MIT Research Study Finds EV Charging Stations Drive Increased Local Business Spending

Businesses within 100 yards of EV charging stations,   especially those in low-income areas, saw a significant jump in customer spending.

The availability of electric vehicle (EV) charging stations plays a vital role in decreasing emissions in the transportation sector. The findings of a recent study conducted by MIT researchers suggest that they have significant economic benefits.

In California, the study revealed that the installation of a charging station positively impacted nearby businesses, with annual spending increasing by an average of around $1,900 from 2019 to 2023. This translates to a substantial boost in revenue for local businesses, particularly in disadvantaged areas.

The researchers aim to shed light on the wider benefits of EV charging stations, going beyond their environmental effects.

Public electric vehicle charging stations (EVCS) can significantly impact local communities, especially the economic health of nearby businesses. As EV drivers wait for their vehicles to recharge, they often have time to explore the surrounding area, leading to increased foot traffic in shops and restaurants. Adding EVSE can revitalize local businesses, attract new customers, and boost revenue. By offering EVCS, businesses can diversify their income streams and become more appealing to environmentally conscious consumers. Policymakers, EVCS providers, and business owners should understand the full potential of EV charging infrastructure to create sustainable and thriving communities.

These increases represent a substantial portion of the cost of installing an EV charger. I hope this study illuminates these economic benefits,” says lead author Yunhan Zheng, a postdoc at the Singapore-MIT Alliance for Research and Technology (SMART). “The findings could also diversify revenue streams for charger providers and site hosts, leading to more informed business models for EV charging stations. Zheng’s co-authors on the paper, published in Nature Communications, include David Keith, a senior lecturer at the MIT Sloan School of Management; Jinhua Zhao, an MIT professor of cities and transportation; and alumni Shenhao Wang.

EVCS boosts annual spending from around .08% to 1.4% per annum, and with a POI close by, that number increased to spillover benefits of spending, increasing up to 3.2% as recently as 2023. The areas with the most significant benefits are neighborhoods designated as underprivileged (Justice40 designation).

This study emphasizes the role of EVCS in driving local economic growth and underscores the economic advantages of implementing multi-host EVCS setups.

Need for More Studies

Despite extensive research on the environmental benefits of electric vehicle charging stations (EVCS), their impact on local businesses and foot traffic needs to be studied more comprehensively.

The Issues in Prior Studies

While some studies by EV charging companies have reported increased customer visits and spending near charging stations, these findings are often limited by small sample sizes and a lack of rigorous causal analysis. This makes it difficult to attribute the observed changes to EVCS installations alone definitively. Additionally, while research on other transportation infrastructure, like rail stations and bus stops, has consistently shown positive impacts on local businesses, a significant gap exists in understanding how EVCS explicitly influences consumer behavior and economic activity.

The Current Study – How, What and Where

In the study, the researchers measured the effects of installing electric vehicle charging stations (EVCS) on the number of customers and related spending at nearby businesses in California. California is a leader in electric vehicle adoption and charging infrastructure, and hence, an excellent sample to look to for future guidance and trends.

The study is broken down into two periods, negating the impacts of the COVID-19 pandemic and unusual EVCS counts during that period. The study looked at the distribution of EVCS in Downtown San Francisco and Downtown Los Angeles during the periods. To address endogeneity issues (a statistical variable condition with an explanatory variable in the model), the researchers used a Difference-in-Differences (DID) approach along with propensity score matching. The team also investigated how these effects varied by different types of EVCS, business categories, and customer demographics. Moreover, by estimating the added benefit of being near an EVCS for local businesses, we assessed the total impact of EVCS on customer spending at surrounding establishments.

To evaluate how EVCS installations affect local businesses, the researchers used an identification strategy focused on changes in customer counts and spending at points of interest (POIs) around these stations. This approach helps establish causal relationships. The team categorizes POIs into three groups: (1) accommodation and food services, (2) retail trade, and (3) arts, entertainment, and recreation. To address the timing differences in EVCS installations, the researchers apply a difference-in-differences (DID) methodology, including fixed effects for each POI and county by month.

The analysis is organized around two study periods: the year 2019 and January 2021 to June 2023. The treatment group consists of POI locations that had newly installed EVCS within 500 meters during the study period. Conversely, the control groups are chosen from POIs that do not have nearby EVCS installed during the same time frame

The Results in Detail

The team’s findings consistently show that newly installed EVCS significantly positively impact customer numbers and spending at nearby points of interest (POIs) across all scenarios. Specifically, adding an extra charging port led to a 0.21% increase in customer count and a 0.25% increase in spending in 2019. In the following period, from 2021 to 2023, while the effects were somewhat smaller, they remained statistically significant, resulting in a 0.14% increase in customer count and a 0.16% increase in spending. Researchers speculated that the reduction in impact during this time may be linked to factors such as limitations on customer purchasing power due to the COVID-19 pandemic and fluctuations in how often public EV chargers were used over time.

While the average number of charging ports per station decreased slightly from 5.4 in 2019 to 5.0 in 2021-2023, the researchers’ analysis shows that even a single EV charging station can have a significant impact on local businesses.

Specifically, they found that adding a single station led to a 1.4% increase in spending in 2019 and a 0.8% increase in spending in 2021-2023. These effects are particularly noteworthy considering the low adoption rates of electric vehicles (2.61% battery electric, 1.15% plug-in hybrid in California) and the typically low utilization of charging stations (often less than one session per port per day)

More from the Study

The researchers’ findings suggest that the impact of electric vehicle charging stations (EVCS) on customer counts varies based on income level. While EVCS installations were particularly effective in attracting high-income customers during the 2021-2023 period, their impact on middle and low-income groups was less pronounced. This shift could be attributed to factors such as changes in the EVCS network, EV adoption trends, economic conditions, and consumer behavior post-COVID-19. Further research is needed to pinpoint the exact causes. Although early EV adopters often come from higher-income households, increasing diversity among EV buyers suggests that the disproportionate effect of EVCS on high-income customers may diminish over time.

The researchers conducted additional analyses to explore the impact of EVCS installations on several other variables, including customers’ median distance from home, median dwell time at surrounding businesses, and the average customer income at these businesses.  Full results

To assess the financial impact of electric vehicle charging stations (EVCS) on local businesses, the researchers calculated the additional customers and spending generated by each station. They found that adding one EVCS to a single nearby point of interest (POI) resulted in an estimated 17 additional customers and $1,478 in increased spending in 2019.  For the period between January 2021 and June 2023, the corresponding figures were five additional customers and $404 in increased spending per year.

When considering the cumulative impact of all EVCS installations in California during the study period, the researchers calculated a total increase in customer spending of $6.7 million in 2019 and $19.5 million between January 2021 and June 2023. These figures represent a significant economic benefit for local businesses and highlight the potential of EVCS infrastructure to stimulate economic growth.

Conclusion

The California study makes it clear that adding EVSE has a massive secondary benefit. Wider networks and increased revenue and traffic from customers benefit both businesses and drivers.