Transcript:
NARRATOR 2 Hello, you’re listening to ‘Face the Facts’, the new current affairs podcast from DNV Talks Energy, where the world’s leading energy experts share their insights on the most important global news stories about the energy transition.
The global race towards electrification is on, with more and more markets looking at the automotive industry as a way to ensure a greener future.
While recent news revealed that combined European sales of both battery and plug-in hybrid electric vehicles totaled 259,000 in the first six months of 2019, growth is also being seen in developing countries. For example, India recently announced a new policy to foster greater demand for electric vehicles, in a bid to reduce traffic congestion and air pollution, particularly in urban centers.
In this last episode of the series, Lucy Craig, Vice President of Technology and Innovation at DNV – Energy, looks at the not-too-distant electric future, the current barriers to large-scale electric vehicle adoption and what this means for renewables moving forward.
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Transcript:
LUCY CRAIG If you live or work near a road you’ll be used to the sound of traffic. It is a common part of everyday life, which most of us have grown up with. But that will be changing over the coming decade. By 2032, we in DNV predict that 50 per cent of sales of light vehicles worldwide will be electric. That is a massive increase from today where, in Europe, electric vehicles account for less than three per cent of new vehicle sales.
Electric vehicles are silent. In fact, so silent that legislation was introduced this year in the US and in Europe which will require vehicles to emit a certain level of noise so that pedestrians can hear them. You may already have an electric vehicle, or know someone who does, but they still represent a very small proportion of total car sales today. However, this is going to change. Recent reports show that, in Europe, sales of battery electric vehicles and plug-in hybrids totaled over a quarter of a million in the first six months of 2019, which is over a 30 per cent increase compared with the same period in 2018.
The largest increase we’ve seen in Europe is in Germany, where sales rose by 13 thousand cars which is a total of around 50 thousand cars sold, and in volume larger than Norway, which has been the leader up until now, and Iceland is also up there. But globally, industry experts expect that by the end of this year there will be over four million electric vehicles on the road, which is a significant increase over 50 per cent year on year. And although Norway remains the leader in this sector, actually a much bigger impact will be made in the world’s largest countries. So, the recent news reported that India will be investing in electric vehicles will have a huge impact, not only on the automotive industry, but also in our move towards a cleaner energy future.
So, India has recently announced the faster adoption and manufacturing of hybrid and electric vehicles scheme or FAME India policy. The aim of this policy is to foster greater demand for electric vehicles, as well as promote a greater supply of them. If you are familiar with some of the mega cities in India, you will be aware of a huge pressure on population and the congestion in the cities. Traffic in India moves along at a slow pace and that causes a lot of pollution and also low efficiency. In fact, New Delhi is now one of the most polluted cities in the world.
So, there are three good reasons for India to be investing in electric vehicles. One is to improve efficiency. Electric vehicles are more than three times more efficient than the internal combustion engine. Another is pollution, electric vehicles have zero emissions at the point of use. And the third, perhaps the most pressing, is the carbon dioxide emission reduction, because electric vehicles have an important role to play in ensuring that we reduce our carbon dioxide emissions globally.
And these reasons are also the drivers behind China’s policies which encourage the take up of electric vehicles. China has invested over 60 billion US dollars in the electric vehicle industry over the last decade and is leading the way in electric vehicles. In fact, there are more electric vehicles on the roads in China than in the rest of the world combined. And for China, there’s a further incentive for investment. There are over one hundred electric vehicle manufacturers in China and their investment is leading to technology development. In fact, Chinese manufacturers are already looking at the export market, so there were reports recently that the Chinese SEIC motor corporation is planning a 350 million dollar investment in India through MG Motor, which is its British subsidiary.
And that will lead to electric vehicles being manufactured in India by the end of this year and that is happening globally. We are seeing electric vehicle manufacturers investing heavily in electric vehicles. There have been announcements from Ford, from Volvo, from VW, BMW. In fact, if you look at the list, most vehicle manufacturers globally are investing heavily in electric vehicles. And these OEM’s are releasing a range of new electric vehicle models because of regulatory requirements that are being raised by governments around the globe. So, with all these investments in electric vehicles and batteries that technology is developing fast, and costs are coming down.
One of the obstacles to growth is range anxiety which is often raised by consumers. That is the fear that your car battery will not last long enough to take you to your final destination, or that you’ll have to stop and charge your car at an inconvenient moment, or even that perhaps there won’t be a charging point on the route that you want to take. But this issue is being addressed. In the Netherlands where I live, it’s quite common to see a charge point at the end of a road of residential buildings, or at workplaces, or in shopping malls. And that has been part of a national rollout managed by the utilities and in many other countries, governments, municipalities, traditional service stations and also manufacturers are setting up charge point networks. And then also the range of electric vehicles is extending as battery technology develops.
Another big obstacle to buying an electric vehicle is the upfront cost, but these costs are also coming down. We have seen reports that battery costs are coming down faster than originally expected. There was a recent report from Bloomberg New Energy Finance on that line and we in DNV expect that price parity to be reached in 2025. That is the point at which the total cost of ownership, so the expected lifetime costs of an electric vehicle, will be equivalent to that of an internal combustion engine.
However, for now the take up of electric vehicles does still depend on favorable policies. So, if we go back to Norway, then we can see that the reason why there’s been such a great take up of EV’s is because it makes economic sense. The tax policies in Norway mean that it is actually more beneficial to buy an electric vehicle than an internal combustion engine.
So, why is the take up of electric vehicles so important? Well, transport currently accounts for 28 per cent of total energy demand. Reducing the impact of climate change therefore depends on electrification of transport. DNV just launched our third Energy Transition Outlook. In our modelling of the world’s energy systems, based on the expected development of demand and supply over the coming decades, we predict very rapid changes ahead for the energy sector. With electricity doubling its share of total energy supply from today’s levels. This electricity production will be powered mainly by renewables, with wind and solar expected to increase twenty-fold in the next three decades.
But, even with this level of renewable generation, these changes are not happening fast enough to limit global temperature rise to 1 and a half degrees C and therefore limit the impact of climate change. In fact, DNV’s Energy Transition Outlook forecasts that, if we continue on our current trajectory, while bringing significant change this will lead to temperature rising by 2.4 degrees C by the end of this century, which means catastrophe for life on planet earth. So, extraordinary action is needed. The technology needed to meet these aggressive targets already exists and a combination of measures can close the gap to a temperature rise of 1.5 degrees C.
Among these measures we need to see even more rapid growth of both wind and solar power and more storage and balancing solutions to enable the high penetration of renewables. So, for example, a 50-fold increase in production of batteries for the 50 million electric vehicles that would be needed on the roads by 2030.
There is no single action that will prevent climate catastrophe. It will take a mix of extraordinary actions working together to close the gap between the current trajectory and the future we want to see. We need policies that will make this happen. But change can happen. Electric vehicles are showing one way in which this is being delivered.
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