Renewable Energy and the Future of Electric Vehicles
Dr. Evangelo Damigos; PhD | Head of Digital Futures Research Desk
- Sustainable Growth and Tech Trends
- EmergingTechnologies
Publication | Update: Nov 2022
Renewable Energy and the Future of Electric Vehicles
Electric vehicles (EVs) are expected to be powered by renewable energy sources in the near future, which could reduce greenhouse gas emissions and air pollutants from road transport. A high share of electric vehicles will require significant additional electricity generation, which, if not well coordinated, could further constrain the electricity infrastructure. Even in developed countries with a high share of renewable energy, the definition of charging strategies for a large number of electric vehicles can vary greatly depending on the type of renewables and the available conventional power generation. In general, coordinating the energy needs of electric vehicles can be a major challenge in countries with highly variable renewable energy supply.[1]
In addition to the potential of replacing fossil fuels, optimism about e-vehicles is also growing because of the benefits they offer in terms of greater energy efficiency and reduced local pollution. Nevertheless, there are serious concerns about meeting future energy needs for EV battery charging, which should ideally come from renewable sources. More importantly, the issue of the long-term sustainability of EVs is underlined by the risks associated with the supply of critical raw materials used in EV batteries and the emissions associated with the extraction process. For many countries that lack fossil reserves, e-vehicles offer the opportunity to become independent of foreign oil and develop a flexible infrastructure based on renewable power sources. Countries such as India, which are less industrialized but have significant potential for economic growth, are also seeking to exploit the economic opportunities offered by e-vehicles through local manufacturing of e-vehicles and batteries. These initiatives can help reap the potential economic benefits and create local jobs, along with other technological and environmental benefits that e-vehicles offer.[2]
Given the current trend towards electric mobility, it is obvious that fully electric vehicles and plug-in hybrid electric vehicles (PHEVs) have the advantage that they can be charged flexibly, as the power grid is close to most parking spaces. The safe supply of a vehicle's battery with energy from the grid, requires a charging station, commonly known as EVSE (Electric Vehicle Supply Equipment. Drivers can charge their vehicles overnight at home, in a residence, at work or, if one is available, at a public charging station. PHEVs are even more adaptable, as they can be fueled with petrol or diesel as needed. Currently, public charging stations are not as common as petrol stations. Charger manufacturers, automakers, utilities, clean cities initiatives, municipalities, and government agencies are collaborating to create a nationwide network of public charging stations.[3] Energy density is the key to ensuring sufficient range for battery-powered vehicles. The energy density of batteries for electric cars has increased over the past year. Some of the most powerful battery cells now achieve an energy density of over 300 Wh/kg, compared to around 100-150 Wh/kg ten years ago, meaning electric cars can travel twice as far with the same mass. This progress has been achieved thanks to continuous improvement in battery chemistry and cell design.
A recent analysis by the IEA estimates that the electric vehicles sales will rise to more than 74% in 2022. Beyond cars, investments are also being made in the electrification of buses and heavy trucks. Governments should continue to support the development of publicly accessible charging infrastructure, at least until there are enough e-vehicles on the road for an operator to maintain a charging network. Continued government support, either through regulations mandating the construction of charging stations or through fiscal measures and support, should ensure equal access to charging stations for all communities to ensure that no one is left behind in the transition. It is important to incentivize and facilitate the installation of charging stations in existing car parks. Coordinated plans for grid expansion and improvement, including digital technologies to facilitate two-way communication and pricing between e-vehicles and grids, are needed now to ensure that e-vehicles become a resource for grid stability rather than a challenge.[4]
[1] European Environmental Agency. (2016). Electric vehicles and the energy sector - impacts on Europe's future emissions. Retrieved from: https://www.eea.europa.eu/publications/electric-vehicles-and-the-energy
[2] Parajuly, K., Ternald, D., Kuehr, R. (2020). The future of Electric Vehicles and Material Resources. United Nations Environment Program. Retrieved from: https://www.unep.org/ietc/resources/report/future-electric-vehicles-and-material-resources-foresight-brief
[3] U.S Department of Energy. (2021). Electric Vehicle Benefits and Considerations. Alternative Fuels Data Center. Retrieved from: https://afdc.energy.gov/fuels/electricity_benefits.html
[4] IEA. (2022). Electric Vehicles Tracking Report. Retrieved from: https://www.iea.org/reports/electric-vehicles
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Objectives and Study Scope
This study has assimilated knowledge and insight from business and subject-matter experts, and from a broad spectrum of market initiatives. Building on this research, the objectives of this market research report is to provide actionable intelligence on opportunities alongside the market size of various segments, as well as fact-based information on key factors influencing the market- growth drivers, industry-specific challenges and other critical issues in terms of detailed analysis and impact.
The report in its entirety provides a comprehensive overview of the current global condition, as well as notable opportunities and challenges.
The analysis reflects market size, latest trends, growth drivers, threats, opportunities, as well as key market segments. The study addresses market dynamics in several geographic segments along with market analysis for the current market environment and future scenario over the forecast period.
The report also segments the market into various categories based on the product, end user, application, type, and region.
The report also studies various growth drivers and restraints impacting the market, plus a comprehensive market and vendor landscape in addition to a SWOT analysis of the key players.
This analysis also examines the competitive landscape within each market. Market factors are assessed by examining barriers to entry and market opportunities. Strategies adopted by key players including recent developments, new product launches, merger and acquisitions, and other insightful updates are provided.
Research Process & Methodology
We leverage extensive primary research, our contact database, knowledge of companies and industry relationships, patent and academic journal searches, and Institutes and University associate links to frame a strong visibility in the markets and technologies we cover.
We draw on available data sources and methods to profile developments. We use computerised data mining methods and analytical techniques, including cluster and regression modelling, to identify patterns from publicly available online information on enterprise web sites.
Historical, qualitative and quantitative information is obtained principally from confidential and proprietary sources, professional network, annual reports, investor relationship presentations, and expert interviews, about key factors, such as recent trends in industry performance and identify factors underlying those trends - drivers, restraints, opportunities, and challenges influencing the growth of the market, for both, the supply and demand sides.
In addition to our own desk research, various secondary sources, such as Hoovers, Dun & Bradstreet, Bloomberg BusinessWeek, Statista, are referred to identify key players in the industry, supply chain and market size, percentage shares, splits, and breakdowns into segments and subsegments with respect to individual growth trends, prospects, and contribution to the total market.
Research Portfolio Sources:
Global Business Reviews, Research Papers, Commentary & Strategy Reports
M&A and Risk Management | Regulation
The future outlook “forecast” is based on a set of statistical methods such as regression analysis, industry specific drivers as well as analyst evaluations, as well as analysis of the trends that influence economic outcomes and business decision making.
The Global Economic Model is covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes,
financing, the labour market and infrastructure.
We aim update our market forecast to include the latest market developments and trends.
Review of independent forecasts for the main macroeconomic variables by the following organizations provide a holistic overview of the range of alternative opinions:
As a result, the reported forecasts derive from different forecasters and may not represent the view of any one forecaster over the whole of the forecast period. These projections provide an indication of what is, in our view most likely to happen, not what it will definitely happen.
Short- and medium-term forecasts are based on a “demand-side” forecasting framework, under the assumption that supply adjusts to meet demand either directly through changes in output or through the depletion of inventories.
Long-term projections rely on a supply-side framework, in which output is determined by the availability of labour and capital equipment and the growth in productivity.
Long-term growth prospects, are impacted by factors including the workforce capabilities, the openness of the economy to trade, the legal framework, fiscal policy, the degree of government regulation.
Direct contribution to GDP
The method for calculating the direct contribution of an industry to GDP, is to measure its ‘gross value added’ (GVA); that is, to calculate the difference between the industry’s total pretax revenue and its total boughtin costs (costs excluding wages and salaries).
Forecasts of GDP growth: GDP = CN+IN+GS+NEX
GDP growth estimates take into account:
Market Quantification
All relevant markets are quantified utilizing revenue figures for the forecast period. The Compound Annual Growth Rate (CAGR) within each segment is used to measure growth and to extrapolate data when figures are not publicly available.
Revenues
Our market segments reflect major categories and subcategories of the global market, followed by an analysis of statistical data covering national spending and international trade relations and patterns. Market values reflect revenues paid by the final customer / end user to vendors and service providers either directly or through distribution channels, excluding VAT. Local currencies are converted to USD using the yearly average exchange rates of local currencies to the USD for the respective year as provided by the IMF World Economic Outlook Database.
Industry Life Cycle Market Phase
Market phase is determined using factors in the Industry Life Cycle model. The adapted market phase definitions are as follows:
The Global Economic Model
The Global Economic Model brings together macroeconomic and sectoral forecasts for quantifying the key relationships.
The model is a hybrid statistical model that uses macroeconomic variables and inter-industry linkages to forecast sectoral output. The model is used to forecast not just output, but prices, wages, employment and investment. The principal variables driving the industry model are the components of final demand, which directly or indirectly determine the demand facing each industry. However, other macroeconomic assumptions — in particular exchange rates, as well as world commodity prices — also enter into the equation, as well as other industry specific factors that have been or are expected to impact.
Forecasts of GDP growth per capita based on these factors can then be combined with demographic projections to give forecasts for overall GDP growth.
Wherever possible, publicly available data from official sources are used for the latest available year. Qualitative indicators are normalised (on the basis of: Normalised x = (x - Min(x)) / (Max(x) - Min(x)) where Min(x) and Max(x) are, the lowest and highest values for any given indicator respectively) and then aggregated across categories to enable an overall comparison. The normalised value is then transformed into a positive number on a scale of 0 to 100. The weighting assigned to each indicator can be changed to reflect different assumptions about their relative importance.
The principal explanatory variable in each industry’s output equation is the Total Demand variable, encompassing exogenous macroeconomic assumptions, consumer spending and investment, and intermediate demand for goods and services by sectors of the economy for use as inputs in the production of their own goods and services.
Elasticities
Elasticity measures the response of one economic variable to a change in another economic variable, whether the good or service is demanded as an input into a final product or whether it is the final product, and provides insight into the proportional impact of different economic actions and policy decisions.
Demand elasticities measure the change in the quantity demanded of a particular good or service as a result of changes to other economic variables, such as its own price, the price of competing or complementary goods and services, income levels, taxes.
Demand elasticities can be influenced by several factors. Each of these factors, along with the specific characteristics of the product, will interact to determine its overall responsiveness of demand to changes in prices and incomes.
The individual characteristics of a good or service will have an impact, but there are also a number of general factors that will typically affect the sensitivity of demand, such as the availability of substitutes, whereby the elasticity is typically higher the greater the number of available substitutes, as consumers can easily switch between different products.
The degree of necessity. Luxury products and habit forming ones, typically have a higher elasticity.
Proportion of the budget consumed by the item. Products that consume a large portion of the
consumer’s budget tend to have greater elasticity.
Elasticities tend to be greater over the long run because consumers have more time to adjust their behaviour.
Finally, if the product or service is an input into a final product then the price elasticity will depend on the price elasticity of the final product, its cost share in the production costs, and the availability of substitutes for that good or service.
Prices
Prices are also forecast using an input-output framework. Input costs have two components; labour costs are driven by wages, while intermediate costs are computed as an input-output weighted aggregate of input sectors’ prices. Employment is a function of output and real sectoral wages, that are forecast as a function of whole economy growth in wages. Investment is forecast as a function of output and aggregate level business investment.