Seeing value in flexibility, EDF's EV charging unit enters UK capacity market

One of the UK's largest installers of electric vehicle charging points announced on Sept. 11 its entrance into the country's capacity market, part of a broader plan to utilize its growing fleet of chargers to provide flexibility services to the grid.

Pod Point Group Holdings PLC, which is majority-owned by utility giant Electricité de France SA, with a portion of its shares publicly traded in London, has put forward 60,000 chargers into the capacity market, delivering a combined 65 MW of flexible capacity.

The move — described by Pod Point as first-of-a-kind for EV charging operators — adds another revenue stream to the company's burgeoning flexibility business.

Known as Energy Flex, the unit aims to capture revenue by shifting the power consumption of its charging fleet to periods when demand on the grid is lower and the cost of charging for customers is cheaper.

Pod Point manages 1.6 GW of nameplate capacity across its fleet of nearly 250,000 chargers in the UK. It is already paid by distribution system operators to relieve pressure on the grid and has pilots with Centrica PLC to explore opportunities in the UK's balancing mechanism and wholesale trading markets.

"There's a huge amount of ability to flex the time of charging," Pod Point CFO David Wolffe said in a Sept. 11 interview. "In a way that doesn't affect the consumer charging behavior, we can move the time of charging to a time that creates less demand, whether that's in total capacity because the wires aren't fat enough in a given region, or because the price of electricity at a given point of day leads to an opportunity to arbitrage."

'Biggest profit driver'

The focus on flexibility comes after Pod Point undertook a strategic review in late 2023 that resulted in the company prioritizing its core home charging market and organizing its exit from public, fleet and destination charging, driven by the tumultuous market environment that caused its share price to plummet.

In an August research note about Pod Point, analysts at Zeus Capital said flexibility markets have the potential to "transform EV charging companies ... into more of a software and services model, particularly as the UK's EV population grows and the demands on the electricity grid from EVs increase."

Pod Point aims to grow to 1 million installed chargers by 2030, of which 15% could be outside the UK. Each of those units represents £40 to £50 of annual revenue for the company given their potential to play in flexibility markets, Wolffe said.

"This is going to be the biggest profit driver in the business over the long term," the CFO added, pointing to a target of £5 million in gross profit from grid flexibility by 2027. "The numbers that you're seeing at the moment are drops in the ocean of what we think is the full potential."

Pod Point sees total group revenues more than doubling by 2027 compared to the £63 million it achieved in 2023.

The company thinks 15% of its 2027 target can come in the form of "high-margin recurring revenue" such as Energy Flex, rising to 25% by 2030. This indicates strong growth in the coming years, given that the segment is only expected to contribute sales of about £500,000 in 2024.

"Clearly there is a strong angle that EDF quite correctly perceives that this kind of distributed capacity is very important strategically for the electricity industry as well as Pod Point," Alex Brooks, senior analyst at Canaccord Genuity, said in an interview.

Share price recovery

Pod Point was acquired by EDF in 2020 and completed an IPO less than two years later. Its shares have tumbled since then, falling from 225 pence at its listing to below 17 pence on Sept. 10 — in line with the wider sell-off of energy transition equities in the last three years.

"One of the reasons for that is ... they tend to be quite [capital expenditure] heavy businesses and [operational expenditure] light, and investors have often been nervous about that," Brooks said. "There's no hiding from it: [Pod Point has] not been a great investment."

Beyond macroeconomic factors, Wolffe said the downward drag on Pod Point's share price since IPO can be attributed to the cost-of-living crisis, which has slowed EV adoption, and to negative media sentiment around EVs.

With the share of Energy Flex revenue rising, Pod Point is aiming to break even at an EBITDA level by 2026 after recording an EBITDA loss of £16 million in 2023.

"That will massively change perceptions of the business, and we think that will obviously flow through to the share price ultimately," Wolffe said.

"Pod Point is still the UK market leader, it has decent cash reserves and funding headroom from EDF ... and has already started making progress in the turnaround," Carl Smith, an equity research analyst at Zeus Capital, said in an email. "We'll have to see a substantial reduction in the cash burn before the share price starts recovering, though."