Big oil firms are making contingency plans for switch to electric motoring, but questions still remain on powering the auto revolution
‘Last year I said that we were in the midst of an energy revolution, and this year it is even more evident,” said Marcus Stewart, a National Grid analyst.
Electric vehicles are coming, and they could well be taking over the world’s roads faster than expected. The whiplash is set to be felt across the energy spectrum: from renewable energy generators to oil drillers.
Barclays warns that the boom in electric vehicles will “undoubtedly” have implications across the big oil companies, from marketing strategies through to their optimal mix of oil and gas investment. By 2030, oil demand will be 2m barrels a day lower than it would have been. In the case of an accelerated take-up, the impact could rise to 4m barrels a day. Already Royal Dutch Shell and BP have signalled a shift from oil-heavy production to a greater emphasis on gas. They are also planning to roll out electric vehicle charging points and make service stations into “retail destinations”.
Although oil bosses are keeping a careful eye on the development of the electric vehicle industry, they are quick to point out that motor vehicles’ engines are a relatively marginal end point for their barrels. By BP’S estimates the world consumes 95m barrels of oil per day overall, with the global car fleet accounting for 19m, or around one fifth of that total. The rest is used to fuel planes and ships, and create petrochemicals that form the basis for a huge range of plastics and other synthetic materials. Add to this the legacy fleet of older cars and the steady appetite from trucks and other heavy vehicles, and peak oil demand seems further away.
But for the power industry the electric vehicle surge raises more pressing questions for the road ahead. National Grid has warned that the boom in the number of people charging up their cars could result in a surge in peak demand, potentially requiring hundreds of billions of pounds-worth of investment.
In one scenario, National Grid estimates that electric vehicles alone could cause peak power demand to climb by 1.3GW a year between 2025 and 2045. This would require the UK’S shrinking generation capacity to grow by the equivalent of two large gasfired power units a year, or one £18bn Hinkley Point C nuclear plant every three years. By 2030 the UK would need 8GW, almost three extra Hinkley projects, to meet the need of drivers who choose to top up their vehicles during peak hours.
Even with a hefty boost to generation capacity, Britain’s distribution networks and substations will require a major overhaul to cope with the roll-out of fast-charging connection points. There are three major obstacles: first, less than half of UK households have a garage and many do not have a permanent parking spot to host a connection. Also, for those who are able to charge at home, the connection will be unable to cope with fast-charging units without tripping a fuse if other appliances are running. Finally, a similar “pinch point” looms at the local substation level where reinforcement will be needed to avoid triggering blackouts. Fortunately, in the same report, National Grid paints a very different picture of how consumers might use electricity in the future – and how this could make electric cars an asset rather than a problem.
A heady roll-out of electric vehicles is expected to drive the cost of battery storage down at an even faster rate than expected, meaning drivers could be parking their electric cars next to affordable home batteries, which are linked to cheap solar panels. The battery boom means energy users can store the unused solar power to charge their cars at night, saving money and easing the pressure on the grid. Major wind farms, including the giant Burbo Bank project off the Liverpool coast, are already connected to batteries so that energy stored during windy nights can power homes when demand rises in the morning.
Using renewable energy more effectively means costs will fall, too. The shift in economics is expected to trigger a deluge of fresh investment into renewable power projects, without the need for subsidies. The cumulative impact of more renewable power – and better use of it – could help meet the demand created by electric vehicles in the first place.
“Given the possibilities we are on the cusp of at the moment, we might move to a world where energy is clean and abundant,” said Greg Clark, the Business Secretary. Let’s hope he has right of way.