Electric vehicle charging stations are essential to cleaning up the transportation sector. A new study by MIT researchers suggests they’re also good for business.

The study found that in California, opening charging stations increased annual spending at each nearby business by an average of about $1,500 in 2019 and about $400 between January 2021 and June 2023. The increase in spending amounts to thousands of additional dollars per year for nearby businesses, with the increase being particularly pronounced for businesses in under-resourced areas.

The study’s authors hope it will provide a more comprehensive picture of the benefits of EV charging stations, beyond environmental factors.

“These increases equate to a significant portion of the cost of installing an EV charger, and I hope this study sheds light on these economic benefits,” says lead author Yunhan Zheng MCP ’21, SM ’21, Ph.D. ’24, a postdoctoral fellow at the Singapore-MIT Alliance for Research and Technology (SMART). “The results could also diversify the revenue stream for charger providers and site hosts and lead to more informed business models for EV charging stations.”

Zheng’s co-authors in the paper, which was published today in Nature communicationare David Keith, a senior lecturer at MIT Sloan School of Management; Jinhua Zhao, a professor of cities and transportation at MIT; and alumni Shenhao Wang MCP ’17, SM ’17, Ph.D. ’20 and Mi Diao MCP ’06, Ph.D. ’10.

Understanding the EV effect

Increasing the number of electric vehicle charging stations is seen as a key requirement for the transition to a cleaner, electrified transportation sector. As such, the US Infrastructure Investment and Jobs Act of 2021 pledged $7.5 billion to build a national network of public electric vehicle chargers across the United States.

But making charging stations widespread will also require significant private investment.

“The United States is investing heavily in EV chargers and really encouraging EV adoption, but many EV charger suppliers are unable to earn enough money at this stage, and achieving profitability is a serious challenge,” Zheng says.

Electric vehicle advocates have long argued that the presence of charging stations brings economic benefits to surrounding communities, but Zheng says previous studies on their impact have been survey-based or small-scale. Her team of colleagues wanted to make the claims more empirical.

For their study, the researchers collected data from more than 4,000 California charging stations and 140,000 businesses, relying on anonymized credit and debit card transactions to measure changes in consumer spending. The researchers used data from 2019 to 2023, leaving out 2020 to minimize the impact of the pandemic.

To assess whether the charging stations increased customer spending, the researchers compared data from businesses located within 500 meters of the new charging stations before and after their installation. They also analyzed transactions from similar businesses during the same time frame that were not located near the charging stations.

Top up nearby businesses

The researchers found that installing charging stations increased annual spending at nearby facilities by an average of 1.4 percent in 2019 and by 0.8 percent from January 2021 to June 2023.

While that may sound like a small amount for a company, it adds up to thousands of dollars in increased consumer spending. More specifically, those percentages translate to nearly $23,000 in cumulative spending increases in 2019 and about $3,400 per year from 2021 through June 2023.

Zheng says the drop in spending over the two periods could be due to EV charger saturation, leading to lower utilization, as well as an overall decline in per-firm spending following the COVID-19 pandemic and a reduced number of businesses served by each EV charging station in period 2. Despite this decline, the annual impact of the charging station on all surrounding businesses would still cover about 11.2 percent of the average infrastructure and installation cost of a standard charging station.

In both time frames, spending increases were highest for businesses within a football field of new stations. They were also significant for businesses in disadvantaged and low-income areas, consistent with California’s Justice Initiative guidelines.40

“The positive impact of EV charging stations on businesses is not limited to certain high-income neighborhoods,” says Wang. “This highlights the importance for policymakers to expand EV charging stations in marginalized areas, as they not only promote a cleaner environment but also serve as a catalyst for economic vitality.”

Zheng believes the results offer a lesson for charging station developers looking to increase the profitability of their projects.

“The common business model of gas stations and convenience stores could also be applied to EV charging stations,” says Zheng. “Traditionally, many gas stations are affiliated with retail chains, allowing owners to both sell fuel and attract customers to diversify their revenue stream. EV charging service providers could consider a similar approach to internalize the positive impact of EV charging stations.”

Zheng also says the findings could help create new financing models for charging stations, such as splitting construction costs among multiple companies so that all can benefit from the additional spending.

These changes could accelerate the creation of charging networks, but Zheng cautions that more research is needed to understand how well the study’s findings can be extrapolated to other areas. He encourages other researchers to study the economic impacts of charging stations and hopes that future studies will include states beyond California and even other countries.

“A large number of studies have examined the retail effects of traditional transportation infrastructure, such as train and subway stations, bus stops, and street layouts,” says Zhao. “These studies provide evidence of an important emerging element of transportation infrastructure and consistently demonstrate positive impacts on local businesses, paving the way for future research in this area.”

This article is republished courtesy of MIT News (web.mit.edu/newsoffice/), a popular site covering news about research, innovation, and teaching at MIT.