The Bloomberg New Energy Finance report that came out last week (press release at bottom) says that in 25 years, electric vehicles will make up just 35% of new car sales. That means that in a generation from now, 65% of people will still be buying petroleum-based cars. It is hard to imagine a world where this few EVs makes any sense, even given BNEF’s own data.
The report and the numbers it presents are much too conservative for any reasonable circumstance. Take its own lede for instance:
“Continuing reductions in battery prices will bring the total cost of ownership of EVs below that for conventional-fuel vehicles by 2025, even with low oil prices.”.
Why would anyone buy a gasoline car when an electric or even a plug-in hybrid costs less than a gas car? Electric cars are cleaner, quieter, faster and safer than equivalent oil cars. Keep in mind that 2040 is 15 years after the cost of an electric car passes parity with oil in their scenario. Furthermore, by Bloomberg’s own estimates, batteries will reach less than one-third of today’s break-even prices.
At the core of this forecast is the work we have done on EV battery prices. Lithium-ion battery costs have already dropped by 65% since 2010, reaching $350 per kWh last year. We expect EV battery costs to be well below $120 per kWh by 2030, and to fall further after that as new chemistries come in.”
In fact, under certain reasonable circumstances, it costs less to own a Chevy SparkEV than a comparable gas version today. Fleet vehicles too. If you drive a lot and gas isn’t cheap but electricity is, the numbers already make sense.
The US department of energy has a handy calculator (above, current prices) which shows that in every state in the union, even with insanely cheap gas prices, it is still on average 50% cheaper to run on electricity than on gasoline. That means once battery/electric engine powertrains reach parity with combustion, it is really game over for oil.
So somehow 65% of people in the year 2040 will want to pay a huge premium for a fossil fuel engine car? Even if the world weren’t heating up this makes no sense at all…
One organization which may be on board with ICE cars still existing in 2040 and even takes it further is of course OPEC whose massive current revenues depend almost entirely on petroleum-powered vehicles. The usually cogent MIT Technology Review actually uses this report as a basis for their post on Bloomberg:
The Organization of Petroleum Exporting Countries (OPEC), for its part, declared in December that without a technology breakthrough, EVs “are not expected to gain significant market share in the foreseeable future.” That would seem to be a safe bet; EVs currently make up less than 1 percent of the world’s car market.
Current market share causation for gaining marketshare? OK. The post then calls Bloomberg’s report “bullish”
The BNEF analysis is much more optimistic, to say the least, projecting that 35 percent of the world’s new cars will run on electrons by 2040. The bullish outlook is based largely on the speed at which costs for lithium-ion batteries are falling. Costs have dropped 65 percent since 2010, reaching $350 per kilowatt-hour last year. According to BNEF, that puts unsubsidized EVs on pace to be cost-competitive with comparable gas cars within six years. The group predicts that by 2030 the cost will be down to $120 per kilowatt-hour.
That’s more or less in line with an extensive analysis published last year by academic researchers, who found that battery costs are falling even faster than the most optimistic analysts predicted just a few years ago. Those researchers concluded that reaching $230 per kilowatt-hour is realistic by 2017, and that at $150 per kilowatt-hour we might see “a potential paradigm shift in vehicle technology.”
I believe exactly the opposite. Bloomberg’s scenario is a bear-ish worst case for electric and it assumes a lot of status quo in government policy, infrastructure, energy and education.
The BNEF report only assumes that Tesla begins adding electric vehicles at the tune of 500,000 per year and that other current vehicle manufacturers stay on the same course. That other auto manufacturers and new entrants like Faraday, Google, Apple and others wouldn’t grow their EV markets seems nutty. Almost every auto manufacturer is currently laying out plans for an EV future.
Here are just a few examples: Ford announced a $4.5 billion investment and 13 new electric models coming to its lineup by 2020. VW recently confirmed plans to introduce 20 new electric vehicles through the group’s brands by the end of the decade. Last month, Mercedes greenlighted 4 new all-electric models for production.
It also assumes that Saudi Arabia and other OPEC nations continue to try to kill off the EV industry by selling oil at less than it costs to produce it. Saudi Arabia has the cheapest oil in the world and it is losing money at current rates. It can’t continue to do this and will go broke in 2 years at current costs. Sure, some tech advances will help get it out of the ground at slightly cheaper rates but no one is coming close to breaking even at $20/barrel. Petroleum prices have to increase sharply.
Speaking of technology advancements, it isn’t just battery costs that will help drive down prices of EVs. Infrastructure improvements and technology will allow EV owners to fill up with electricity just as fast and as safe as current gasoline stations, if not faster/safer. Fast DC charging spots will multiply and even outpace gas stations as the need and economics improve. Fleet vehicles will have battery swap options like Tesla demonstrated that take less than 90 seconds to swap a car battery and there are already electric scooter swap stations doing very well. Inside the car, economies of scale will drive down the price of electric motors and other components needed to build electric cars.
These advantages assume that global governments do nothing more to avoid runaway carbon emissions and pollution of cities like New Dehli and Beijing. That’s unlikely in my opinion. It is hard to imagine more won’t be done to curb petroleum pollution. Every day that Beijing takes ICE cars off the road and every new middle class Delhi citizen is another EV incentive.
Where will all of this new electric energy the cars require come from? The Bloomberg research estimates that the “growth of EVs will mean they represent a quarter of the cars on the road by that date, displacing 13 million barrels per day of crude oil but using 1,900TWh of electricity. This would be equivalent to nearly 8% of global electricity demand in 2015”. That’s Bloomberg’s low estimate so the electricity demand will likely be way higher, perhaps 2-3 times if almost all new cars are electric by then.
As solar and wind energy continues to grow, we reach a tipping point where it is not only equivalent to coal and natural gas but eventually it will cost significantly less. This will make electric transportation energy even cheaper than it is now.
In short, every indicator out there shows that internal combustion engines will die off, and a lot quicker than everyone thinks. The only thing that could stop this transition is if the trillion dollar global oil industry buys enough politicians and corruption to block it.
ELECTRIC VEHICLES TO BE 35% OF GLOBAL NEW CAR SALES BY 2040 Continuing reductions in battery prices will bring the total cost of ownership of EVs below that for conventional-fuel vehicles by 2025, even with low oil prices.
London and New York, 25 February 2016 – The electric vehicle revolution could turn out to be more dramatic than governments and oil companies have yet realized. New research by Bloomberg New Energy Finance suggests that further, big reductions in battery prices lie ahead, and that during the 2020s EVs will become a more economic option than gasoline or diesel cars in most countries.
The study, published today, forecasts that sales of electric vehicles will hit 41 million by 2040, representing 35% of new light duty vehicle sales. This would be almost 90 times the equivalent figure for 2015, when EV sales are estimated to have been 462,000, some 60% up on 2014.
This projected change between now and 2040 will have implications beyond the car market. The research estimates that the growth of EVs will mean they represent a quarter of the cars on the road by that date, displacing 13 million barrels per day of crude oil but using 1,900TWh of electricity. This would be equivalent to nearly 8% of global electricity demand in 2015.
Colin McKerracher, lead advanced transportation analyst at Bloomberg New Energy Finance, said: “At the core of this forecast is the work we have done on EV battery prices. Lithium-ion battery costs have already dropped by 65% since 2010, reaching $350 per kWh last year. We expect EV battery costs to be well below $120 per kWh by 2030, and to fall further after that as new chemistries come in.”
Salim Morsy, senior analyst and author of the study, commented: “Our central forecast is based on the crude oil price recovering to $50, and then trending back up to $70-a-barrel or higher by 2040. Interestingly, if the oil price were to fall to $20 and stick there, this would only delay mass adoption of EVs to the early 2030s.”
The electric vehicle market at present is heavily dependent on “early adopters” keen to try out new technology or reduce their emissions, and on government incentives offered in markets such as China, Netherlands and Norway. Although some 1.3 million EVs have now been sold worldwide and 2015 saw strong growth, they still represented less than 1% of light duty vehicle sales last year.
EVs come in two categories – battery electric vehicles, or BEVs, that rely entirely on their batteries to provide power; and plug-in hybrid electric vehicles, or PHEVs, that have batteries that can be recharged but have conventional engines as back-up. The best-selling BEV over the last six years has been the Nissan Leaf, and the best-selling PHEV the Chevrolet Volt.
** To see this data in interactive charts and related commentary, please click here**
The study’s calculations on total cost of ownership show BEVs becoming cheaper on an unsubsidized basis than internal combustion engine cars by the mid-2020s, even if the latter continue to improve their average mileage per gallon by 3.5% per year. It assumes that a BEV with a 60kWh battery will travel 200 miles between charges. The first generation of these long-range, mid-priced BEVs is set to hit the market in the next 18 months with the launch of the Chevy Bolt and Tesla Model 3.
Morsy said: “In the next few years, the total-cost-of-ownership advantage will continue to lie with conventional cars, and we therefore do not expect EVs to exceed 5% of light duty vehicle sales in most markets – except where subsidies make up the difference. However, that cost comparison is set to change radically in the 2020s.”
The EV forecast will be a featured topic at our annual BNEF Summit.