Electric vehicles – Taking charge of infrastructure
The uptake of electric vehicles (EVs) is accelerating. As of end-May 2021, there were over 500,000 EVs registered in the UK, representing a growth of 66% since 2019. That growth in ownership means increasing demand for charging infrastructure at home and at the workplace. Is the housing sector ready for the transition?
Transport became the largest emitting sector of greenhouse gas emissions in 2016. The most recent figures published earlier this year still shows transport contributing 27% of the UK's total emissions. So it should be little surprise that accelerating the transition to EVs is high on the Government's agenda. The Government's Transport Decarbonisation Plan (published in July 2021) recognises the importance of developing the necessary charging infrastructure to meet the demand of users. The Government has committed to invest £1.3 billion for the rollout of charging infrastructure across the UK and plan to publish an EV Infrastructure Strategy later this year. But what are the practical considerations for landlords considering the needs of their tenants?
Demand for power
As EV ownership becomes more widespread, landlords need to consider how they will respond to tenants' requests to install EV chargepoints. Most new-build schemes already consider future charging requirements, and forthcoming changes to Building Regulations will make this less of an issue going forward. For existing properties, however, the issue is more difficult. Retrofitting EV chargepoints on any scale is likely to require upgraded electricity connections (with associated grid upgrade costs). In locations with limited grid capacity, the cost of network reinforcement may make it commercially unviable to install chargepoints, leaving tenants unable to charge at home.
Smart charging is essential to help manage the potential pressure on the grid. This ensures that chargepoints have the ability to adjust the supply of electricity (load shedding) during periods of high demand. In the response to the recent EV smart charging consultation, the Government committed to mandate (through the Automated and Electric Vehicles Act 2018) that all EV chargepoints sold and installed in the UK will have smart functionality and meet minimum device-level requirements. These regulations are due to be published later this year, but landlords should consider the 'smart functionality' of any EV chargepoints currently being specified and installed to minimise the need for early upgrades/replacements.
Charging speed is also an area that needs careful review, as there is a risk in over-specifying chargepoints with associated impact on infrastructure costs. Slow chargepoints (3.5kW – 7kW) should meet the needs of most domestic properties where vehicles can be charged overnight.
Fast chargepoints (7kW - 22kW) are more relevant for destination charging, such as shopping centres or public parking spaces. These may be more appropriate where multiple users are sharing a small number of chargepoints, but there are implications on the power requirements and installation costs. Landlords need to account for the likely routine and requirements of users when deciding on chargepoint installation and specification.
Location and consents
Deciding where to locate chargepoints may be less of an issue for new-build schemes, where spaces are often required to be chargepoint enabled under local planning policies. Determining chargepoint location will be more of a challenge for retrofitting existing buildings. Commercial EV chargepoint providers may require property security, such a lease of the parking space and associated easements. Consents may be required from adjoining landowners when bringing in new electricity cables or connecting to new substations. Depending on the extent of the works, planning permission may also be required.
The specific consents and permissions that landlords need to obtain will be dependent on the property ownership pattern in place at each site (eg whether car parking spaces are demised to tenants under their apartment leases, whether ownership of the common areas has been transferred to a management company and the extent and location of the EV apparatus being installed). Site specific due diligence will be required to determine the nature of the consents required.
The EV charging market is still developing, and contract structures are evolving. Where chargepoint providers are expected to invest in the necessary infrastructure, then it is likely they will want exclusivity for a defined contract period. These types of 'concession' models need to be approached carefully, as landlords may want controls over the quality of service and the tariff structure being charged to users.
Landlords also need to consider the public procurement regime when procuring such opportunities. Even in scenarios where the value of the works do not meet the thresholds for a fully regulated procurement process (currently £4,733,252 net of VAT under both the Concession Contracts Regulations 2016 and the Public Contracts Regulations 2015), RP landlords still need to comply with certain obligations when procuring the opportunity. This includes complying with the general principles of public procurement and ensuring that however a provider is procured, it is done in a manner which is transparent and proportionate, and in a way which treats suppliers equally and without discrimination. Landlords should acquaint themselves with the publication requirements that apply to below threshold contracts and will also need to comply with their own internal contract procedure rules for contracts of this type and value.
Alternatively, EV chargepoints could be landlord-owned with operation and maintenance costs recovered under the service charge regime and metered usage charged to individual users.
Where chargepoints are being retrofitted, existing leases will need to be checked in order to understand whether the capital installation costs and ongoing maintenance costs could be recovered as a service charge. While there may be an ability to recover operating costs via service charges, this may be resisted by leaseholders who do not have an electric vehicle. Section 20 consultation may also be applicable in relation to the capital works of installation. Landlords may wish to proactively consider the need to future proof their leases and tenancy agreements at this stage, so that the drafting is wide enough to cover the likely installation and operation of EV chargepoints in the future.
The Department for Transport is expected to publish its full Electric Vehicle Infrastructure Strategy later this year, which should provide further clarity on the Government support that is necessary to build the EV charging market. We expect it to build on the recommendations set out in the recent Competitions and Markets Authority report on building a comprehensive and competitive EV charging sector. We are also awaiting the Government's response to the consultation on amending building regulations to require EV charging infrastructure in new buildings and those undergoing major renovations, which closed on 15 July 2019. In the meantime, landlords should look at their existing property ownership structures, capacity requirements and procurement processes so that they are prepared to take charge and facilitate the EV chargepoint rollout.