​Growing global use of electric vehicles will challenge power producers—eventually

For the first time in a century the oil industry’s transportation-fuel monopoly has been broken, but that doesn’t mean the end of fossil fuels.

That was essentially the message several prominent speakers delivered at the ARC Energy Investment Forum on Monday.

The comments came on the same day electric car maker Tesla Inc. saw its capitalization surge to about US$48.2 billion, surpassing Ford Motor Co.’s roughly US$45.1 billion, Bloomberg reported.

While these numbers may reflect investors’ vision of the future, the Tesla-Ford market capitalizations bear no resemblance to the current reality.

Bloomberg said Ford’s net income over the last five years totalled US$26 billion. Tesla lost US$2.3 billion during the same period.

The electric car maker’s stock surge came one day after it reported worldwide shipments of 25,000 cars and SUVs in the first quarter, Bloomberg reported, while Ford delivered about nine times as many vehicles in just the U.S. last month alone.

There are currently about one billion petroleum-powered vehicles on the world’s roads, said ARC chief energy economist Peter Tertzakian.

“Even if we sell a million [electric vehicles] a year it would take a thousand years to replace the existing fleet,” Tertzakian said.

And that’s only the roughly half of the oil barrel that’s converted to transportation fuel. The other half is used to make lubricants, petrochemicals and other non-transportation products.

Electric vehicles moving towards a tipping point

The electric car industry will reach a “tipping point” by 2025, predicts Larry Burns, an advisor to Google’s self-driving car project (now called Waymo, which stands for a new way forward in mobility).

“I define a tipping point as follows: that the consumer value exceeds price—so people want it. And the price exceeds cost—so companies want to supply it,” Burns told reporters after his conference speech.

The Detroit-based Burns, a former vice-president of research and development for General Motors Co., foresees a world where people share, rather than own, self-driving electric vehicles.

He isn’t suggesting that people will stop buying cars, or that a billion vehicles with internal-combustion engines will be replaced anytime soon, but he said that vehicle sharing could dramatically reduce the number of vehicles required for the same mileage.

“I can see a path to a 10 per cent market share by 2025 by producing a million and a half of this class of vehicles out of the industry’s 17 million—and that’s 10 per cent. Ten per cent is a big deal.”

Steve Koonin, a former under secretary for science at the U.S. Department of Energy, expects electric vehicles will make up about 10 per cent of the world’s vehicle fleet by 2030, and about 50 per cent by 2050.

Koonin, who holds a PhD in theoretical physics from the Massachusetts Institute of Technology, acknowledged this would be rapid growth from only about one-tenth of one per cent of the global car fleet today.

One of the main drivers is that the cost of lithium ion batteries is falling “spectacularly,” said Koonin, who is now director of the Center for Urban Science and Progress at New York University.

Challenges for power producers

Electricity generation is one of the major sources of greenhouse gas emissions—and this would be much more important if the world starts to electrify its vehicle fleet.

“Absent carbon constraints—if you didn’t care about greenhouse gas emissions—coal, gas and nuclear power dominate. The world is just about tapped out on hydro power,” Koonin said.

Despite environmental opposition to the hydraulic fracturing techniques needed for large-scale natural gas production and economic concerns about high decline rates in shale wells, Koonin believes the technology is “here to stay, and will provide a cap on gas prices for the foreseeable future.”

However, he rejects the argument that methane is a bridge to a low-carbon future.

“Yes, the CO2 emissions are lower, but if you account for the methane leaks—methane is a potent greenhouse gas—and you also account for the loss of the aerosols that coal produces that help cool the planet, the net effect on the climate is likely to be pretty minimal, if we go to methane [instead of coal-fired power].”

Minimizing human influences on the climate in the long term, he said, would mean burning no oil, coal or gas.

After nuclear and fossil fuels, the biggest power-generation sources are wind and solar. Both are growing rapidly.

Koonin said wind now produces about five per cent of the electricity generated in the U.S., or about one-quarter of what nuclear reactors generate. Solar panels account for about one per cent of U.S. power generation.

But “if you want to generate all your electricity in this way, you’ve got issues,” the energy expert warned.

The obvious limitation is that everywhere doesn’t get the same amount of wind and sun, and the sunniest and windiest places aren’t necessarily near the biggest power markets. And the power grid has to be extremely reliable.

“That’s a major challenge if you’re working with intermittent and somewhat unpredictable sources of generation,” said Koonin.

Land use is another big issue.

“People don’t realize that a gigawatt of PV equivalent, or five gigawatts peak, occupies about 50 square miles. That’s a pretty big chunk of land.”

Koonin expects renewables will capture about 20 per cent of the electricity market before these problems start to become significant obstacles for grid operators.

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