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Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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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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  • Tom Blazek on September 17 2018 said:
    But where is the Oil Industry?

    While the world is moving to favor lower emission vehicles, API and the Oil Industry are busy fighting things like octane from ethanol, that can help lower vehicle emissions and reduce fuel costs.

    API and Refiners are busy fighting the very thing that can help their fuels compete in a new lower emission, lower carbon environment against the low emission electrics.

    What planet are the Refiners and API really on?
  • El Gato on September 17 2018 said:
    What a pipe dream!
    Electric cannot develop 2 things that are critical in the commercial industry, Horsepower, and thrust. Thrust is what drives the airline industry, and electric can only drive props at Best, so aviation is a really severe pipe dream. All heavy equipment, ag equipment need horse power.. Electric can't do that
  • Madan R on September 17 2018 said:
    Last month, 150,000 electric vehicles were sold worldwide and this month, it may very well touch 170,000 and will increase further next month mainly because of Tesla ramping up the sales of their Model-3.

    Diesel buses could be a bigger game changer and they run 200 - 300 miles / day and consume lot of fuel. More cities are keenly interested in this as it could get their return on investment quickly.
  • tom gavem on September 18 2018 said:
    Nick:
    I enjoy reading your article as they are well written and researched. What i would like to a scenario and potential roadblock. Most big cities, London, Rome, Paris etc, the density is very high and local electrical grids are over taxed. With more electrical vehicles in the cities and in dense parking lots, will there even be capacity to charge them and what is that capacity, ie 100 cars per 10sq miles?

    Thank you and hope you can shed light on this and include in the electrification studies
  • Josh Gregner on September 18 2018 said:
    It is important to separate to things: oil demand growth and oil demand.

    So far, there still is a oil demand growth. But that is largely in developing countries are oil demand in OECD countries is essentially flat or slightly declining. Overall the demand growth is down to about 1% per annum.

    This means that electrification doesn't need all that much to get us to peak-oil: 1% is easily achieved by normal economic fluctuations, then we have an overall drive for fuel efficiency and of course the developments in China (watch their latest EV sales numbers, watch their 300k electric buses) tell us that electrification starts to have a significant impact. So oil demand growth will be done and dealt with in the coming 5 years.

    The bigger question is when electrification will start to cause overall oil demand to decline. That's a bit further out in my mind, but as we see with coal - investor money is quick to leave, even if overall demand is still there for a few year - the demand trend alone is what decides investor behaviour...

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