Electrification is key to an energy transition in transport.

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Despite more efficient traffic planning and new mobility habits, motorised vehicles will continue to produce significant traffic volume in the coming years. If the transport sector is to become essentially CO2 free by 2050, traditional technologies must be replaced by alternative powertrain technologies.
 
This is all the more necessary given the growing global demand for automobiles. By 2050, the number of vehicles on the road could increase from 900 million to around 2.4 billion.104 This trend is only compatible with current international climate targets if the share of emission-free vehicles increases considerably in passenger and freight transport.

German politicians understand the challenge. The German Climate Action Plan 2050 calls for the decarbonisation of the transport section and for Germany to be a leading marker and provider of electric vehicles.  Moreover, it aims to reduce the cost and increase system reliability for hydrogren.105 But the legal framework for reaching these aims needs more work. The experience gained with renewables has shown that new markets arise provided investors believe the framework is reliable. Creating this framework is a task for lawmakers.

 

104. See OECD, ITF (2017).
105. See Bundesregierung (2016d).

  • Battery electric vehicles are the standard for efficiency and low-cost operation

    The electrification of road transport is a general term covering various types of vehicles:

    • Battery Electric Vehicles – BEV,
    • Range Extended Electric Vehicles – REEV,
    • Plug-in Hybrid Electric Vehicles – PHEV,
    • Fuel Cell Electric Vehicles – FCEV.106

    Each type of electric vehicle is more efficient than a combustion engine and is of central importance for the clean-energy transformation of the transport sector. Provided electricity is generated from renewables, the electrification of road transportation will play a vital role in the decarbonisation of land-based transport. Without it, this project will be almost impossible to realise.

    Of the above technologies, battery electric vehicles (BEV) are particularly advantageous because they use renewable electricity directly without transforming it into other forms, thus avoiding conversion loses.107

    This efficiency advantage in the entire process chain means that battery electric vehicles require the least amount of renewable electricity of all other decarbonisation options over a 100-kilometer trip. (See figure 6.1; for more on fuels, see Insight 7.) The second most efficient type is fuel cell electric vehicles (FCEV) running on hydrogen generated from renewables. Much less efficient are cars with combustion engines that run on renewable gas or renewable liquid fuel.



    The direct electricity use in battery electric vehicles for road transport is not only the most efficient energy option. On the basis of the current state of knowledge, it is also economically the most affordable form of decarbonisation. Relative to all other combinations of powertrains and fuels, battery electric vehicles cause the least amount of additional costs compared with a reference scenario without decarbonisation (figure 6.2).108 The cost balance takes into account all costs from today until 2050 for energy supply, petrol stations, charging station infrastructure and vehicle acquisition.109 Battery electric vehicles are the standard on which other powertrain and fuel combinations must be measured.110



    Electrification can be a means of decarbonisation not only for passenger cars but also for light utility vehicles. Short trips in cities and back to-base trips111 are particularly suitable for commercial transport and fleets. Smaller trucks can use the same energy supply and powertrain concepts as passenger vehicles.112 Even for larger truck models, pure electric engines are a possibility. Electric buses are already being used, especially in urban areas. In Germany, there are pilot projects with hybrid busses, plug-in hybrid buses and an increasing number of electric busses. Some of these can be charged without cable.113 Reducing noise and air pollution is an important motivation for the electrification of road transport, especially buses and light utility vehicles in urban areas (Insight3).

    Economic optimisation is important for assessing future technology options, but it is not always adequate for the successful use of new technologies. Factors such as public acceptance of alternative powertrain systems and how well they can be integrated into the energy system should not be neglected. It is very possible that, in addition to battery electric cars, other alternatives such as fuel cell electric vehicles will play an important role. And it is likely that a mix of different vehicles with alternative powertrain systems will be used. The exact composition of this mix mostly depends on the development of prices and ranges.

    106. According to sec. 2 of Germany’s 2015 Electric Mobility Act (Elektromobilitätsgesetzt, EmoG), an electric powered vehicle is “an entirely battery electric vehicle, a chargeable hybrid electric or a fuel cell vehicle.”
    107. The hydrogen for fuel cell vehicles must be produced from wind and solar energy, not from fossil-based fuels and natural gas, if it is to contribute to decarbonisation. For more on fuels, see Insight 7.
    108. In the reference scenario used by this study, conventional fuels (petrol, diesel, kerosene, crude oil) will continue to be the main energy sources for the transport sector in 2050. See Öko-Institut, KIT, INFRAS (2016).
    109. See Öko-Institut, KIT, INFRAS (2016). Figure 6.2 shows only local road traffic. In the cited study, the term “local road traffic” refers to motorised individual transport with passenger cars, motorcycles, light utility vehicles and trucks up to 18 metric tonnes. The study produces similar findings for long distance road transport. For more on freight transport, see Insight 8.
    110. Given the dynamic nature of this field, these cost prognoses are subject to change, in which case a new assessment will be needed.
    111. These are trips in which vehicles return to a charging station after reaching their destination. See Schaufenster Elektromobilität (2015).
    112. See INFRAS, Quantis (2015); Ifeu, INFRAS, LBST (2016).
    113. See NOW (2016).

  • Lower prices and greater ranges make electric vehicles more attractive

    High purchase costs, concern about range and a lack of charging opportunities are the main obstacles today keeping people from buying electric cars. For the success of fuel cell electric vehicles, the initial outlay is also a decisive impediment, as is the fuelling station infrastructure, which is a long way from covering the nation. But these factors will change noticeably in the coming years as the climate target benchmark years of 2030 and 2050 get closer.

    In the past decade, battery price projections have undergone a downward correction. Between 2008 and 2015, the forecasts for plug-in hybrid batteries dropped by 73%.114 Costs for electric vehicles and fuel cell electric vehicles are projected to drop considerably as well.115 For instance, costs for battery packs in 2015 were projected at 250 €/kWh. Between 2020 and 2025, they are expected to drop to 100 €/kWh. Prices for electric cars in the next few years are predicted to fall faster than predicted in previous studies.116

    Amid rising costs for internal combustion engine cars (a result of higher emissions standards) and falling battery prices a question has arisen: when will electric cars achieve cost parity with internal-combustion engine vehicles? Some use scenarios project that electric car prices will be able to compete with traditionally powered vehicles somewhere between 2023 and 2030.117 Car manufacturers in Germany and elsewhere have taken note and announced ambitious electric vehicle sales targets for 2020–2025.

    Increasing battery capacity has extended ranges per charge.118 Several major car manufacturers have stated that by 2020 their vehicles will have ranges exceeding 400 kilometres. If these can be reached in real-life use, concerns about limited range will no longer be an impediment to prospective buyers, especially because the range of fuel cell vehicles will also not be much higher.

    There is more uncertainty about how costs for fuel cell vehicles will develop, though. Here too, prices are expected to fall as more units are sold.119 Current forecasts for the 2030–2050 market penetration of fuel cell vehicles vary enormously.120 The industry leaders that make up the Hydrogen Council believe that, measured by the total cost of ownership (TCO), fuel cell vehicles have the potential to achieve cost parity with medium- und large-sized passenger cars by 2025.121

    Despite the promising technological developments in road transport electrification, it is not yet clear whether they can take hold quickly enough to provide the needed contribution to the decarbonisation of the transport sector. Crucial for this is not least the development of an appropriate legal framework. Germany’s current aim of putting six million electric vehicles on the road by 2030 will probably not suffice to reach the ambitious reduction targets of 40 to 42% relative to 1990 levels set down in the 2050 Climate Action Plan. Hence, the federal government must introduce effective and efficient policies to increase the market share of electric vehicles. Regulations must be robust yet open enough to permit innovation, such as the tried and trusted approach of adopting emissions standards. At the same time, regulation must be geared towards feasible, effective and cost-efficient technologies. One way to get electric vehicles on the market more quickly is to tighten CO2 standards for passenger cars and utility vehicles at the EU level. Many have proposed accompanying this strategy with zero-emission vehicle mandates like the ones used in California or mentioned in China’s latest draft policy. Should EU regulation not be enough for Germany to reach its climate targets in the transport sector, further national measures will be needed. One strategy that could be considered is a reform of the motor vehicle tax.

    114. See IEA (2016a).
    115. See ICCT (2016b); Öko-Institut (2014); ICCT (2016c).
    116. See ICCT (2016d).
    117. See NPE (2016); ICCT (2016b); ICCT (2016d).
    118. See ICCT (2016c).
    119. See ICCT (2016b); Öko-Institut (2014); McKinsey (2010).
    120. See TAB (2012). Cf. ICCT (2016b)
    121.Hydrogen Council (2017), S. 9: „When FCEVs reach at-scale commercialization, we are confident that cost parity (from a TCO perspective) can be reached by 2025 for medium to large passenger cars.“

  • Access to quick and reliable charging is essential

    Two of the impediments for more widespread public acceptance of electric vehicles are the lack of charging stations and long charging times. It’s not enough that most owners can charge their vehicles at home. Sufficient quantities of publically accessible charging stations must be available as well, especially in ­cities. Furthermore, the charging infrastructure must be aligned with users’ needs and grow in accordance with the market penetration of electric vehicles. Three factors make investment in charging infrastructure difficult, however. First, charging technology is rapidly changing, as the issue of inductive charging shows. The same goes for the communication infrastructure of electric vehicles. Finally, the charging infrastructure must be designed in a way that benefits the power system. Together, these factors pose complicated challenges for the private sector and for policymakers.

    The establishment of a suitable nation-wide network of publically accessible charging stations is the stated goal of the German federal government.122 The current plan provides for 36,000 standard charging stations and 7,000 rapid charging stations by 2020. The federal government has earmarked 300 million euros to encourage the construction of 10,000 standard charging points and 5,000 rapid-charge stations by 2020.123 The program is also designed to create an appropriate infrastructure for hydrogen and fuel-cell technology, with the aim of establishing 400 hydrogen stations by the middle of the next decade. Public funds through 2026 have also been set aside for this purpose.124

    In the long term, however, charging infrastructure should not rely on public funding alone. Rather, expansion must be supported by a mixture of private investment and seed funding from the state. The private sector is on the verge of an investment wave in charging stations for electric vehicles.125 Companies in the automobile, gas and oil industries are planning to build the first 100 hydrogen stations by 2018 or 2019.126

    What remains unclear which business models will be affordable yet profitable, especially for quick charging stations. The priority for lawmakers now should be to provide reliable conditions for investment.

    122. See LSV (2016). The Ladesäulenverordnung, Germany’s charging regulation enacted on 9 March 2016, defines charging points “as a suitable device designed to charge a one electric vehicle at a time” (Sec. 2, no. 9). By contrast, a charging station can have multiple charging points.
    123. See BMVI (2016e).
    124. See Bundesregierung (2016d).
    125. In November of 2016, Daimler, BMW, Ford, Porsche and Audi announced a planned joint venture for a Europe-wide network of rapid charging stations. See BMW Group et al. (2016). Tesla now operates its own rapid-charging network in Europe and has now built 56 supercharger stations in Germany. See FAZ (2016).
    126. See H2 mobility (undated).

  • Electrification requires a strategic approach

    The growing number of efficient cars and vehicles with alternative powertrains will decrease Germany’s dependency on foreign oil. However, the acquisition of resources for battery manufacturing can produce dependencies on other imports and cause new environmental problems. Moreover, this can lead to resource competition if, for example, resources for decarbonisation are required by different sectors at the same or if other applications have higher demands. Developments here need to be carefully observed in order to avoid or minimise (physical or economic) supply shortages. Discussions of the environmental effects of electric vehicles – such as the manufacture and disposal of batteries – should keep in mind that the long-term problems caused by combustion engines are no less challenging when it comes to climate change, the environment and raw materials.

    What is undisputable, however, is that a quick expansion of the market share of electric vehicles will raise questions about how to meet the demand for resources and cope with shortages. As the number of units sold increase, so will the demand for battery cells, most of which are now produced in Asia.127 This will bring additional import dependencies, whether directly through the import of batteries or indirectly through the demand for raw materials used to manufacture the battery cells. The German National Platform for Electric Mobility (Nationaler Plattform Elektromobilität, or NPE) projects that shortages in natural graphite and cobalt could occur.128 The availability of these and other resources such as lithium and the dominant market position of producer countries can have a major impact on battery prices. What is crucial is whether dependency on these resources can be reduced in the future and whether environmentally friendly and economic recycling techniques can be developed. The electrification of road transport requires new, comprehensive and proactive strategies that protect the environment while also securing resources.

    127. See NPE (2016).
    128. See NPE (2016); Ifeu (2016).

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