The Obama Administration is extending its loan guarantee program to electric vehicle (EV) charging stations, which could speed the process of building necessary infrastructure as well as increase the adoption of EVs. If successful, this could be a boon to the companies leading the EV revolution, and provide a financial backstop to those testing out business models. 

Charging is a big challenge today

EVs have been playing a chicken and egg game with charging stations for years. According to the White House, there were 500 public charging stations in 2008 as EVs began to take hold. Today, while that number has grown to 16,000, there still aren't enough for drivers to know they can find a charge when they need it. Tesla Motors (NASDAQ:TSLA) is seen as a leader in charging stations, but it has only 681 supercharger stations across the country, and most are tens, if not hundreds, of miles apart. Imagine if gas stations were that hard to find.

Screen Shot

Image source: Tesla Motors.

And Tesla is providing supercharging for free to Model S owners -- which isn't helping third parties like PlugShare, ChargePoint, or NRG Energy's (NYSE:NRG) EVgo. They are trying to figure out revenue generating models that would pay for the expensive charging infrastructure. A loan guarantee could give a backstop against potential losses, leading to lower borrowing costs and a faster network build out. The program could be fuel to the necessary business model innovation needed in charging.

For charger manufacturers like Aerovironment (NASDAQ:AVAV) and General Electric (NYSE:GE), this could help increase demand for commercial chargers that accept payments from customers. Building some kind of pay-for-service or subscription business model will be key to generating the necessary revenue to justify loans. 

Ev

GE's commercial charging station. Image source: GE.

A $4.5 billion boost for EVs

What's incredible is the potential scale of this program. In the announcement, the White House said it is unlocking $4.5 billion in loan guarantees that companies building commercial scale businesses can apply for.

The list price for an Aerovironment TurboDock is $1,299, so there's potential for 3.5 million EV stations (not including installation costs). If the full amount is used, chargers could be more common than gast stations.

Workplace charging challenge

One of the major drivers of broader charging and EV adoption will be businesses. According to the White House, "35 new businesses, non-profits, universities, and utilities [are] signing on to DOE's Workplace Charging Challenge and committing to provide electric vehicle charging access for their workforce."

And nearly 50 major organizations, from carmakers to state governments, have greed to guiding principles to promote EVs and charging infrastructure. Part of the plan will be to encourage state and local governments to adopt EVs more widely, helping meet the Obama aministration's carbon emission reduction goals.

A step toward EV domination

Automakers are moving toward a broader range of EV offerings, and if this program is successful it could create a critical mass of charging infrastructure. That could create a perfect storm of accessibility for EVs and grow adoption. And for those building charging stations, it will reduce the risk of losses, which is great news for investors in a bleeding edge industry.

Travis Hoium owns shares of AeroVironment and General Electric. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool owns shares of General Electric and NRG Energy. The Motley Fool recommends AeroVironment. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.