Written evidence submitted by Macquarie Asset Management (EVS0013)

Macquarie Asset Management welcomes the opportunity to submit evidence in response to Parliament’s inquiry into the rollout of electric vehicle charging infrastructure, and is happy to be contacted by the Public Accounts Committee in relation to the submission.

Contents of this submission

• About Macquarie Asset Management
• Summary of views
• Evidence submissions

About Macquarie Asset Management

Macquarie Asset Management (“Macquarie”) is part of Macquarie Group, a global diversified financial group that operates across 34 markets and employs over 20,600 people.

As the world’s largest infrastructure manager[1], Macquarie manages approximately £474.0 billion in assets on behalf of institutional clients, pension funds, insurance capital, and sovereign wealth funds. Our investments in infrastructure are relied upon by ~290 million people every day across the globe.

Macquarie Group has been invested in the UK for more than 35 years and employs more than 2,500 people across its London and Edinburgh offices. Since 1999, Macquarie Group has invested and arranged more than £60 billion in UK infrastructure. In October 2024, as part of the UK Government’s International Investment Summit, Macquarie Group announced its commitment to invest an additional £20 billion in across our UK infrastructure investments. The investment plans span our interests across energy, utilities, transport, waste, and digital infrastructure and will see new investment across England, Wales and Scotland.

We have considerable exposure to the UK’s EV charging industry, and are invested in Roadchef, a leading roadside service area operator with 30 locations across the UK that serves more than 53 million customers each year. Macquarie invested in the business in 2022 to develop and accelerate the rollout of fast-charging infrastructure for EVs. As part of our £20 billion investment programme for our UK portfolio of assets, we announced Roadchef will install around 650 new ultra-rapid charging points across most of its sites. The upgraded EV charging facilities will be powered in part by 9 MW of new solar energy capacity installed on site, and Roadchef will pilot charging solutions for heavy goods vehicles (HGVs) at two key locations along the UK’s motorway network.

Two years ago, Macquarie’s Green Investments business launched Fleete to accelerate the electrification of heavy-duty commercial fleets. Fleete aims to makes the transition easier for companies by offering: i) Electric vehicle charging infrastructure ii) electric vehicle charging management platform and iii) electric vehicle charging hub development and depot electrification. The business is headquartered in the UK and conducts activities across the UK, Europe, and Australia. Its first project is the 5MW eHGV charging hub in the London Port of Tilbury and it is a member of the eFreight 2030, ZEHID consortium.

Summary of views

Our submission to the inquiry focuses on three key issues:

1. The creation of mechanisms to encourage the investment of private capital into EV charging infrastructure.
2. Removal of barriers impacting EV charging rollout.
3. Incentives for increased retail take up of EV vehicles.

Macquarie and its portfolio companies are committed to working in partnership with the UK Government to support the rollout of EV charging points. The UK’s International Investment Summit provided a strong indication of the UK as a destination for investment by private firms, particularly across infrastructure and technology sectors. Within the EV sector, there is a desire for private capital to invest and support the sector, as demonstrated by our own announcement to support the rollout of approximately 650 new ultra-rapid charging points across Roadchef’s estate of motor way service areas (MSAs). However, a clear path of travel in regards to targets, funding mechanisms, public subsidies and incentives for increased take-up is required to provide comfort that investors will receive a return on investment (ROI). Further, Macquarie identifies the process to obtain grid connections and planning consent significant barriers to the rollout of EV charging points.

1. The creation of mechanisms to encourage the investment into EV charging infrastructure

Longevity of government ambitions

The past five years has seen several revisions of targets for the transition to zero emission vehicles. In the Johnson Government’s Ten Point Plan for a Green Industrial Revolution, the final sale of petrol and diesel cars and vans was announced to be 2030. The target to fully electricity fleets was revised by the Sunak government to 2035 and is understood to be brought forward to 2030 under the new Labour Government. To facilitate long-term investment in the sector, a commitment to targets must be made to provide confidence to investors of the government’s intentions and clarity to consumers which would, in turn, support demand for electric vehicles.

Creation of effective funding mechanisms

The introduction of the Rapid Charging Fund (RCF) in 2021 demonstrated a commitment by the previous Government to remove some of the barriers facing the EV rollout. However, the ineffectiveness of the RCF became apparent. The pilot programme, which opened in December 2023, only saw £70 million allocated to the pilot out of a total of £950 million[2], and notably no MSAs have benefitted from the scheme. Participants of the pilot scheme were met with issues during the application process, and despite the objective of the scheme being to de-risk private investment, the high costs for upgrading electrical capacity before it was in use would have been shouldered by the MSA operators.

The Labour Government has indicated an intention to “release and redirect existing charge point funding to ensure there is reliable charging coverage” as outlined in ‘Driving a Growing Economy: Labour’s Plan for the Automotive Sector’, published in October 2023. Macquarie, alongside its portfolio companies, is willing to engage with Government, industry and DNOs to find a suitable mechanism to deploy the reserved funds to upgrade the connection capacity on the strategic road network – the fundamental design of the Ofgem Green Recovery Scheme is a helpful precedent to build on.

2. Removal of barriers impacting EV charging rollout

Grid connections

Obtaining grid connections remain a significant barrier to the creation of new EV charging facilities, and this is particularly apparent for MSAs on the strategic road network. The National Audit Office’s recently published report sets out that around 10% of MSAs have the power capacity required to meet the projected charging point demand by at least 2035[3]. However, as highlighted in the report, the process to receive adequate electricity gird connections is a lengthy process, and for some sites, can result in a wait of several years.

There are a number of factors impacting the cost and timeline of increasing the power capacity of sites, including existing power availability, the speed at which a DNO can deliver a new connection, and the levels of traffic visiting the MSA. Our portfolio company, Roadchef, estimated in their response to the ‘Rapid Charging Fund: Scheme Design’ consultation in February 2024 that their commercial model could accommodate for between £100,000 and £300,000 per MW for the cost of securing a connection with usage across a 2-to-5-year period. Combined with the capital expenditure required to install charging infrastructure, the total cost provides some reassurance and ROI over the assets’ lifetime. Yet the extent of the strategic road network across the UK results in regional variation in power availability; and for some sites, the investment is not viable due to the higher costs of securing power.

Planning and permitting

The construction or upgrade of MSAs to include ultra-rapid charging points is further inhibited by delays or issues with the planning process. A key component to this is the duration of leaseholds for MSAs particular those where the freehold of many MSAs are owned by the Government, via its shareholding of National Highways, resulting in reduced control over the renewal of state leases. The security of tenure on these specific sites is critical to ensuring that investors deploying significant capital for the rejuvenation of sites or rollout of charging points will see a ROI and to provide confidence in future projects.

3. Incentives for increased take up of EV vehicles

With the Labour Government expected to bring forward the ban of the sale of new petrol and diesel vehicles to 2030, the need to create incentives to encourage increased take up of EV vehicles begins to become more paramount. While it is widely acknowledged there are several concerns for consumers inhibiting the purchase of EVs, one such concern that should be noted is the significant cost difference between public charging and home charging.

The cost difference is due in part to the two applied VAT rates. The use of home charging facilities is charged at 5%, allowing for individuals a cost-effective solution for charging their vehicle at home. However, to charge a vehicle at a public charging point the standard VAT rate of 20% is applied. The resulting cost difference implies that an EV charged a home will cost 7p per mile, while a vehicle charged using a public ‘rapid’ or ‘ultra-rapid’ charger will cost the driver 24p per mile. To draw a comparison, the average cost per mile of a petrol car is 15p per mile[4]. The need to equalise or reduce VAT for public charging points has been noted with the House of Lord’s report on EV strategy: rapid recharge needed, published in February 2024. The report provided the recommendation to equalise VAT for public charging to 5%, and for the government to retain low benefit-in-kind (BIK) tax rates. While the previous Government acknowledged the BIK recommendation, the Government disagreed with the VAT reduction on the grounds that the public rate of 20% applied to most goods and services, and expectations to this rate have been limited by both legal and fiscal considerations. The significant difference in charging rates holds a material impact to consumers more broadly, and particularly to individuals who are reliant on their vehicles for their livelihood.

January 2025