The False Dawns of LEVs – A brief discussion of previous LEV failures

There is a rather pessimistic saying that history is bound to repeat itself which is a modification of George Santayana’s comment “those who cannot remember their past are condemned to repeat it”. This tautology has been adapted to serve a myriad of different purposes ranging from financial planning to military strategy. I for one think that it is a sound rule to keep in mind and it is something the current generation of people and companies working in the EV market should consider.

When the personal automobile first hit the roads in the early twentieth century the market was initially dominated by EVs. They were by far technically superior to their ICE compatriots but this superiority was quickly eroded by advancements in ICE engineering and also in its associated fuel, petroleum. It wasn’t long until pretty much every vehicle on the roads was powered by an ICE and this was how the market remained for the next 70 years. Things would change in the early 1980s with the automotive industry and industrialised economies having to take account of an external threat. The Oil Crisis’ of 1973 and 1980 showed how dependent oil importing industrialised nations were on a steady inflow of petroleum into their economies. When these supplies were put in danger oil prices rose dramatically with fuel shortages occurring across the globe.

LEVs – The Possibility of a Rebound Effect

Efficiency is one of those buzz words that has become embedded in professional circles with managers consistently stressing the need to continually increase it. In its simplest form, efficiency is an assessment of the level of output associated with a given level of input. By increasing efficiency, you are increasing the level of output given the same level of input. This seems like a win-win situation both for managers and systems analysts.

In energy terms, national statistics monitor the level of energy input required into the economic system of a country to generate a designated quantity of output (usually USD$). This statistic has decreased significantly over the last century as our industrialized economy became much more energy efficient. In relation to passenger vehicles, the internal combustion engine has undergone a similar transition with more energy being generated from a single input of fuel driven by technological advancement. It is not surprising that this improvement in energy efficiency has not all went into increasing vehicle range. Instead, vehicles have become more powerful, heavier and now incorporate more consumer electricals. Similarly, as our vehicles have become more energy efficient we have chosen to increase their utilization with substantial increases in vehicle miles driven.

The Government may want LEVs to Substitute for Conventional Vehicles but don’t be Surprised if they act as Compliments.

Over the past 60 years in the UK we have witness a dramatic increase in the vehicle miles driven of passenger vehicles by around 20 times. This has been due to a combination of an increasing national vehicle fleet with these vehicles being driven much further distances. 60 years ago it was uncommon for a household to have a single car whereas now multi car households are the norm. These trends are set to continue in the future with both the quantity of vehicles on the roads, the number of multi car households and the distances driven by these vehicles set to increase towards 2025.

If the UK Government desires to be able to meet the commitments it set out in the Climate Change Bill (cutting CO2 equivalent by 80% by 2050 with 4 year Climate Budgets) it must decouple this estimated growth from CO2 emissions. Not only that, it must also reverse this relationship so that CO2 reduces even whilst we are buying more cars and driving them further.

The Search for Stability

It wasn’t too long ago that Gordon Brown, the then Chancellor of the Exchequer, claimed to have banished boom and bust economic business cycles leading to an environment of stable financial prosperity. What a difference a few years can make, now instead of enjoying unrivalled stability we are have to cope with a much more uncertain world where, if short term prospects seem shaky, medium and long term predictions are almost worthless. This world of uncertainty goes all the way up from the micro household level, where individuals are worried about their jobs and mortgage payments, to the macro government and international levels where fiscal restructuring and sovereign debt are major topics of debate.

Uncertainty and instability are not always bad things. Many financiers have made large profits from being able to accurately plot the fall of companies, betting on stock price decreases. It also generates a need for more advanced prediction and estimation techniques stimulating academic and professional innovation. Some companies specialize in “bad times” services such as insolvency firms, debt restructuring agencies and bankruptcy accountants. Unfortunately, for the vehicle market and most notably LEVs, uncertainty is not desired and can lead to a great deal of distress.

Marginal Abatement Costs of LEVs: Is it an open and closed case?

It seemed to me that, leading up to the worldwide economic recession, climate change was building up to a critical mass of public exposure and concern. A large and increasing quantity of airtime and newspaper coverage was helping propel this topic into the mainstream of public attention. Perhaps, when the good times were rolling, we had the luxury of caring about things above and beyond the basic human needs of providing food and shelter for our families. It has been proven empirically that as a Nations Gross Domestic Product increases past a certain point, so too does a desire to live in a clean and unpolluted environment (see Environmental Kuznets Curve).

Since 2008, with the recession in full swing, the debate regarding Climate Change took a back seat to “more important”(read more short term) fundamental issues. Public concern about the environment fell off dramatically leading to lower levels of media and political attention. Politicians in developed nations were all for installing ambitious targets and legislation to reduce greenhouse gas emissions when the times were good and capital was plentiful. Now that Sovereign Debt is a major issue in most Western economies, politicians are being asked to quickly reduce their nation’s budget deficits leading to some tough decisions that are needed. In the UK, some departments are facing 40% funding decreases and are being asked to do more with less. Added to this, the developed economies have not nearly recovered as fast as those in emerging markets leading to a very weak and fragile recovery. Asking companies to invest more money into cleaner technologies and reduce their carbon footprints may have seemed like a good idea before the recession but now are being perceived as potential recovery busters. The last thing the UK Government will want to do is damage the economy’s chances of a speedy recovery so some of these potential climate change orientated measures are coming under greater scrutiny.

What is causing the Recent Vehicle Emission Reductions?

The SMMT (Society for Motor Manufactures and Traders) recently published their first half year figures relating to sustainability indicators. There has been a significant drop in the CO2 emissions figures of new vehicles registered in the last six months, decreasing by 4.5% to 145.2 gCO2/km. This is great news for those of us who want to see a move towards a more sustainable personal transport system. What we must find out now is what the reasons behind this decrease are so that we can ensure that they continue and prosper.

The background environment that motorists have found themselves in over the past few years has undergone some considerable changes. Firstly and perhaps most importantly the worldwide economic recession has put a brake on people’s finances encouraging them to consider large purchasing decisions in greater detail and look to save money wherever possible. The previous trend of the last decade of upsizing vehicles has been somewhat reversed with motorists now thinking about downsizing to enjoy greater levels of fuel efficiency.

New vehicle sales fell off rather dramatically during the start of the recession as households put off large purchases due to the increased uncertainty in the economy. The UK Government introduced a stimulus plan that encouraged households to part ways with old vehicles (over 10 years old since first registration) in exchange for a £2000 reduction in the costs of a new car. This incentive was widely subscribed to generating a substantial decrease in the average emissions level of the UK vehicle car fleet (under the principle that a new car will be significantly more efficient than a 10 year old vehicle). This incentive did not have any vehicle requirements attached allowing households to trade in their old cars for any new vehicle they desired. It was observed that households subscribing to this incentive generally tended to purchase new vehicles that were below the average new vehicle emissions vehicle. This was a unplanned for additional benefit of the UK Car Scrappage Scheme which not only helped prop up the UK’s large automotive manufacturing sector but also moved the new vehicle market in the right direction of lowering CO2 emissions.

Is Peak Oil the End of Liquid Fuels?

Across the world around 90 million barrels of oil are consumed in any one day. The vast majority of this consumption is in the transportation sector powering our planes, trains and cars. World oil reserves have stayed somewhat steady over the last decade however relatively few new “mega fields” have been discovered. The official statistics concerning these reserves are hotly debated with many analysts arguing the figure is actually much lower than what is officially stated. Petroleum politics between OPEC, other major oil producing countries and the world’s largest oil consumers make the picture of current world oil a murky one with a large degree of subterfuge and asymmetrical information.

Peak Oil is a phrase that has recently come into fashion to discuss the situation where oil extraction reaches its absolute limits and potentially starts to decline. What was initially a taboo subject in oil circles has become one of serious debate and concern. The oil industry has progressed from arguing against the entire principle of Peak Oil to stating that it is likely not going to occur for the foreseeable future. Other commentators disagree believing Peak Oil will be upon us imminently. Whatever the case may be, it is important to look into the likely effects of this situation for the automotive industry and discuss likely implications and possible strategies to minimise disruption and exposure.