While many are quick to crow about the "Earth-saving" benefits of electric vehicles, few have looked at the incremental demand in power necessary to meet the growing demand of the "green" vehicles. Furthermore, even fewer have looked at who could stand to benefit from the increased demand.
In a new note called "The Future of Energy Demand" out this week, Goldman Sachs looked at both of these points.
The note states that battery electric vehicles and plug in hybrid electric vehicles are only about 1% of the current automotive fleet, but that this is expected to rise to 13% by 2030 and 32% by 2040.
And with the adoption comes an increase in energy needs. Goldman says the shift will have an "impact which adds an incremental 2.4% to our 2030 power demand forecast and 5.7% to our 2040 outlook."
When it comes to investments that will benefit from this power need, Goldman hilariously cites "pure play" Tesla as the "largest beneficiary". It also says that long term suppliers to OEMs and the utilities sector as a whole could benefit.
"We see an acceleration of power demand as a positive for the broader utilities sector (sector index or XLU) albeit most impactful after 2025, with both T&D companies such as EIX, SRE and those with clean energy generation like NEE, NEP, PEG and EXC — and even those with more emissions intensive fleets, but with retail supply as well, like NRG, as benefiting from EV adoption driving higher potential power demand," the note reads.
Goldman is predicting a "sizable ramp in EV deployment and adoption in the US" - especially after 2025.
"Annual sales of EVs (BEVs and PHEVs) in the US will rise from 364k units in 2020 to almost 7.2mn in 2030 and 12.5mn in 2040," Goldman's analysts, led by Michael Lapides, predict.
And the power demands would follow: "We estimate by 2030 the increased demand from EVs would drive 2.4% incremental power demand, adding 105 TWh relative to our 4,340 TWh forecast ex-EVs. By 2040, we estimate this would add 257 TWh compared to our estimate of 4,523 TWh ex-EVs, which is an uplift of 5.7%."
The note also predicts that the tailwinds from power generation could result in $39 billion to $117 billion in investments by 2040 if new alternative energy is used to meet the EV-driven demand.
Goldman is also bullish on infrastructure that will be needed to transmit and distribute the power:
"We also see an increased need for investment in transmission and distribution (T&D) infrastructure from power producers and utilities, which opens up a plethora of other challenges bundled with opportunities including investment in charging infrastructure — either by 3rd parties, by utilities or both, especially for Levels 1-2 and DC Fast Charging (DCFC) capabilities. This also opens up complexity for utilities and their state regulators — primarily over how to revise rate design to allocate charging costs appropriately to those with EVs."
Recall, we have been one of the few sites that have presented both sides of the EV story - highlighting not only the ESG hysteria surrounding their adoption but also skepticism of EVs and their net benefit for the environment.
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