Climate Action 2017-2018

TRANSPORT
Colin McKerracher, Head of
Advanced Transport at Bloomberg
New Energy Finance
The global automotive industry
is entering a period of profound
transformation. The combination
of supportive policy and improvements
in lithium-ion battery technology have
enabled electric vehicles to gain a toehold
in a market that has been dominated by
the internal combustion engine for over a
hundred years. Meanwhile, tightening fuel
eff iciency regulations and urban air quality
concerns are putting increased pressure on
automakers to improve the rest of their fleet.
Global passenger electric vehicle sales
will hit about 1 million in 2017, up from one
hundred thousand just a few years earlier.
There are now almost three million electric
vehicles on the world’s roads. But before
we get too excited about this progress, it is
worth bearing in mind that the global fleet
of all cars is around 1 billion. Reductions
in emissions from road transport will be
a key part of meeting climate targets, but
an average vehicle is on the road for 12-15
years, creating significant lock-in to our
current transport system. So, just how far
can EV adoption go and what would this
mean for energy and automotive markets?
Lithium-ion battery prices per kilowatthour
dropped 74 per cent between 2010
and 2016 and their energy density is
improving by around 5 per cent per year.
This puts electric vehicles on a path
towards being fully cost-competitive with
their internal combustion counterparts,
a point that will be reached in diff erent
countries from 2025 onwards. In response,
automakers around the world are ramping
up the number of electric models they
off er – there are 150 diff erent plug-in
hybrids and pure electrics available today,
and this is set to rise to over 240 by 2021.
Groups like VW, Daimler, Volvo and Nissan
have made aggressive plans to electrify
their vehicles over the next 10 years.
China is pushing the hardest here.
China’s 2025 auto plan calls for internal
combustion sales to flatline and EVs to
make up all vehicle sales growth over the
next seven years. Its recently introduced
‘new energy vehicle’ quota requires
automakers to sell a set percentage of
electric or fuel cell vehicles, which it will
ratchet up over time. China is doing this
not just to reduce oil imports and improve
urban air quality, but also for industrial
policy reasons. As the vehicle mix shifts,
China wants to position its domestic
automakers to leapfrog established
international brands. A thriving, globally
competitive auto sector is a major source
of employment, investment and innovation.
Nobody wants to see their national
champions left behind.
A view to 2040
Each year at Bloomberg New Energy
Finance, we publish a comprehensive
global Electric Vehicle Outlook, in which
we look at all the technology, policy and
economics factors that could influence
EV adoption over the next two decades.
In this year’s report, we concluded that 54
per cent of the world’s vehicle sales would
be electric by 2040, with Europe, China
and the U.S. the largest EV markets. Some
countries will get there much sooner. In
Norway – the leader on EV adoption –
sales are already above 40 per cent and
the government is aiming fully to phase
out traditional vehicle sales by 2025.
Our forecast would mean 530 million
electric vehicles on the road in 2040, or
around a third of the total fleet. This is a
dramatic change from today and would
require significant scale-up in the battery
manufacturing supply chain, in materials,
and in charging infrastructure. This many
EVs would displace around eight million
barrels per day of oil demand, and would
increase global electricity demand by
around 5 per cent. The power system can
Credit: Bloomberg
accommodate the additional demand, but
smart-charging systems will be needed
to ensure vehicles are not contributing to
demand during peak periods. CO 2
emissions
would also fall. Even with power generation
emissions in diff erent countries factored
in, EVs still have a lower CO 2
footprint per
kilometre driven and this gap is set to widen
further over time as the amount of renewable
power generation grows.
So what holds back further adoption?
Charging infrastructure is still a major
barrier, particularly in urban areas with
limited off -street parking. Low average
vehicle purchase prices and power grid
issues in emerging economies also play a
role. Supply constraints for key materials
like cobalt, lithium and graphite could still
slow down the declines in battery cost
seen in recent years. Governments will
need to recoup some of the lost revenues
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