UK Studies Suggest New Business Models and Policies Required for EV and PHEV Uptake; Price a Critical Issue

16 October 2009

The UK’s Committee on Climate Change commissioned research from a number of consultants to inform its advice on meeting carbon budgets across multiple sectors, including transportation. CCC has published the reports on its website. Two of those, one by consultancy Element Energy and a second by AEA Technology,  explored the characteristics of EV buyers, technology, utilization, and prospects for market adoption of battery electric vehicles and plug-in hybrid electric vehicles.

Element Energy report: Electric Vehicles, Strategies for uptake and infrastructure implications. Element energy explored a set of related topics, including purchasing decisions, demographics of EV buyers, EV types and utilization; and infrastructure requirements. Among the findings of the report:

• Purchasing decisions. High capital on-cost remains the biggest barrier to EV adoption. In the UK, derogation of the London congestion charge and parking charges, combined with early adopters’ “willingness to pay” will go some way in bridging the gap in cost and supporting EV uptake. Outside of the early adopter group,however, the report finds the willingness to pay is zero or negative.

  Limited range is the next most frequently stated concern. Drivers place a very high utility on the ability to drive very long distances, the report found, even though they realize that such trips are (for the majority) extremely rare. However, Plug-in Hybrid Electric Vehicles (PHEVs), which do not suffer from this restriction could achieve significant market uptake while delivering electrification of the overwhelming majority of vehicle trips, the report says.

  Recharging infrastructure is mentioned as a concern but with a lower priority.

• Demographics. The overwhelming majority of EV users (internationally and in the UK) are multi-car families with off-street parking, the report says. This is somewhat at odds with the “urban city car model” of electric vehicle adoption, where both parking availability and car ownership is lower.

• Utilization. The full technical range of EVs is significantly underexploited in use, according to the report. On average, between one third to on half of the technical range is actually used—i.e. a vehicle with a capability of 100 mile range will on average be used between 33.50 miles.

  The low utilization ratio is a rational response to limited recharging opportunities, long recharging times, and concerns over the reliability of new technology. This utilization ratio needs to increase if EVs are to achieve their CO₂ reduction potential.

  There is evidence to suggest that widespread slow charging will have limited effect on increasing the utilization ratio, but in contrast fast-charging can be very effective in encouraging users to exploit the vehicles’ full potential.

• Electric vehicles and trip types. A statistical analysis of the Department for Transport (DfT) travel database revealed:

  • The driving patterns of a significant proportion of the UK population are dominated by relatively low daily distances. Half the people in the sample analysed did not exceed 40 km (25 miles) on any day of the travel diary week.

  • Commuting is the dominant trip purpose, with circa one-quarter of all car trips being undertaken with getting to or from work as the primary reason for travel.

  • Around two-thirds of commuting trips are less than 16 km (10 miles). This suggests that there are a significant number of commuters with round-trip commutes of less than 20 miles.

  • There is an important distinction between the trip types and distance. For example, a vehicle with a utilized range of 100km, would account for over 90% of trips, but only 60% of overall UK car-km.

  • Assuming a utilized range of 80 km (i.e. the capable range is much higher, between 120 km and 240 km), 50% of all UK vehicle-km can be undertaken by EVs. The remaining distance is undertaken by a relatively small number of high mileage individuals.

  • To achieve an 80% reduction in CO₂, assuming that renewable electricity was used to charge EVs, would require a vehicle with a utilized range of circa 200 km (and therefore a capable range between 300 km-600 km, assuming current behavior patterns). Battery technology is unlikely to deliver this very high, single charge range in an affordable vehicle.

  • Battery swap technology or fast charging stations could provide the extension in range required to accommodate this high mileage sector, although given the limited number of such drivers, alternative means for reducing carbon could be more effective.

• Daily usage patterns. Average time spent at a destination (outside of the home and workplace) is 1-2 hours. A slow charge system has limited utility in such circumstances as it would provide a small fractional increase in battery state of charge. The average time spent at the workplace is seven hours, indicating that slow charging has merit here.

• Recharging infrastructures. Residential and workplace recharging points are shown to be technically capable of providing the majority of EV accessible passenger km at a much lower cost than publicly available recharging solutions.

• CO₂ implications. Under a 2030 scenario where the UK passenger car parc includes 15.9 million EVs (the scenario provided by CCC), and these vehicles are responsible for 45% of all car-km travelled, up to 16 Mt of CO₂ per year may be saved relative to the baseline (no EVs)—a savings of 30% of baseline emissions from cars, or around 2.7% of total 1990 CO₂ emissions. This is based on an average grid CO₂ intensity of around 0.14 kgCO₂/kWh.

• Demonstration and rollout. While London represents an important site for early EV demonstration projects, to achieve meaningful CO₂ savings requires significant EV adoption in suburban areas throughout the UK.

  A demonstration project testing the issues surrounding suburban EV use and recharging is required, and the results compared with urban EV projects. A suburban project should focus on domestic recharging. Without the benefits of congestion charging, a suburban project is likely to require significant financial assistance to overcome the capital oncost of EVs (either capital grants or subsidized leasing of vehicles).

AEA: Market outlook to 2022 for battery electric vehicles and plug-in hybrid electric vehicles. In 2008, CCC commissioned AEA to lead a consortium to compile a marginal abatement cost (MAC) curve model for transport, ranking the emissions savings opportunities according to cost effectiveness.

The 2008 MAC curve provided high-level estimates of the anticipated levels of uptake for EVs and PHEVs. However, with growing interest in EVs and PHEVs, CCC commissioned AEA to update the MAC curve with a particular focus on improving the EV and PHEV aspects of the model.

The first element of the project was to update the marginal capital cost and learning rate data entered into the model. The second part of the project—The Market Outlook presented in this report—developed four MAC model scenarios specifically for EVs and PHEVs for the period between 2009 and 2022.

It reviewed automotive manufacturers’ strategies and planned EV/PHEV developments; examined new business models designed to encourage the uptake of plug-in vehicles; analyzed upfront price support to encourage the uptake of EVs and PHEVs; described actions to create a favorable investment climate in EV and PHEV technologies; and developed scenarios for the uptake of EVs and PHEVs.

In its review of automakers’s plans, the report found:

• Many early EVs are likely to be small cars since their lower mass means smaller (and hence) cheaper batteries are required. It also found that there are currently no small PHEVs in development although such vehicles may be developed by 2022. The dual powertrain, which characterizes PHEVs, is not currently commercially viable for small cars where price is a key differentiator.

• Aside from Ford, none of the mainstream manufacturers have announced that they are working on medium EVs. Several companies are developing medium PHEVs, which are viewed as a more commercial proposition than EVs, pre-2022. Smaller batteries reduce the marginal capital cost and the range extending gasoline or diesel engine negates the need for a widespread infrastructure.

• Most vehicles in the large car segment (which includes sports cars) are marketed at high earners and/or early adopters of technologies so in principle they are well suited for early EVs. A significant number of large electric cars are already available or will become available in the next couple of years. That said, the absolute number of large EVs sold is likely to be relatively modest since they only make up 14% of new car sales.

• A number of large manufacturers have announced their intention to develop large PHEVs, which reflects the growing belief that PHEVs will act as a bridging technology between conventional powertrains and EVs.

• There are several ranges of electric vans already available for purchase from specialist EV van manufacturers.

• Aside from niche low-range application, heavy-goods vehicles (HGVs) are not well suited to electric only operation. The size and cost of the battery packs and a lack of widespread charging infrastructure are key barriers. Consequently, the largest HGV available is 12 tonne gross vehicle weight.

The report found that advanced diesels will present strong competition for EVS and PHEVs, and that diesel penetration is likely to grow over the coming years before peaking in the middle of the next decade. A key constraint will be a shortage of diesel refinery capacity.

Due to the high up-front costs of electric vehicles and the perceived technology risk, alternative business models are likely to be required to encourage their uptake, the report found. Some of these include:

• A strategy based around battery leasing.

• The Better Place model of subscription pricing packages that will provide access to the network of charging points and battery swap stations.

  Both the mobile phone style contract and battery swap station elements of the business model introduce a great deal of flexibility for consumers, which is a weakness of many of the other business models.

• Vehicle leasing as a natural extension to battery leasing.

• In the short term the car club business model could be a viable means of introducing the public to electric vehicle technology.

Although a number of national governments in Europe and both federal and state Governments in the US have already introduced financial support packages to help stimulate the early uptake of EVs and PHEVs. However, the report finds that unless marginal capital costs reduce significantly in the next couple of years many consumers and businesses may find it difficult to justify purchasing an EV or PHEV even taking account the level of existing financial support.

Actions to create a favorable investment climate in EV and PHEV technologies could include national government policy statements; regulatory pressures; government-backed R&D funding programs; and government-backed demonstration and commercialization programs.

The report developed four scenarios for EV/PHEV uptake: Severe Protracted Recession; Green Recovery; Green Recovery + Upfront Price Support; Green Recovery + Upfront Price Support + Strong Competition from Advanced Diesel. Key themes from the scenarios include:

• Uptake of EVs and PHEVs will be very limited without upfront price support.

• Uptake of PHEVs will occur faster than EVs due to their greater fuel flexibility and lower cost.

• Even under the more optimistic scenarios EVs and PHEVs are unlikely to reach mass production (defined at 100,000 units sold) until the early 2020s.

• Achieving high levels of EV and PHEV uptake will require a high degree of cooperation between local and national Government. Softer, local measures such as access to bus lanes, free parking and the provision of a widespread charging infrastructure will be need alongside central Government initiatives such as upfront price support.

• The launch of advanced diesels will affect the uptake of EVs and PHEVs in the short to medium term.

• However, advanced diesels will only be able to reduce GHG emissions so far. The deepest cut in transport GHG emissions can only be achieved by EVs.

(A hat-tip to Jamie!)

Resources

• Strategies for the uptake of electric vehicles and associated infrastructure implications (Element Energy 2009)

• Market outlook to 2022 for battery electric vehicles and plug-in hybrid electric vehicles (AEA 2009)