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A DA Davidson analyst analyzed legislative forces following the Inflation Reduction Act, as-well-as electric vehicle charging infrastructure names in response to positive catalysts that have been recently observed.
The analyst wrote in a note: “We provide an update on legislative forces driven by the Infrastructure Investment and Jobs Act (IIJA) and the associated National Electric Vehicle Infrastructure (NEVI) Formula Program, incrementally favorable catalysts set into motion by the recently-passed Inflation Reduction Act, and their respective impacts to our five (of six) U.S.- operating EV charging companies under coverage: BUY-rated ADS-TEC Energy PLC (ADSE), ChargePoint Holdings, Inc. (CHPT), and Tritium DCFC Limited (DCFC), and NEUTRAL-rated Blink Charging Co. (BLNK) and Volta Inc. (VLTA). With respect to BUY-rated Allego N.V. (ALLG), as well as BLNK and CHPT, we also observe positive incremental developments in the UK market. Our goal is to provide a greater understanding of the consequences of each new law or program, whether they serve to encourage incremental demand via greater EV adoption, or directly incentivize the installation of charging infrastructure via credits. These legislative forces represent important drivers of our positive disposition towards BUY-rated ADSE, ALLG, CHPT, and DCFC, all four of which are positioned differently to capture value from the energy transition and the significant infrastructure investment required to enable it.”
The Alternative Fuel Vehicle Refueling Property Credit (AVRC) was a previous credit program available to property owners, whereby the customer could use IRS Form 8911 to receive a tax credit after installing alternative fueling infrastructure, which includes EV charging stations. The program was extended through December 31st, 2032 under the Inflation Reduction Act (IRA). Enabling property owners to apply for AVRCs for another ten-plus years.
The maximum allowable credit under the AVRC program more than tripled following the IRA, from $30,000 to $100,000. The new guidelines allow property owners to apply for a credit valued at the smaller of either 30% of the charging property’s cost, or $100,000, which in DA Davidson’s view ‘unlocks’ a significant opportunity to install DC fast or ultra-fast infrastructure with meaningful support from the credit.
In early February 2022, the National Electric Vehicle Infrastructure (NEVI) Formula Program codified the rules for the disbursement of $5B in IIJA funds allocated towards EV charging infrastructure. The rules specified an August 1st, 2022 deadline for States to submit formalized plans for how they would utilize their initial share of funds. President Biden recently announced the approval of the first $900M in fund distributions across 35 States at the recent Detroit Auto Show; followed by another $600M in approvals for the remaining 15 States, D.C., and Puerto Rico announced just yesterday.
The funds unlocked should serve to set in motion States beginning to award the associated contracts for new site construction starting in late 2022 and throughout 2023. DA Davidson believes that all five U.S.-operating EV charging enterprises – ADSE, BLNK, CHPT, DCFC, and VLTA– stand as potential beneficiaries.
In the note, the analyst also highlights California’s new requirement that all new cars sold by the year 2035 must be “zero emissions”. The law was made effective Thursday, August 25th. Reports from the New York Times implies that as many as 17 additional States may adopt a similarly strict EV adoption standard by the end of 2023, which could effectively mandate 100% new EV sales in about a third of the U.S. auto market by 2035.
DA Davidson called attention to ADSE as a uniquely attractive public charging infrastructure solution. Its battery-buffered, ultra-fast chargers can be quickly installed without upgrades to site utility infrastructure, and on an ongoing basis eliminate peak-demand fluctuations by drawing upon stored kWh from its fully-integrated battery management system.
DA Davidson also called attention to a new ~£21M pilot program in the UK, announced August 24th, to fund over 1,000 new public EV charge-points across nine localities. Approximately £10M of the funding will be provided by the UK government’s Local Electric Vehicle Infrastructure (LEVI) program, complemented by an additional £9M provided by the private sector and £1.9M granted by local authorities. The analyst believes ALLG– a leading owner-operator of pan-European EV charging infrastructure – is well-positioned to win contracts sponsored by this pilot program.
