victorian electric vehicle trial mid-term report - Department of Transport

6.1.3 What are the costs andbenefits of electric vehicleadoption for Victoria?Under all scenarios, electric vehicleswill provide a net economic benefitfor Victoria. The benefit varies from$1.8 billion to $23.4 billion over theperiod to 2040, without considering theeconomic contribution of the electricityand automotive industry sectors. Oilprices and EV purchase costs arethe key factors driving the timingand extent of the economic benefit.Local vehicle supply constraintsare an important influence on theeconomic analysis, both in the earlyyears while the vehicles are expensiveand following the point at whichthey become economically viable.The availability of public charginginfrastructure has a strong influenceon the size of the economic benefitonce EV uptake begins at scale.EVs cost more to purchase initially,but they are cheaper to run thanconventional vehicles. Over time, thepurchase price for EVs is expected tofall, and running costs of conventionalvehicles are likely to increase asoil gets more expensive. Under allscenarios modelled, the EV marketis both economically and financiallystrong with a net present value thatbecomes positive in the period between2026 and 2031. Over the 30-yearevaluation period, economic benefitsto the State range from $1.8 billionto $23.4 billion, mostly as savingsto households and businesses intransport costs.Notably, the modelling does not takeinto account the potentially significanteconomic contributions from electricvehicle market goods or serviceprovision, electricity generation forEV operation, or from local designand/or production of EV technology.These contributions may be additionalto existing economic activity, as is thecase with electricity generation, orsimply an evolution, such as design ofelectric rather of internal combustionengine vehicles. Section 6.1.4provides some insights into potentialemployment benefits for the state.The key influences on the modellingpredictions are the same as thosedescribed in Section 6.1.2:• Technology costs – in the shortto medium-term take-up of EVsis strongly influenced by theirprice relative to conventionalvehicles. Measures to reduceEV costs earlier bring forwardthe economic benefits• Oil prices – take-up of EVs ishighly sensitive to oil prices butless sensitive to electricity pricesand/or a carbon tax. Should oilprices increase ahead of forecasts,measures to promote EV uptakewill increase economic benefits• Consumer preferences –increasing the availability ofcharging infrastructure andremoving barriers to EV ownershipwill encourage take-up of EVswhen prices become moreaffordable, and bring forward theeconomic benefits.The economic model finds that in orderto optimise the economic benefit ofEVs, rapid uptake of EVs should bepromoted once the take-off point isreached where the higher purchaseprice of an EV (technology costs) ismatched by the operating cost savingsEVs provide versus conventionalvehicles (oil prices).An important consideration inpromoting uptake of EVs is vehiclesupply constraints. As outlined inSection 4.1.3, the Australian marketis envisaged to be constrainedto around one per cent of globalproduction until 2020 (AECOM 2011).This forecast is beneficial in thecontext of the economic analysis, asprior to this time EV uptake occursat a cost to the economy due tothe unfavourable purchase price/operating cost relationship. Followingthe removal of supply constraints,uptake is determined by the factorsabove (technology costs, oil prices andconsumer preferences).It is important to note however thatdue to the leadtime on productplanning decisions (refer to Section4.1.3), automotive OEMs should bemade aware of EV market supportmeasures at least two years ahead ofwhen improved supply is being soughtto optimise the overall economicbenefit to the state – in other words,around 2018 based upon the forecastscontained in the Department’seconomic modelling.CREATING A MARKET 103