The real reason we will all drive electric vehicles
Saving money will be the main thing that turns people on to EVs.
By Matt Finch
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Electric vehicles (EVs) are, for the most part, brilliant. They are the answer to our air pollution problems. They help us combat our climate change problem. They are better for energy security. They will probably help solve any potential future grid balancing problems. They even solve the problem of the car being cold on a winter's morning (you can start an EV’s climate controls from the comfort of your house). But none of these will be the reason why they will become the dominant mode of transport for most of us. That would be cold hard cash.
The average commute to work in the UK is now 9.32 miles, or 15 km (2011 census figures), so in a normal week a commuter will do 150km, plus a few more (for a trip to the shops, etc.). Let’s say 180 km.
The Nissan Leaf (the UK’s current best selling EV) needs 34kWh (using NextGreencar calculations) to do 180km. If you’re on British Gas standard variable electricity tariff (i.e. the tariff that has the most UK households on), this will cost you 13.53 pence per kWh (ppkWh) if you’re in Scotland, and 15.83 ppkWh if you’re in the South West (before you ask, I dunno. Maybe British Gas doesn’t like Cornish people?) So the weekly transport bill for a Scot on British Gas’ standard variable tariff is £4.60, and for a Cornishman is £5.41 a week.
The good thing is that these figures are pretty much the maximum an EV driver will have to pay for this weekly commute. Using (for example) Birmingham-based Tonik Energy’s Economy 7 rates, an EV owner could charge their car for 8.1 ppkWh, meaning their weekly transport bill would be just £2.75. And even that could be reduced. Future EV models will almost certainly be more efficient, getting you further on less electricity. Gyms, shopping centres and supermarkets will try and win custom by offering free electricity for EV owners. And of course, some places of work will also offer free electricity as an employee perk. Furthermore, some energy companies may well offer ‘free miles’ in exchange for access to an individual's car battery (take a bow, Ovo Energy).
In short, an individual car owner's running costs could go very low. Anyone wily enough to get the boss to pay for electricity will get free transport. A Tonikly-charged Brummie that only charges their vehicle at night will pay just £143 per year. Even a Cornishman will only pay £281.32.
Obviously combustion cars have different characteristics. For a start, since a combustion driver (probably) doesn’t have a petrol pump at home, (s)he doesn’t have the luxury of never having to drive out of his/her way to go to a petrol station.
But the main characteristic is that when you’re there you have to pay more than an EV driver for your weekly transport. How much more is dependent on a number of factors: the age of your car, how you drive it, and so on. But even with the newest, most efficient combustion cars a driver will pay more. The UK’s average new car fuel consumption in 2016 was 5.4 litres per 100 km (lp100km) for petrol vehicles, and 4.5 lp100km for diesel vehicles. So an ‘average’ petrol driver needs 9.72l for their weekly transport, and a diesel driver needs 8.1l. The average price of a litre of fuel is now around £1.29 for petrol and £1.32 for diesel (May 2018 figures), meaning it costs a petrol driver £12.54 a week, or £652 a year to drive around, and a diesel driver £10.69 a week, or £556 a year for their transport. And remember, this is for brand new cars - most people cars are not brand new, and therefore they probably pay more.
So the real reason for EVs suddenly becomes obvious: running costs are tiny compared with those of combustion vehicles.
Whilst oil prices can come down and electricity prices can go up, the chances of them achieving parity are slim. I’d rather not pay more for something if I have to, and I’m sure most individuals will feel the same. Vehicle excise duty costs are currently cheaper for EVs, but will eventually be the same for both. Insurance costs should be the same. Maintenance costs are cheaper for EVs already (there are less moving parts in an EV, so less to break). And the beautiful thing is, the more miles you do, the more you save.
Range anxiety
But there is a problem with doing more miles in an EV, and that’s the fact that you could approach the maximum range of the car. Solving range anxiety (the worry that your battery will run out of power before your destination is reached) is the major focus of EV manufacturers, and new models are pushing the boundaries (literally). Using the Nissan Leaf as an example again, the 2018 model can do 168 miles on a single charge. The 2019 model will reportedly be able to do 225 miles.
Whilst new EV models are increasingly pushing the maximum range, solutions are also coming from other sources.
One unlikely white knight could be utility company National Grid. It has identified 50 strategic sites where it could supply enough electricity to to enable ultra fast charging. The chosen sites would mean that more than 90% of drivers would be able to drive in any direction from any location in the UK and still be within 50 miles of an ultra rapid charger (meaning you could ‘fill up’ an EV in the same time it takes you to fill up currently). National Grid estimates that building that infrastructure would cost between £500m and a £1bn.
(Note: The AA were called out an average of 364 times a day by drivers who put petrol in a diesel car, or vice versa. The RAC can trump that though, getting through an average of 2271 callouts a day from drivers that had run out of fuel (2014 figures). Whilst it is impossible for EV drivers to put the wrong type of electricity in their car, they can, and some will, ignore the warning lights and run out of charge.)
Upfront cost
EVs can’t currently compete with combustion vehicles in another area: the upfront capital cost. Right now, combustion cars win that contest hands (and prices) down. They are cheaper, but the difference is that EVs are dropping in price, whilst combustion vehicle prices are stable.
Eventually the two curves will cross each other. Investment bank Morgan Stanley estimates that this will happen in 2025, as does Nissan. Bloomberg New Energy Finance believes the date will be 2024.
Higher capital costs, then, but lower running costs. Last year, investment bank UBS estimated that the total lifetime cost of an EV will equal the total lifetime cost of a combustion vehicle in 2018 about now. And for EnergySupermarket.com, that day has already arrived, with EVs costlier than petrol models but cheaper than diesels - overall, very much in the same ballpark.
Why pay more?
So capital costs are coming down, and range anxiety can be fixed. This begs the question: why would you pay more for something when you could pay less? Why would you buy a petrol or diesel car, when an electric one will save you money? Of course, petrol and diesel cars will still be on sale, but the question to an individual suddenly becomes ‘how much more are you prepared to pay for (mostly unneeded) increased range?’. And this is the real reason why, at some point in the early to mid 2020s, sales of EVs will almost certainly take off.
Whilst the annual savings for an average individual might only be a couple of hundred quid, there will be economic effects for the nation.
The UK is already a net importer of electricity - net imports equalled 4.9% of electricity supply in 2016. The amount of electricity we import in the 2020s is very dependent on decisions being taken now: will any new nuclear plants be up and running? How many more wind turbines will there be? Will tidal be a contributor? All things being equal, if there are a lot more EVs driving around, it is likely that we will need to import more electricity, which obviously will a) cost the nation more, and b) give rise to energy security concerns. These are definite issues.
However, when it comes to combustion vehicles' energy source - oil - the picture is less rosy.
In 2016 the UK’s drivers drove an estimated 323.7 billion miles. To do this, the petrol drivers used 12 million tonnes of oil, whilst the diesel drivers accounted for 24.6 million tonnes (interestingly, this is roughly the same amount of oil used for driving as in 1995. As our cars have become more efficient, we’ve simply cancelled out the saving by driving more of them further).
Why mention this? Well, the UK is a net importer of oil, and as the North Sea oil fields gradually fade into obscurity (if nothing else changes) we will have to import more and more. In 2016, across all oil products we had to (net) import more than 10 million tonnes to match our thirst for the black stuff. Being a net importer of oil (or, in fact, anything) means being a net exporter of the cash used to pay for the imports. As I write this (June 2018), a tonne of oil costs $464, so 10 million tonnes collectively cost $4.64 billion, or roughly £3.5 billion.
The difference between being a net importer of electricity and a net importer of oil is that we can relatively quickly build new electricity generation capacity, but we can’t find a new oil field. Regardless, you can see three and a half billion reasons why the government would want to switch the UK car fleet to EVs. This ‘EV dividend’ is the same as giving everyone in the country £50 to go and spend as they like. Every year. The ongoing economic boost would be most welcome, and that’s before even considering the fact that our air would be cleaner and our greenhouse gas emissions greatly lowered. It certainly puts National Grid’s one-off ask of a billion quid to be found from somewhere look like a smart investment. Obviously there will be losers - the oil companies being the obvious ones - but there will be winners too. The main group of winners will be the country's commuters.
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