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An Electric Car Revolution Will Require Perpetual Subsidies

Alternative Energy

Highlights:

  • Battery electric vehicles (BEVs) can be economically attractive as commuter cars in city traffic.
  • Attractiveness fades for longer-distance travelling due to larger battery packs, a smaller efficiency advantage, and more fast charging at on-peak rates.
  • As a result, displacing just a low single-digit percentage of global oil consumption through BEVs will require perpetual subsidies. 
  • A strong argument can be made that future overall cost reductions could be greater for hybrids than BEVs.
  • Autonomous driving technology does not change this outlook. 

Introduction

This article follows up from a widely read earlier article on why a fully electric transportation future is unlikely to arrive any time soon. Battery electric vehicles (BEVs) certainly represent an important wedge in any transportation emissions reduction plan, but they are no holy grail.

BEVs have the same ideological appeal as wind and solar power. They are very easily marketed as perfectly clean and sustainable alternatives with rapid cost reductions that will soon relegate dirty fossil fuels to the dustbin of history. As in the case of wind and solar, this ideological appeal has attracted a broad fan-base and an equally broad range of technology-forcing policies.

Similar to wind and solar, however, the truth is that market penetration beyond a certain, relatively modest, level will require perpetual subsidies. A previous article quantified this point for wind and solar. This article will do the same for BEVs.

BEV saturation point

All energy technologies have strengths and weaknesses. That is why a healthy mix of technologies is generally the optimal solution, allowing each technology to serve the market segment it suits best.

BEVs have totally different strengths and weaknesses to ICE vehicles, implying that this technology class will diffuse easily into certain market segments, but have a much tougher time in others. Indeed, BEVs will penetrate the mobility market according to the well-known S-curve, struggling not to saturate well below 10% of current oil consumption.

Greater clean mobility contributions will likely come from much less hyped solutions such as car-free lifestyle options, efficiency improvements (including hybrids), sustainable fuels, conservation (downsizing), and fuel cell technology. It is vital that we leave ideology aside and replace current BEV technology-forcing policies with technology-neutral policies creating a level playing field for all clean mobility options.

Quantifying BEV competitiveness

As an illustrative example, we will calculate the combined fuel and drivetrain costs of a BEV and a hybrid as a function of driving patterns. The following graph shows the assumptions employed.

Here we assume that BEVs will be available with ranges between 200 miles (sales below this range have been poor even with large incentives) and 500 miles (comparable to a conventional car). At the low end, BEVs will be used as commuter cars, accumulating 10000 miles per year. At the high end, BEVs are often used for longer trips, racking up 15000 miles per year. Based on fuel economy of the Hyundai Ioniq hybrid and electric versions, BEVs are assumed to be 3x more efficient than hybrids at the low end (primarily city driving) and 2x more efficient at the high end (primarily highway driving).

Finally, electricity is assumed to cost $100/MWh at the low end due to off-peak charging at home (cost of home charger included), but $180/MWh at the high end due to more peak-time charging at more expensive fast charging stations (half way between home charging and $260/MWh at Tesla’s “non-profit” California superchargers).

Other important assumptions are as follows: BEV and hybrid drivetrain costs of $2500 and $7000 respectively (1, 2, 3), BEV efficiency of 270 Wh/mile (including charging losses),  gasoline price of $2.1/gal before taxes ($60/bbl oil), 20 year lifetime, 6% discount rate, and 30% gross margin on drivetrain and battery packs.

Three technology improvement levels are assessed for BEVs and hybrids. For BEVs, it is all about battery pack costs over a range of $50/kWh to $150/kWh. For hybrids, a scenario of 50% higher efficiency as well as a scenario of 50% increase in efficiency and power/cost ratio is assessed. The results look as follows:

BEV vs hybrid drivetrain and fuel costs

As shown, BEVs just start to become competitive at the low end for the three different levels of technology advancement. Thus, BEV economics are attractive when the required range is small, driving occurs in stop-start city traffic and charging happens at home during off-peak hours. On the other end of the spectrum, BEV costs are generally more than double hybrid costs.

It should also be mentioned that future car-free lifestyle options may well remove a large chunk of demand for shorter city trips where BEVs are at their most attractive.

Technology uncertainties

BEV technology development is heavily focussed on batteries. Simple extrapolation of learning curves (e.g. the method used in BNEF‘s projections) yields impressively low numbers:

However, lithium ion batteries face harsher physical limits than microchips or PV cells. Even though cumulative battery production will need to increase 1000-fold (10 doublings) from today’s level to displace 10% of oil consumption, lithium ion batteries are already approaching their commercially achievable energy density limits. Recent impressive cost declines were primarily due to the establishment of global value chains and economies of scale, and are not repeatable. Future cost reduction efforts are therefore likely to be hampered by diminishing returns as technology development encounters physical limits.

More importantly, lithium ion batteries rely on several relatively rare technology metals. Given the absolutely enormous scale-up that will be required to have a substantial impact, this potential limitation is getting increased attention. The recent spike in the price of cobalt, a critical technology metal produced primarily in the unstable Democratic Republic of Congo, is shown below as an example.

Interestingly, oil offers a very good analogy in this case. At the start of the ICE revolution, oil was very cheap. One simply needed to drill a hole in the right place and oil would just come gushing up. At that point, oil was a minor component of gasoline prices next to refining and distribution costs. This is the point where we are now with BEVs: technology metals are a relatively minor cost in battery packs.

Of course, we all know what happened next. Despite continued technological advancements, oil prices eventually increased 5-fold as demand boomed and the easy resources dried up, making oil the dominant component in gasoline prices. The same is likely to happen with technology metals. At current spot prices, only the raw materials required for Tesla’s battery cathodes already cost $50/kWh. If the oil price history is anything to go by, material costs could really spoil the battery cost reduction story going forward.

As a result of physical limits on technological advancement and technology metal availability, sustainable production of $100/kWh lithium ion battery packs may well be impossible, with even the $150/kWh level proving difficult to maintain at the massive production volumes required to make a significant dent in oil consumption. Of course, oil also offers a good example of the potential geopolitical implications of technology metals.

I am therefore less confident about the optimistic technology assumptions for the BEV than the hybrid in the graph repeated below. Hybrids still have significant headroom for improvements in efficiency and cost, and are much less exposed to battery material limitations due to much smaller battery packs.

BEV vs hybrid drivetrain and fuel costs

As an example, Mazda is targeting 56% thermal efficiency in the longer term for its new SPCCI engine technology illustrated in the video below (current hybrid engines are about 40% efficient). The first generation SPCCI engine is due to enter commercial production next year and beta version test drives have been encouraging (1, 2, 3).

As outlined in an earlier article, my view is that such advanced combustion engines will eventually end up in a hybrid configuration where the electric motor is much more powerful than the engine. This will allow the engine and transmission to be strongly downsized, saving costs and allowing for operation within the optimal operating range almost all the time. As a result, efficiency, reliability and longevity will go up, while cost and emissions will go down. A drivetrain cost breakdown from the previous article is repeated below as an example.

Such a hybrid configuration can conceivably increase overall efficiency by 50% over the current state of the art with no cost penalty relative to conventional ICE cars, thus achieving the most optimistic hybrid technology scenario considered in this study. The most optimistic BEV scenario, on the other hand, will most likely require a new battery technology. If such a technology emerges, it will take 2-3 decades and hundreds of billions of dollars to establish a new fully cost-optimized global value chain and scrap outdated lithium ion battery infrastructure.

Autonomous vehicles

The previous article outlined why autonomous driving technology may well favor ICEs more than BEVs. Besides, the competitiveness picture does not change much if we increase the distance traveled per year by a factor of 5, reduce the vehicle lifetime to 7 years and add $2000 for autonomous hardware costs:

The hybrid will probably perform even better than suggested by the above graph. Autonomous traffic flow will be much smoother, allowing hybrids to also achieve highway efficiency at the low end. Also, such high-utilization applications will encourage developers to further enhance hybrid efficiency through waste-heat recovery systems, thus further reducing fuel costs. The ability of hybrids to refuel very rapidly at any time (without having to worry about electricity price fluctuations) will also be a significant advantage in an autonomous fleet.

That being said though, I maintain that we are unlikely to achieve broad deployment of full autonomy within the timeframes demanded by climate science.

Conclusion

Adding all of these observations together, it is difficult to see BEVs displacing more than 10% of LDV fuel consumption (2% of oil consumption) without perpetual subsidies. Displacing 10% of oil consumption may be possible at a substantial subsidy cost, but pushing beyond that point really sounds increasingly wasteful.

As mentioned earlier, substantially larger cuts in oil consumption and greenhouse gas emissions can be achieved through a range of other channels such as car-free lifestyle options, efficiency improvements (including hybrids), sustainable fuels, conservation (downsizing), and fuel cell technology. It will be a real shame if we get so distracted by BEVs that we fail to harness the great potential of these clean mobility options.

 

Energy Collective



33 Comments on "An Electric Car Revolution Will Require Perpetual Subsidies"

  1. Dredd on Mon, 9th Apr 2018 11:54 am 

    An Oil-Qaeda Revolution Will Require Perpetual Subsidies” because Oil-Qaeda still, after a century, gets billions of dollars in subsidies.

    As one of the original founders of Oil-Qaeda proclaimed in writing:

    John D. Rockefeller, in his 1909 Random Reminiscences of Men and Events, recalled, “One of our greatest helpers has been the State Department. Our ambassadors and ministers and consuls have aided to push our way into new markets in the utmost corners of the world.” But he left out a key explanation for the government’s interest. Standard Oil was the biggest U.S. company, putting a hundred ships to sea, buying and selling oil in Latin America, Germany, and the Far East. It also operated a global intelligence system. “By 1885,” according to one historian, “seventy percent of the Standard’s business was overseas and it had its own network of agents through the world, and its own espionage service, to forestall the initiatives of rival companies or governments.

    (The Authoritarianism of Climate Change)

  2. Outcast_Searcher on Mon, 9th Apr 2018 12:36 pm 

    Consider the source.

    Consider their track record re economic predictions.

    They’re already basically wrong, given the current numbers.

    Then look realistically at improving battery technology, including things other than the same current liquid based LI technology.

    Ongoing incentives (for a decade or two) would certainly speed up the process. Or, a tax on the damage CO2 does could be levied, like a big CO2 tax, and no direct incentives for EV’s would even be needed at all.

    Using the kind of studies and thinking that support the polluting FF industry, like AGW denial, is certainly what some people want to hear.

    And of course, glibly pretending that a “car free lifestyle” has no downsides and will magically solve all our problems in the US is easy – but getting there would make using BEV’s look like a cake walk.

  3. Outcast_Searcher on Mon, 9th Apr 2018 12:39 pm 

    Oh, I see Dredd has now changed the article source from the Dredd doomer website to the energy collective, with no mention of the edit.

    At least paper articles couldn’t be changed on the fly.

  4. Anonymouse1 on Mon, 9th Apr 2018 12:41 pm 

    An OIL-powered Car Revolution Will Require Perpetual Subsidies

    (And has it ever!)

    Only a retard would complain about EV subsidies, while ignoring, or completely glossing over, the fact that uS oil and auto corporations are the biggest corporate welfare queens in history. When it comes to car-dependency, its subsidies all the way down, no matter what the ultimate power source happens to be.(That would still be oil btw).

  5. Plantagenet on Mon, 9th Apr 2018 12:49 pm 

    Here in the USA we shouldn’t even be talking about whether BEV or ICE cars are better. We should be building high speed intercity rail and city tram lines to get people out of their cars and into mass transit. Oh…..and don’t forget that modern trains and trams are EVs.

    Cheers!

  6. jef on Mon, 9th Apr 2018 1:06 pm 

    The Future Will Require Perpetual Subsidies

    Because no matter what we have to have a way for some one to get rich or else forget about it.

  7. GregT on Mon, 9th Apr 2018 2:42 pm 

    “Here in the USA we shouldn’t even be talking about whether BEV or ICE cars are better. We should be building high speed intercity rail and city tram lines to get people out of their cars and into mass transit.”

    I thought you said that you lived in Alaska planter? You could easily cycle the entire downtown core of Anchorage in less than five minutes. Why would you ever want, or need, high speed rail?

  8. Cloggie on Mon, 9th Apr 2018 3:04 pm 

    In the EU economic growth and electricity use are decoupled:

    https://ec.europa.eu/info/news/new-energy-market-reports-show-surge-wind-energy-2018-mar-26_en

    The EU’s GDP increased by almost 12% between 2010 and the end of 2017; over the same period, electricity consumption decreased by 4%.

    Moreover, in December 2017 more energy from wind was generated in the EU than ever before: 41 TWh (terawatt hours), equivalent to 16% of the EU’s electricity mix.

  9. MASTERMIND on Mon, 9th Apr 2018 3:30 pm 

    Clogg

    Your sources are biased and not true.

    Bill Gates: We need global ‘energy miracles’
    http://www.cnn.com/2010/TECH/02/12/bill.gates.clean.energy/index.html

    Solar and Wind produced less than one percent of total world energy in 2016 – IEA WEO 2017
    https://www.iea.org/publications/freepublications/publication/KeyWorld2017.pdf

  10. MASTERMIND on Mon, 9th Apr 2018 3:32 pm 

    clogg

    The EU GDP grew at average of 3 percent annually before the great recession…What happened to your economy?

    https://imgur.com/a/pYxKa

    Its in a depression and headed for collapse!

  11. Outcast_Searcher on Mon, 9th Apr 2018 5:27 pm 

    Plant, that’s great for the cities. But how about the huge expanse of rural areas in the US. I just don’t see the economics supporting mass transit for such areas, where small towns often can’t even support one taxi. Or where many people live miles from ANY town.

    But yeah, clearly for mid sized to large cities, efficient mass transit would be a good thing long term, though expensive short term.

  12. makati1 on Mon, 9th Apr 2018 5:57 pm 

    Outcast, perhaps Plant should use Google Earth and take a look at the non-coastal mass of the Us? Where it may be miles between houses and a hundred miles between small towns? Been there. Seen that. Drop in on Kansas for example.

    How many million miles of new track would that take? And, even then, there would be large areas not served. Not going to happen.

    Even bus routes require a way to get to town, which may be several hours walk, or longer, away from your farm. The Us was built for a never ending oil/car culture. Not the real world of limited resources. Now the price will be paid.

  13. Anonymouse1 on Mon, 9th Apr 2018 6:10 pm 

    Anyone that still thinks car dependency is the ‘cheap(er)’ option, should head to the nearest clinic to have their head removed from their arse. Outside of perhaps, the amerikan war-machine, there are few things in this world more expensive, costly, inefficient, and wasteful of resources, than corporate mandated private car-ownership. Whatever excuses one makes.

  14. Antius on Mon, 9th Apr 2018 6:11 pm 

    “In the EU economic growth and electricity use are decoupled”

    I have strong doubts that this will be sustainable as an ongoing trend. But that discussion is better had elsewhere. Getting back to the topic of this article…

    To summarize: BEV vehicles are a poor technology option for all but short-range, niche applications. Hybrid vehicles are a much better option – with much lower whole system costs. Material shortages will prevent the sustained reduction in battery prices needed to make BEVs competitive with ICEs.

    The BEV is a result of delusional and purist thinking. The idea that the hybrid is some sort of halfway house on the way to an all electric transport infrastructure.

    The most sensible thing that Musk could do right now, is form a joint venture with GM or Ford in the quest to produce a more affordable hybrid. His pure BEV could have valuable niche applications. I doubt that he will do this, because he enjoys the role of stand-alone visionary leader far too much. The same flawed idealistic thinking is pushing his space endeavours towards Mars colonisation, rather than the far more practical goal of Earth orbital space manufacturing.

  15. Antius on Mon, 9th Apr 2018 6:28 pm 

    “Anyone that still thinks car dependency is the ‘cheap(er)’ option, should head to the nearest clinic to have their head removed from their arse. Outside of perhaps, the amerikan war-machine, there are few things in this world more expensive, costly, inefficient, and wasteful of resources, than corporate mandated private car-ownership. Whatever excuses one makes.”

    Quite true. And that is why it is starting to decline in developed countries. Fewer young people can afford it.

    Amidst the hype surrounding BEVs, it is forgotten that electric vehicles have been the unsung workhorses of public transportation systems for a century. Most large cities have electric underground systems. Most European cities have electric tram systems. In Europe and Japan, mainline railways have been electrified for several decades. South east England has an extensive suburban electric railway system. It was fitted with third-rail electrification in the 1930s.

    Perhaps it is time to roll out these fully developed systems on a larger scale and working around their limitations, rather than trying to develop something fundamentally new and uncertain.

  16. Sissyfuss on Mon, 9th Apr 2018 7:41 pm 

    I remember as a small child walking with my mother in a commercial area of a Chicago suburb as electric buses rolled by constantly with their spring loaded armatures bouncing off the overhead wires emitting cascading showers of sparks that would occasionally bounce off of us in a frightening manner. It was the early 50s.

  17. Anonymouse1 on Mon, 9th Apr 2018 7:57 pm 

    And your point is? That you were, at one time, subjected to primitive, poorly designed and maintained amerikan electric transit? In chicago no less, a place notorious for its corruption. Ok…..

    I have been on a number of electric transit systems over the years, and I can say, all of them were quiet, clean, and I cant recall ever being showered by sparks or threatened with spontaneous combustion by electric transit. And, since you are here posting sissy, I am guess the rickety chicago system didn’t manage to imlolate you either. Maybe you lost a friend or family member to electric mass-transit? If so, sorry for your loss.

    On the other hand sissy;s favorite brand, oil powered cars are completely safe and fire-free, as this chart here can attest.

    https://www.nfpa.org/News-and-Research/Fire-statistics-and-reports/Fire-statistics/Vehicle-fires/Highway-vehicle-fires

    As we can see, there were only 174,000 fossil-fuel vehicle fires and 445 deaths (in 2015). I bet the numbers of fires and deaths for electric transit are so high the uS gov is afraid to even release the numbers for those.

  18. Kat C on Tue, 10th Apr 2018 3:32 am 

    Outcast you wrote “Plant, that’s great for the cities. But how about the huge expanse of rural areas in the US. I just don’t see the economics supporting mass transit for such areas, where small towns often can’t even support one taxi. Or where many people live miles from ANY town.”
    Yeah I know, how did humans EVER survive without the personal car? I guess that humans just didn’t exist before the invention of the internal combustion engine.
    But of course humans did survive and some apparently had good lives before the advent of the internal combustion engine. In fact humans existed without any machines for eons. Unfortunately we can’t go back because we have ruined the world and created expectations for unsustainable lifestyles

  19. Kat C on Tue, 10th Apr 2018 3:35 am 

    After a car accident I found myself unable to face driving the interstates of Atlanta. But my father was dying and I needed to visit him. So I drove a small distance to a town where I could get a shuttle to the Atlanta Airport. From there I took Marta train and bus. Instead of worrying about life and limb and having to be on high alert, I got lots of reading in. I found Marta of Atlanta to be clean, safe and reliable.

  20. Kenz300 on Tue, 10th Apr 2018 6:17 am 

    Energy Collective — Spokesman for the fossil fuel industry.

  21. Sissyfuss on Tue, 10th Apr 2018 8:38 am 

    I was relating a childhood memory without a value attached to it,AM1. The system was primitive and quaint and the sparks made a huge impression on my young mind. I was not castigating the system that obviously worked, merely stating that electrified transportation has been utilized in the past successfully. Sorry that the appurtenances frightened you so.

  22. tommywantshismommy on Tue, 10th Apr 2018 3:57 pm 

    Honestly..no way is electric replacing 200 million+ cars/trucks/boats … we’ll be lucky to have an electric bike, scooter or skateboard…better have knobby tires for the roads that will no longer be upkept.

  23. Cloggie on Tue, 10th Apr 2018 4:34 pm 

    https://damnthematrix.wordpress.com/2018/04/09/wind-will-never-make-a-significant-contribution-to-energy-supplies/

    Check your sources, dave.

    https://anewnatureblog.wordpress.com/2014/12/22/viscount-matt-ridley-the-new-king-coal/

    “I knew Ridley was a major landowner in Northumberland and derived an income from coal mining. But I only now realise just how major and just how large an income. Ridley owns the Blagdon Estate in Northumberland, just north of Newcastle.”

  24. Cloggie on Tue, 10th Apr 2018 4:37 pm 

    “So, altogether Ridley is removing nearly 10 million tonnes of coal from his estate over the next 5 years. That equates to emissions of around 28.6 million tonnes of CO2, with around 900g of CO2 produced for every kilowatt hour of energy produced. I don’t know how much profit Ridley is making from his coal but it must be massive. To put this in perspective the UK produces about 3 million tonnes of coal per quarter, which equates to 60 million tonnes over a 5 year period. So Ridley’s mines are 1/6 of the entire UK coal production.:

    Ridley = 16% UK coal production.
    Hahahaha!

  25. Dave Thompson on Tue, 10th Apr 2018 8:00 pm 

    So what? Ridley only presses home the point further by being in the coal industry knowing full well as you do that wind power is less than 1% of total world electricity production.

  26. Kenz300 on Wed, 11th Apr 2018 11:09 am 

    Two-thirds of world’s new energy capacity in 2016 was renewable: IEA
    http://www.greencarreports.com/news/1113115_two-thirds-of-worlds-new-energy-capacity-in-2016-was-renewable-iea

    Wind and solar are growing every year displacing fossil fuels and nuclear.

    The best part is that wind and solar keep getting cheaper making them by far the most economical long term power generation source.

    Wind and solar will become the leading providers of electrical generation in the world. The only questions is how fast will it happen.

  27. dave thompson on Wed, 11th Apr 2018 11:11 am 

    At less that 1% world wide, wind and solar have been “growing” for 20 plus years, if that tells you anything.

  28. Cloggie on Wed, 11th Apr 2018 12:10 pm 

    “At less that 1% world wide, wind and solar have been “growing” for 20 plus years, if that tells you anything.”

    How many years went by between the invention of the automobile and 1% of the world’s population owned a car?

    How many childhood years did it take for YOU to become productive?

    Since when does offshore wind no longer require subsidy? (one month)
    https://www.offshorewind.biz/2018/03/19/vattenfall-wins-dutch-zero-subsidy-offshore-wind-tender/

    And who cares about “the world 1%”? Several European countries have 36% from wind or higher (D, DK, Scotland), illustrating it CAN be done.

    But by all means, talk yourself in the grave.

  29. MASTERMIND on Wed, 11th Apr 2018 1:43 pm 

    Clogg

    Your sources are biased and not true..You always have to site some source that promotes renewable.. its like citing bible.com as proof Jesus existed. One percent is a joke! Its been around over 40 years. there isn’t enough wind and sunny days for it to work. End of story you dumb ignorant neckbeard.
    https://imgur.com/a/pYxKa

  30. Cloggie on Wed, 11th Apr 2018 2:14 pm 

    “One percent is a joke! “

    Translation: the world outside Europe is a joke.

    I can live with that assessment although I would be inclined to use more diplomatic language than that.

  31. MASTERMIND on Wed, 11th Apr 2018 3:02 pm 

    Clogg

    Your country is going to run out of gas real soon. If I was you I would try to move to another place. No way they will be able to keep their high standard of living without selling their natural resources. And that was the only reason they had the high standard in the first place. The dutch create nothing of use. besides Lego’s..And even they have laid people off recently because Europe is in a depression and headed for total economic collapse.

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