Insights Strategy

The changing landscape of energy needs for the EV industry

Close to 20% of automobiles sold in Europe are electric-chargeable as we go past the first quarter of 2022. For the same time period, the figure in Norway is 86%. In the US, Electric vehicle sales soared in the first quarter of 2022, owing largely to the introduction of new auto players in the market. Meanwhile, in China, the total EV market share has reached 18%. Governments and policymakers throughout the world are committing to net-zero goals. Over the next 15 years, global and regional automakers such as Tesla, General Motors, Volvo, Volkswagen, BYD, Nissan, Honda, Hyundai, Vinfast, Tata and Jaguar Land Rover will migrate to all-electric vehicles. As the energy storage technology is rapidly improving and costs dropping, 2023 is therefore predicted to be the year when mass-market EVs achieve cost and margin equilibrium with fossil fuel-based cars.

How do we meet the growing energy needs of the EV industry in a sustainable way?

The inclusion of the high electricity demand produced by electric automobiles presents issues for energy management systems at the local, national, and international levels. Depending on the types of renewable energy and conventional power generation in each nation, energy management policies to allow the charging of a significant number of electric cars can be highly varied, even amongst countries with equal shares of renewable energy. Coordination of energy demand from electric vehicles may become a big difficulty in nations with constantly varying renewable energy supply to lead a sustainable mobility future. 

By pushing EV’s first strategy to increase the number of electric vehicles on the road can considerably cut Carbon and other air pollutant emissions. However, increased emissions due to the more electricity required and sustained fossil fuel usage in the power sector projected in 2050 somewhat balance these good benefits. 

It is predicted that EVs may account for 80% of the passenger vehicles on the road by 2050, resulting in fewer carbon and air pollution emissions from the transportation sector. However, if power demand from other sectors is not reduced, such as through energy efficiency improvements & increased use of renewables, greater emissions would arise from the corresponding fossil fuel burning in the electricity-generating sector.

Carbon emissions averted in the road transportation sector balance increased emissions from energy generation. According to the European Commission’s projections, the EU-28 may achieve a net reduction of 255 Mt CO in 2050, which is around 10% of total emissions from all sectors for that year. Electric vehicle demand, on the other hand, might result in increased carbon emissions in nations with a significant proportion of fossil fuel power plants. As a result, the environmental benefits of electric mobility would never be effectively realized in such circumstances.

Moving towards a green economy

As the EV automobiles sold in the world increases, it will lead to reduced battery costs, with major battery players trying to capture the market share. As a ripple effect, EV growth will put immense pressure on the costs of crucial battery components, including raw materials like cobalt and lithium in production, for which demand will rise sharply. That trend has already begun to play out; cobalt and lithium prices have more than quadrupled since 2015, resulting in a net rise in EV manufacturing costs during that time period.

Will the availability of these materials limit the uptake of EVs? No, not in the optimistic sense. Even with expected increases in input prices, batteries can still reach the $75 to $100 per kilowatt barrier required to achieve broad ICE price parity. While there are concerns about a “cobalt cliff,” and demand implications may cause a temporary slowdown, the restrictions and uncertainties should be addressed. Switching to different battery chemistries can help to reduce the likelihood of a shortage. More raw material mining will be required, which would need expenditures of $100 billion to $150 billion, according to our estimates. In addition, mining’s harsh realities will continue to apply, such as long lead times and environmental and social issues in countries like Africa and South America where many of these raw minerals are sourced. In other words, even as a green solution, EVs will have costs and benefits for society, the environment, and the resources we consume.

The Paris Agreement aided in shifting expectations and the political economy toward a low-carbon path. To make an early transition to a carbon-neutral economy, governments will need to significantly increase investment and accelerate innovation in critical technologies and industries. Five years of change-driven innovation and investment have resulted in significant development in low-carbon solutions and markets. However, emissions are continuing to rise, necessitating a quick acceleration in technological development, particularly in hard-to-abate industries (such as steel, cement, and aviation). In many parts of the world, sectors are approaching commercial tipping points where low-carbon solutions can outcompete incumbents based on fossil fuels, including power. Many models fail to capture the processes of innovation that underpin technological development (e.g. models failed to predict the tenfold reduction in the cost of both solar photovoltaic generation and battery storage over the past 10 years). Models and scenarios must take into account the rapid scaling up of investment as well as disruptive technology change that might accelerate the shift.

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