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The Answer to Electric Car Range Anxiety

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Jan 25, 2013

January 25, 2013

The Motley Fool

Matthew Luke

I personally love the idea of the electric car. And when Nissan Motors (NASDAQOTH: NSANY) announced a new Nissan LEAF model that could potentially sell for as little as $18,800 after various tax credits, I began to seriously consider the purchase of a new electric car. So I began to do my research. And as I was at my local Nissan dealership checking-out the current Nissan LEAF model, I was reminded of the one thing that has thus far kept me from pulling the trigger on a new electric car purchase. And that one thing is the battery. While I love the electric car in theory, the electric car battery leaves a lot to be desired for in practice. Specifically, I am referring to finding locations to charge the electric car’s battery.

Think of all of the consumer electronics you have with a battery. Smartphones, laptops, tablets. Losing charge on a phone is an inconvenience, but not a major problem. But what happens when you are driving an electric car and you get that low battery warning?

That is a significantly bigger problem than a smartphone with a low battery. This worry actually has a term for it: range anxiety, the fear that your electric vehicle will run out of power with no way of recharging it away from home. Range anxiety is rationally nothing to worry about. Nearly 95% of the daily commutes of all Americans are less than 30-miles a day. Despite that statistic, that feeling of anxiety is still a very real problem that needs to be addressed.

For electric automakers, range anxiety is one of the biggest factors holding back electric car adoption. And until public charging stations are a common sight on the road, range anxiety will likely always be an issue for automakers.

Tesla Motors (NASDAQ: TSLA) has done relatively well for itself catering to a wealthy clientele. And if Tesla continues to only sell luxury electric cars to its wealthy niche audience, they will likely continue to do well regardless of the lack of an adequate public charging infrastructure. and General Motors’ (NYSE: GM) gas engine to extend the range of their Chevy Volt (and their soon to be released Cadillac ELR) has shown to be cleaver way address the range anxiety issue.

But for automakers looking to sell mainstream all-electric vehicles, such as Ford’s all-electric Focus Electric and Nissan Motor’s all-electric LEAF, the infrastructure for public charging stations is a must to achieve widespread electric car adoption. What can be done about this?

Enter the electric utility NRG Energy (NYSE: NRG). Though appearing to be your typical electric utility, with retail operations in 16 states selling electricity to customers, NRG Energy is actually one of the most innovative companies in the entire utility sector. And one of the many innovative aspects of this company that I wish to highlight is NRG’s subsidiary, eVgo.

eVgo is NRG’s answer to the traditional gas station: America’s first comprehensive, privately-funded (no taxpayer money) network of home and public fast charging stations. Operating as a Netflix-like subscription model, subscribers of eVgo pay a flat-rate for unlimited electricity for their electric cars, no matter where they charge their car on eVgo’s network.

Comprising three different types of charging stations, eVgo’s network includes eVgo Home Charging, eVgo Freedom Stations and eVgo Convenience Stations. eVgo Home Charging is fairly self-explanatory; a free home charger for any eVgo subscribers. Freedom Stations are eVgo’s flagship public-charging station, with each station including a DC Fast Charger that can add 30-miles of range in 10-minutes. Convenience Stations are similar to Freedom Stations, but are typically smaller sites hosted by a retailer, such as a supermarket or a restaurant.

Although eVgo has been around since 2010 operating in Texas, it was not until the middle of last year that things began to get interesting for this NRG Energy subsidiary. Last year, NRG Energy finalized plans with the government of California to expand their operations to the Golden State. Over the next four years, NRG will build 200 Freedom Stations across the state.

Those 200 Freedom Stations are great, but is the other aspect of NRG Energy’s plan that is really encouraging. NRG Energy will build the infrastructure for over 10,000 plug-in units at about 1,000 locations across California (such as apartment buildings, offices buildings, colleges, hospitals and other similar locales).

The spreading of eVgo public charging stations will be a significant step forward to alleviate range anxiety, ensuring that electric car owners will have the assurance that they will never run out of power away from their home. The alleviation of this anxiety will go a long way to encourage the further adoption of electric car. With more electric cars on the road, that of course means more electricity will be used.

Whether that electricity is used at home or used at one of NRG Energy’s public eVgo charging station makes little difference to NRG, so long as there are electric cars plugged into the grid somewhere. The investment in eVgo public charging stations is the investment in more electric cars charging anywhere and everywhere on the electric grid. That, in turn, simply means many more green dollar bills in NRG Energy’s pockets. Now that is the type of green investing we can all get behind.

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