The future of electric vehicle (EV) could be brighter than governments and oil companies have anticipated.
New research by Bloomberg New Energy Finance (BNEF) suggests that further, big reductions in battery prices lie ahead, and that EVs will, in the 2020s, become a more economic option than petrol or diesel cars in most countries.
The study, published on Friday, forecasts that sales of EVs will reach 41-million units by 2040, representing 35% of global new light-duty vehicle sales.
This will be almost 90 times the equivalent figure for 2015, when EV sales were estimated to have been 462 000 units. Sales last year were already 60% up on 2014’s number.
This acceleration between will have implications far beyond the car market, says BNEF.
The group’s research estimates that the sales growth of EVs will see them represent 25% of the cars on the road by 2040, displacing 13-million barrels a day of crude oil, but using 1 900 TWh of electricity.
This would be equivalent to nearly 8% of global electricity demand in 2015.
“At the core of this forecast is the work we have done on EV battery prices,” notes BNEF lead advanced transportation analyst Colin McKerracher.
“Lithium-ion battery costs have already dropped by 65% since 2010, reaching $350 per kWh last year.
“We expect EV battery costs to be well below $120 per kWh by 2030, and to fall further after that as new chemistries come in.”
“Our central forecast is based on the crude oil price recovering to $50, and then trending back up to $70 a barrel, or higher, by 2040,” adds senior analyst and author of the study Salim Morsy.
“Interestingly, if the oil price were to fall to $20 and stick there, it would only delay mass adoption of EVs to the early 2030s.”
Currently, the electric vehicle market relies heavily on early adopters who are keen to try out new technology, or to reduce their emission footprint, and on government incentives offered in markets such as China, the Netherlands and Norway.
Although around 1.3-million EVs have been sold worldwide, to date, with strong growth recorded last year, they still represented less than 1% of light-duty vehicle sales in 2015.
EVs are available in two forms – battery electric vehicles, or BEVs, that rely entirely on their batteries to provide power; and plug-in hybrid electric vehicles, or PHEVs.
A PHEV has a battery that can be recharged, but also a conventional engine as a back-up.
The best-selling BEV over the past six years has been the Nissan Leaf, while the best-selling PHEV has been the Chevrolet Volt.
The BNEF study’s calculations on total cost of ownership show BEVs becoming cheaper on an unsubsidised basis than internal combustion engine cars by the mid-2020s, even if the latter continue to improve their average mileage per gallon by 3.5% a year.
The study assumes that a BEV with a 60 kWh battery will travel 200 miles between charges.
The first generation of these long-range, mid-priced BEVs is set to hit the market in the next 18 months with the launch of the Chevy Bolt and Tesla Model 3.
“In the next few years, the total-cost-of-ownership advantage will continue to lie with conventional cars and we, therefore, do not expect EVs to exceed 5% of light-duty vehicle sales in most markets – except where subsidies make up the difference,” says Morsy.
“However, that cost comparison is set to change radically in the 2020s.”
* BNEF provides analysis, tools and data for decision-makers in the energy system.