The Age Of Electrification Has Arrived

Electric vehicles continue to gain market share at an accelerating rate, but electrification could go even further, expanding into the realm of commercial trucking, marine travel and even to airplanes.

"The news today is full of cities and countries banning internal combustion vehicles, and of car companies launching electric models every other week," Michael Liebreich, founder of Bloomberg New Energy Finance, wrote in a note. "There may still be some who are convinced that battery electric vehicles will never catch on, or that the world's drivers will wait for hydrogen cars, but their numbers are dwindling."

Liebreich laid out a case in which the whole transportation sector will move towards electrification, even to areas once thought impossible. To preface his argument, he pointed out that he and BNEF once seemed like an outlier, way more bullish on electric vehicles and clean technologies than other staid and serious forecasters. For instance, two years ago, when BNEF said that the EVs were going to upend the oil market over the next two decades, the IEA said that cumulative EVs on the road by 2030 would only reach 23 million, a paltry sum in the grand scheme of things. Earlier this year, the IEA revised that estimate up to 127 million by 2030 and 280 million for 2040.

To be sure, Liebreich is still a lot more bullish than the IEA, predicting 560 million EVs will be sold by 2040 - double the IEA estimate. But the IEA and other forecasters are moving in his direction.

But while EVs garner the lion's share of attention, Liebreich argues that a bigger story lies elsewhere. For example, electric buses will take over the bus market much faster than passenger EVs. "BNEF expects electric buses to have a lower total cost of ownership in almost all charging configurations by 2019. By 2030, it expects 84 percent of all municipal bus sales globally to be electric, and by 2040, some 80 percent of the global municipal bus fleet will be electric." It's hard to overstate the importance of that conclusion, as well as the speed with which the energy transition in the bus sector is unfolding. Related: Are Flying Taxis Just 4 Years Away?

Electric buses and vans have one key advantage over EVs that could mean a much faster adoption rate: They tend to be owned by companies, municipalities and state governments, who make procurement decisions based on a sober total cost-of-ownership basis, which means that they aren't scared away by upfront costs or branding in the same way that an individual might be. As such, if the math works out - and BNEF says that it will for electric buses as soon as next year - then large-scale fleet managers will switch over relatively quickly. It is for this reason that BNEF says four out of five municipal bus sales around the world will be electric by 2030.

Long haul trucks are a little further behind, but a growing number of models are hitting the market. Elon Musk made a splash two years ago, introducing Tesla's concept for a long-haul electric truck. Musk is surely bogged down with other concerns right now, and given the track record of the Model 3 production, one could be forgiven for being skeptical about Musk's ambitions.

Nevertheless, Musk's bravado may have played a role in spurring some competitors into action. BNEF notes the array of electric truck models coming out from Daimler and Volvo, as well as those in the works for Cummings, Scania, Paccar and other truck manufacturers.

Moving right along, Liebreich pointed to the sea for evidence of the expanding wave of global electrification. Critics scoff at the technical challenges of ever manufacturing a ship that can span the globe in the same way that today's container ships can, which run on dirty fuel oil. "But they are missing the point: there are plenty of ships that never travel long distances: ferries, short-haul freighters, tugs and service ships, inland ships working waterways and lakes, and of course a vast range of tenders and smaller commercial and leisure craft," Liebreich countered. "They will all go electric in due course."

Related: The U.S. Calls On Russia To Cap Soaring Oil Prices

Aviation is perhaps the hardest to tackle, but Liebreich says that smaller electric and autonomous planes are not far off. The regulatory challenges might actually be trickier than the technology. For commercial aviation, hybrids are the most likely near- to medium-term outcome, with batteries complementing jet fuel.

Ultimately, Liebreich argues, clean energy continues to expand into realms once thought off limits. "What we have seen time and again in clean energy is the value of getting started in sectors that can be served today, and using the resulting volume to spur innovation and drive down costs to meet the needs of tomorrow's markets," he argued.

Finally, expanding electrification into commercial vehicles, ships and even airplanes would have the added benefit of bolstering the infrastructure needed for passenger EVs as well as for the electric grid. More renewable electricity poses challenges because of the variable nature of solar and wind, but as the transportation sector electrifies, the grid challenges become a bit easier. "Airports, ports, train stations, logistics centers and the like could become energy hubs - offering low-cost charging, batteries to smooth demand, and ancillary grid services, resilient power for server farms and the like, maybe even heat and cooling to local businesses and homes," Liebreich argues.

It all may sound futuristic, but as serious energy forecasters repeatedly revise up their forecasts for EVs, the future may arrive quicker than many expect.

By Nick Cunningham of Oilprice.com

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