by DavidSpratt | Jun 12, 2018 | Energy
In this fourth and final article evaluating whether electric vehicles are a fad or the future, I conclude they are indeed the future.
I can feel the cold chill of the climate change deniers and petrol heads breathing down my collar as I write.
I love a grunty V8 as much as the next Kiwi. But the words, “Show me the money”, aren’t restricted to a Tom Cruise movie.
Yes, there are issues around the distance range, price and style options of electric vehicles (EVs). Yes, you will require a three-phase electricity supply if you want to charge your EV in less than eight hours. Yes, we may even see the need in the long term for changes to the way we generate and distribute energy nationally.
Yet, despite these reservations, any EMA member looking at replacing their vehicles any time soon would be well advised to run the numbers before succumbing to the team’s demands for yet more heavy metal.
The reality about EVs compared to petrol/diesel vehicles is as follows.
Electric vehicles are cheaper to run
I asked Graham Galliers, a utility analyst at Total Utilities Management Group, to review the fuel costs for my trusty V6 Commodore and compare them to an electric car equivalent.
When he sent me the calculation table (below), I checked the numbers over and over. Surely, he had been smoking the wacky baccy? But no. Sober, sensible Graham had not fallen into the arms of a patchouli-scented, hippy femme fatale and joined the ranks of the planet savers. The numbers added up.
Even allowing for the assumptions we made around fuel tax, distance range and electricity charges, the economic case behind EVs makes sense today and will progressively improve in the years ahead.
The cost comparison for a business use vehicle travelling 15,000 to 60,000 km a year is compelling – based on a price of $2 per litre for petrol, and taking into account an equivalent amount (66.5 cents per litre) for Government fuel taxes, levies and duties.
Beyond 60,000km, the numbers get even better, but you do run into range issues that could make a hybrid option more practical than a fully EV option, in the short to medium term.
Electric vehicles are, of course, way more expensive to buy than the equivalent petrol vehicle. The associated financial calculations require more time and space than I have here. In each case, a lot will depend on the resale value at the end of the term.
I expect electric car prices to fall rapidly as production rises and competitive pressure sets in. At the same time, I expect the residuals for petrol and diesel cars to fall, along with their declining popularity.
NZ relies on fuel imports to drive our economy.
Yet we are the Saudi Arabia of the Pacific when it comes to renewables like hydro, wind and geothermal energy. Our entire balance of payments deficit would evaporate if we switched to our existing renewables for our vehicles.
Oil is the fuel of last century
Petrol-powered vehicles will be as relevant to this century as horse and buggies were to last century: 24 million horses in the US when the first Model T Ford rolled into production
in 1908, reduced to three million by 1960.
China will produce seven million EVs by 2025. Europe, the world’s second largest car producer, will not be far behind.
See you at the charging station.
Read more electric car analysis in the New Zealand/Australia context, or take a look at these electric car reviews.
by DavidSpratt | May 9, 2018 | Energy
In this Part III examining whether electric vehicles (EVs) are a fad or really are the future, we consider the implications for the supply of electricity and more.
What happens when New Zealand stops importing oil and substitutes it with hydro, geothermal, solar and wind energy to make our cars and trucks work?
To start with, New Zealand would move from a current account deficit to a budget surplus. That’s good news all round. Save money on oil, save the planet, sleep easy at night.
Except…
There are 3.9 million registered cars and trucks in New Zealand. They consume $11.8 billion worth of fuel each year and employ tens of thousands of workers selling, servicing and repairing these vehicles.
Electric vehicles on the other hand number just over 24,000. They require much less service and support and the margins for new car sales are so low that most dealers won’t want to be involved with them.
So, the move to EVs will place a whole lot of jobs at risk while at the same time requiring a whole new set of skills that may or may not be available in the market.
Oil companies, in the meantime, won’t be just sitting around the campfire singing love songs while awaiting the new dawn. Don’t expect too many electric car chargers at your local petrol station. Do expect the price of petrol to fall though.
Electricity supply
Just how our electricity network will cope, is a key question. Concerned at the vision of transformers exploding, fuses blowing and power cuts making candlelit dinners a less-than romantic interlude, I went to the oracle: Andrew Toop, GM Commercial at Counties Power. I hoped he might ease my fears.
He said it’s not as bad as people might think.
Andrew said, “Our country’s generation capability is already very substantial and the recent investments by Transpower in new transmission infrastructure gives us a great platform to work off.
“Also, efficiency gains from better housing, lighting and insulation choices mean national demand
for electricity isn’t growing all that quickly in many regions outside Auckland.
“So EVs could make a lot of sense, subject to us paying attention to the basics, like smart local networks, suitable transformers and ensuring the wiring we put in place in our new and existing buildings is up to spec.”
Let’s pay attention to some of that underpinning technology.
Taking care of the basics
New Zealand is a world leader in “ripple switching”, the system lines companies (energy distributors) use to switch hot water heaters on and off when electricity demand peaks around dinner time. This same approach could well be used to balance the load generated by cars being charged when people get home from work.
There is also a mechanism called “Time of Use Billing”. Commonly used in commercial settings, we are also likely to see smart retailers automating the management of householders’ electricity usage to ensure that peak loads are managed and that users are getting the cheapest price all the time.
Let’s not forget the EV itself. Onboard artificial intelligence already supports safe driverless cars (well, almost). The same smarts could be used to ensure the car charges itself when the price is low, and the power is most available.
Speaking of peak demand. You may be surprised to know that our current electricity system only hits peak load a few times each year, in fact, only 0.6 percent of the time. For the remaining 99.4 percent of the time, the system is working well within its capacity. Adding to that, I believe that the Government is subsidising the Australian owners of Tiwai Point to consume nearly 15 percent of our total electricity production, so it appears there is a fair bit of potential headroom to support the emergence of electric cars. New Zealand is, after all, the Saudi Arabia of the wind and hydro world. Why not take advantage of all that cheap, renewable power?
Read more electric car analysis in the New Zealand/Australia context, or take a look at these electric car reviews.
by DavidSpratt | Apr 4, 2018 | Energy
Last month’s article on electric vehicles elicited responses ranging from “hippy, coombyah, PC, Greenie horse poo” through to “Where can I get one of these gosh darn, new-fangled, electric buggies?”. Thanks to you all for your feedback.
Rather than take sides in the debate about whether or not we should be buying electric vehicles, let’s examine the drivers that inform the decisions we will all make around which vehicles our companies buy.
Price
Electric vehicles are expensive. Buying electric vehicles today, we can expect to pay BMW prices for Corolla performance. As production volumes rise we can expect this delta to shift to equilibrium. In the meantime, expect FBT to be high on the financial controller’s agenda.
Fuel costs
Petrol costs around $2 per litre. An electric vehicle equivalent is 30 cents per litre. For the average company car fleet, this is a huge saving. Expect changes though. The government taxes the heck out of petrol and diesel and will likely move to Electric Vehicle road user charges to protect their revenues. If the IRD is true to form you can expect the tax per kilometre to be the same in the future as it is today, regardless of the vehicle type you choose.
Resale value
Last month five German cities announced bans on diesel vehicles. A court ruling means many others may follow suit across Europe. This has seen the resale price of second-hand diesel cars in Germany plummet as up to 12 million diesel vehicles will be forced off their roads by 2020. We can expect to see residuals becoming a major question for procurement managers as the popularity of second-hand petrol and diesel vehicles declines across the world.
Servicing
Electric vehicles have around 20 moving parts compared to the 2000 parts we find in the average sedan. This translates into far greater simplicity, reliability and with that, much lower service charges. Expect huge changes in the way new cars are sold and serviced in the years ahead. Lifetime warranties and free service schedules anyone? Finding a trained electric vehicle mechanic might be a trick though.
Insurance
Insurance companies are looking with a jaundiced eye at the high price of buying electric vehicles and more significantly at the cost of repair. If you prang your $120,000 Tesla there is currently no repair facility in NZ. Your insurer will need to ship your pride and joy to Australia or write it off. That’s a recipe for weeks off the road and higher insurance premiums.
Range
Assuming you keep the air conditioner off and aren’t stuck in traffic, the average new electric vehicle has a range of around 200kms fully charged. This is less than half the range of an average petrol-powered car. A private car only travels 40kms per day on average and range will get sorted in time. Right now, though, most company cars don’t have the luxury of sitting around in the garage or being stranded on the side of the road.
Charging
It takes quite a while to charge an electric vehicle, from 30 minutes at a fast charge station through to twelve hours on a single-phase home connection. Add to this the lack of fast charge facilities and questions around just how well our distribution grids will cope with the peak demand of 3 million electric cars charging while we are cooking dinner and the industry faces quite a few challenges.
Choice
Today there are around 30 new electric vehicle car models available in New Zealand, compared with literally hundreds of petrol and diesel cars. By the end of next year, the number and quality of new electric vehicle car models will rise to over 100 while petrol and diesel choices will fall. Expect this trend to continue.
Lack of information
Finding unbiased data on electric vehicles is tough and in many cases, the information is contradictory and confusing.
One place you can all go for well-presented, easy-to-understand information is the Energy Efficiency and Conservation Authority (EECA). It is biased in favour of electric vehicles but nonetheless, it provides useful facts as you evaluate your options when considering buying electric vehicles.
This article is the second part of a series on electric vehicles. Part 1 explored the business case for electric vehicles. Next month I will look at the impacts of putting several million electric vehicles onto an already complex electricity grid. I will also explore the ways our government and our electricity industry is likely to respond to these challenges.
Read more electric car analysis in the New Zealand/Australia context, or take a look at these electric car reviews.
by DavidSpratt | Mar 2, 2018 | Energy
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.
by RichardGardiner | Feb 20, 2017 | Energy
I formed our company in 1999, with the energy part of our business covering both procurement (a commercial focus) and energy use optimization (a technical focus). Both are designed to minimize the expenditure of our business clients.
The energy sector where we operate has been significantly affected by the climate change debate. Knock-on effects of which have included the introduction of the Emissions Trading Scheme (a significant new tax) and the closure of various fossil fuel-based power stations in North Island.
The purpose of this blog is to step back from some of the partisan attitudes on this issue and hopefully take a balanced pragmatic view.
The Weather Machine
Let me emphasise from the outset that I have a background in economics and energy – not climatology. Climatology has however interested me since reading Nigel Calder’s book, The Weather Machine, in 1974. It is a subject that all of us should be concerned about for a raft of very obvious reasons.
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