The electrification of transport
How, why and when the transportation sector will electrify.
Note: This article was written 31.8.2019 but remained unpublished (like most of my work) until now.
Electrification of Transport
The entire world’s transport sector, ranging from cars to planes to boats, are going completely electric, faster than you think. This is a major fundamental shift in technologies, that will impact everyone and is crucial for sustainability. In this post, we will go through a brief background of transport technologies, the benefits of electric and how this will change the world.
Background of electric transport
For many years, the vast majority of the world’s transport has been powered through Internal Combustion Engines (ICE), that essentially convert energy stored in fossil fuels into mechanical energy, through controlled explosions. Such mechanical energy is what makes the wheels/turbines/propellers turn and allows the vehicle to move forward. This technology powers everything from our cars, trains, trucks, boats, planes and motorcycles.
A new type of engine has grown rapidly the last few years. Being fully electric and powered by batteries, this type of vehicle is called Electric Vehicle (EV). The growth of EVs was enabled by advancements in battery technologies and EV designs. About 10 years ago, EVs were mainly proof of concept cars designed to illustrate how the future might look, today, it is becoming the new standard within transport.
The main difference in EVs, is the use of stored electricity, powering an electric motor. The key part here is the use of electricity. Stored electricity fundamentally means that you can take any energy generation method, such as solar or wind, enabling for zero emission transport. An ICE, will never be zero emission, because it specifically relies carbon combustion, as opposed to EVs, that depending on grid composition can be carbon neutral.
Case study: Tesla and the car industry
What sparked the international drive towards shifting all modes of transport to EVs, really came from the car industry. More precisely, with the growth and success of Tesla. During the last quarter, the new Tesla Model 3 became the top selling car by revenue, of all cars in US. Beating out ICE cars and other major brands like Toyota, BMW, Mercedes among many others. Although the transition to EVs would eventually come regardless, Tesla has demonstrated EVs benefits and inspired the world to go electric. Since cars are the largest mode of transportation internationally, it serves as a great case study , demonstrating the disruptive benefits of EVs and how an industry over a few years can go through a complete shift.
Currently, all major car makers are investing heavily and making grandiose plans to bring EVs to market. Volkswagen is investing €70b in EVs, Toyota is investing €13b, Daimler is investing €10b, and the list goes on. Essentially all investments into new cars, new engines, new fuels etc. are going exclusively into electric vehicles. The reason these investments are so large, is because the shift is so fundamental, and takes time. These investments are normally focused on research and development, but overlooks the extensive charging networks, manufacturing equipment changes and service infrastructure changes that come from a transition to EVs. Every major car maker wants to be the Tesla killer, but the only thing that is sure to have died, is the future of the ICE car.
Cost declines of electric powertrains
The enormous investments in EVs by car makers, will not only benefit the car industry, but contribute to the electrification of all transport sectors (and energy storage). For example, massive investments in battery technologies, will decrease the cost of batteries, increase production capacities, improve energy densities, decrease usage of scarce metals and improve reliability of batteries. This will benefit any application that utilizes batteries. For example, it will also make our phone batteries last longer, our computers lighter and more durable as well as enable use cases like electric trucks and planes.
Research from Ark Invest, demonstrate that Lithium Ion Batteries (the most common type of battery), follow a Wright's Law cost decline. What this entails, is that for each cumulative doubling of batteries produced, there is an 18% percentage decrease in production cost.
If you look over time, the yearly and especially cumulative production of batteries is increasing extremely rapidly. This in turn, accelerates cost declines which in turn accelerates adoption. This flywheel effect, makes it difficult to predict future disruption based on historical data. If based on Wright’s Law, you look based on cumulative production, there is a clear linear cost decline, but when we look at the corresponding adoption and production increases, they are highly exponential, and humans suck at exponentials
It is no coincidence that the current day large battery producers mostly consist of consumer electronics companies like Samsung, Panasonic and LG. And that their cells are both powering all computers, laptops and cars. In many ways, we have smartphones and laptops to thank for recent innovations in electric cars, electric scooters and electric bikes. Because they rely on the same batteries. With vehicles, there are other aspects to the drivetrain that matter, such as motors, electronics, regenerative braking and battery pack design. Although the biggest contributor to cost is batteries, these other factors are decreasing in cost at similar rates, which at increasing rates unlock new opportunities and use cases.
Benefits of electric
The excitement around electrification, comes from three benefits of EVs; performance, economic and environmental. An aspect often overlooked is the key performance increases that EVs have over ICEs. ICEs create a huge amount of noise and vibration, which requires architectures supporting ICEs to support such vibrations, as well as movement of gases and liquids within the ICE. EVs can build from the ground up for safety and endurance, with so many fewer parts, increasing total security. This is very evident when you look at safety ratings for vehicles such as the Tesla Model S, X and 3, which are the top 3 vehicles in the world when it comes to lowest probability of a serious injury of any car tested by NHTSA.
As an additional result of this simplicity, you can build very lean electric vehicles, such as electric scooters, as well as electric vehicles with way more space available than ICEs (such as the front-trunk: Frunk). Electric motors have instant torque (aka instant acceleration), meaning you have way faster response times in EVs. Leading to absurd acceleration times such as the Tesla Model S, a 4 door consumer electric sedan which is electric and is the production car with the fastest acceleration time in the world, beating million dollar race cars.
The performance consideration means the simplicity of design, manufacture and repairs will reduce production and maintenance costs. In the short term, most EVs will be more expensive than ICEs, but as production increases even the sticker price will be less than an ICE. Due to the fundamental simplicity in EVs, to both buy and own an EV will be much lower than that of an ICE car. Even today, a Tesla Model 3, has a cost of ownership that is cheaper than theToyota Camery (0.46$/mile Model 3 vs 0.49$/mile Camery over 5 year period). In the future, the cost of ownership will be a slim fraction of the ICE ownership costs.
The environmental benefits of EVs are mainly a reduction in emissions of CO2, NOx gasses and noise pollution. EVs are currently not carbon neutral since the energy used today often comes from fossil fuels, but the shift in transport infrastructure fundamentally enables EVs to become carbon neutral due to the new capacity to use electricity for transport. NOx gases and noise pollution, are huge issues that largely go away with EVs. Combined with the CO2 reductions, these benefits are key aspects why adoption of EVs save governments large amounts of money. There is a strong reason for why EVs, thus, should be subsidized, or at least receive some preferential treatment, since lawmakers indirectly have preferentially treated ICEs by not taxing their costs on society. Nations have strong reasons to push for the phase-out of ICEs, by banning them in cities, banning production/import of ICEs, huge gas taxes, car registration caps for ICEs etc. This is already happening, for example China has aggressively been pursuing this path, whilst most other countries have opted for more direct subsidies on EVs.
Limitations
Four major limitations are often quoted when it comes to EVs. Firstly, natural resources, specifically cobalt. Although the world has about 60 years of cobalt reserves left, we are increasing the amount used each year. I think this is a non issue, because we are aware of the issue and rapidly figuring out ways to use drastically less cobalt and even found chemistries without cobalt. Furthermore, like with almost any natural resource, increasing demand leads to increasing exploration for this resource. We have had about 40-50 years oil reserves since the 1970s, because exploration has matched usage. In the short term, it will be an expensive resource, but it still only makes up a small part of battery costs and is being displaced quickly.
Secondly, performance, especially range. In the short term, some applications will be limited by the range of batteries, but this will gradually be overcome with increasing battery densities and efficiencies. Next gen-technologies such as solid state and dry-electrode batteries, that are just a few years away, will unlock energy densities that allow for electric planes, long range trucking etc. There will be specialized transport needs such as military, rockets etc. that won't go electric, but the vast majority of applications will in time be served with battery technologies. Already today, a Tesla can drive just short of 600km on one charge, without the mentioned improvements.
Thirdly, costs. Some car manufacturers claim we will never reach price parity with EVs. I believe this more reflects that some old car makers are having a bad time being disrupted by EVs, rather than the reality of the tech. As the tech reaches scale and matures as outlined above, it is fundamentally cheaper than ICEs due to simplicity. As ICEs tech becomes outdated and lower in production, the price pendulum will swing heavily in favor of EVs.
Fourthly, that the lifetime carbon footprint of EVs is the same as ICEs or higher due to the energy intensive process of creating batteries and burning coal to power EVs. Although in some areas for some cars, this may be true, efficiency gains are making this point obsolete. Furthermore, the emissions from production and operation of EVs, comes from the use of energy. Grids everywhere are becoming greener, and increasingly powered by solar PV, wind and hydro. Even if all cars sold today were electric, it would take about 20 years to replace the existing fleet of cars. I think we will get to a point where our grids are green before having phased out ICEs. The only way to begin this transition is to start going electric whilst we are improving the grid composition. Regardless, it is more efficient to produce energy in a coal plant to power an EV than combustion in an engine.
Most limitations with EVs are a direct result of it being a new technology that has only reached limited scale and received minimal investments compared to other technologies. ICEs have been around for over 100 years, but are fundamentally limited. The short term limitations of EVs will soon be overcome, and will result in extreme disruption in all areas of transport.
Hydrogen EVs
So far, we have mainly alluded to talking about battery EVs, but there is another technology where you store energy in the form of compressed hydrogen, which is then converted to electricity in the car. This technology has been praised as the future, for many years now, but in reality will never get any serious traction. The primary reason is that in best case scenarios, Hydrogen powered vehicles lose 65% of the energy you charge it with, in the worst cases, this figure is much higher. The massive energy inefficiencies come from the processes of converting water into hydrogen gas, storing hydrogen, moving hydrogen and re-converting it to electricity in the car. Hydrogen is not a fuel, it is a form of energy storage, just like batteries.
The limitations with Hydrogen are not related to scale or lack of investments or infrastructure, but fundamental to the technology. As such, it is only in the short term that people will make bets on hydrogen powered vehicles, because in the long term battery EVs will dominate. A good indication of where these technologies are going is where companies are putting their money. No major car maker other than Toyota is making any bets on hydrogen. Today (2019), there are about 6,500 hydrogen vehicles available worldwide, half of which are in California, compared to 3 million battery EVs growing 50% YoY between 2016 and 2018.
Future opportunities
The global transport industry is a massive $8T (2015) industry, and expected to reach $15T by 2023, whilst going through a transformation to electric and autonomous vehicles. This disruption will have winners and losers. As a believer in the fundamental economic and physical benefits of electric propulsion systems, I strongly believe the leaders in electrifications within the respective transport modes, will be the big winners. Firms that are slow to adapt, fundamentally rely on ICE or relating infrastructure, will be major losers. Right now, cars, bikes and scooters have been the first to begin adoption. However, due to the density increases and cost declines, soon several major sectors will become promising subjects to electrification.
Density is especially important in applications where large batteries are required. Busses and trucks are natural next steps for electrification. Although early models already exist, mass adoption of those two are likely set to pick up in mid 2020s. Due to their heavy use, the operational cost of EVs will bring drastic cost improvements that will allow fast adoption. These two sectors are also major contributors to CO2 emissions, and of key economic importance. Several companies are pursuing the electrification of this sector, with promising initial results and an incredibly exciting path forward.
Many types of vehicles have long life-cycles and the sheer amount of vehicles around will result in a relatively long transition period. However, mounting regulations, significantly cheaper running costs and falling sticker prices will cause a drastic shift in all modes of transport. As densities continue to improve, new opportunities will be unlocked. This transition is in no way linear, and adoption is only getting faster. Forecasters have continuously been to conservative because they don’t understand the fundamental economics of EVs, and will continue to think linearly. Exponential electrification has already commenced, and it is what will get both us, and the world, where it needs to be.