The election is over, let’s get on with policy
In this note we take a look at vehicle standards to see the framework that electric cars can play in. This is less familiar territory to me so I am proceeding cautiously. Following this we will go on to look at lithium storage and its potential role, if any, for stationary energy supply.
As far as policy towards stricter vehicle emission standards and electric vehicles go, there is a ministerial working group working on a policy and it’s due to finalize its stance by mid 2017. Because this is the year the policy is being put in place, it’s really the tie for all lobbyists big and small to get on the case.
Our view is that EVs “should” be exempt from GST, stamp duty and luxury car tax. Infrastructure for street level EV charging should be put in place by networks in major cities in the same was as it is Paris, London and parts of the USA.
Australia has no policy about battery storage or electric vehicles. An economist might say, “that’s good, the market will decide”. However, even in pure economic terms this ignores the taxes and benefits built into the current oil and electricity supply arrangements.
Furthermore, it ignores a couple of economic forces that might well make it in Australia’s interests to do a bit to speed up the roll out of Electric Vehicles to Australia.
One such reason is the cost of imported oil and petrol, which according to the ABS oil stats totaled $34 bn in FY15 and of course is also a national security issue. The dollar value will likely be down in FY16 quite substantially due to the lower oil price. Australia’s dependency on oil and oil products is growing but has not seen much change in the past couple of years.
Secondly, Australia is one of the world’s largest sources of lithium and as previously discussed there are a number of listed Australian companies active in either producing or exploring for lithium.
Thirdly, Australia has a geographically dispersed electricity network with high, by global standards, distribution and transmission charges as a percentage of the delivered cost of electricity. From memory, the NEM has the longest contiguous transmission distance in the world.
Fourthly getting a bit more political about it. Batteries like rooftop PV are going to be vote winners rather than a vote loser. Every house that installs a battery or has an electric car supported by some kind of policy is a potential vote won.
On the other hand taxes on petrol raise substantial revenue, but the taxes are the lowest in the OCED save for the USA, Canada and Mexico.
We turn to fuel efficiency standards for passenger vehicles in other parts of the world.
Vehicle CO2 emissions standards
This graph represents official policy standards for much of the world’s motor vehicle fleet, but, in the real world these standards are not being met. Cars meet the standards in the lab but testing shows significant short falls in the real world. Still that is “just” a matter of enforcement. As we understand it Australia has no standards on CO2 emissions for passenger vehicles although the ICCT put us at around 200 grams CO2 per km as of 2012.
EV sales are growing strongly, but off a small base
Partly as a result of policy push, partly as a result of demand pull EV sales globally are growing strongly. For the four months ended April 2016 global sales were up around 42% compared to PCP. Still the market share remains tiny at just 180,000 sales for the four months.
In June China registered 34K new EVs up 154% on PCP and more, for the month, than the USA and Europe combined. The Kandi cylone and Kandi K17 5 seater claimed range greater than 150 km lead Kandi to top of the month EV sales in China at over 4.5 K.
Global Electric Vehicle goals and national aspirations
The ICCT published a 2015 summary of various country “goals” which we recreate below. However, once again the goals up to 2015 have not been achieved. Our point is that at least there are some goals.
Australia does have one policy, and that is the exemption for fuel efficient vehicles under luxury car tax mentioned below. That is a fuel efficiency standard though, not an electric vehicle policy. In addition QLD charges stamp duty at 2% for electric vehicles whereas most four cylinder cars in NSW, QLD and Vic pay 3%. So 1% on a $50 K car is $500.
Competition can work as well as regulation
Just as for stationary energy (electricity generation), where the combination of a carbon tax and a renewable energy incentive is clearly the most effective suite of policies, and where we can add energy efficiency into the mix, so it is with cars.
As well as better vehicle efficiency we need an incentive for EVs. Luxury car tax is paid at 33% of the cost above $75,526 for fuel efficient vehicles and $64,132 for other vehicles. The definition of fuel efficient is < 7 litres per 100 Km. That is not fuel efficient. Its not even close.
According to the ICCT the best design principles for EV’s include:
- Move incentives up front to the vehicle purchase and make their value crystal clear to dealers and consumers;
- Make the incentives available to the full target market.
- Commit to durable incentives that all the industry can rely on for several years. This facilitates investment in the supply chain infrastructure.
In our view relief from GST, luxury car tax and stamp duty, are policies that best meet these objectives.
The Australian situation “she’ll be right mate”
In a 2013 report Environment Victoria noted that:
- Transport is the second largest source of CO2 emissions in Australia responsible for about 80 mt per year.
- New cars purchased in Australia are about 41% more CO2 emitting than those in the EU. Yes you read that right, 41%. Still that has to be read in the context that European cars probably aren’t meeting the standards they are supposed to.
- The average rate of fuel consumption in Australian vehicles has hardly changed since 1963! Engines have become more efficient but its eaten up by air conditioning, 4 wheel drive, info systems etc.
Environment Victoria recommended that the Australian Government introduce a mandatory efficiency standard of 5L per 100 km (114g/km) by 2015. Fat chance. I’d have to sell my car!
2016 Federal government discussion paper
In February 2016 the Federal Department of Infrastructure and Regional Development published a discussion paper as a result of a ministerial forum headed by Paul Fletcher, Greg Hunt and Josh Frydenberg. Comments to the discussion paper closed in April and we counted 79 submissions on the web site.
The discussion paper stated.
“The working group will report by 30 June 2016 to the Ministerial Forum on measures to reduce noxious and carbon dioxide (CO2) emissions from the road transport sector. This will be followed by consultation in the second half of 2016 on draft regulation impact statements (RIS) for noxious emissions standards and fuel efficiency (CO2) measures that will present a full cost benefit analysis of options. The working group will report by 31 March 2017 to the Ministerial Forum on a draft implementation plan for new measures—aligning with the Australian Government’s commitment to announce new measures to deliver Australia’s 2030 climate change targets.”
The document states that for light vehicles Australia has adopted the “Euro 5” noxious emissions standards and these apply to all light vehicles sold from 1 November 2013.
Regarding CO2 the document stated that:
“The 2014 American Council for an Energy-Efficient Economy (ACEEE) International Scorecard ranked Australia last out of 16 major OECD countries for the energy efficiency of the transport sector.21”
Regarding electric vehicles, the discussion paper was, not unexpectedly, relatively unenthusiastic and based its views on work done by “Energeia”. The discussion paper states:
“Energeia considered policy options to encourage uptake of electric vehicles, and found that policies that seek to lower the cost of vehicles, such as subsidies or lower registration fees, resulted in a net economic cost. The cost of the subsidy outweighed benefits such as economic and employment growth and air quality improvements. Low cost policies such as allowing use of transit lanes and requiring manufacturers to increase model availability resulted in net economic benefits. Recharging infrastructure may be another limiting factor, but these facilities are starting to emerge”
ITK thinks that vastly, vastly underestimates the problems that EVs can solve.
David Leitch is principal of ITK. He was formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.
David Leitch is a regular contributor to Renew Economy. He is principal at ITK, specialising in analysis of electricity, gas and decarbonisation drawn from 33 years experience in stockbroking research & analysis for UBS, JPMorgan and predecessor firms.