Overcoming infrastructure challenges critical to Canada’s EV ambition

Mandating the sale of electric vehicles (EV) was the easy first step in the electrification of Canada’s transportation economy, a key component of Canada’s clean energy transition. Creating the conditions needed by Canadian consumers and industry to accelerate and sustain EV adoption is where the rubber seems to be hitting the proverbial road.

One of the leading obstacles to EV adoption is the lack of adequate public EV-charging infrastructure in Canada. As of February 2024, the government of Canada estimated there were only 30,000 public charging ports in place, against a forecasted need of 679,000 by 2040. The result of this severe shortage is Canada’s charging network currently lacks the footprint needed to transition to electric mobility.  

It is not lost on policymakers that it is critically important to close this “charger gap”. There is a growing recognition that charging infrastructure will need to be added across Canada. This must include remote and lower income areas, office towers and multi-unit residential buildings, as well as key public infrastructure, such as airports, highways and roadways. Ultra-fast charging stations with high availability will be needed for shippers, ride hailing services, car rental companies, public transit operators, and other enterprises that require continuous or near-continuous vehicle use.

A combination of federal, provincial and municipal regulations and incentives are being implemented in an attempt to respond to the charger gap. Stakeholders in the real estate, parking, technology, payments, EV and electricity infrastructure servicing sectors (among others) are mobilizing to seize these opportunities in an effort to establish profitable business models for EV charging. How effective these efforts will be — and what other policy mechanisms will be needed to bring about the changes required for Canada to realize its EV ambition — remains to be seen.

The infrastructure imperative

Decarbonization of the transportation sector is a key plank of Canada’s strategy for complying with its commitment to achieve net-zero emissions by 2050. This commitment was enshrined in the Canadian Net-Zero Emissions Accountability Act, which was passed in 2021. More recently, on December 20, 2023, the government of Canada enacted new regulations that will require manufacturers’ and importers’ fleets of new light-duty vehicles offered for sale in Canada to include a minimum number of zero-emission vehicles (ZEVs). Specifically, 100% of passenger car and light-truck sales will need to be ZEVs by 2035. The regulations also mandate interim quantities of at least 20% ZEVs by 2026, and at least 60% ZEVs by 2030.

In 2019, British Columbia became the first jurisdiction in the world to legislate a 100% ZEV sales requirement through the Zero-Emission Vehicle Act, which, as of November 2023, requires 100% ZEV sales in the Province by 2035. Québec recently published a draft regulation that would create similar requirements in 2035 within the province.

A combination of federal, provincial and municipal regulations and incentives are being implemented in an attempt to respond to the charger gap.

It is clear that massive investments in charging infrastructure will be needed to meet the needs of significantly higher numbers of EVs on Canada’s roads. Natural Resources Canada has estimated the cumulative capital cost of building new public charging infrastructure to be at least $18 billion through 2040 for charging ports used by passenger cars and other light-duty vehicles. This does not include the costs for charging facilities for medium- and heavy-duty vehicles, which are estimated to be a further $47 billion.

The economics of public charging networks are different from traditional gas stations. While virtually all internal combustion vehicles must be fueled up at a gas station, most EVs, whether owned personally or by fleet operators, are able to plug in at home or their place of business, except when there is a need for sufficient power to travel longer distances. For consumers, one major benefit of being able to charge at home is the availability of low electricity costs during off-peak hours. This creates a corresponding disincentive for consumers to use public charging stations, where they pay a premium for electricity. Both of these factors place significant pressure on operating profit margins for EV charging services. They also make ancillary revenue streams critical to the economic viability of public infrastructure. These alternative streams can include sales of carbon compliance credits available to EV charging providers through Canada’s Clean Fuels Regulations or Canada’s Electric Vehicle Availability Standard.

Some observers look to Tesla Motors as a case study for how market-driven expansion of charging infrastructure can work. Tesla has unquestionably the widest and most far-reaching network of fast charging stations in North America, with more than 17,800 superchargers. In Canada, this number is now approaching 1,500 superchargers. Further, since Tesla announced in 2022 it was opening its charging network to owners of EVs manufactured by other auto manufacturers, several of these other manufacturers, including Ford, GM and BMW, have entered commercial agreements with Tesla that will enable their vehicles to access Tesla’s charging network and payment system.

Financing of charger expansion

The growth in adoption of EVs suggests an increase in demand for new charger investments. Nonetheless, it remains to be seen whether Tesla and other owners of charging networks in Canada, such as Flo Networks, will forecast sufficient demand for EV charging to justify making large capital investments in charging stations. This will, in turn, determine the extent to which governmental support will be required.

Some government incentives are already in place. Through the Zero Emission Vehicle Infrastructure Program, Canada has earmarked $1.18 billion to support the deployment of approximately 84,500 charging ports by 2029. These investments are focused on installing charging ports in public spaces, on streets, in multi-unit residential buildings, and at workplaces. The program subsidizes 50% of total EV charging station capital costs, to a maximum of $5 million per project. Unfortunately, this program has not been popular with the medium- and heavy-duty vehicles segment. To date, less than 0.2% of the funding applications under the program have been made for “MHDV” chargers.

Additionally, through the Canada Infrastructure Bank’s Charging and Hydrogen Refuelling Infrastructure Initiative (CHRI), Canada has provisioned at least $800 million in concessionary capital for lending structures supporting public fast charging or hydrogen refueling. This program is intended to work in tandem with the Zero Emission Vehicle Infrastructure Program and other government funding, providing public funding up to an overall limit of eligible project costs, typically set at approximately 75%. 

Even though investment tax credits (ITCs) have been one of the main forms of federal government support for the clean energy transition, the federal government has not introduced any ITCs specifically focused on EV charging infrastructure. The only form of federal tax incentive available for the development and installation of EV charging infrastructure is a temporary 50% reduction in the general corporate federal income tax rate for businesses that manufacture zero-emission technology, including EV charging systems. This rate reduction is only available from 2022 to 2031, and will be fully phased out in 2035.

Political uncertainties loom

There are many long-term political uncertainties for EVs in Canada. For example, there is significant uncertainty about the level of government support that will exist at the federal level, as well as about Canada’s Electric Vehicle Availability Standard more generally. While several provinces, territories and municipalities have programs designed to close the charger gap, most of these programs are limited to providing small refunds to individuals installing home chargers. Most are also currently slated to expire in the next few years. At this point, large scale programs at the provincial level that provide funding for larger or commercial projects similar in nature to the CHRI are yet to be developed. Québec’s Electric Vehicle Charging Strategy has set aside a relatively modest $265 million for fast and level two public chargers installed by private companies.

Government attention to EV infrastructure development will also need to address charging infrastructure in domestic building codes. Currently there is no uniform national building code that requires new or existing multi-unit dwellings or public buildings to be equipped with EV charging stations. Although the Ontario Building Code previously adopted such requirements, these were revoked following the 2018 election. Since then, the current Ontario government has rebuffed attempts to reintroduce such a requirement. The reticence to change the Ontario Building Code appears surprising, given that the province has committed more than $28 billion to attract EV supply chain manufacturing facilities to Ontario.

Outlook for the future

Given the need for increased access to capital, supplemental revenue opportunities, harmonization of building codes, and improvements to electricity supply, governments will have a critically important role to play if Canada’s charger gap is to be addressed in time to achieve the extremely ambitious goal of 100% EV sales by 2035.