Originally published on The Electrochemical Society Interface.
By James Fenton
In the Interface article “PV, EV and Your Home at Less Than $1 a Gallon” (1) that appeared in the spring of 2015, I wrote:
Many of the states in the United States have not had a strong renewable energy policy in place, primarily because renewable energy was thought to be too expensive and we thought only biomass could be used to make transportation fuel. We were wrong! It’s gasoline (often imported from other states or countries) and electricity produced from coal and natural gas (also, often imported) that are too expensive. Transportation fuel can and should be electrons or hydrogen because it is cheaper!
Figure 2 of that article showed the efficiency through the cost per mile of gasoline and electric vehicles as a function of the fuel price in the U.S. For that article, gasoline prices were $3.60/gal and $3.00/gal in 2014. For most of 2015 the price was closer to $2.00/gal than $3.00/gal and on February 15, 2016, it was only $1.83/gal in the U.S. (today May 16, 2016, it is $2.35/gal). So does this cheap gasoline mean I was wrong?
Figure 1 is an updated version of the previous article’s Fig. 2, reflecting the change in gasoline prices. I also updated the fuel efficiency from 3 miles per kWh to that of the more typical value today of 3.7 miles per kWh (my own EV gives about 3.8 miles per kWh). Even at $1.75/gal, gasoline is more than twice as expensive as using U.S. residential electricity in EVs! So I was not wrong (maybe not four times as correct though).
So gasoline is still more expensive than electricity for transportation, but is electricity produced from coal and natural gas cheaper than that from renewables? Price of fossil fuels (oil (2) and natural gas(3)) in the U.S. are at 14 year lows. The amount of electricity generated using coal in the U.S. is at its lowest level since 1970 (4) and last year, natural gas surpassed coal as the top U.S. fuel used to produce electricity.
Even with cheap fuels, energy efficiency is even less expensive, and over the period of 2007 to 2015 U.S. energy use declined 2.4% while GDP increased 10%. (5) This appears to be good for the consumer, bad for the oil and natural gas industry and really bad for the coal industry.
Despite the sharp drop in the price of natural gas, a Gas Combined Cycle Natural Gas plant (Levelized-Cost-of-Energy (LCOE), $52 –$78/MWh) is more expensive than utility-scale solar (c-Si LCOE, $47 – $57/MWh) and wind power (LCOE, $14 – $63/MWh) with the Income Tax Credit, and renewable generation remains cost-competitive without subsidies. The average cost of generating electricity from utility-scale PV has declined ~25% from one year ago. (6) This was the second straight year that renewable additions to the grid exceeded that of fossil fuel additions.
Fossil fuels have lost the race against renewables for electricity generation or as shown in Fig. 2, clean energy is starting to eat fossil fuels for lunch. (7) But let us get back to cheap gasoline (U.S. $1.73 gallon on Feb 22, 2016) made from that cheap oil. Oil prices are likely to fall further as oil producing countries are not slowing production, as they are desperate for cash and do not want to lose their global market share.
This has contributed to an oil glut (2 million barrels a day of excess production), which first started in 2014. Oil is primarily used as a transportation fuel, while renewables are largely electricity sources that provide power. So oil does not directly compete with renewables, but could cheap gasoline cause problems for electric vehicle sales?
Last year, sales of sport utility vehicles and pickup trucks exploded in the U.S. (8) Light-vehicle sales passed 17 million in 2015; the last time that happened was in 2000. To put this in context, during the poor economy of 2009 the U.S. only sold 10.4 million light-vehicles, even though gasoline cost was not high (U.S. $2.41/gal). In 2011, when gasoline cost was U.S. $3.58/gal, President Barack Obama called for a million electric cars on the road in America by 2015. So far, Americans have bought only 400,000—and with such low gas prices, are we back to Who Killed the Electric Car? (9) Maybe not. While Americans are buying pickup trucks that operate on $2/gal gasoline, Europe is buying vehicles that operate on $6/gal gasoline (a decrease from the $8/gal of 2014) and though Europe’s electricity prices are about twice as high as the U.S., their $6/gal gasoline is four times more expensive as their residential electricity used in EVs! EV sales have doubled in Europe, more than tripled in China and contracted by 4 % in the U.S. as shown in Fig. 3. (10)
More than 530,000 plug-in electric vehicles were purchased globally in 2015 (Fig. 4), a 70% increase over 2014, which itself was a 50% increase over 2013.10 Solar panels are showing similar growth, 50% each year, while LED light-bulb sales are soaring by about 140% each year. Global cumulative numbers for PHEVs passed the 1 million mark in September 2015. That said, the share of the total global auto market held by electric vehicles (EVs and PHEVs) in 2015 was still only 0.6%.
So what is holding the U.S. back? For consumers, range and price are the biggest obstacles to purchasing an electric vehicle: For the last three years EV’s retailing at less than $30,000 were not able to go 100 miles on a charge—even less in cold weather. And if you want to go 300 miles on a charge, you have to pay more than double (>$60,000). With the average price of a new IC engine car (that can go 400 miles on a single fill up) in the U.S. at $31,000, range anxiety is a major problem. In the Interface article “Home Energy Efficiency retrofits and PV Provide Fuel for Our Cars” (11) that appeared in the spring of 2015, I wrote:
President Obama issued the EV Everywhere Grand Challenge to the nation on March 2012 to produce plug-in electric vehicles that are as affordable for the average American family as today’s gasoline-powered vehicles by 2022. In June of 2012, David Danielson, the U.S. DOE Assistant Secretary, referred to the Challenge as a ‘Big Hairy Audacious Goal.’ Today the current cost of the battery is $325/kWh, while the 2022 battery technology cost target is at $125/kWh. As technology advances, and battery and drivetrain costs continue to drop, plug-in electric vehicle (PEV) sales are expected to keep increasing each year, replacing demand for petroleum with demand for electricity. This additional demand for electricity can be met by widespread deployment of renewables, such as photovoltaic (PV) solar power. (Emphasis added.)
The cost of these long-range EVs is substantially dropping as Chevrolet, Tesla, and Nissan release their long range EVs over the next few years. Chevrolet (end of 2016) and Tesla (fall of 2017) say that they will deliver 200+ mile range EVs at a price less than the average IC engine car—including tax incentives. (12) 2022 is today!
GM disclosed last fall that the battery pack for the Bolt, procured from the South Korean company LG Chem, will cost just $145 per kilowatt-hour (kWh). GM is expecting the price to continue to drop to $100/kWh by 2022, as shown in Fig. 5. (13,14) Analysts have predicted that the upcoming Gigafactory in Reno, Nevada will reduce Tesla battery costs to below $100 per kWh. (15) Salim Morsy, Bloomberg New Energy Finance (BNEF) analyst, is the author of Bloomberg’s EV report (16) that focuses on the total cost of ownership of electric vehicles, including things like maintenance, gasoline costs, and—most important—the cost of batteries up to the year 2040. Figure 6 from this report shows that U.S. car buyers are willing to look at long-range EVs once the purchase price drops. By 2030, an electric car at $22,500 would be a practical choice for almost 70 percent of car buyers (gray line).
Bloomberg’s EV report (17-19) (see Fig. 7) forecast the number of worldwide electric vehicles moving from today’s ~ 1 million (0.6%) to 41 million by 2040, representing 35% of new light duty vehicle sales. The report also looked at the rise of autonomous cars and ridesharing services like Uber and Lyft, which would put more cars on the road that drive more than 20,000 miles a year, thereby increasing the return on investment on the EV. If these new services are successful, they could increase the EV market to 50% of new cars by 2040. Even if oil stayed at $20 a barrel the adoption would be 25 percent EVs. Morsy said: “Whether the end number by 2040 is 25 percent or 50 percent, it frankly doesn’t matter as much as making the binary call that there will be mass adoption.”
On Feb 25, 2016, BNEF showed a must-see 3 minute, 39 second video “The Peak Oil Myth and the Rise of the Electric Car.” (18) Using a world-wide 60 percent growth of the electric vehicle market (current rate of adoption) they found that electric vehicles could displace oil demand of 2 million barrels a day as early as 2023 (Fig. 8). That would create a glut of oil equivalent to what triggered the 2014 oil crisis. Assuming a more conservative adoption rate, the world will cross the oil-crash benchmark of 2 million barrels a few years later—in 2028.
In the Interface article “PV, EV and Your Home at Less Than $1 a Gallon”1 that appeared in the spring of 2015, I wrote:
PV, EVs, buildings, and the grid—If we embrace this transformation from (a) expensive fossil fuels for transportation and (b) utility only production of electricity, to that of cheaper utility and rooftop solar plants for electricity for transportation and to power our energy efficiency retrofitted buildings and homes, we will be able to manufacture the solar PV panels, energy efficiency products, batteries, and vehicles locally. If we delay, we will be trading our addiction to expensive and often imported fossil fuels to imported PV panels, and batteries, but at least the installation jobs would not be outsourced. The question (continued on next page) then is will nations get out in front and surf the wave created by the solar and EV tsunami or will they drown? Will electric utilities succumb to a “Utility Death Spiral”? (As more customers adopt distributed generation installed behind the customer’s utility meter, utilities’ costs to maintain and operate the grid must be spread across a smaller customer base, raising customer rates and increasing the economic incentive to cut the connection to the grid.) Or can we all work together and look at the future as an opportunity?
Figure 9 shows the impacts of the electrification of transportation. By 2040, electric cars will draw 1,900 terawatt-hours of electricity (the solar and energy efficiency opportunity). That is equivalent to 10 percent of electricity produced last year. This will also represent a destruction by 2040 of 13 million barrels of oil a day, or 14 to 15% of the world’s demand for oil. So we lose our oil addiction even faster than I wrote in spring 2015, though instead of the solar and EV tsunami and a “Utility Death Spiral” we may end up in an Oil Industry “Death Spiral”, drowning in oil that no one wants? “One thing is certain: Whenever the oil crash comes, it will only be the beginning. Every year that follows will bring more electric cars to the road, and less demand for oil. Someone will be left holding the
About the author: James M. Fenton is the Director of the University of Central Florida’s Florida Solar Energy Center (FSEC).
- J. M. Fenton, “PV, EV and Your Home at Less Than $1 a Gallon,” Electrochem. Soc. Interface, 24 (1), 41 (2015).
- C. Krauss, “Oil Prices: What’s Behind the Drop? Simple Economics,” The New York Times, April 18, 2016, http://www.nytimes.com/interactive/2016/business/energy-environment/oilprices.
- T. Puko, “Natural Gas Sinks to 14-Year Low,” The Wall Street Journal, December 14, 2015, http://www.wsj.com/articles/natural-gas-sinks-to-lowest-level-since-2002-1450103930.
- B. Magill, “Coal Slides to New Low As Source of Electricity,” Climate Central, January 28, 2016, http://www.climatecentral.org/news/coal-slides-new-low-source-of-electricity-19967.
- 2016 Sustainable Energy in America Factbook, The Business Council for Sustainable Energy, http://www.bcse.org/sustainableenergyfactbook/#.
- “Levelized Cost of Energy Analysis 9.0,” Lazard, November 17, 2015, https://www.lazard.com/perspective/levelized-cost-ofenergy-analysis-90/.
- M. Liebreich, “Global Trends in Clean Energy Investment,” Bloomberg New Energy Finance EMEA Summit, October 12, 2015, London, http://www.bbhub.io/bnef/sites/4/2015/10/Liebreich_BNEF-Summit-London.pdf.
- B. Hulac, “Cheap Gas Fires Up Big SUV Sales, Slows Electric Cars, Hybrids,” Scientific American, September 8, 2015, http://www.scientificamerican.com/article/cheap-gas-fires-up-big-suvsales-slows-electric-cars-hybrids/.
- C. Paine, Who Killed the Electric Car?, Papercut Films, Culver City, Calif., 2006, http://www.whokilledtheelectriccar.com/.
- “Global Plug-In Vehicle Sales 2015,” EV-volumes.com, http://www.ev-volumes.com/news/global-plug-in-vehicle-sales/.
- J. M. Fenton, “Home Energy Efficiency Retrofits and PV Provide Fuel for Our Cars,” Electrochem. Soc. Interface, 24 (1), 43 (2015).
- J. Romm, “Game Change: Tesla And GM Announce Affordable, Long-Range Electric Cars,” Climate Progress, February 11, 2016, http://thinkprogress.org/climate/2016/02/11/3748451/tesla-gm-affordable-electric-cars/.
- J. Cole, “GM: Chevrolet Bolt Arrives In 2016, $145/kWh Cell Cost, Volt Margin Improves $3,500,” Inside EVs, October 2015, http://insideevs.com/gm-chevrolet-bolt-for-2016-145kwh-cellcost-volt-margin-improves-3500/.
- J. Ayre, “$145 kWh Battery Cell Costs At Chevy Bolt Launch, GM Says,” EV Obsession, October 2015, http://evobsession.com/gm-145-kwh-battery-costs-bolt-ev-launch/.
- S. Hanley, “Analyst predicts Gigafactory will reduce Tesla battery costs below $100 per kWh,” Ecomento, September 2015, http://ecomento.com/2015/09/24/analyst-predicts-gigafactorywill-reduce-tesla-battery-costs-below-100-per-kwh/.
- T. Randall, “Electric Fantasy: Will the Next Tesla Sell for $25,000,” Bloomberg Technology, February 9, 2016, http://www.bloomberg.com/news/articles/2016-02-09/will-the-tesla-model-3-really-sell-for-25-000.
- “Electric Vehicles to be 35% of Global New Car Sales by 2040,” Bloomberg New Energy Finance, February 25, 2016, http://about.bnef.com/press-releases/electric-vehicles-to-be-35-ofglobal-new-car-sales-by-2040/#_ftn2.
- T, Randall, “Here’s How Electric Cars Will Cause the Next Oil Crisis,” Bloomberg, February 25, 2016, http://www.bloomberg.com/features/2016-ev-oil-crisis/.
- M. Liebreich, “In Search of the Miraculous,” Bloomberg New Energy Finance Summit, April 5, 2016, New York, http://www.bbhub.io/bnef/sites/4/2016/04/BNEF-Summit-Keynote-2016.pdf.
© The Electrochemical Society. Reproduced with permission.