Bloomberg New Energy Finance predicts Australia’s slow start to the uptake of electric vehicles will quickly morph into a “fast finish” – particularly after the key financial tipping point is reached in 2025.
In the release of Australia-specific forecasts to add to its global predictions released last month, BNEF analysts say that by 2040, some 40 per cent of all vehicles on the road in Australia will have a plug, and 60 per cent of new car sales will be electric.
This will have benefits – lower cost to consumes, cleaner air, fewer emissions and less dependence on fuel imports. In fact, it predicts Australia will reach “peak oil demand” by around 2029 because of the impact of EVs.
It will have other implications – adding 11 per cent to electricity demand by 2040, but offering huge flexibility to a renewables-dominated grid.
And it will provide a large reservoir of storage – 350GWh – “behind the motor,” around the same size as the massive Snowy 2.0 pumped hydro proposal.
BNEF says the reasons for Australia’s slow start are clear – the availability of only a few (very expensive) EV models, and a lack of infrastructure.
Australia also does not have the government support enjoyed in other countries. In Australia, there is no EV target, no vehicle emissions target, no up-front purchase incentives, and little support from government for infrastructure.
Despite these hurdles, BNEF says interest is growing in the early adopter space. And as more models become available, and the issues around “range” are addressed, and costs come down, that will change rapidly.
Australia has trailed the world in the uptake of EVs, with only 0.2 per cent of sales going to EVs or plug-ins, but BNEF expects that sales will total 2,400 in 2018, accelerating to 27,000 in calendar 2022.
After that, and as tipping points approach and are passed, sales will jump to 6 per cent of all car sales (Australia sells about 1.2 million cars a year) by 2025, and then 28 per cent by 2030, although it warns that infrastructure could be a restraint.
By the time it gets to the early 2030s, Australia will have caught up to its global peers, and by 2040, Australia will have overtaken the global average of 55 per cent of new car sales and 33 per cent of the total fleet.
Australia will stand at around 60 per cent of new sales and 40 per cent of total fleet, in line with the EU, China and the US. This forecast is higher than BNEF’s estimate released in September 2017, when it predicted a sales rate of 45 per cent of the total market by 2045.
“We see a pick up in sales in 2019 and 2020 when mass market electric vehicles start entering the market and government fleets start buying electric vehicles,” says Ali Asghar, BNEF’s Australia based specialist in electric vehicles.
“Once EVs start to become cheaper and get a cost advantage over ICE cars, and when consumers start to find more value in EVs, we will see more of an exponential uptake.
“The only thing that is stopping it is network infrastructure constraints,” this includes the availability of charging network and access, for instance, for those living in multi-dwelling habitations.
Most of the EV market in Australia will in be medium-sized cars and SUV vehicles.
The implications for the energy sector are going to be fascinating. While a 40 per cent share, the fleet of EVs will add around 11 per cent to annual demand, although this will actually be dwarfed by the increased uptake of rooftop solar – which will be used by many to charge the vehicles
“This (amount of storage) is equivalent to Snowy 2.0,” says Asghar, ”and eight times the size of the stationary storage market.
“There will be a considerable amount of reserve ‘behind the motor’ – an exceptional opportunity for aggregators to come up with a model for consumers.”
And because households will not have to rely on the sort of prices that diesel or gas plants need to survive, they will happily sell in the peak to a lot less than the current $14,000/MWh peak.
“That’s bad news for a lot of peaking generators in the market,” Asghar says.
And there are other implications too. “Peak” oil demand could be reached in 2029, with 100,000 barrels of oil displaced – even earlier, with added efficiency improvements in petrol and diesel cars.
Another implication is the impact on government revenues earned through the fuel excises of between 35c-40c/litre.
That will be slow at the start, but by 2040 it could amount to $5.5 billion a year, meaning some form of substitute, possible a road use charge, may need to be introduced.