In comparison to traditional energy and ICEs, the Electric mobility and EV market is expanding at an increasingly rapid pace – with the car fleet exceeding 5 million last year – with new electric car sales almost doubling compared to the previous year. China remains the world’s electric car front-runner, along with Europe (especially Norway) and the United States.
The forecasts for EVs diverge significantly. According to EV30@30 Scenario (New Policies Scenario of IEA), the goal is to reach 30% market share for EVs by 2030, which means global EV sales would need to reach 23 mln. and the stock to exceed 130 mln. vehicles. China would maintain its position as the world leader with 57% share of the EV market in 2030, Europe (26%) and Japan (21%), less than those in Canada, US, and India.
In projected scenario this would impact demand for oil products by 127 Mtoe. Electricity demand for EVs in the New Policies Scenario is projected to reach almost 640 or even 1 110 TWh in 2030, with light duty vehicles being among the largest electricity consumers.
There are also two alternative scenarios to that: IEA 2DS – the aim is to limit global warming (temperature increase by 2°С) with 140 mln. EVs in 2030, and IEA 4DS - 4°С and 25 mln. EVs in 2030 (28% of motor vehicles), accordingly. Some experts say, by 2040, 30% of kilometers travelled by passenger cars could be powered by electricity.
Volkswagen plans 22 million electric vehicles in ten years: ~ 70 new electric models, 30 billion euro of investments by 2023, > 40% of all cars manufactured in 2030 will be electric, > 85% of all cars sold in China in 2040 will be electric.
Turning our focus to the major factors influencing the development of electric car market & based on opinions of our major conference speakers and influential experts:
- First of all, many benefits that come nicely packed with an EV: quiet motor, the amount of GHG (for a hybrid plug-in version the level of emissions is less than of a global average ICE vehicle using gasoline over their life cycle, instant torque, energy consumption intensity of a vehicle – although still to be improved, and so on.
- Policies have and will still play a critical role - leading countries in this area largely support electric mobility both from consumer and manufacturer sides, using a variety of measures such as fuel economy, zero-emissions regulatory rules and standards, tax compensations and other economic instruments that helped lower down the costs of production as well as construction of charging infrastructure. Since EVs purchase prices are higher than ICE vehicles, regulatory measures are usually applied that boost the value proposition of EVs (e.g. waivers to access restrictions, lower toll or parking fees) or embedding incentives for vehicles with low tailpipe emissions (e.g. fuel economy standards).
- Availability of technological innovations, i.e. better batteries, sustainable materials for manufacturing plants, optimization solutions, including big data, lean and innovative designs. As a result, we have seen the cost of battery decrease by almost 80% in only 7-8 years – price in 2010 $1000/unit – while battery capacity went up by 5 times. According to Tesla and General Motors, the aim is to achieve the price of $100 per battery.
- State of country’s economy and thus consumer choices towards green energy and conscious decisions for larger private household investments like buying a new electric car – it would have been easier to promote this idea in the community if there were options to redesign a traditional vehicle into an electric one with minimum changes in- and out. Social media and influence of agencies like IEA, IRENA and industry leaders – TOTAL, SHELL, EQUINOR, etc. is crucial to spread the importance and value of EVs if society wants this concept to succeed – similar to the evolution of solar panel systems. Many countries are deploying electric buses and coaches which is a good starting point for showing the benefits of such type of vehicles – and also to lower operational and fuel costs a US State is saving $25,000 annually per bus. Shared mobility is another trend that introduces EVs to the public. Tesla is the world’s pioneer in EV business, and any changes in corporate stock prices as well as announcements can influence the whole market.
- In larger countries the charging infrastructure is the major issue when it comes to selling more EVs – transportation companies shall need to work together with charging hardware manufacturers, charging point operators as well as battery manufacturing companies in order to proceed with joint effort towards higher efficiency of this industry in general. For consumers a critical factor remains the speed of charge and voluminosity of the battery – both characteristics will need to outperform the ones of ICEs to make electric mobility attractive (not many people are prepared to spend hours waiting for the battery to be charged).
- Raw materials supply for battery production – metals (cobalt, lithium, nickel, etc) used are not easily obtained on a competitive price and in sufficient amount if the growth rate will peak in the nearest future – the cost impact of raw materials to the final product is up to 13% which makes the production quite vulnerable to any changes.
- Battery end-of-life management is very important, including second-life applications, notably for economics of the industry and environmental protection reasons as batteries contain toxic chemicals and should be utilized with special care. We welcome the initiative of 3R framework (reduce, reuse and recycle).
- EVs require much more electricity in general, and that consequently raises the question of capacity of country’s power industry plants, sources and cost of kW/h – in some cases increased demand for power can undermine all initiatives towards clean energy and result in competition for energy resources between electric mobility and other manufacturing industries. Concawe assessed the CO2 emissions during manufacture and stated that Audi A6 diesel emits about 7.5 tonnes, while Tesla S (e-mix) results in 21 tonnes – 7 for the car, and 14 for the battery. Parity is reached after around 120.000 kilometres – food for thought.
The Longer Term predictions for EV and fuel market globally:
- Long-term demand growth in fuels will slow down, possibly in Asia and North America, where passenger diesel use is limited, thus possibly displaced partly by renewables. Nexant expects EVs to have more limited impact on transportation fuels demand than ongoing engine efficiency improvements.
- Considerable divergent views on the outlook for EVs and its impact on gasoline/diesel, no unified forecast of EV market share in the future – the development will be modest. In basic scenario of ‘no electrification’: total global motor fuel consumption is ~1.9 tpa (1% annual growth), fuel efficiency of vehicles growth would be ~2.5% per annum. If we follow the route of Paris Agreement, by 2030 global motor fuel consumption will decrease by 150 MTPA, and IEA 2DS imply the change will be even higher – 320 MTPA.
- Geographically, global light duty motor vehicle sales do not favor fast approach of EV sales – today, less than 50% of the market share is covered by regions and countries with high sales potential. In 2018-2019 the period of tax incentives for EVs shall end in Norway, China, and USA (cash subsidies cut down by 50%), which increases the uncertainty for market players. Africa, Middle East, Latin America and South Asia will be the next markets for electric vehicles due to support of local government through incentives and subsidies for both automobile manufacturers and car buyers.
- Producing H2 for fuel cells cars and Power-to-X (eFuels) and Re-Oil can offer sustainable future for liquid fuels according to Roland Berger, but it is not an investment-easy and traditional route.
Summarising the abovementioned, we can say that transport fuels growth will be curtailed from 2025 on by impact of EVs and autonomous vehicles as well as selective restrictions on diesel use, but it doesn’t seem to affect current investment decisions made by O&G companies. For refiners, all of that means the risk of massive pressure on demand across the board may trigger some further plant closures, especially in mature markets like Europe, as well as taxation of CO2.
Euro Petroleum Consultants is a technical oil and gas consultancy with offices in Dubai, London, Moscow, Sofia and Kuala Lumpur, who also organises leading conferences worldwide including ME-TECH 2020 – 10th Middle East Technology Forum for Refining & Petrochemicals - which will take place in in Abu Dhabi on 18–20 February 2020.
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