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BLOG: Greater EV adoption relies on some big ‘ifs’

Rigzone/24 August 2017

Electric vehicles (EV) constitute a very small share of all cars on the road worldwide. According to the International Energy Agency (IEA), the total number of EVs hit 2 million in 2016. Compare that to the nearly 1.3 billion figure of all vehicles worldwide, according to 2015 figures from the International Association of Motor Vehicle Manufacturers, and it’s clear that EVs do not currently represent a personal transport juggernaut.

EV penetration in the global vehicle fleet could be considerably greater less than 20 years from now, however. A recent study by Wood Mackenzie and GTM Research predicts that more than one in five vehicles worldwide – or more than 350 million units – could be powered by electricity rather than the internal combustion engine. The study’s authors foresee such a sharp EV growth trajectory under what they call a “carbon-constrained scenario.”

“The carbon-constrained scenario accelerates and extends the impact of EVs, renewables and energy efficiency,” Paul McConnell, Wood Mackenzie’s research director for global trends, explained to Rigzone. “It builds an increased role for energy storage technologies, and provides access to decarbonized electricity for millions across the developing world. It posits a world in which the energy industry, policymakers and the general public are focused on minimizing the environmental impacts of their behavior. Accelerated decarbonization and lower consumption are embedded in this scenario.”

No Small Feat, But…

Achieving a point where EVs make up more than 20 percent of the world’s vehicle fleet would represent a significant milestone, but McConnell cautions that EV uptake faces some formidable obstacles. When asked what the biggest “ifs” are for EVs to become more widely accepted, he ticked off the following list:

  • Battery prices will need to fall fast enough so that sticker prices reach parity with internal combustion engine-powered vehicles
  • Charging infrastructure will need to be rolled out so that drivers can charge their EVs when and where they want
  • The battery supply chain must “ramp up enormously,” and it needs to incorporate battery recycling

A common criticism of initiatives to boost the acceptance of EVs and renewable energy has been that they need government support to gain traction in the market. (Consider the U.S. mandate that almost all gasoline sold at retail outlets contain ethanol, federal EV tax incentives and various measures in Europe.) Although he envisions an ongoing government role for providing market frameworks to expand decarbonization, McConnell said the “critical factor in the carbon-constrained scenario” is that the technology will need to mature. In other words, EV and renewable technologies will need to stand on their own proverbial two feet.

“Here we see a world where low- or no-carbon technologies are increasingly able to compete on an economic basis,” McConnell said. “Decarbonization begins to happen in spite of policymakers, not because of them. This is a really significant change from where we were 20 years ago, when policies like the Kyoto Protocol were being developed.”

Aside from any advances in EV technology, auto manufacturers will need to offer products that people actually want to buy – without benefit of government subsidies.

“EVs need to prove themselves to the consumer to take off,” McConnell continued. “This means they need to be a good or better substitute for existing vehicle offerings – and right across vehicle segments. If manufacturers struggle to make a true mass-market EV then sales will not take off.”

Are any companies actually making strides toward the “true mass-market EV” goal? Yes, said McConnell.

“There are a number of Chinese manufacturers who are aiming at exactly that segment of the market,” he noted. “If sticker prices of EVs approach parity with internal combustion cars, they will be pretty attractive to consumers because the running costs are so much lower.”

What Could This Mean for Oil And Gas?

If these various factors actually do pan out, McConnell said that some within the oil and gas industry could still see some upside even with a wholesale – albeit gradual – shift toward renewables.

“It’s a difficult scenario, certainly, but it’s not all bad news,” noted McConnell. “Hydrocarbons – including coal – still meet 75 percent of global energy demand in 2035 in this scenario. It’s a very negative story for coal, but that decline is offset by growth for natural gas demand. Oil peaks and then declines, but demand only falls back to about where it is today – there’s still going to be a big market to satisfy.”

McConnell also expects cost pressures to be “inescapable” for oil and gas players in a carbon-constrained world.

“Those at the bottom of the cost curve will be highly advantaged,” he concluded. “Those with a high balance of gas in the portfolio should also do well through the medium term, but if renewables really surprise to the upside some of that demand growth could be at risk, too. Watching the development of energy storage technologies is really critical here.”

 

News Source: Rigzone

Jayden

I am JC and I am an editor.