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The Nine Key Points In Biden’s Energy Strategy

The Nine Key Points In Biden’s Energy Strategy

Democratic presidential candidate Joe Biden…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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What Will It Take For Americans To Switch To EVs?

One and a half million electric cars on the roads of the U.S. West and Midwest by 2030: this is the vision of regional power utility Xcel Energy, and part of its aim to be emissions-free by 2050. Those EVs are certainly enjoying a lot of attention on both sides of the Atlantic. In Europe, some companies are even giving them away for free to encourage people to go electric. Xcel Energy is not going this far, however. It will simply encourage people to switch to an EV.

An electrifying vision “Through new electric vehicle customer programs and charging infrastructure, we will expand our clean energy leadership to transportation, developing innovative partnerships with our communities, customers and others,” the company says in a brochure. “The vision means that 20% of all vehicles in the areas we serve would be replaced with electric vehicles by 2030.”

The approach is smart: promoting EVs by making it easier for people to install home chargers and building a network of public chargers. The utility also says it will provide financial incentives to EV drivers in the form of rebates. Mostly, however, it will be promotion work through educating people on the benefits of EVs, such as lower maintenance costs and also lower ‘fuelling” costs. Will this be enough?

It Really Is About the Price Tag

For all the hype surrounding electric cars, and for all their genuine benefits and advantages over internal combustion engines, including the lower costs and the no emissions, EVs are still way too expensive for most drivers.

Some of Excel Energy’s efforts in promoting EVs will target specifically low-income drivers and underserved communities through work with organizations that could help make EVs more widely available to these communities. But unless they give those drivers and those communities money to buy EVs, those promotion efforts will hardly go far enough for the company’s vision to materialize.

The truth is that even in Europe, where incentives for EV purchases are even more generous than in the United States, electric cars make a small portion of all cars. And yes, that is still true despite a recent increase in EV sales on the continent: in annual terms, the June EV and hybrid car sales marked a 95-percent increase on June 2019. In absolute terms, these EVs and hybrids only made up 8.2 percent of total sales. And EVs alone made up 4.4 percent of that 8.2 percent. Not really the surge many are still waiting for.

The grid that feeds the cars

Given the economic fallout of the pandemic in the United States, promoting expensive EVs is likely to become even more challenging. But it is not just the price of the vehicles that is an issue. There is also the grid that would supply these vehicles with electricity.

Related: Saudi Oil Minister: Oil Demand Could See A 97% Recovery By The End Of 2020 California this week hogged headlines with its now habitual power supply problems. Millions of people were threatened by power outages because of higher-than-normal consumption amid a devastating heatwave. The blackouts were avoided, this time, because pleas for the conservation of power worked. But worry remained that California is vulnerable to spikes in consumption.

California is the biggest EV market in the U.S. This is not to say that EVs were responsible for the spike in power consumption—ACs were—but the question remains, how reliable is the grid when you want to add a million EVs to it?

Xcel Energy is preparing for this load: the company recently announced a $1.4-billion investment in upgrading its older wind farms, again as part of its 2050 zero-emission plan. The upgrade will further reduce the cost of the electricity they produce and extend their lives, the company’s CEO. And this should benefit all those future EV drivers across the eight states the utility serves. If they ever come.

A slow grow

Plug-in vehicles (that’s EVs and plug-in hybrids) represented 5 percent of all U.S. car sales during the first half of the year. Most of these, perhaps unsurprisingly, were Teslas, the rest a variety of makes. Those tracking EV sales note there is no comprehensive report on them because “Too many automakers do not publish EV sales data to create such a report,” according to CleanTechnica’s Zachary Shannan. Unfortunately, the reason to not publish certain sales data is usually that these sales are not significant enough to make a difference in total sales.

Related: Low Prices Put The Brakes On Peru’s Oil Ambitions

The outlook for EV globally continues to be rosy. Wood Mackenzie recently published a report that said global EV sales could reach 45 million by 2040, with the total on roads in that year standing at 323 million. But the drivers of this sales growth will not include the United States. The drivers, at least so far, will be Europe and China. And, according to the analysts, it is businesses rather than consumers, that will drive this wider EV adoption.

“Unlike retail customers, fleet owners are well versed in the capital and operational expenses of their vehicles. They also have well-defined operating routes, as well as overnight parking locations,” Wood Mac principal analyst Ram Chandrasekaran noted in the report. In other words, fleet owners are a lot more aware about how they could benefit from going electric than consumers.

So, does this mean Xcel Energy is targeting the wrong group? In a way, maybe. Its brochure certainly leaves one with the impression its focus is if not exclusively then mostly on retail customers as the drivers of an EV transformation—retail customers who will obediently charge their new EVs during off-peak times only. Some probably will. Others, too, used to the convenience of stopping at a gas station for a quick top-up the moment you need it, will shun the benefits and advantages EVs can offer them over their gas guzzlers both in terms of costs and environmental impact. 

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on August 22 2020 said:
    The race between electric vehicles (EVs) and internal combustion engines (ICEs) for market share and dominance will continue unabated throughout the 21st century and far beyond with huge implications for the environment, the global oil industry and the future of oil.

    Three major trends support a rising demand for EVs. The first is that the future is electric. The second trend is the continued pressure to reduce carbon emissions and the third is that investors are beginning to think seriously about reducing their carbon footprint.

    Still, EVs are going to face an uphill battle against ICEs. And while they are bound to get a share of the global transport system, they will never prevail over ICEs. EVs’ share of the market could only decelerate slightly the demand for oil. As a result, ICEs will continue to be the dominant means of transport throughout the 21st century and far beyond.

    Currently, EVs number around 4 million out of 1.5 bn ICEs on the roads worldwide, or a negligible 0.27%. The total number of ICEs is projected to reach 2.0 bn by 2025 rising to 2.79 bn by 2040 according to US Research.

    In 2019 the world consumed 36.9 bn barrels of oil (bb) of which 73% or 27.0 bb were used to power 1.5 billion ICEs. Bringing 50 million EVs on the roads will reduce the global oil demand by only 0.68 bb (equivalent to 1.87 mbd), or 2.5%. This isn't a tipping point for oil.

    A tipping point could only be reached once 750 million EVs (50% of the current global ICEs) are on the roads worldwide. This is impossible to achieve within that time frame. One then can only guess how many decades will have to pass before the entire global fleet of ICEs is replaced by EVs.

    It will take many decades before EVs can match ICEs in price, range, convenience and practicability.

    Furthermore, there will be a need for trillions of dollars of investment to expand the global electricity generation capacity in order to accommodate the extra electricity needed to recharge 50 million EVs. How could such expansion be sourced: nuclear, hydrocarbons or solar?

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Henry Hewitt on August 23 2020 said:
    Thanks, Irina,
    The answer to your headline is: Time. I still say 0 to 60 in 15 Years, where 60 is percent market share and we are 5 years in. By 2030 we will have forgotten about the oil wars and be focusing on the most important resource issue of all: Water. You can go 3 days without oil; try that with water.

    A dozen moving parts and miles costing a penny from your rooftop, or your neighbors, vs a thousand moving parts and 10 cent, or more, miles even before Carbon gets its price and a single source fuel coming from places where people want to kill you. Frankly, it's not a fair fight and gravity always wins.

    Finally, in 2030, when you see an infernal combustion engine burning on the side of the road, or just out of gas, be sure to yell out: "Get a roof." Given the rising temps all around we don't need to start any more wildfires than necessary. Got Water?

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