Driving the electric vehicle future

March 2019

In 2017 the Business, Energy and Industrial Strategy Committee launched an inquiry into the role of electric vehicles in the transition to a low-carbon economy.

In particular, it was looking to understand:

  • What are the key barriers to development of the UK's electric vehicle market?
  • Does the Government's Industrial Strategy address the challenges and opportunities?
  • What support for purchase costs should the Government provide after 2018?
  • How best can the Government ensure that there is consistent provision of charging infrastructure across the country?
  • Is the Government's road transport decarbonisation strategy sufficiently flexible to adapt to disruptive market trends such as driverless cars?

The announcement preceded the July announcement of plans for £246m of support into UK battery storage technology. In addition, and even more headline grabbing, Michael Gove announced plans to ban the sale of new petrol and diesel cars in Britain by 2040, following the lead of France, in line with the UK’s published air quality plan.

The fifth Carbon Budget suggested that the deployment of electric vehicles across cars, vans and small HGVs will reach 9% of new car and van sales in 2020 and around 60% in 2030. Even to reach these levels it is estimated that 1.5 million vehicles would be sold (out of a market of 2.5 million), equating an increase in new electric vehicle registrations of c.100,000 vehicles each year up to 2030. The current proposal to ban new petrol and diesel cars will clearly set an even more ambitious (and potentially unrealistic) target.

The UK already has some battery production capacity with the likes of Nissan, but significant market growth will be required, alongside corresponding investment in charging infrastructure, to meet the 2040 target. In this article we’ll consider the five questions above.

What are the barriers to the UK's electric vehicle market?

Cost is one of the biggest barriers – battery electric vehicles and plug-in hybrid electric vehicles, even after the Government’s current plug-in grant, are still cost prohibitive for many. The cost of batteries is the main contributor, although battery costs are expected to reduce further. For example, the Nissan Leaf costs almost twice as much as an equivalent non-electric Nissan Note, of which the battery costs the consumer some £9,500.

From a consumer point of view battery technology also constrains vehicle range and resulting journey time. Larger batteries are being developed but are unlikely to be accommodated on home chargers given the necessary power needed. That said, the Renault Zoe Z.E 40 has a real-world range of 186 miles as opposed to 80 miles achieved by the previous version.

Until charging infrastructure is much more pervasive, this will remain a big adoption barrier. This is also the case for c.40% of the population who do not have access to off street parking. EV charging infrastructure is dispersed and not interoperable. In practice this means that even where there are charging points, consumers are unable to use this with different makes and models of EVs.

In addition, growth of the EV market will be limited by current installed and planned OEM manufacturing capacity and the capacity of supporting supply chains. Of the 1.7m cars that were produced in the UK last year, 19,000 were electric, and 86,000 were hybrid. This represents a total of around 6%. Given that it is estimated that by 2025 one-third of all cars sold in Europe will be battery-powered, the UK has some way to go to achieve these levels.

The UK already has some battery-making capacity, with Nissan producing around 23,000 batteries in Sunderland for both the Leaf car — which is also produced on the site — and for the electric e-NV200 van, which is assembled in Spain. China, Korea and Japan currently account for almost all of the world’s electric car battery output, however, alongside Tesla Motors’ headline grabbing “gigafactory” in Nevada. It is estimated that of the 14 global factories planned or under construction, nine are in China.

Does the Government's Industrial Strategy address the challenges and opportunities?

The Industrial Strategy, currently out for consultation, provides detail regarding investment in science, research and innovation; developing skills; upgrading infrastructure; and the delivery of affordable energy and clean growth, relevant to the Electric Vehicle market. It highlights the UK’s expertise in early stage research and the importance of automotive manufacturing to the UK economy. But it does demonstrate the current challenge that whilst the UK is a leading player for University and related research and development, the commercialisation of such technology through to mass market has been traditionally much harder.

The Vehicle Technology and Aviation Bill (separate from the Industrial Strategy) also provides legislative foundations, addressing the issue of insurance for driverless vehicles and exploring the information provision, compatibility and accessibility of charging points, amongst other areas.

It is clearly incumbent on the UK Government to set out a consistent policy framework that targets any market barriers and accelerates any opportunities. It also has a duty to direct appropriate funding to stimulate the industry. Signs are positive in this respect. In 2015 the Department for Transport Government promised spending of more than £600m between 2015-16 and 2020-21, to support uptake and manufacturing of ULEVs in the UK, in addition to the £246m within the Industrial Strategy fund. In the 2014 Autumn Statement the UK Chancellor also committed £15 million to ensure that by 2020-21 drivers in England are never more than 20 miles from a charge point on the Strategic Road Network.

What support for purchase costs should the Government provide after 2018?

There is clearly significant momentum behind the consumer uptake of electric vehicles, with the number of registered electric vehicles increasing from ~3,500 in 2013 to over 95,000 by the end of March 2017. Falling battery and vehicle costs have contributed to this but the Government support of up to £4,500 has also played an important role.

The grant has been adjusted to include a purchase price cap and sliding scale based on emissions. It may also need to be adjusted to incentivise non-consumer uptake. It is interesting to note that the data for plug-in grants awarded demonstrates 87,162 claims (97% of total) given to cars and only 2,938 (3%) awarded to plug-in vans.

Price parity between electric and traditional vehicles based on total cost of ownership (excluding government support) is suggested to be reached at some point between 2020 and 2025. Price parity based solely on upfront purchase cost of vehicles is forecast to be reached even later. Whilst the current UK grants are committed to 2018, it is likely that the consumer will require support beyond this date, at least towards 2020, if not 2025+.

How best can the Government ensure that there is consistent provision of charging infrastructure across the country?

It is critical that an accessible, convenient network of charging points is available to support the adoption of electric vehicles. The Office for Low Emission Vehicles suggests that the UK’s electric vehicle charging network is one of the most extensive in Europe, with more than 11,000 public chargepoints, including over 900 rapid chargepoints. This will need to increase substantially to support adoption at scale.

The charging points that are already in place are of a range of types and technologies. The Open Charging Point Protocol should provide a minimum standard but is not enforced in the UK. Local authorities who have tendered for public charging infrastructures may be exposed to inadequate and unsuitable solutions if developers promote least cost over interoperability, for example. Organisations such as National Grid are pushing for technology, automotive and energy companies to be brought to together to find collaborative solutions for the standardisation of charging technology.

The majority of charging is expected to take place at homes overnight. The Government already provides a grant to plug-in vehicle drivers of up to £500 towards the installation of dedicated domestic chargepoints. 75,000 have been installed to-date and workplace and local authority delivered charging is also being encouraged. Highways England have committed to ensure a rapid chargepoint at least every 20 miles on the Strategic Road Network, with £15m set aside for this objective. The 2016 Autumn Statement pledged an additional £80m funding for charging infrastructure for the period 2017/18 – 2020/21.

Charging also presents a potential issue for grid and network operators. Whilst not all analysts agree, DNOs such as Western Power Distribution estimate that to accommodate a 40% penetration of households owning electric vehicles would require in excess of 30% of the electricity network across the UK to require intervention, at a cost of £2.2billion. Smart charging and vehicle-to-grid (battery) technology would help to make additional capacity available.

Is the Government's road transport decarbonisation strategy sufficiently flexible to adapt to disruptive market trends such as driverless cars?

Anticipated growth of full autonomous vehicles is expected to be substantial – by 2035, more than 12 million fully autonomous vehicles are expected to be sold per year globally at a market value of up to $77 billion. By 2040 the IEEE predicts that an estimated 75% of cars is expected to incorporate autonomous technology (IEEE).

A range of recent use cases is demonstrating the rapid development of autonomous vehicle technology from technology and more traditional automotive organisations, for example:

  • Ford is one of the leading car manufacturers creating driverless technology, including testing a fleet of Fusion Hybrid autonomous vehicles since 2013 and planned investment in Argo AI of £800 million to produce fully autonomous vehicles by 2021
  • Mercedes-Benz / Daimler has partnered with Bosch to develop an autonomous taxi service by 2020
  • Waymo has been testing self-driving vehicles since 2010, collecting more than 3 million miles' worth of data on public roads; it is currently testing self-driving trucks alongside competitors such as Uber, Embark, Otto and Peleton
  • Uber performed its first self-driving trucking delivery in October 2016: a 120-mile beer haul for Anheuser-Busch
  • Apple launched Project Titan back in 2014 to work on autonomous-driving technology. Originally hardware and software it is suggested it will focus its activities on artificial intelligencesupported by a 2016 spend of $10bn in research and development

As the Energy Technologies Institute notes, the potential impact of driverless cars would materially affect journey types, driving frequency and distances as well as the size, rate of turnover and utilisation of vehicles and resulting requirements for charging infrastructure.

The adoption of driverless cars and other disruptive trends is really too far off to be able to accurately forecast their full impact. The UK Government is investing £109 million into 38 automotive driverless and low carbon research and development projects, but the concern in terms of electric vehicles, is whether another technology or business model will replace them and hence negate their investment. This might include inductive charging or hydrogen power. The latter for example receives an estimated annual investment of £1.4bn per year and is backed by major automotive and energy firms as a potential alternative to electric vehicles, particularly in haulage or commercial applications.
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