Justice 40 Initiative.
“The positive business impact of EV charging stations is not limited to a few high-income areas,” Wang said, “highlighting the importance for policymakers to install EV charging stations in marginalized areas, as they not only promote a cleaner environment but also act as a catalyst for increased economic vitality.”
Zheng believes the study’s findings hold lessons for charging station developers looking to improve the profitability of their projects.
“The joint business model of gas stations and convenience stores can also be applied to EV charging stations,” Zheng said. “Traditionally, many gas stations have partnered with retail chains, allowing owners to sell fuel and attract customers at the same time, diversifying their revenue streams. EV charging providers could consider a similar approach to internalize the positive impact of EV charging stations.”
Zheng also said the findings could help create new financing models for charging stations, in which multiple companies could share the cost of construction, allowing everyone to benefit from the extra expenditure.
These changes could speed up the buildout of charging networks, but Cheng cautions that more research is needed to understand how applicable the findings are to other regions. She encourages other researchers to study the economic effects of charging stations, and hopes that future studies will extend to states other than California and even other countries.
“There has been a significant amount of research into the impact of traditional transport infrastructure, such as rail and subway stations, bus stops and road configurations, on retail sales,” Zhao said. “This study provides evidence of important emerging transport infrastructure demonstrating consistent positive impacts on local businesses, paving the way for future research in this area.”
This research was supported in part by the Singapore-MIT Alliance for Research and Technology (SMART) and the National Research Foundation of Singapore. Diao was supported in part by the Shanghai Natural Science Foundation and the Fundamental Research Funds for the Central Universities of China.