THE TRANSPORTATION REVOLUTION STARTS IN 2010

Electric Vehicles: 10 Predictions for 2010
John Gartner and Clint Wheelock, 4Q 2009 (Pike Research and HybridCars.com)

SUMMARY
Change is tricky and change is coming to the car business. It won’t be a simple seasonal change, it will be an epochal change. In 2010, personal transportation will begin its transition from liquid to electric fuel. The only question is, how rapid, chaotic and costly will it be? Or is the better question how slow and fraught with resistance and corrections will it be?

Pike Research’s Electric Vehicles: 10 Predictions for 2010 constructs a documented picture of the transition from cars with internal combustion engines (ICEs) to battery electric vehicles (BEVs), which include all-electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs) and hydrid electric vehicles (hybrids/HEVs). Key things to watch for are (1) the evolving way BEVs are sold either by affordability or hype, and (2) how fast the price of the lithium ion (Li-ion) batteries that power them falls.

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The 10 predictions from Pike Research:
(1) BEVs won’t be cheaper right away.
(2) 2010 is the year they hit showrooms but 2012 is the year to watch.
(3) Hybrids (HEVs) will dominate next year and grow faster than EVs and PHEVs, with more models and options.
(4) PHEVs will keep evolving, just like ICEs evolved but faster.
(5) Early EV Li-ion batteries may not have a strong resale market.
(6) Asia will dominate.
(7) Growth is not presently foreseen for battery swapping station technology.
(8) The commercial BEV charging station business is not presently expected to be big or profitable.
(9) The electric transmission system (the grid) will accommodate and benefit BEV charging but improvements will be necessary as usage grows.
(10) Vehicle-to-Grid (V-2-G) technology will track the growth of the BEV market and may not be a significant economic factor before 2015.

Some crucial bottom line findings:
(1) HEVs will continue to be the most commonly seen tomorrow car through the first half of the next decade but BEVs will become progressively more apparent.
(2) Combined portion of total vehicle market for BEVs through 2015: 2.5%
(3) It may require billions of investment dollars for new automotive and battery technologies, charging equipment and transmission mission upgrades through 2015.
(4) Worldwide, there will be 5.3+ million charging stations by 2015.
(5) Lithium ion (Li-ion) battery makers are already taking advantage of federal subsidies and venture capital to expand manufacturing capacity and, by 2015, the business will be worth $8 billion.

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COMMENTARY
Point by point details of the Pike Research predictions on the coming transition from internal combustion engines (ICEs) to battery electric vehicles (BEVs: all-electric vehicles, EVs, plug-in hybrid electric vehicles, PHEVs, and hydrid electric vehicles, hybrids or HEVs).

(1) BEVs won’t be cheaper right away.

Some estimates put the cost of driving on electricity at the equivalent of 75 cents per gallon. That translates to ~3 cents per mile. Gas at $3 per gallon translates to ~12 cents per mile.

The Pike paper argues this overlooks the extra cost of going electric. It takes 7 years of daily full use to pay off the upfront cost of the transition, which could be 75% of the total cost of driving, depending on miles driven. The battery and drive train are 50% of the cost of a BEV.

A jump in the price of (1) oil and/or (2) electricity will make BEVs the better buy, as will (3) a gas tax. Expect oil to go up. Expect electricity to go up when the fossil fools at power companies give up on coal or when the Senate gets off it collective atrophying backside and puts a price on emissions. Pray for a gas tax, lobby for it, vote for it but don’t expect it.

If thwe pump price of gas goes to $5 per gallon and stays there, which OPEC will try to prevent from happening, BEVs will be a much better buy than ICEs.

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(2) 2010 is the year BEVs hit showrooms but 2012 is the year to watch.

BEVs will hit showrooms this year. Enthusiasts will snap them up, helping to justify big support for the industries that make them from governments around the world, like the $7,500 U.S tax incentive and the $8,800 Chinese tax incentive.

By 2012, the enthusiast market will be invested, the subsidies could be economically burdensome or politically problematic and the larger market will have the opportunity to express itself. If BEVs are not cost competitive or automakers have not found another basis – such as the driving experience – on which to market them, there could be trouble.

On the other hand, early support could easily generate big word-of-mouth, as it did with hybrids (HEVs). Economies of scale could begin to more than make up for subsidies. Battery makers expect price drops to come in the 2010-11 period and are even preparing for the possibility of a cost-depressing over production with plans to deliver power transmission storage capacity to grid operators.

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(3) HEVs will dominate next year and grow in sales faster than EVs and PHEVs, with more models and options.

HEVs, using less costly nickel metal hydride (NiMH) batteries than the Li-ion batteries of EVs and PHEVs, will benefit from technology advances and increasing popularity. Through fleet sales they will pass 1 million total unit yearly sales in 2014. The fuel-saving “stop-start” idle will be used in a wide spectrum of new “mild” hybrids, “micro” hybrids and “hybrids+,” some using lower-cost ICE technology. Ultracapacitors, in many ways superior to Li-ion batteries, will also be incorporated to add efficiency and range.

Near 2015, Li-ion battery technology may very well be advanced enough to replace the NiMH batteries in HEVs as well as to allow EVs to begin encroaching not only on HEV sales but on PHEV sales as well.

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(4) PHEVs will keep evolving, just like ICEs evolved but faster.

Drivers average 13,000 miles per year and 80% drive no more than 33 miles per day. The PHEV range of 40 miles per charge is aimed at that market.

Pike Research argues that designing for that large market is a mistake because the earliest uptake will be in a much smaller target market made up of 17% of drivers who are willing and able to pay the 20% extra cost ($10,000+) for cutting-edge Li-ion technology.

It is possible a market response like the one Pike expects could lead to a new kind of PHEV with a shorter, 10-to-20 mile range. It would have a smaller, less expensive battery and would meet the needs of only 60% of drivers but they would be driving full-time on electricity in a cheaper car and therefore deriving greater and more immediate savings.

EVs may follow a similar evolution.

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(5) Early EV Li-ion batteries may not have a strong resale market.

Though Li-ion battery makers are aiming for a $300 per kWh cost, there are serious technological challenges before the industry. Pike’s estimate is that battery price will fall over 50% by 2015 to $470 per kWh.

This seeming good news has bad news wrapped in it because it means the batteries in the vehicles sold in the next few years will have little resale value and that means early BEVs may have little resale value. (Except as collectors items; try buying one of the 1990s EV experiments, like GM's EV1 or Toyota's RAV4 EV. It’s not just expensive, it’s almost impossible.)

All batteries’ storage capacity degrades over time. 2010 PHEVs will have diminished ranges in 5 years. Engineers estimate their Li-ion batteries’ useful life in vehicles at 7-to-10 years, depending on use and care.

The improving storage expected from newer batteries may depreciate the resale potential of early batteries as stationary energy storage. If the batteries have little value, automakers may not be able to participate in lease deals in the early years, compromising the market. Early owners may have to keep batteries with diminishing performance and simply hope new battery price drops fast enough to make the economics of a lower resale value on their early purchases acceptable.

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(6) Asia will dominate.

China and Japan are backing their BEV industries with aggressive goals for production, charging infrastructure and consumer incentives.

Asia is expected to hit the million unit sales market in 2015. The Li-ion battery market, driven by Japan, Korea and China, will be 53% of the world market and worth more than $4 billion in 2015.

China’s goal, to produce 500,000 BEVs per year, will make it the world leader. Its familiarity with “cost-effective” mass production will give it a big advantage as it develops both its emerging domestic market and the international market. China is so determined to sell BEVs domestically that it has invited foreign companies in to help develop its charging infrastructure.

Asia’s BEV and battery makers will benefit from early successes and continue holding market share going forward.

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(7) Growth is not presently foreseen for battery swapping station technology.

Current technology requires 2-to-8 hours for full recharges. The commonly accepted response is to drive BEVs only within their ranges. A PHEV can be driven to work, recharged, and driven home. Trip driving will require the use of the gas-powered ICE battery charging system. EVs will only be driven within their 100-to-200 mile ranges and when stay-overs or home stays allow time for full recharging from accessible wall plugs.

Better Place has a whole different plan. Its EVs will be sold with leased batteries and usage contracts. It plans to build a network of battery swapping stations that will be automated and move a battery-depleted vehicle in, exchange the battery for a fully charged one and get it out in less time than it takes to refill at a gas station. Such stations may cost $500,000.

Barriers are daunting. Better Place believes it has the fast exchange automation technology as well as vehicles with swap-ready, standardized batteries. Governments around the world have formed agreements with Better Place. Commercialization is scheduled in Israel for 2010 and Denmark for 2011.

Pike Research believes battery swapping technology has little mass potential because automakers won’t conform, sharply diminishing the market. With a limited number of vehicles designed to participate, the return on the large investment in hardware for swapping stations won’t pay off.

From evworldvideo via YouTube

(8) The commercial BEV charging station business is not presently expected to be big or profitable.

With batteries comes consumers’ “range anxiety.” An omnipresent network of charging stations may alleviate it but most BEV owners are more likely to rely primarily on recharging at home and work and use public stations on rare occasions and long trips.

Home charging stations may sell well because they offer the option of faster or more convenient charging than standard wall sockets. Municipal charging stations and those in garages will be useful if they allow cheap or free charging because a PHEV recharge probably won’t cost more than $1 and an EV recharge won’t cost more than $2.

Commercial charging stations, which could cost as little as $2,000 or as much as $40,000, won’t make much economic sense.

Rapid charging stations, which will cost $50,000 and more, will not be popular because of the expense and because it can be detrimental to the vehicles and batteries.

There may be some long-term investments at highly-trafficked locations and some publicly-funded stations for environmental and economic development purposes. Retailers may use loss-leader charging stations to attract customers.

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(9) The electric transmission system (the grid) will accommodate and benefit BEV charging but improvements will be necessary as usage grows.

The present grid has the capacity to support increasing demand from vehicle charging. An addition of 1 million daily vehicle charges will only up demand 0.5%.

Some high-uptake regions where off-peak recharging is not the norm could require a technology upgrade. The upgrade would be in the small transformer that transfers power from the lines to a section of 3-to-5 homes. Charging several vehicles simultaneously could overwhelm that transformer.

Most transformers now in use do not automatically notify utilities of failure so customers will have to report any outages until smart grid upgrades and more capable transformers are installed. Fortunately, this type of early need is most likely to be in places with the biggest tax bases and the best service from their utilities.

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(10) Vehicle-to-Grid (V-2-G) technology will track the growth of the BEV market and may not be a significant economic factor before 2015.

With V-2-G technology, BEV batteries plugged into the grid serve as distributed power storage. There are pilot projects now in place but large scale applications can only come when lots of cars are plugging in.

To make V-2-G work, utilities will need much smarter systems that can keep track of BEVs. While it is perhaps not more complicated than the Internet’s tracking of all its electrons, utilities do not yet have the IT to do it and many are not prepared to make the investment to prepare for such an eventuality.

Neither autonmakers nor battery makers are prepared to offer warranties for V-2-G technology. Automakers are not sure what its impact will be on their vehicles and are worried about how utilities might use their cars. Li-ion battery makers worry about the additional charge cycles.

Bottom line on the 10 predictions: These are not the rosey pictures painted by those that see BEVs saving the U.S. economy and the world environment but they are a sharp rebuke to BEV naysayers. The Pike Research forecast will disappoint the most optimistic and seem unduly expectant to the dubious but it is becoming progressively more difficult to turn away from watching the transportation revolution happening before our very eyes.

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QUOTES
- From the Pike Research report: “A new era of the electrified vehicle will soon be upon us. During the next decade, millions of vehicles that primarily run on electric power and are plugged in to be recharged will enter roadways as the automotive industry slowly begins to wean itself from fossil fuels. While the transition will be slower than many individuals with concerns about climatechange would like, the impact on auto manufacturers, battery makers, utilities, and smart grid companies will be profound.”

click thru to see all the BEVs coming

- From the Pike Research report: “While several governments in Asia and the Middle East have expressed interest in the battery swap station concept, the high cost of the equipment prevents it from becoming widely adopted. The constraints it would impose on vehicle design and are too great to be adopted by many manufacturers, and the amount of return on the investment in hardware is too little. Auto industry executives have expressed strong reservations about battery swapping in the United States.”

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- From the Pike Research report: “Most people will likely plug-in their vehicles at the conclusion of their workday, usually between the hours of 4:00 and 8:00 P.M. Charging will take between two and seven hours depending on the charging equipment and percentage of the battery that is depleted. This has the potential to add to the load during peak hours and extend peak demand later into the evening, potentially until midnight. Utilities are expected to develop incentives that would prompt most consumers to delay charging until 10:00 P.M. and minimize the impact of vehicle charging during peak times.”