Terawatt Infrastructure snags $1B for EV charging buildout

It’s going to take tens of billions of dollars to build the charging networks the U.S. needs to shift from fossil-fueled to electric vehicles. The average consumer can’t do much to speed that deployment, but the companies that plan to buy hundreds of thousands of EVs to green their fleets in the coming years have a tight timeline to secure the charging they’ll need — and they’re willing to pay to help get it ready.

This massive demand for EV charging helps put into perspective figures like the more than $900 million raised by San Francisco–based startup Terawatt Infrastructure on Tuesday. The funding from Vision Ridge Partners and previous investors Keyframe Capital and Cyrus Capital, which invested $100 million in the company last year, elevates Terawatt into ​“unicorn” status among fellow cleantech startups with more than $1 billion raised to date.

“If you think about what it takes to build a large-scale, high-power EV charging center, it’s in the tens of millions of dollars,” Terawatt CEO Neha Palmer, the former head of Google’s energy strategy, said in an interview. For a company that wants to build a network of these charging centers across the country, billions of dollars will be needed to ​“meet our mission to build the backbone of electric transport in the U.S.”

Terawatt is taking on all the tasks involved in giving corporate customers access to EV charging, from buying and developing sites to installing and maintaining the charging equipment and associated electrical infrastructure. ​“There are locations in metro areas, locations that are at warehouses, and locations that are more open highway,” Palmer said. ​“We’ve started development on all three of those.”

Palmer didn’t disclose any of the locations where the company is now active. Nor did she name any corporate customers beyond the one publicly announced so far — Kaptyn, the Las Vegas–based EV ride-share startup that agreed in June to use Terawatt as its exclusive charging development provider for operations in Nevada, California and Florida — although she noted that ​“we hope to have some more to share in the coming weeks and months.”

Palmer also declined to say how much of the more than $1 billion in funding represents equity investment in the company versus infrastructure funding for the costs of acquiring sites and funding their development. ​“We’re not able to go into the specifics,” she said. But $1 billion ​“really gives us the runway to build out our business plan.”

Terawatt’s massive capital raise is in keeping with the scale of investments in the EV charging space writ large, according to Atlas Public Policy. The EV and decarbonization advisory group has tracked more than $6.4 billion in equity and debt financing in private-sector efforts to build EV charging in the U.S. to date.

That funding includes the billions raised by publicly traded EV charging network operators such as ChargePoint, EVgo and Volta Charging, as well as commitments from automakers such as General Motors’ $750 million investment, Daimler Truck North America’s $650 million joint venture, and Volkswagen’s $2 billion investment in the Electrify America charging network resulting from its settlement with federal regulators over its Dieselgate scandal.

Most of these charging networks are being built to serve the general driving public, but some, like Daimler’s joint venture with BlackRock Renewable Power and NextEra Energy Resources, are aimed specifically at medium- and heavy-duty trucks. Other companies are focused on serving fleet-charging needs, such as Amply (now part of BP) and WattEV, or on assisting corporate fleet electrification, such as Inspiration Mobility and Zeem.

Palmer sees plenty of space for companies bringing different technologies and charging-as-a-service business models to the fleet-charging business. But she also sees Terawatt’s ​“full-stack solution” as valuable for companies eager to ensure they’ll have the charging they need for their near-term electrification targets.

That demand is growing quickly, according to the Ceres Corporate Electric Vehicle Alliance, a group of utilities, property owners and companies with aggressive EV goals including Amazon, American Airlines, Best Buy, DHL, Hertz, Ikea, Siemens, Lyft and Uber. The group’s members plan to buy a total of 330,000 EVs over the next five years — roughly one-quarter of their combined U.S. vehicle fleets.

While most of those EVs will be charged at fleet depots and other private locations, charging stations located alongside roadways will make up about one-third of total needs, the group reported in a June letter to the U.S. Department of Transportation. That makes public charging ​“a critical element of a successful EV transition, in particular for regional and long-haul freight movement, and fleet movement within urban, suburban and rural areas.”

Terawatt is planning its network to meet this mix of charging needs, Palmer said. ​“It depends on the customer. Some of them have routes with a lot of certainty” and can rely on charging on company property at the end of daily routes, she said. ​“Others are earlier on their electrification journey and want to have a variety of options for their fleets on their way from Point A to Point B.”

Transit agency buses and school buses, which make up the majority of heavy-duty vehicles being electrified today, are good examples of vehicles that can plan their charging needs around regular routes and overnight charging. Similar dynamics exist for medium-duty vans and trucks that run daily routes of less than 100 miles, which make up roughly half of all freight trips in the country.

More challenging are the long-haul trucks that need charging sites along highways, she said. Terawatt plans to ​“have flexible models that will be able to serve both segments of the market,” she said.

“The true challenge is putting those sites together,” she said. That requires not only providing ample charging options, but also ​“confidence that you’ll have a sufficient amount of demand” from EV charging to pay off the costs of building and operating the sites.

This describes the fundamental challenge facing public and fleet-centric EV charging providers alike, said Pavel Molchanov, director and equity research analyst at Raymond James & Associates.

“The number of EVs on the road is still so small that utilization rates of charging sites are extremely low,” he said. ​“The business model will become sustainably profitable in due course, but it hinges on much greater levels of EV penetration.”

“In the meantime, there is somewhat of a proverbial land grab going on as companies focus on identifying the best locations,” he said. ​“However, the best locations today may not always remain the best if we are looking out five or 10 years.”

Terawatt is keeping its options open on this front, Palmer said. ​“We might have a parking garage in a specific location with a couple of floors, and we might have a customer that says, ​‘I need to charge my fleet — can I have half of one floor?’” In other cases, a customer may say, “‘Hey, I will need locations in these five geographies,’ and we work to find the different locations that suit their needs.”

Public funding to expand EV charging will play a critical role in supporting electrification and charging in its early years, Palmer added. Last year’s infrastructure law allocated $7.5 billion to build out EV charging networks along U.S. highways and in communities, and the Inflation Reduction Act passed last month offers tax credits for charging equipment and EVs including medium- and heavy-duty vehicles, among other policy supports.

The Corporate Electric Vehicle Alliance is advocating for a long list of policies it says will enable the charging infrastructure built with federal funds to properly serve commercial EV fleets. While much of the public’s attention has been on charging for passenger cars, heavy vehicles are responsible for a disproportionate share of total carbon and air pollution emitted by the U.S. transportation sector, making them an important target for quicker electrification.

One tricky issue for companies like Terawatt is how to balance their interest in building charging stations that are reserved for their corporate customers with federal rules that require projects that receive grant funding to be open to broader public use.

“A lot of the rules are still being written, honestly,” Palmer said. ​“I do think this is a rapidly evolving space, and I think we’re going to see a lot more details to come on that.”