When we started our Drive Green with Mass Energy & People's Power & Light program on November 2nd, we felt like we were catching a fast moving train. And nine months into the program, we can say that that’s an understatement. Month after month, sales in Massachusetts, Rhode Island, the US, and the world are significantly higher than a year before. Here in America, we have seen strong sales from Tesla (Models S and X), Chevrolet Volt and Bolt, Toyota Prius Prime, and Nissan LEAF. But where is this all going?
In the next few months, we can expect sales to remain strong as the Tesla Model 3 becomes available. It should be popular in its own right, but it will also cause other EV producers to compete on both price and quality. Before long, we should see new versions of the Nissan LEAF, VW eGolf, and Hyundai Ioniq. And then, over the next 3-5 years, we will see countless new all-electrics and plug-in hybrids roll off the assembly lines. Just about every passenger carmaker selling in the US is talking a big game – BMW, Volvo, Ford, and more. They are responding in large part to policies at the state level, specifically California and states that tend to follow California’s lead, such as Massachusetts and Rhode Island.
Meanwhile, we have recently seen big announcements coming out of Norway, the Netherlands, France, England, and India – all about phasing out gasoline and diesel. China, by the way, has more EVs than any other country and will for the foreseeable future. Billions are being invested on EVs and factories making batteries. One can see the snowball picking up speed and size as it rolls down the hill.
The principal driver (pun intended) for all this is the dramatic reductions in cost for lithium-ion batteries. With falling costs, car companies can increase the range of their cars, lower the price of their cars, or pocket the savings. All are good things for the market.
Without federal tax credits and state rebates, EVs are still more expensive than cars with internal combustion engines (ICE), but battery costs are falling faster than anyone predicted, including planners at Tesla, General Motors, and others. And that means there will come a time when an electric drivetrain will be less expensive than an ICE, without government subsidy. Bloomberg New Energy Finance forecasts that time will be circa 2025-2030.
But, first costs are not everything. In general, it costs less to travel a mile on electricity than on gasoline, even when drivers have to pay the average retail rate for electricity. Newer EVs are using electricity more efficiently too. I loved my 2015 Volt so much that when I needed another car, I got a 2017 Volt. The newer Volt gets significantly further per kilowatt hour than the older one. Pretty soon we will see the Hyundai Ioniq become available and while it won’t have the range of a Bolt or Tesla, it will use the least amount of electricity per mile. Progress.
And EVs typically require less maintenance than conventional vehicles because:
- The battery, motor, and associated electronics require little to no regular maintenance
- There are fewer fluids to change
- Brake wear is significantly reduced due to regenerative braking
- There are far fewer moving parts relative to a conventional gasoline engine.
When you combine all these parts of the equation; the falling cost to build, lower cost of energy, and lower cost to maintain, you can see how EVs will eventually have a lower “true cost to own”. In May, UBS projected that cost parity will occur in Europe as early as 2018 and in the US by 2025.
When utilities get around to offering lower rates for off-peak use, the time when most EV charging is done, the difference between electricity and gasoline costs will increase further. That’s not a subsidy. It’s just modern regulation. States need to catch up with the times and direct utilities to modernize electricity rate structures to support the electrification of transportation.
When you put these factors together, we can see the snowball, but we might not have a great sense of how fast and big it is or will become. So it’s fun to consider what the experts are forecasting. We like Bloomberg New Energy Finance, which has been very optimistic about the future for EVs. But as Bloomberg points out, while some groups are less bullish, they are all revising their forecasts up – and very significantly.
Exxon Mobil Corp. raised its 2040 forecast to 100 million EVs from 64.8 million the previous year. Last year BP predicted 71.4 million by 2035, and now it sees 100 million. The International Energy Agency more than doubled its base-case EV forecast for 2030.
OPEC (remember them) outdid them all. In 2016, the group predicted 266 million EVs in 2040, almost six times the year-earlier estimate of 46 million.
To get a real sense of how OPEC is trying to catch up to the snowball, check this out. They have a real incentive to understand what’s happening with EVs. Because it’s going to run them over if they don’t get out of the way.
This is exciting stuff. Cost parity without subsidies by 2025. But WITH subsidies and our Drive Green program discounts, you can buy or lease an EV today cheaper than the average price of a new American car. Here, we are becoming one with the snowball. What’s in your driveway?
P.S. Aside from the vehicles themselves, we obviously need more public charging stations if we are going to increase the number of EVs in Massachusetts and Rhode Island by a factor of about 30 by 2025 (goals set by governors of each state). But there are more charging stations in place than people think and most charging is done at home. The charging part of the equation will become easier over time as (a) we see ranges get longer and longer and as plug-in hybrids become more available, (b) EVs come equipped with onboard chargers capable of taking a faster charge, and (c) public fast charging stations become more prevalent. But we need more stations, so that is one of the priorities of our Advocacy program.