Currently electric vehicles (EVs) represent less than 1% combined market share across the world’s largest markets for new passenger cars. To achieve the aggressive fuel economy standards set by regulators electric vehicles (EVs) will have to elevate their combined market share to 16% by 2020, according to new research by the World Energy Council. To do this, EV’s will need to be considered central to any policy and technology portfolio designed to lower transport emissions.
The EV growth opportunity
Christoph Frei, Secretary-General of the World Energy Council, says that over the last 10 years, there has been an emergence of climate change and fuel price volatility, leaving energy leaders sweating under their collars. As a result, many countries have set ambitious fuel efficiency targets for passenger vehicles.
Explains Frei: “The innovative role EVs can play in meeting these standards makes for a pragmatic step in closing the emissions gap by 2020. Looking beyond 2020, EVs and innovation in this area present a major growth opportunity not only for car manufacturers but for the energy sector as a whole.”
Over the next five to ten years, passenger vehicle manufacturers will be confronted with regulatory pressure and material penalties, as gains in fuel economy fall behind the required rates of improvement set to address environmental preservation and climate change mitigation.
With a collective annual demand of over 40 million passenger vehicles, three of the largest car markets in the world, the EU, US and China, have all set fuel economy improvement targets of approximately 30% for cars from 2014-2020 (as measured in NEDC gCO2/km), which are expected to exceed forecasted new internal combustion engine (ICE) powered car capabilities.
The World Energy Perspective 2016: ‘E-mobility: closing the emissions gap’, published by the Council in collaboration with Accenture Strategy, examines the growth in sales of EVs as the latest technologies to increase average fuel efficiency and meet these stringent economy standards, set in all three markets, referred to as the “EV gap”. In the EU, the EV gap is 1.4 million, 10% of the estimated 2020 projected passenger sales, in the US, 0.9 million (11%) and in China roughly 5.3 million, 22% of the projected passenger car sales.
The report highlights key findings which represent a new frontier and a significant opportunity for the energy sector.
New revenue streams for utilities
Stuart Solomon, Managing Director, Accenture Strategy explains that to help close the emissions gap through a more widespread adoption of EVs, utilities need to play a critical role - not only to ensure a reliable electricity supply, given the added pressure from plugging more EVs into an already stressed grid network, but also by ensuring that any added demand for electricity to power EVs increasingly comes from clean energy. [Global electric vehicle outlook-four perspectives.]
“Utilities can also play a leading role in bringing together key stakeholders from the automotive, technology and home services industries to encourage customer uptake of EVs through more attractive electricity tariff structures, combined with bundled product offers, such as connected car and home solutions. Customers could realise cost and lifestyle benefits as a result, while new revenue streams could benefit industry players.”
Electricity demand attributed to new EVs can likely be managed with proper planning by utilities and could be further mitigated at the local level with emerging technologies such as vehicle-to-grid (V2G). Faced with a complex array of policy and technology options including hybrid technology, down-weighting technology, off-cycle credit, aerodynamic improvements and many more, it is important for decision makers to understand the potential impact and feasibility of each option.
The report also recommends that vehicle manufacturers respond to regulatory pressures and shift their product portfolio to avoid material penalties. Additionally, there is an opportunity for vehicle manufacturers and utility electricity providers to partner to deliver a superior value proposition to consumers. By 2020 each market would need an additional:
- 3.7TWh (equivalent to 734,000 homes) in the EU
- 4.5TWh (equivalent to 367,000 homes) in the US
- 26.2TWh (equivalent to 17 million homes) in China
The report states that regulators should examine how proposed fuel requirements can be matched by working with industry through financial and operational incentives in order to achieve desired improvements in CO2 emissions.
We wrote recently how Tesla is proving that EVs can take the automobile market by storm and that it is a matter of time before the industry wakes up to Tesla’s “secret sauce”. As a result we expect to see a lot more EV car sales which often offer more luxury and better performance, as well as being more environmentally friendly and cost effective. [When an Electric Vehicle Outstrips Luxury Car Sales]