Brand Watch: How energy security concerns are powering surge in EV use

Author: Oliver Balch

Source: reuters.com, July 1, 2022 (section Sustainable Business)

July 1 - The current hike in global energy prices is fuelling optimism in the electric vehicle (EV) sector, as energy security adds to the economic and environmental arguments for battery-powered transport.

Industry optimism came despite higher costs of charging an EV following a sharp rise in electricity prices on the back of sanctions against Russian oil and natural gas into Europe.

A recent study by Vauxhall Financial Services, for example, finds that the average EV owner in the UK is now paying 43% higher than prior to the Ukraine conflict.

But compared with the far greater spike in petrol and diesel costs, switching from fossil-fuels to electricity is a “clear money-saving tool”, states Jurag Ulehla, co-founder of Voltia, a Slovakian electric vehicle conversion company.

The precise saving varies according to the reliance of national electricity grids on non-renewable sources, with low fossil-fuel dependent countries such as Sweden and Finland benefitting most.

Even so, research by Voltia finds that, on average, around half of the total ownership cost of diesel vans is linked to the oil price, compared to just one-sixth for their battery-powered equivalents.

“So, even if the cost for that one-sixth increases by 50%, say, the relative impact of increased oil prices for an EV is much less than for a diesel vehicle,” Ulehla argues.

With a war on Europe’s borders, the issue of security is emerging as an additional driving force in the electrification of transport.

Following the EU’s commitment to ban imports of Russian oil, energy security has fast become a priority concern for European industry.

Filling the supply gap caused by the Ukrainian conflict adds to concerns about supply security resulting from the Covid-19 pandemic and restrictions to global logistics.

Both trends are pushing companies across the EV sector to look for solutions closer to home. On the manufacturing side, a case in point is British Volt, which recently announced its intention to invest over £200m in a full-scale battery “gigaplant” in Northumberland, UK.

Similar moves are afoot on the energy supply side, says Toddington Harper, founder and chief executive of the UK-based sustainable energy company Gridserve.

Gridserve, which operates 184 charging facilities across the UK, is one of the few charging firms to generate its own clean electricity. It is currently investing in a new 50-megawatt solar farm, due to come on stream early next year, to meet surging demand.

“We didn't anticipate that our charging demand would be as high as it is currently,” says Harper.

The observation dovetails with recent research from Volkswagen Financial Services UK, which shows that EV sales in 2021 outstripped volume levels for the past five years combined.

An additional driver of energy security is the “almost perfect match” between electricity demand by EV users and electricity production at the solar plants powering Gridserve’s charging network, Toddington adds.

“So, our charging network actually takes pressure off the grid, as well as providing the renewable energy supply,” he states.

Tim Anderson, head of transport at the Energy Saving Trust, concurs that energy security promises to become a “major consideration” for charge point operators going forward.

Ensuring that the electricity used to power EVs is as clean and local as possible is critical to future price stability, brand-competitiveness, and market penetration, he argues.

Technological advances will help, he adds: “We expect smaller-scale energy generation through solar and wind to continue to increase, with further innovation in energy storage and vehicle-to-grid (V2G) technologies to balance load.”

Improvements in battery storage and V2G systems raise the prospect of a generation of “prosumers”; namely, consumers who produce as well as consume. In the case of electrified transport, householders who use power from their own rooftop photovoltaics to charge their car represent a case in point.

Even with a more shored-up EV ecosystem, however, consumers across Europe are facing a cost-of-living crisis that threatens to dampen large-scale EV demand and slow the electric transition.

Rising charging costs add to the inherent premium already built into EV pricing, says Suzanna Hinson, battery lead at the UK-based Green Finance Institute. Given the “interconnected” nature of transport systems, the EV sector can reasonably look to government to help “de-risk” private investment.

“Mechanisms are also needed to make finance easier and more accessible for car buyers, such as bundled finance, which bundles together the cost of the new vehicle with the EV charger,” she says.

Potential policy measures to bring speed and scale to the sector go beyond those linked to public finance. Electrifying the fleets of public institutions such as the NHS is one option, for instance. A ramping up of the charging point approval process by local councils would also help.

Both suggestions are among proposals put forward by Chris Pateman-Jones, chief executive of the charging company Connected Kerb. But it does not just fall on government to take the first step, he says. Industry also has a role in ensuring EVs do not become the sole preserve of well-off consumers.

“Communities need educating about the reduced operating costs of an EV vehicle compared to a traditional petrol or diesel car, in addition to their improving range,” he says.

“But it is up to the industry to provide the proof in the pudding by making EV sustainable, accessible, affordable, and accessible to all.”

One example is the partnership between UK charging provider Pod Point and supermarkets Lidl and Tesco.

In conjunction with Volkswagen, for example, Tesco rolled out chargers in its 500th store in the UK earlier this year. Slower chargers (i.e. 7 kilowatts and 22 kilowatts) are free to use, while faster, second-generation chargers (50kW) are priced at £0.28 per kilowatt hour.

Despite inflationary pressures and supply constraints, Pod Point chief executive Erik Fairbairn remains confident that EVs will remain “significantly cheaper” than internal combustion vehicles.

“We don’t expect this fundamental running cost advantage in favour of electric vehicles to change in the foreseeable future,” he says.

Fiona Howarth, chief executive of Octopus Electric Vehicles (the EV arm of clean energy brand Octopus), believes EVs have “come of age” in the last few years, with more than 65 fully electric car brands available to UK consumers.

With a tank of petrol now nearing £100, an increasing number are exploring the possibility of making the switch: “And when they do, many discover that they can power their cars with local, renewable energy for a fraction of the cost. … It’s a win for the planet, as well as their wallets.”