Fleets transitioning faster…iPhone moment for transportation? Electric, shared mobility fleets reaching cost parity with oil-fueled vehicles by 2020

Navigant predicts most companies will commit by 2020 to electrifying fleets

10 Giant Companies Commit to Electric Vehicles, Sending Auto Industry a Message: The EV100 coalition is expanding EV charging infrastructure and shifting away from gas for transportation, the fastest growing emissions source.


SEP 19, 2017

A coalition of global corporations, including Unilever, Ikea and shipping giant DHL, launched a global campaign today to accelerate the shift to electric vehicles and away from gas- and diesel-powered transportation—which generates almost a quarter of energy-related greenhouse gas emissions worldwide and has been the fastest growing emissions source.

Since more than half of the cars on the road belong to companies, the new EV100 coalition could have a major impact. It aims to do for EVs and electric car charging infrastructure what coalitions such as the RE100 are already doing to encourage corporate purchasing of clean energy (and thus motivating development of new solar and wind power).

EV100’s goal is to send a signal to automakers that there is mass demand for electric vehicles before 2030, when current forecasts suggest global uptake will start to really ramp up.

“We want to make electric transport the normal,” said Helen Clarkson, CEO for The Climate Group, the international nonprofit spearheading the effort.

Government pressure is already adding to that signal in Europe and Asia: France and the UK have given automakers a 2040 deadline to end the sale of new gas-powered cars; China recently indicated it would set its own deadline; India has suggested it is moving toward 100 percent electric vehicles; and Chancellor Angela Merkel hinted last month that Germany may follow suit. Automakers have been responding by expanding their EV fleets, as showcased at last week’s Frankfurt Motor Show.

The Commitments: EVs and Infrastructure

Among the 10 companies that launched EV100 with a goal of getting to 100 members, seven are committing to replacing part or all of their vehicle fleets with hydrogen-powered or plug-in electric cars—either fully battery electric or plug-in hybrids that combine grid-charging and a conventional engine. Others, such as Ikea and PG&E, have committed to building the charging stations that make electric cars more practical.

Germany’s Deutsche Post DHL Group, a global delivery company, purchased EV startup StreetScooter to build its own homegrown electric delivery vans. European power plant operator Vattenfall plans to replace its 3,500-car fleet with plug-ins over the next five years.

LeasePlan, which manages vehicle fleets for companies in 32 countries, plans to electrify its internal fleet by 2021 while helping its corporate customers make their own transitions. Other companies involved in EV100 include Chinese web services giant Baidu, retailer Metro AG, Heathrow Airport and HP.

Sam Abuelsamid, a Detroit-based senior analyst for Navigant Research, said many corporate fleets are in a position to go plug-in by 2030. He predicted the concept will catch fire over the next couple of years: “By 2020 I would expect that most fleets that can will probably commit to it,” he said.

Challenges to the EV Switch

The exceptions, in Abuelsamid’s view, might be some fleets of heavy-duty trucks and those that companies rely on them to travel between cities—vehicles that “might not yet be feasible” to run on battery power.

One example among the EV100 companies is the fleet of utility repair trucks operated by San Francisco-based power company PG&E. Christopher Benjamin, director of corporate sustainability, noted that PG&E financed development of custom “plug-in hybrid” bucket trucks that can be powered by the grid or by their internal combustion engines. The company is holding back on moving to fully battery-powered trucks, however, he told InsideClimate News. For one thing, he noted, the trucks must sometimes operate when the power grid is down.

Benjamin said joining EV100 is about reinforcing PG&E’s existing efforts to expanding access to EV charging for their customers and employees.

PG&E is getting ready to begin the three-year process of installing 7,500 charging stations at workplaces and multifamily dwellings in its territory. Today the utility planned to announce a pilot program providing free home electric panel upgrades to at least 25 low-income families in California’s Central Valley that will enable them to charge up EVs at home. The program is a collaboration with Sacramento environmental group Valley Clean Air Now and the International Brotherhood of Electrical Workers.

The Playing Field Has Changed, Despite Trump

Roland Hwang, who runs the Natural Resources Defense Council’s energy and transportation program, said the new EV100 campaign is timely given the Trump administration’s effort to delay or undo tighter U.S. fuel economy standards. “An EV100—a big corporate commitment towards EVs—is exactly what is needed at this point. We are on that tipping point, and we could easily stall,” Hwang said.

The EV100 companies are more likely to follow through than the U.S. companies that committed to leadership on electrification back in 2010 and then failed to deliver, Hwang said. Most notable of those bailouts was GE, which vowed to electrify half of its 30,000-vehicle corporate fleet and to sell GE Capital leasing customers 10,000 EVs by 2015. But its plan fizzled within a few years and was replaced with a plan to purchase more natural gas-fuelled cars.

Since then, EVs have come down in price, largely due to the plummeting cost of lithium batteries. Those batteries have also developed a promising track record, making their longevity—and thus an EV’s full costs and benefits—easier to gauge.

“It’s no longer the same ballgame as 2010. We’re not trying to push a big rock up a hill,” Hwang said.

He acknowledged that EVs may deliver meager greenhouse gas reductions in the short term in some places, such as China, where the power grid is chock full of carbon-intensive coal-fired electricity. But he stressed the long view presented in an NRDC report to be released today that lays out a roadmap for the U.S. to slash its greenhouse gas emissions by 80 percent by 2050. The report, he said, identifies electrification of transportation as a crucial plank for about 10 percent of the total emissions reductions.

By 2050, Hwang said, the U.S. could be sourcing 70 percent of its power from wind and solar, with hydropower and nuclear energy making up most of the balance, and battery-powered EVs could be 85 percent of new vehicles sold that year. As power grid emissions fall, EV emissions will drop with them. “We’re not looking at today’s power plants,” Hwang said, “we’re looking at tomorrow’s.”

Bloomberg, 11 Sep 2017 – The total cost of ownership of electric and oil-fueled vehicles will reach parity in 2020 for shared-mobility fleets, five years earlier than for individually-owned vehicles, according to Bloomberg New Energy Finance.

It’s been 10 years since Apple Inc. unleashed a surge of innovation that upended the mobile phone industry. Electric cars, with a little help from ride-hailing and self-driving technology, could be about to pull the same trick on Big Oil.

The rise of Tesla Inc. and its rivals could be turbo charged by complementary services from Uber Technologies Inc. and Alphabet Inc.’s Waymo unit, just as the iPhone rode the app economy and fast mobile internet to decimate mobile phone giants like Nokia Oyj.  The culmination of these technologies — autonomous electric cars available on demand — could transform how people travel and confound predictions that battery-powered vehicles will have a limited impact on oil demand in the coming decades.

“Electric cars on their own may not add up to much,” David Eyton, head of technology at London-based oil giant BP Plc, said in an interview. “But when you add in car sharing, ride pooling, the numbers can get significantly greater.”

Most forecasters see the shift away from oil in transport as an incremental process guided by slow improvements in the cost and capacity of batteries and progressive tightening of emissions standards. But big economic shifts are rarely that straightforward, said Tim Harford, the economist behind a book and BBC radio serieson historic innovations that disrupted the economy.

Systemic Change

“These things are a lot more complicated,” he said. Rather than electric motors gradually replacing internal combustion engines within the existing model, there’s probably going to be “some degree of systemic change.” 

That’s what happened 10 years ago. The iPhone didn’t just offer people a new way to make phone calls; it created an entirely new economy for multibillion-dollar companies like Angry Birds maker Rovio Entertainment Oy or WhatsApp Inc. The fundamental nature of the mobile phone business changed and incumbents like Nokia and BlackBerry Ltd. were replaced by Apple and makers of Android handsets like Samsung Electronics Co.

Today, as Elon Musk’s Tesla and established automakers like General Motors Co. are striving to make their electric cars desirable consumer products, companies like Uber and Lyft Inc. are turning transport into an on-demand service and Waymo is testing fully autonomous vehicles on the streets of California and Arizona.

Combine all three, for example through an Alphabet investment in Lyft, and you have a new model of transport as a service that would be a cheap compelling alternative to traditional car ownership, according to RethinkX, a think tank that analyzes technology-driven disruption.

One key advantage of electric cars is the lack of mechanical complexity, which makes them more suitable for the heavy use allowed by driverless technology, Francesco Starace, chief executive officer of Enel SpA, Italy’s largest utility, said in an interview. “I don’t see driverless being pushed into internal combustion engine” vehicles, he said.

After disassembling General Motors’s Chevrolet Bolt, UBS Group AG concluded it required almost no maintenance, with the electric motor having just three moving parts compared with 133 in a four-cylinder internal combustion engine.

“Competitiveness very much depends on the utilization of the car,” Laszlo Varro, chief economist at the International Energy Agency, said in an interview. The average Uber vehicle covers a third more distance than the typical middle-class family car in Europe, amplifying the benefit of lower running costs to the point that “the oil price at which it makes sense to switch to electric is $30 per barrel lower,” he said. 

Uber on Steroids

The total cost of ownership of electric and oil-fueled vehicles will reach parity in 2020 for shared-mobility fleets, five years earlier than for individually-owned vehicles, according to Bloomberg New Energy Finance.

Already in London, Uber plans for its UberX service to be hybrid or fully electric by the end of 2019. Its rival Lyft aims to provide at least 1 billion rides a year in autonomous electric vehicles by 2025, saying they can be used much more efficiently than gasoline-powered cars.

This combination would be “the Uber model on steroids,” Steven Martin, chief digital officer and vice president of General Electric Co.’s Energy Connections unit, said in an interview. “Once you have complete autonomous operation of a vehicle, then my desire to own one is going to go down and I’ll be more willing to sign up to a subscription service.”

Autonomous Hurdles

The transition to fully autonomous fleets may not match the speed of the smartphone revolution because of the many regulatory, legal, ethical and behavioral hurdles. Self-driving technology should become available in the 2020s, but won’t be widely adopted until 2030, BNEF says. Even so, the shift to electric cars could displace about 8 million barrels a day of oil demand by 2040, more than the 7 million barrels a day Saudi Arabia exports today, the London-based researcher says. That could have a significant impact on oil prices—a drop of 1.7 million barrels a day in global consumption during the 2008-2009 financial crisis caused prices to slump from $146 a barrel to $36.

That doesn’t mean oil giants like BP or Exxon Mobil Corp. are heading for an inevitable Nokia-style downfall. While transport fuels account for the majority of their sales, they also have huge businesses turning crude into chemicals used for everything from plastics to fertilizer. They also pump large volumes of natural gas and generate renewable energy, both of which could benefit from increased electricity demand.

Even if electric vehicles do grow as rapidly as BNEF forecasts, the world currently consumes 95 million barrels a day and other sources of demand will keep growing, said Spencer Dale, BP’s chief economist. The London-based energy giant expects battery-powered cars to reduce oil demand by just 1 million barrels a day by 2035, while also acknowledging the potential for a much larger impact if the industry has an iPhone moment.

The sheer breadth of the potential disruption makes it hard to predict what will happen. When Steve Jobs unveiled the iPhone, few people anticipated that it meant trouble for makers of everything from cameras to chewing gum.

“The smartphone and its apps made new business models possible,” said Tony Seba, a Stanford University economist and one of the founders of RethinkX. “The mix of sharing, electric and driverless cars could disrupt everything from parking to insurance, oil demand and retail.”