Energy crisis is accelerating the electrification of transport

electrification

Rising energy costs are accelerating investment in the electrification of transport and renewable power, according to the ECIU.

The Energy & Climate Intelligence Unit forecast rising investment in electrification of transport as Europe reaches a tipping point in electrification of the transport system, indicated by the number of EV models now available in Europe – at 184 models a five-fold increase compared with five years ago.

An ECIU report shows global EV sales more than doubled in 2021 and similar growth was seen in 2022. Germany and Britain led the world’s biggest economies in EV share of new passenger vehicle sales in 2021, at 26 per cent and 22 per cent respectively.

Growth has been boosted by a reduction in EV battery prices that have fallen 89 per cent since 2010 and are projected to fall a further 66 per cent by 2035.

Sales growth has caught out analysts. Sales this year are likely to overshoot expectations for 2030, as forecast by Goldman Sachs just five years ago, as well as the International Energy Agency’s EV fleet projections looking likely to be passed.

The ECIU report compares costs and savings over the average or expected 14-year ownership period of a vehicle in Britain and Germany, for three popular EV brands versus equivalent combustion cars.

All EV models generate net savings over the lifetime of the vehicle. Average net savings of £8.3k in Britain and €7.4k in Germany, over a 14-year lifetime, imply national cash savings of £300 billion and €353 billion respectively, over the next 14 years, if replicated across national passenger car fleets.

Making a conservative assumption that ten per cent of the EV battery value will be available to consumers at scrappage, average net savings rise to £8.7k in Britain and €7.8k in Germany.

The EV premium above the upfront price of an equivalent combustion car is significantly higher in Germany than in Britain for two of the three models looked at in the report, indicating carmakers are capturing Germany’s EV grants, now phased out in Britain.

All EV models generate net savings over the lifetime of the vehicle. Average net savings of £8.3k in Britain and €7.4k in Germany over a 14-year lifetime imply national cash savings of £300 billion and €353 billion respectively, over the next 14 years, if replicated across national passenger car fleets.

Making a conservative assumption that ten per cent of the EV battery value will be available to consumers at scrappage, average net savings rise to £8.7k in Britain and €7.8k in Germany The EV premium above the upfront price of an equivalent combustion car is significantly higher in Germany than in Britain, indicating carmakers are capturing Germany’s EV grants, now phased out in Britain.

There are tax neutral policy choices to boost EV adoption: In Germany, an accelerated smart meter rollout would make cheaper, off-peak tariffs available to EV drivers, as is already the case in Britain, offsetting the effect of halving German EV grants next year.

In Britain, EV adoption could be accelerated by simplifying rapid charging network tariffs, to eliminate hidden charges and minimise risks of price-gouging. By shifting the burden of environmental and other taxation and charges to gas bills, and away from electricity bills (as already in the Netherlands), this could further reduce EV charging costs.

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