Electric Vehicles: capacity building for take-off
* Oil displacement to rise from 200,000 b/d at end-2017 to 250,000 b/d by end-2018
* Global EV electricity consumption to rise from 38 TWh/year to 49 TWh/year by end-2018
* Battery manufacturing capacity to more than double by 2021
Progress in electric vehicle (EV) technology and rising production capacity, particularly in the heavy-duty vehicle segment, backed by government incentives and increasing concern over the use of diesel, are all supporting EV sales in key markets such as China and the US. Although starting from a low base, EVs are set to have a steadily increasing impact on oil and electricity demand.
Just over 1 million light-duty electric vehicles (e-LDVs) were sold worldwide in the 12 months to end-October 2017, up 43% from the same period a year earlier. In total, the cumulative number of e-LDVs on the world’s roads passed the 3 million mark in November 2017, according to data from www.EV-Volumes.com.
At this rate of growth the cumulative number of e-LDVs on the road will reach 4.3 million by end-2018 and 8.8 million by end-2020, at which point the oldest EVs will be reaching the end of their lives.
This year’s 43% growth may even be exceeded in 2018 as the number of more affordable models on the market increases. This is an industry gathering momentum.
Step changes in costs are expected in the next two to three years as battery “gigafactories” come into production in Europe, the US and Asia. Plans for 10 new gigafactories were announced in the first half of 2017 alone. Global battery manufacturing capacity is expected to more than double in the next four years, which should bring with it significant cost reductions, while faster recharging times and improved range are making EVs more appealing to consumers.
Almost all major car companies are now developing EV models. Research and development dollars are being shifted into electric technology and away from internal combustion engines.
Money is starting to flow into recharging networks, from both the public purse and private investment, including from major oil companies such as Shell. Auto makers, electric utilities and the oil industry are all positioning themselves to take advantage of at least a partial switch in transport fuel demand.
Governments keen to put road transport on a more sustainable footing and reduce urban air pollution are providing financial incentives to encourage EV adoption. Prospective diesel bans, ranging in implementation dates from 2025 to 2040, are proliferating at the city level internationally. Total bans on the sale of internal combustion engines at some future date have made it on to the political agenda in a number of countries, not least China.
Oil and electricity demand
The growing number of e-LDVs will have a steadily increasing impact on oil and electricity demand. The 3 million EVs on the road at end-2017 will displace about 60,000 b/d of oil product demand and consume an additional 6.65 TWh of electricity a year.
More important though is the spread of lithium-ion technology into the heavy-duty vehicle segment. This is happening earlier and faster than expected.
China’s BYD, the world’s largest e-bus manufacturer, is to open a new e-truck factory in Ontario, Canada, next year and expand its existing operations in California, making e-trucks as well as e-buses. In addition, iconic EV manufacturer Tesla unveiled its new e-truck in November, which it hopes to have in production by 2019 with a full load range of 300 to 500 miles, depending on the model.
According to US government data an LDV will on average travel 11,300 miles (18,185 kilometers) a year with fuel efficiency of about 22.5 miles to the gallon (9.6 km/liter). In contrast, a class 8 truck will travel 68,155 miles (109,685 km) in a year at 5.3 miles per gallon (2.3 km/l), which means that an e-HDV displaces 25 times more oil demand than an e-LDV in the US.
New e-HDV sales worldwide were 117,514 in 2015, rising to 206,995 in 2016. Only 70,074 new sales were recorded in the first nine months of 2017 as issues with Chinese subsidies held up production, highlighting how dependent the industry remains on government incentives. However, global cumulative e-HDV numbers could reach an estimated 465,000 by end-2017.
By end-2017 e-HDVs are expected to be displacing an estimated 126,000 b/d of oil demand and consuming on an annual basis 32.15 TWh of electricity.
Batteries are also being deployed on ships. While pure electric ships are rare, there are 107 hybrid vessels in service and 21 under construction. These ships use large batteries to enhance the operational efficiency of diesel generating sets, resulting in significant fuel savings.
As a result, total oil displacement by end-2017 from EVs will be somewhere in the region of 200,000 b/d, and can be expected, by end-2018, to rise to 250,000 b/d. In terms of oil products, the biggest impact will be felt in the diesel market and, regionally, in China, which is the biggest maker and buyer of EVs, particularly e-HDVs.
Similarly, the additional electricity demand required for EVs at end-2017 is estimated at 37.78 TWh, rising to 49.14 TWh a year by end-2018.
However, with the exception of Norway, nowhere do EVs yet make up more than a fraction of new car sales. Nor is the oil displacement and additional electricity demand likely to cause major near-term market impacts. In China, oil displacement will offset imports and the additional electricity demand should easily be met by surplus generating capacity.
Nonetheless, 2018 could prove a watershed for the EV industry as it ramps up its offerings to consumers in both the private and commercial segments, and, most importantly, continues to expand its productive capacities as it looks to years of future strong growth.
Ross McCracken, firstname.lastname@example.org