Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Opportunities of electric vehicles

Electric vehicles (EVs) have been gaining increased attention within the energy sector as policy makers look to move beyond decarbonising power to other sectors, including transport, and to tackle issues such as air pollution and the energy security implications of reliance on imported fossil fuels.

As well as providing environmental benefits, a number of organisations have highlighted that a rise in EVs could open up opportunities to enable grid flexibility and help with system balancing as EV batteries can be used as storage units. There are also a growing number of opportunities for companies working on developing technologies to make EVs more effective and more commercially viable. As such, businesses are increasingly calling for measures to support the transition away from fossil-fuel based vehicles.

Policy driving forward

In July the government launched its Road to Zero Strategy, which set out plans to meet a target for all new vehicles to be “effectively” zero emission by 2040 – and for every car and van to be zero emission by 2050. Building on the paper, the UK held its first Zero Emission Vehicle (ZEV) summit from 11-12 September at which Prime Minister Theresa May announced £106mn of government funding for projects developing innovative battery and vehicle technologies, along with £500mn from the private sector.

Similarly in Scotland, First Minister Nicola Sturgeon announced on 4 September that this year the Scottish government will invest £15mn to add an additional 1,500 EV charge points across the country, split across homes and businesses. The announcement came as part plans to more than double investment in new ultra-low emission vehicles from £8mn to £20mn.

Demand accelerating

Demand for EVs in the UK is expected to experience huge growth in the 2020s and 2030s. According to the latest figures from the Society of Motor Manufacturers and Traders, this trend is already picking up pace with sales of EVs reaching a record high in August, accounting for one in 12 new cars purchased in the UK. It found year-to-date sales of hybrid and plug-in cars was up 27.4% on 2017.

Revving up business interest

Businesses are also showing increased interest in the EV sector. Speaking at the ZEV summit on the opportunities presented by EVs, Director-General of the Confederation of British Industry (CBI) Carolyn Fairbairn said: “[…] a new chapter in the history of transport is being written,” adding: “business is seizing this opportunity. Companies are pouring billions into innovation, research and development.”

Ahead of the ZEV summit groups of businesses, as well as NGOs, academics and policy makers, called for the government to seize the opportunity for the UK to become a leader in low-emission vehicles. Led by trade association Energy UK and low-carbon consortium the Aldersgate Group, whose members include former Deputy Prime Minister John Prescott, National Grid and Tesco, the groups made several recommendations including bringing forward the government’s 2040 target, implementing affordable, efficient and reliable EV charging infrastructure, providing fiscal incentives to drive consumer interest in EVs, and work towards putting the UK at the forefront of global EV manufacturing through measures such as mandatory EV sales targets.

Elsewhere 11 major firms, including Sky and Siemens, announced support of London Mayor Sadiq Khan’s plans for the city to transition towards zero-emission vehicles by 2025.

Fuelling opportunities for business

The £606mn of funding announced at the ZEV summit includes £200mn for 200 fast-charging stations, the establishment of the UK’s largest vehicle battery manufacturing plant in Coventry, due to open early 2019, and up to £50mn for a new R&D Innovation Centre for EVs, rail, and renewables. Other recent government funding announcements include a new competition under the Faraday battery challenge offering up to £25mn for businesses working on developing EV battery projects that reduce costs, increase energy density per battery cell and improve recyclability, and a share of up to £22mn from Innovate UK and the Office for Low Emission Vehicles for UK businesses working on the development of advanced power electronics, machines and drives for automotive applications, improved energy storage and management, and development of lightweight vehicles.

As well as these supply chain opportunities, a report published on 12 September by Innovate UK estimated that for every £1 invested in low or zero emissions vehicle projects, up to £8.40 could be returned to the economy over 5-10 years, and up to £22.60 over 10-15 years. It added that the profitability of such projects could reach £1.9bn over the next decade.

EVs could also be used as part of a more flexible energy system by feeding back, as well as drawing out, power to buildings or into the grid depending on where demand it – a system known as known as vehicle-to-grid (V2G). V2G – along with other forms of energy storage – is likely to become more necessary to help manage the grid as less flexible, intermittent renewable supply comes online.

A report by independent policy institute Chatham House published in August said that higher demand for EVs will put pressure on the electricity system to deliver more power and require significant network upgrades. However, it highlighted growing evidence that highly flexible electricity systems have the potential to lower whole-system costs, mainly due to dramatic declines in the costs of solar and wind technologies projected to 2030. It also said that an estimated £2.2bn worth of anticipated EV-related network upgrades could be avoided if smart charging and V2G trials currently underway proved successful. It also warned that these lower-cost systems were dependent on policy and regulatory action to stimulate enabling technologies including smart EV charging, battery storage and digital energy management.

In terms of unlocking capacity, Chatham House estimated that by 2030 smart EV charging could open up 11GW of additional flexibility, equivalent to 18% of current generating capacity. The Powerloop V2G consortium – which includes supplier Octopus Energy, Chargepoint Services and UK Power Networks – goes even further and recently suggested that if half of the 11mn EVs estimated by National Grid to be on UK roads by 2030 used V2G to power households during peak demand rather than drawing from the grid, an additional 38GW of electricity supply would become available.

Conclusion

A diverse range of businesses are showing growing interest in EVs and with good reason considering the funding and grid-balancing opportunities emerging.