True story. An employee took the flash new company Electric Vehicle (EV) up North on a sales trip. On the way home, they realised that the battery charge was running out so stopped in a small town to find a charging point. There was, inevitably, no charging station for electric vehicles so they rang the tow company and got a ride home alongside a towie with bad breath and even worse body odour. Back at work, the boss pointed out the switch that turned the hybrid vehicle back to petrol power.
My point? Electric Vehicles (EV’s) are still a bit of a mystery both to their users and to the people making the financial decisions.
Add to this the element of uncertainty of buying a car from a man who straps his second-hand sports cars to a space rocket and whose loss-making company can’t actually deliver a simple sedan on time and you must have to have reservations around updating your fleet from petrol to electric.
Despite the uncertainty let’s examine the business case for electric vehicles.
Business Case for Electric Vehicles
At a recent presentation to energy sector leaders, Gary Holden, CEO at Pulse Energy and a well-known thought leader and innovator, proposed that it costs, all up, around $10 to travel 100kms in a car and that it has pretty much always done so.
Simply put, it cost the same for a Model T in 1920 to travel 100km as it did for a Honda Accord to travel the same distance in 1990. The reason? Internal combustion engines are, and always have been, between 25% and 30% efficient. Any gains achieved through advances in technology are quickly swallowed up by faster travel – or slower if you are travelling on that great carpark known as the Auckland motorway network.
Along come electric vehicles and a very simple idea. Capture the energy of braking and stuffing it into a battery and 30% efficiency suddenly rises to 80%, 3 times more efficient than a petrol engine.
Cheap Electricity Provides Strategic Advantage
Now add the New Zealand strategic advantage, cheap renewable hydropower, and the comparative cost of electricity to that of a barrel of oil, roughly US$40 on average for the last forty-five years, is now almost exactly half that at $20. “In other words,” says Gary “for oil to compete with electric it would have to permanently return to pre- 1973 prices.”
Is it any wonder we are seeing major oil producers falling over themselves to drop the price of oil and investing in massively polluting extraction of shale oil and fracking in order to slow down the inevitable march of electric vehicles into the market?
Barriers to Adoption of Electric Vehicles Disappearing
So, what is stopping New Zealand’s companies from rapidly switching to electric vehicles, say by 2020? Not a heck of a lot according to Gary.
He believes, and I agree, that by 2020 the premium we pay for electric cars will be a thing of the past. The high running cost, inefficiency and plain nasty polluting qualities of petrol vehicles will mean that electric vehicle leaseholders will see higher residual prices being offered at the end of their three-year term (2023) Combine that with the electric vehicles superior efficiency, low operating cost and ever-increasing range and companies should be looking very, very hard at their vehicle choices.
There is, however, more to this equation than a simple cost per kilometre and residual value. Our electricity market is complex, riven with contradictions and slow to respond to demand drivers like electric vehicles. Next month I will have a close look at the forces in the New Zealand market that will either hasten or slow electric vehicle uptake.
This article is part 1 of a series in which I will explore the EV future over the coming months. Part 2 discusses buying electric vehicles.
Read more electric car analysis in the New Zealand/Australia context, or take a look at these electric car reviews.