Transportation lies at the heart of the public debate over greenhouse gas emissions and the future of oil. About three-quarters of global oil production is consumed by the transportation sector: cars and pickup trucks (58.6%), medium and heavy-duty trucks (22%), airplanes (8%), and water transport, such as ships (4.5%). While alternate fuels - e.g. ethanol, hydrogen - were once thought to be a big part of the transition away from oil, it is becoming increasingly apparent that electric vehicles (EVs) are the future of transportation.
Discussing the future of transportation electrification dispassionately is somewhat difficult because there is so much hype during the early stage of a new technology.
Inflated expectations occur when hype-cyclers latch onto a new technology and promote it for their own reasons, including ideology (electric vehicles are a darling of anti-oil protestors), financial (no surprise that EV entrepreneurs like Elon Musk of Tesla Motors are great promoters) or even political.
Inflating expectations works. A 2016 survey of American consumers found they thought wind and solar energy will make up 34 per cent of US electricity generation within five years, whereas experts put the figure closer to five per cent.
EVs can be a very sexy media story. Musk shook the automotive world in 2016 with the introduction of “ludicrous mode” that turned the Model S four-door sedan grocery-getter into a screaming fast super car capable of times of 0-to-60 MPH in 2.39 seconds. That makes the Model S the third fastest production car on the market. That’s some sexy.
Some of the media are far more enthusiastic than the data warrant. Bloomberg New Energy Finance, for instance, continually makes outrageous forecasts of EV sales that depend upon almost vertical “hockey stick” growth, which naive readers swallow wholesale. Their methodology, however, doesn’t stand up to scrutiny.
“The central scenario…[is] that 35 percent of new sales would be electric by 2040, and perhaps as high as 47 percent under certain conditions (higher oil prices, more widespread use of car-sharing),” said Michael Liebreich, chairman of the BNEF advisory board, and chief editor Angus McCrone.
“If anything, since publishing that forecast, we are tending to think EV penetration will be faster, not slower, despite persistently low oil prices. In the first half of this year, worldwide EV sales were 285,000, up 57 percent on 2015.”
The global EV fleet in 2016 numbered about 1.3 million, according to the International Energy Agency. And while global new car sales last year were 88.1 million, EV sales were a paltry 776,000, less than one per cent of the total.
Another way to measure EV adoption is as a percentage of the global auto fleet, which numbered 1.2 billion in 2014 and is projected to rise to 2.4 billion around 2040. The IEA estimates the global EV fleet at 1.3 million, or about one-tenth of one percent of the global fleet.
The likelihood of EV sales rising from less than 1% of global new vehicle sales to 35% to 47% in just 23 years, as BNEF believes, is remote.
Then why are Liebreich and McCrone so enthusiastic?
EV battery advances, they say: lower costs coupled with higher energy density, which means more kilometres before recharging. RethinkX think tanker founder Tony Seba argues the data shows that from 1995 to into the 2000s lithium-ion batteries prices improved by 14%. From 2010 to 2016 they improved by 20%.
“These are facts, not opinions. so the question is, which number do you use? Do you believe that it’s going to improve at that 20% rate or go back to 14%?” Seba said in an interview.
The opinions Seba is referring to are those of top American EV battery scientists and EV market analysts.
Dr. Yi Cui, Stanford said in an email interview: “I expect to reduce the cost by 50%” of Li-ion batteries within 10 years," and “the range would be double for the same weight of battery pack…This is achieved by using Si (in combination with graphite, or high content of Si) at the anode and improving the Li-metal oxide cathodes.”
And Tim Grejtak of Lux Research said in a phone interview: “I definitely think those numbers [from Dr. Cui] are accurate and about what you’d expect. We’ve seen about 3% or so year-on-year improvement in cost and energy density.”
Dr. Haleh Ardebili from the University of Houston observed in a phone interview: “We are indeed reaching the maximum theoretical change for lithium ion…The commercial types [e.g. EV batteries] of lithium ion batteries – excluding the silicon or other types of anode material – are reaching their maximum capacity.”
And in a phone interview, Chris Robinson, Lux Research said: “Our opinion is that the next generation of batteries that might really start to boost EV adoption are probably going to be a little closer to twenty years. If we look at potential replacements for lithium ion right now, I’m not sure I see any promising technologies on the market. Or even in the lab, necessarily, that can directly replace it in 10 years. But 20 years, maybe.”
Who to believe? The economists calculating trends or scientists in the lab and analysts with their pulse on the EV industry?
Below are the bullish and bearish cases for rapid EV adoption. Both are possible. But which one is most likely?
Replacement Model - The Bearish Case
If we wait for consumers to replace their ICE cars, trucks, and SUVs with EV cars, trucks, and SUVs, the transition will be a long one, probably 50 years in North America and Europe, a bit longer in China, and the end of the century in developing countries.
The reason is quite simple: if you consider the relative strengths of the accelerators and constraints to adoption of EVs, the constraints are much stronger.
Constraints
Cost: EV boosters claims the total cost of ownership (direct and indirect costs) for electric cars is competitive with ICE vehicles. Even if that is true, car buyers generally don’t make their decisions that way. Instead, they try to get the most car for the payment they can afford. By that standard, EVs sell for a huge price premium.
For instance, will a family of four pay $42,000CDN ($37,500USD) for a Chevy Bolt or under $20,000 for a Chevy Cruze hatchback – a very similar car – with a gas-powered engine? A price premium that wide means only Innovators (2.5% of consumers) will be buying Bolts. Subsidies of $5,000 available in BC - Alberta does not have EV subsidies - have had little effect on EV sales thus far. And evidence from other jurisdictions, like California (where buyers enjoy a state subsidy of $2,500 and a federal bonus of $7,500) suggests that subsidies just reduce the cost of expensive and trendy EVs like Tesla Model S to wealthy buyers.
Range anxiety: Both Bolt and the Tesla Model 3 will have a range of 325 kms (200 miles) when they begin selling in 2017. That’s far better than the first generation of EVs like the Nissan Leaf, which was rated by the manufacturer for 170 kms in 2011 when it was introduced, but that was cut back to 117 kms by the EPA. Turn on air conditioning or the heater and those numbers drop significantly.
This has led to “range anxiety” - the fear by consumers that they will run out of battery charge before they can get home or find a charging station. Industry has tried to downplay range anxiety by pointing out that most EV owners travel less than 100 kms a day and charge every two days on average. Furthermore, a 2015 study by the National Laboratory of Idaho found that 85% of EV owners do 85% of their charging at home or work, suggesting most owners have ample access to charging facilities when they need it. Nevertheless, range anxiety is considered by most analysts as the second strongest constraint to adoption.
Miscellaneous: There are many other factors that act as disincentives to adopt EVs, including:
- Municipal building and electrical codes that make it difficult to install charging stations in urban condominium and apartment parkades.
- Lack of models to choose from. Most EVs are small five-door hatches, designed to keep down weight and cost, whereas consumers prefer larger cars, pick-up trucks, and SUVs. And because EV makers lose thousands of dollars on each vehicle, trim and options are usually limited.
- Shortage of charging infrastructure. Chris Robinson of Lux Research argues that plentiful access to charging isn’t so much required as it is comforting to drivers suffering from range anxiety.
- High value of ICE vehicles: gas-powered cars are mature technology and automakers have done an excellent job refining power-trains, fuel economy and performance. The average modern car lasts 15 years.
- Public policy: to encourage EV sales, some governments allow single-occupant EVs to travel in HOV lanes or take premium downtown parking spaces. Some European countries are considering banning ICE cars from downtown areas but giving preference to EVs, but these policies are still in their infancy.
The value proposition for replacing an ICE car with an EV is not compelling. Prices would have to drop significantly and battery range would have to double or triple for EVs to offer superior value to car buyers. That's not likely to happen for 20 years, according to the battery experts quoted above.
But the best evidence that the EV value proposition is not compelling is sales figures. Only 4,698 electric vehicles are registered in British Columbia as of September 31 2016, according to the FleetCarma website, despite a $5,000 provincial subsidy. Keep in mind the total BC light duty vehicle fleet numbered 3.5 million, according to Statistics Canada. That means EVs accounted for thirteen one-hundredth of 1% of all the cars, trucks and SUVs in the province.
Alberta, with a population only slightly lower than BC, had a grand total of 653 EVs registered, with no subsidies. Total Canadian EV sales in September were just over 13,000.
Accelerators
The most significant accelerator is public policy and that will continue to be the case going forward, according to Chris Robinson.
“Policy will continue to drive EV adoption, but not because of government offering financial incentives to consumers. It'll be in the form of fuel efficiency regulations,” Robinson said in an interview.
“It's simply so that automakers can meet these targets that if they don't meet, they face financial penalties. EV adoption is still going to be somewhat policy-driven, but it's going to be OEMs (original equipment manufacturers) are feeling the policy influence, not the consumers getting the benefits.”
British Columbia adopted Canada’s first low carbon fuel standard in 2010. Regulations require refiners to blend biofuels fuels into gasoline and diesel fuels (similar legislation exists in California and Oregon). Companies with fleet vehicles get credit for using electricity, natural gas or hydrogen. The standard gets tougher over time, encouraging automakers, refiners and consumers to innovate toward cleaner transportation options - including “micro hybrids” that use small batteries and low levels of electrification, according to Robinson.
The BC plan has now been adopted by the Canadian government. But the small number of EVs purchased to date in the province suggest the standards will have to become much more stringent before they overcome the many constraints to adopting EVs in the replacement model.
Transportation as a Service - The Bullish Case
In May 2017, RethinkX think tank founder Tony Seba released a landmark study that calculated the math for a model that could generate a huge increase in consumer value and overcome the constraints of the replacement mode. “Transportation as a Service” - or TaaS - is more a business model disruption than a technical disruption.
In this case, consumers will no longer own personal vehicles. TaaS companies like Uber or Lyft (or maybe even Google and Apple or GM and Ford) will own huge fleets of autonomous EVs (A-EVs) that will be a fraction of the cost of private car ownership. Seba says TaaS will be four to 10 times cheaper per mile than buying a new car, and two to four times cheaper than operating an existing paid-off vehicle, as early as 2021. He estimates the average American family will save just under $6,000 a year using TaaS.
Highlights of Seba’s study, “In Rethinking Transportation 2020-2030: The Disruption of Transportation and the Collapse of the ICE Vehicle and Oil Industries” include:
- By 2030 95% of US passenger miles traveled will be served by TaaS
- A-EVs engaged in TaaS will make up 60% of U.S vehicle stock.
- As fewer cars travel more miles, the number of passenger vehicles on American roads will drop from 247 million in 2020 to 44 million in 2030.
- The cost of TaaS will be driven down by utilization rates that are 10 times higher; electric vehicle lifetimes exceeding 500,000 miles; and far lower maintenance, energy, finance and insurance costs.
“We are on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history,” says Seba. “But there is nothing magical about it. This is driven by the economics.”
But there are other accelerators that could support the TaaS model:
- Mega-city traffic congestion: Metro Vancouver is the most congested urban area in North America. If commuters ditched their own cars for TaaS, eliminating 50% or 75% of cars on the road would eliminate or reduce gridlock, free up time for commuters to work while travelling to and from work (or relax, which might have a very high value for some), and relieve metro municipalities from spend billions on more roads and public transit to accommodate a rapidly growing population. Less traffic congestion as a result of promoting the TaaS model could generate tremendous direct and indirect economic benefits for Metro Vancouver.
- The BC and Canadian governments - confronted by a public skeptical that Canada can expand oil and production and still meet climate mitigation targets - could see TaaS as a key part of their greenhouse gas reduction strategies.
There are also constraints that work against the rapid adoption of TaaS:
Bottom line? Professor Beach thinks Seba’s math is sound, but his timelines are too aggressive. Technology change just doesn’t happen that quickly.
The SOLO
TaaS is not the only EV model that could reduce mega-city congestion. Vancouver-based Electrica Meccanica recently launched commercial production of a one-person, three-wheeled EV designed specifically for commuters. The Solo is much smaller than a car or truck, but has many of the amenities of a modern automobile.
The SOLO has a range of 160 kms (100 miles) and is powered by a 16.1 kWh lithium ion battery. The chassis is made of a lightweight composite aerospace material combined with an aluminum drivetrain, keeping vehicle weight to about1,000 lbs. The Electrica Meccanica design team used wind tunnel data to achieve greater aerodynamic efficiency than the Chevrolet Corvette and Porsche 911.
“Eight-three per cent of people commute 30 kms or less each direction by themselves in a five-person gasoline car. That’s the sweet spot for us. It's not a niche, it's the majority,” said Electrica Meccanica CEO Jerry Kroll in an interview. “You can drive downtown, park literally for free. Get back in the car, go home nice and efficiently by driving the HOV lane.”
Kroll says The SOLO has potential beyond just a commuter vehicle.
“We've been approached by a number of delivery companies who are now also starting to wake up to the fact that their employees can save tons of money by not buying gasoline,” he said.
“They can also wrap themselves in a beautiful green aura for their customers by saying they're not polluting. Those are three big very powerful reasons to buy an electric Solo.”
Kroll is the consummate salesman, who believes his creation is set to revolutionize urban transportation. When asked where he thinks The SOLO is on the diffusion S-curve, he argues that it is already beyond the bottom leg of the curve - despite only beginning production in 2017.
“I would say we've gone over the tipping point, we're no longer at the point where it's early adopters buying regular electric cars. I think the Bolt and the Model 3 (neither EV is yet for sale in Canada) are evidence of that, that everybody wants an electric car,” he says.
“The next S-curve we're looking for, the adoption curve, is for people to get over the fact that they need a five-person car everywhere they go and to use a one-person Solo the same way they'd use a smartphone as opposed to a large desktop computer.”
Kroll says The SOLO is undergoing American compliance certification testing, which will qualify it for California, which currently buys 40 per cent of US-sold EVs. Next up is Canadian certification, meaning The SOLO will qualify for the $5,000 BC EV subsidy, a substantial deduction on its $20,000 sticker price.
“We've already started Canadian compliance testing and as soon as that's done then that would allow for Canadian provinces who require Canadian compliance for all their bonuses and all that. It's a province-by-province, region-by-region thing,” said Kroll.
Electrification of large trucks
Large trucks are essential to modern commerce but their contribution to energy consumption is much greater than their numbers suggest. In the United States, for instance, medium and heavy-duty trucks generate 23 per cent of greenhouse gas emissions from the transportation sector, even though they make up only five per cent of the national vehicle fleet.
Electrifying large trucks is difficult. Given the low energy density of current battery technology, the number of batteries it would take to power a freight hauling semi-truck makes electrification impractical. Established and start-up drivetrain suppliers are concentrating on niche markets - such as garbage trucks or delivery vans - where hybrid or electric only technology offers advantages.
“Limited daily range and a drive cycle featuring a lot of stopping and starting are applications that benefit most from electric drive capabilities and delivery and refuse collection vehicles are expected to be the primary targets in the short term,” says David Alexander, senior research analyst with Navigant Research in a recent report.
It takes a lot of technological ambition to break into such an old and established market, says Mark Duvall, a research director at the Electric Power Research Institute in Palo Alto: “If you want to sell a fleet owner an electric truck, you have to convince them that it’s better than what they’re already using. So the bar is set very high.”
One approach is to manufacture electric power-trains that can be installed on existing medium-and heavy-duty commercial vehicles - making them cleaner, quieter and more energy-efficient. Wrightspeed is a San Jose, California-based company generating interest from fleet owners scrambling to meet California’s increasingly strict emissions standards, but who don’t want to replace the entire vehicle.
“You can take this truck that you’ve invested all this money in and it’s still in good shape, and you can swap out the power-train for our power-train and suddenly you’re emissions-compliant,” said Ian Wright, who left Tesla Motors in 2005 to start the company.
Navigant Research forecasts sales of 332,000 medium and heavy duty electric annually trucks through 2026.
CONCLUSION
The global economy stands upon the cusp of significant change how people and things are moved from one place to another. What isn’t clear is how long that change will take or even what form it will take.
If the replacement model of EV diffusion triumphs, then change will be gradual and human society may not be much changed 50 or 75 years from now when the process is complete.
But if the Transportation as a Service model wins out, then change could be much more rapid and cities especially could look very different if so much of their footprint isn’t devoted to automobiles. Who knows how TaaS might change suburbs and exburbs?
A third option might be a hybrid of the two models in which consumers and businesses still own EVs, but use TaaS for commuting or getting around congested city cores.
And the trust internal combustion engine will probably still play a role in very cold climates like Canada, and in classes of vehicles that don’t easily lend themselves to electrification.