Conway: Transitioning to Electrification

Graham Conway
Southwest Research Institute
Tue., February 20, 2024 (11:15 AM )
Bringing Truth to the Energy Transition

Transcript

1. Transitioning to Electrification How’s it going? Dr. Graham Conway February 2024 1
2. Energy Matters 2
3. Energy is Life Human development is tied to energy – we must move people and goods to sustain economies and support societal good 3
4. Where is the USA Today?  27.5 Quads of energy for transportation  94% of our energy still from fossil sources 4
5. Visualizing 24 Quads of Energy from Oil  24 Quads of energy is equal to 4.4 billion barrels of oil  To move would require 10-20 million tanker trucks  That line of tankers would go around the earth 4-8 times – Higher efficiency of electrified products mean we can reduce this to ‘only’ twice around the earth 5
6. Energy Transition in the USA  Solar and wind generate most of the U.S. electricity by 2050 in the Reference and High Uptake cases https://www.eia.gov/outlooks/aeo/pdf/AEO2023_Release_Presentation.pdf 6
7. Will Our Future Be “Net Zero”? 7
8. Summary Energy = Happiness (and probably always will) Energy = Emissions (and will do for a while) 8
9. A Low Carbon Passenger Car Fleet: 2015-Today 9
10. 0 2 4 6 8 10 12 14 16 18 20 2015 2016 2017 2018 2019 2020 2021 2022 2023 Light Duty Sales (million) Sales Volumes  2023 sales volumes approached pre-covid numbers globally  US had a four-year high in sales at just under 16 million LD units 0 10 20 30 40 50 60 70 80 90 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 Global Light Duty Sales (million) 10
11. Vehicle Sales by Powertrain Type  2023 has seen a slow-down in GROWTH, not MARKET SHARE of EVs  China EV sales slow down in 2023  US around 8% BEV sales  12% of vehicles sold in the world are now BEVs MHEV = Mild Hybrid Electric Vehicle (<=48V) FHEV = Hybrid Electric Vehicle (>48V) PHEV = Plug-in Hybrid Electric Vehicle BEV = Battery Electric Vehicle 11
12. Vehicle Sales by Powertrain Type  India, as populated as China but without the push towards EV manufacturing and leadership – (9,300 sold since 2015)  Japan is all-in on hybrids, not so much on BEVs  Norway seeing the other end of the ‘S-curve’. They have 12 months to meet their target for 100% EV sales in 2025. 12
13. Internal Combustion Engine Sales Rise  Sales of vehicles with an ICE increased in 2023 driven by the overall increase in sales  Still over 70,000,000 vehicles sold in 2023 were equipped with an internal combustion engine 0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 80,000,000 90,000,000 100,000,000 2014 2016 2018 2020 2022 2024 Market Share [%] Without ICE With ICE 13
14. Summary  More people are buying BEVs than ever before  However, markets are evolving at different rates  ICE still sell in large volumes, and will do for a long time to come 14
15. A Low Carbon Passenger Car Fleet: 2030-2035 15
16. What Drives the Market? Consumers Companies Regulators  Consumers – Performance – Price  Companies – Sales – Profits  Regulators – Compliance 16
17. Regulators 17
18. Regulations and LCA?  “EPA is also proposing that the requirement for upstream emissions accounting for BEVs and PHEVs would be removed under the proposed program”  i.e. No LCA for transportation 18
19. LD GHG Proposed Standards  Industry-wide average target for the light-duty fleet of 82 g/mile in MY32 – Average of 12.7 % year- on-year reduction in GHG emissions from the LD fleet  EPA expects ~50% of the LD fleet to be plug-in EV by 2030 0 50 100 150 200 250 2020 2022 2024 2026 2028 2030 2032 2034 CO2 (g/mile) Model Year SAFE USA MY22-MY26 Final Rule USA MY27-MY32 Proposal 19
20. OEM Targets & Requirements  Each OEM must meet their own target…  They are not allowed to be above their target per federal law – However, most are not in compliance  How can this be? The 2022 EPA Automotive Trends Report 20
21. Averaging, Banking & Trading Credit Provisions  Averaging, banking, and trading (ABT) provisions allow manufacturers to average their car or truck fleet CO2 emissions to earn and “bank” credits, and to trade credits between manufacturers. The 2022 EPA Automotive Trends Report 21
22. LCA Based Credits – Hypothetically…  What if Stellantis sold all hybrids and we had LCA regulations? -70 -60 -50 -40 -30 -20 -10 0 10 20 Tailpipe Emissions LCA WY Grid LCA US Av Grid LCA WA Grid CO2 Credits Per Vehicle Produced (Mg) Tesla Stellantis 22
23. Credit Generation is Lucrative  Sale of Tesla Credits continues to be lucrative although as a percentage of overall net income the impact is lowering overtime  In 2020 Tesla’s net income was 720 million USD with $1.6 bn revenue from carbon credits  In 2023 Tesla’s net income was ~$15 billion USD with $1.7 bn revenue from carbon credits 23
24. Check-In Consumers Companies Regulators  Consumers – Performance – Price  Companies – Sales – Profits  Regulators – BEVs are ZEVs – ZEV market share must increase 24
25. Companies 25
26. Vehicles Sold In America  The USA likes SUVs and trucks 26
27. Breakdown of CAR Sales (Detroit Three)  Ford sells no EV cars… 0 10 20 30 40 50 60 70 80 90 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 Market Share as a % of total Ford Cars Year Ford Cars BEV PHEV FHEV ICE 0 10 20 30 40 50 60 70 80 90 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 Market Share as a % of total GM Cars Year GM Cars BEV PHEV FHEV ICE 0 10 20 30 40 50 60 70 80 90 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 Market Share as a % of total FCA/STLA Cars Year FCA/STLA Cars BEV PHEV FHEV ICE 27
28. Breakdown of Truck Sales (Detroit Three)  Shares are slowly increasing 0 10 20 30 40 50 60 70 80 90 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 Market Share as a % of total Ford Trucks Year Ford Trucks BEV PHEV FHEV ICE 0 10 20 30 40 50 60 70 80 90 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 Market Share as a % of total GM Trucks Year BEV PHEV FHEV ICE 0 10 20 30 40 50 60 70 80 90 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 Market Share as a % of total FCA/STLA Trucks Year FCA/STLA Trucks BEV PHEV FHEV ICE 28
29. Cybertruck Production  Tesla started deliveries of its Cybertruck to VIPs in November  Production capacity to build 125,000 per year increasing to 250,000 by 2025  Unknown number of pre-orders – Tesla sleuths have estimated it at around 2,000,000 pre-orders based on reservation numbers  16 year wait-list at 125,000 production units/year 29
30. Meanwhile…  2023 Ford F150 sales – ICE = 676,521 – HEV = 50,103 – BEV = 24,165 30
31. Dodge Ramcharger (Range-Extender)  Series-hybrid with a ~180 hp 3.6 L V6 ICE/generator  Two electric motors – 335-hp front – 319-hp rear  690 mile combined range – 71-95 kWh battery – 27 gallon fuel tank 31
32. EV Growth Tied to Battery Costs  Key to EV growth is access to raw materials and steadily decreasing costs for batteries  BNEF report released in Nov 23 reversed previous predictions of raw material increase – Stabilized and/or lower commodity prices, new cell chemistries (e.g. chemistries that use more nickel and less cobalt, and higher adoption of LFP),  They now predict $100/kWh pack by 2027 and $80/kWh in 2030  $126/kWh in China today https://about.bnef.com/blog/lithium-ion-battery-pack-prices-hit-record-low-of-139-kwh/ 32
33. Battery Pack vs Vehicle Sales Price  ICE-only vehicle today far cheaper than BEV (assuming ~$130/kWh)  But even in 2030 assuming a <$67/kWh pack price doesn’t give parity in all segments  Federal incentives will still be required even with extremely low pack prices 2030 ~$67/kWh 2022 ~$117/kWh https://theicct.org/publication/ev-cost-benefits-2035-oct22/ 33
34. Summary  EV sales for legacy OEMs are increasing but slowly, especially in the ‘truck’ segment  Batteries prices are starting to come back down after a two-year ‘spike’  Continuing government support for EVs is required  Profits are offset by ‘not paying fines’ on other vehicles 34
35. Consumers Companies Regulators  Consumers – Performance – Price  Companies – Sales (too low) – Profits (low or negative)  Regulators – BEVs are Zero Emissions Check-In 35
36. Consumers 36
37. Deloitte Annual Automotive Customer Survey 37
38. Powertrain for NEXT vehicle  Nearly 90% of US consumers want an ICE in their next vehicle 38
39. How Have Perspectives Changed?  Deloitte have asked the same question since 2019, so here are the results from different regions in that time frame  ICE-only number has dropped but “with an ICE” remains fairly flat. 0 10 20 30 40 50 60 70 80 90 100 2019 2020 2021 2022 2023 2024 Market Share (%) Customers who want an ICE in their next vehicle US China Germany India 0 10 20 30 40 50 60 70 80 90 100 2019 2020 2021 2022 2023 2024 Market Share (%) Customers who want an ICE-ONLY powertrain in their next vehicle US China Germany India 39
40. BEV Concerns  “Time required to charge” given as the greatest concern to move to BEVs  Germany also cites ‘driving range’  Further concerns over cost, battery durability and safety 40
41. Truck Use Cases  Many in the US load their trucks for leisure or utility purposes – Towing large and heavy loads significantly reduces vehicle range – The widespread use of EV trucks seems unlikely before 2040 41
42. Check-In Consumers Companies Regulators  Consumers – Performance • Will buy an EV if it works for them, infrastructure is a bigger concern – Price • Incentives help  Companies – Sales (too low) – Profits (low or negative)  Regulators – BEVs are Zero Emissions 42
43. So Where Do We End Up 2030-2035? 43
44. Technology Adoption  Adoption curves for new technologies follow an S-shape – Early adopters – Laggards etc  But… – It doesn’t always reach 100% – It isn’t always an S 44
45. A Note about Forecasting 45
46. January 2020 Prediction 46
47. S&P Global (43% by 2030) https://www.spglobal.com/mobility/en/research-analysis/fuel-for-thought-ev-marketing-challenges-vehicle-portfolio-grows.html 47
48. Deloitte (30% by 2030) 48
49. BNEF (~39% by 2030) 49
50. Other Projections (100% EV by 2027) 50
51. Where do I think we will be in the USA in 2030? 0 10 20 30 40 50 60 70 80 90 100 2010 2020 2030 2040 2050 2060 Market Share [%]  I would predict steady growth for the US  Too many outside influences to predict accurately  I would say ~30% by 2030  I’d like to see the industry at 75%+ hybrid sales by 2025 100% Confidence Interval 75% Confidence Interval 51
52. In Summary 52
53. Before that…What about hydrogen?  That one is easier…  No…  Not for passenger cars – MD/HD there are scenarios that work 53
54. Summary  People like energy – Producing energy, produces emissions and it might stay like that for a while (if we produce more people)  Regulators have chosen BEVs as the path forward for the US – We might produce more, less or similar levels of emissions with BEVs based on LCA results – No federal level outright ban yet, but strict targets being set  Legacy OEMs are in a tough spot; they don’t make a profit from EVs and the volumes aren’t high enough… but they must sell them for compliance  Consumers are warming to them, especially if they are a Tesla, but want a better infrastructure 54
55. Thank You! Graham Conway, PhD graham.conway@swri.org (210) 522-5134 (office) (210) 665-6363 (mobile) 6220 Culebra Road San Antonio, Texas 78238-5166 55