old petrol stations present a $6.7 billion problem that fuel excise must address

On the corner of Head Street and St Kilda Road at the northern end of the wealthy Melbourne suburb of Brighton sits a fairly new property development, 448 Brighton.

It marks the end of a frustrating journey for confused locals who had been staring at an eyesore. The old Mobil petrol station that once filled the tanks of motorists heading down Beach Road sat abandoned for years.

Locals couldn’t quite figure it out. “How can no one make a buck turning this into apartments?” Similar sites throughout the electorate of Goldstein, particularly on Bay Street and McKinnon Road, posed the same questions.

Goldstein was of course part of the Teal wave that tipped the federal Coalition out of government. At the top of their list of demands? Reduced carbon emissions. That means the electrification of our roads, more abandoned petrol stations and a clean up bill in the billions. Especially if Labor resists pressure to end the petrol price excise cut.

The sticking point in cleaning up a petrol station is the reclamation costs. The clean up bill of a typical petrol station was about $1 million back in 2011. Adjusted for inflation that’s $1.2 million in today’s money, although the true figure is likely to be higher as construction costs have outpaced inflation.

Take a drive through many regional towns, with their booming property markets and zero per cent vacancy, and you’ll notice the abandoned stations in the middle of otherwise thriving main streets. The costs of reclamation have made the property a non-starter for developers.

The $6.7 billion problem

There are an estimated 7,000 petrol stations currently operating in Australia. According to the state’s public registry, there are 133 former service station sites waiting to be cleaned up in NSW alone along with hundreds more across Victoria, Tasmania, WA, and Queensland.

Boston Consulting Group estimates under a worst-case scenario between 60-80 per cent of current petrol stations will be unprofitable by 2035 as motorists switch to EVs.

If this estimate holds true (and every other EV ‘expert’ opinion has proven wildly underestimated from range to cost to adoption rates) and every petrol station costs $1.2 million to clean up, that’s a $6.7 billion total bill. And most will not be remodelled into luxury Brighton apartments.

There’s been a lot of attention devoted to a hybrid business model for petrol stations where owners offer traditional petrol bowsers alongside EV chargers. There’s been some progress on this, but it’s very early-stage and change is not coming quickly enough.

In April, Ampol unveiled plans to run its own EV fast-charging network, dubbed ‘AmpCharge,’ starting in mid-2022 with a measly five pilot sites.

The policy heft behind this move is the $26.8 million from ARENA under the Future Fuels Strategy. Ampol is sharing the spoils with Evie Networks, Chargefox, Engie and Electric Highway Tasmania.

But the vast majority of petrol stations won’t make the switch to EV chargers even if ARENA grants are involved. Installing L3+ charging infrastructure costs hundreds of thousands of dollars. Fuel offers little in terms of margin. The modern petrol station has swollen to accommodate products such as food, premium coffee, and motoring accessories.

Norway offers a route

Australian policymakers have increasingly been told to look to Norway, a fossil fuel economy that is a decade ahead of Australia in terms of EV adoption, to see what the future could look like.

The majority of charging infrastructure in Norway was built by government led partnerships with varying success. It worked great in public spaces, less so in residential areas. Maintenance and reliability along with charge velocity was an issue. Regardless, the state had to lead this effort.

Ten years into their transformation, what have we learned?

The number of petrol stations has decreased by over 60 per cent since 1959 and the surviving modern station in Norway increasingly resembles the Qantas Club. The business model is about entertaining motorists as they charge their EVs over the course of 30 minutes or to just provide them the high margin staples they need.

Perhaps our governments could look to pairing EV incentives for petrol stations with a rehabilitation bond similar to mining exploration. Become an early adopter of L3+ charging infrastructure to avoid the bond and retain licence to operate diesel, petrol, and electric sources. 

Australia’s rehabilitation bond regime has mostly been implemented in the last 20 years. It’s a case study of this country re-examining an industry for its long-term economic and environmental outcomes. We have $10 billion set aside for mine clean-up as a result.

That might sound like a lot, but researchers have shown there are as many as 50,000 abandoned mine sites in Australia that could have legacy environmental issues.

This underlines the need for a proactive approach. Australia must have some long-term thinking and ultimately, policy, about this industry and prepare for significant change. That’s why the current cut in fuel excise should not be extended.

We should be leveraging our existing petrol station network as partners in our conversion to EVs, not ignoring them. Mismanaging the transition will result in a lot of ugly idle stations all at once with no one to clean them up.

Charlie Richardson is former Accenture Managing Director of Utilities and currently Strategic Advisor to Aussie EV startup Vyro

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