The time mankind wanted to introduce electric cars to its everyday's life was quite far away from the XXI century. So, in the 1920s, the share of electric cars in the car market was a 20 per cent (Jeffries. Are electric cars…). The talks of using electric cars started when cars were invented and even more recently in the 70s, 80s and 90s the alternatives for combustion engine cars were widely discussed. For instance, in 1974 marketing actions for introducing electric vehicles were summarized by Naidu (Naidu. The role of marketing in the introduction…) in the article about the role of marketing in introducing technologically new products. However, the skepticism remained for decades due to a number of constraints which were difficult to overcome. The title of an article “Why electric cars make no sense” () serves as an example of the sepsis towards electric vehicles those days. In 1995, for instance, big Three automakers gave an ultimatum to regulators in the Northeast of the US against the sales mandate for electric cars there. (Big three fight sales…). In 1998 there were already several vehicles in the market but high prices, low driving range, scarce infrastructure and environmental concerns did not help to increase electric cars' sales then (Halliday and Cuneo 1998). For instance, PSA/Peugeot-Citroen sold 10 000 electric cars in the period from the late 1980s to 2005. The „old“ nickel batteries were used and the producer had to stop producing them because of a new directive against cadmium (Hall and Rowley. Are batteries in electric cars safe?).
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However, the burgeoning oil and gas prices together with a technological progress (the progress in lithium ion batteries capacity from the beginning of the 2000s was especially significant) and rising concern on environmental pollution gave a second birth for an exploration of fossil fuel cars' alternatives. Today it is widely recognized that the future lies in the field of “new energy” cars such as electric ones, hybrid, hydrogen, solar, etc. The environmental concern seems to prevail as there is no alternative for environmentally friendly energy sources in the future. Right now more than 60% of oil consumption belongs to transport (Are electric cars truly the future?) With today's combustion engines and overall rising wealth of population in Asia, Africa and eastern Europe the mobility is not sustainable and starts to pose questions for the future.
Here are the words of CEOs of Toyota and VW, Katsuake Watanabe “There can be no future for our cat business. We need to develop powertrains for alternative energy sources” and Martin Wintercorn, CEO of the Volkswagen Group, “There is no way to replace diesel and petrol cars over the next few years, but the future belongs to the plug-in electric car”. Burkhard Goeschel, BMW's head of research added “It starts with small things like an electric plugin in an underground parking garage”. (Are electric cars truly the future?)
Additionally, an electric car uses approximately 75% less energy than a combustion engine one. Moreover, the cost of electricity per 10 km is approximately 0.20-0.25€ or more than five times less than the price for gasoline. (Electric vehicles: Using electricity for transport)
However, changes are not going to happen immediately even with electric cars introduction.
Firstly, still, if the consumers really want to buy an electric vehicle they need to pay a premium because of the costly batteries inside.
Secondly, the fact that the car uses electricity does not mean that there are no emissions as it strongly depends on how the electricity is produced. If electricity is derived from carbon sources, CO2 emissions reductions will be marginal. This is why EU plans to increase constantly the share of renewable energy sources. For instance, Germany's goal is to increase the share of renewable energy sources in its electricity mix from around 15% today to as much as 40% by 2020. (figure) So the more decarbonised electricity will be, the more emissions savings will occur.
However, another concern that is always raised in public discussions on the readiness of the grid for electric cars is overestimated. An increase in electricity consumption is not high. For example, in the US the Electric Power Research Institute and the Natural Resources Defense Council calculated that “if 60% of U.S. light vehicles were electrified by 2050, it would increase national electricity consumption by less than 8%. But it would cut total U.S. carbon-dioxide emissions by 450 million metric tons annually, equivalent to taking 82 million cars off the road.” (Hey, auto industry…) So, the benefits clearly outweigh the contras. If closer perspective of 2020 is considered, according to the report of German Renewable Energies Agency (The German approach to electric mobility…) the presence of 1 mln electric cars on the roads by 2020 will equal 2 bio. kWh power consumption and about 0.3% of all German final consumption of electricity in 2007.
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Therefore, the situation in the market is as follows:
- there is a need to change to alternative energy sources,
- there is a public awareness about electric mobility,
- there is a growing environmental concern which seems to be a trigger in the field of electric mobility,
- the price for an electric vehicle is still higher than for a conventional one,
- the infrastructure for electric mobility is not here.
If there appears a solid quite cheap electric car prototype, infrastructure will start to grow.
Wulf H. Bernotat, E.ON's CEO, said at the national strategy conference on electric mobility in Berlin in November 2008: “Today, the question is no longer if but when we will be driving electric cars”.
Advancing technological progress makes these costs lower and lower.
As Mr. Kai Kinast from E.ON suggested E.ON be interested more in short-term knowledge and forecasts on e-mobility industry.
Therefore, the situation in the electric mobility market and E.ON's suggestions on the project formed the objective of this work ─
to understand how the industry is going to fulfill the consumers' expectations in the next five years.
What will be the situation in the market of electric mobility now and in five years? What are challenges E.ON will meet in this period of time? What will happen and what won't?
2. The consumers' expectations
First of all, in order to understand how the industry is going to fulfill the consumers' expectations we need to know what are these expectations.
As the penetration of electric vehicles (EV) is not deep there are not many surveys available about the consumers' perceptions on EV. On the other hand, there are investigations on the choices of hybrid cars' owners.
The hybrids are also more fuel-efficient and environmentally-friendly than conventional, combustion engine cars. They are already in the market for several years and have been targeted at the same type of consumers as electric ones. Hybrids' prices are usually higher than those for similar conventional models by several thousands of Euros. The same holds true for Toyota Prius hybrid vehicle as the most popular hybrid car nowadays. Here we assume that Toyota Prius' buyers, especially initial ones, are from the same segment as the buyers of electric vehicles, we apply the results of marketing investigations on the Toyota Prius drivers on the consumers' expectations from truly electric cars.
Here is the data from a survey conducted by Toyota targeting Prius owners in the UK and Germany (http://www.toyota-europe.com/images/Chapter_6.pdf).
Key purchase reasons:
- low fuel consumption (spontaneously mentioned by 50% of buyers),
- environmental/ green issues (41%) and
- the new technology (21%).
When asked what they like best about their car, buyers of the new Prius are very likely to spontaneously mention fuel consumption (43%), quietness of operation (28%), low running costs (19%) and environmental friendliness (18%).
Satisfaction has also significantly increased on:
- Interior-related items such as interior styling (62% completely satisfied buyers), roominess (73%, up from 53%), luggage capacity (36%).
- Equipment level (61% completely satisfied buyers, up from 51%),
- Quality-related items like safety (71% completely satisfied buyers) and reliability (77%),
- Value for money (29% completely satisfied buyers),
- Performance-related items such as acceleration (52% completely satisfied buyers), road-holding
(61%), braking (69%) and sportiness (30%)
- Satisfaction is very high on environmental friendliness (with 91% of buyers completely satisfied)
- Satisfaction remains high (though it has decreased vs. previous generation, due to high and increasing customer expectations) on fuel economy (with 64% completely satisfied buyers), quietness when driving (with 67% completely satisfied buyers), body workmanship & finish (with 71% completely satisfied buyers), no squeaks and rattles (with 67% completely satisfied buyers).
Next survey by “Frost and Sullivan” identified main causes of why people are not going to buy alternative (electric and hybrid) cars in the upcoming years: (European Consumers: Attitudes)
- 67% of respondents across Europe stated that high prices would stop them from purchasing such vehicles;
- 61% stated that the inconvenience of fuelling stations was a deterrent;
- 51% are held back by the limited availability of models, a problem associated with an early stage market;
- 35% cite the inconvenience of monitoring battery charge.
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Some researchers into this issue identify the segment more clearly. Dr Paul Nieuwenhuis of the Centre for Automotive Industry Research at Cardiff University says that ‘Historically, battery electric vehicles are usually sold to well-to-do ladies in urban areas who use them to do a bit of shopping, do lunch, visit friends. If such niches can be identified, there is a future for electric vehicles even with their existing limited range — as long as we don't expect them to do the same things as our internal-combustion cars.' (Jeffries. Are electric cars…)
I will add more opinions
Summarizing these surveys the consumers' expectations on electric vehicles could be divided into those on
- environmental friendliness;
- driving distance without recharging;
- easy infrastructure;
- comprehensive metering devices;
- other (price reduction, inapplicability to congestion charge, etc.).
2.1. Expectations on prices
Generally speaking, to be attractive to general public the price for electric vehicle should be comparable to that of combustion engine car. However, several segments of buyers are willing to pay premium for a number of reasons such as the environmental friendliness of the electric vehicle (EV), reduced fuel consumption, smoother acceleration and braking. The segment which is going to pay a premium for electric car - environmentally conscious and/or technology-driven part of population. Basically, this part of population mostly belongs to so called upper segment of the middle class and they are not very cost-conscious.
It is impossible to say how much premium an average electric car buyer is going to pay to buy an electric car. It depends on the particular person's attitude towards electric car and purchasing power of an individual. However, general vector is clear: EST survey conducted in 2004 suggested that 80% of car buyers would buy a “greener” car if they got some financial assistance. (New Vehicle Survey…)
According to Toyota survey on its Prius model owners (see above), the price for a car was not listed as a key reason to buy. However, it was implicitly mentioned as low fuel consumption ─ the main reason to buy. This holds true for Prius segment as fuel consumption does not play a big role among general public as they assume that in a particular car class there is not much difference in fuel consumption. On the other hand, there is another side - the purchases of Toyota Prius have been driven by the volatility of oil and gas prices. If oil prices are down, and consistently down, the number of potential hybrid cars' buyers would be reduced significantly. But this scenario is not highly probable.
Another point is the most expensive part of electric vehicle nowadays - a battery.
According to the University of California, Berkeley study on the correlation between the time of EV technology adoption and separate battery ownership, car price seems to be lower significantly if batteries are included into the car price but are leased and consumer makes the monthly payments after the purchase. (Loveday. Should EVs Come With Batteries…). The study suggests that 64% of upcoming electric cars sales will include the vehicle and the battery as separate products.
2.2. Expectations on environmental friendliness
Although it is almost always mentioned as a low priority among car drivers aiming to buy a new vehicle, for the segments who are interested in “green” issues, this aspect is important.
As it was shown in Toyota Prius owners' survey (see above), environmental issues as one of the main reasons to buy a car mentioned 41% of Prius drivers. Moreover, satisfaction remains very high on environmental friendliness (91%). Assuming that it is possible to extrapolate these findings on the electric cars, their potential buyers would be satisfied with their share into “green” issues.
According to Accenture report, a lot of consumers (89%) are going to change their energy provider if a new one helps to reduce carbon footprint. See Figure
These figures are quite supported by the 2006 Annual Car Owner Satisfaction Survey of Consumer Reports subscribers where Toyota Prius became the most satisfying vehicle of all cars and 95% of Prius owners said that they would buy Prius again. Owners of the other hybrids (Honda Civic and Ford Escape) rated their choices higher than those of the same vehicles with combustion engines (Consumer reports Which cars…).
2.3. Expectations on the distance without recharging (batteries)
Today we assume that general public expects from electric cars to go without recharging the distance comparable to conventional cars' one without refueling - equal or more than 350-400 km.
Today purely electric cars could go 100-150 km without recharging (see Table 1… below). Taking into account that recharging stations do not make sense right now except quick charge slots which have their own limitations, an electric car could be attractive to potential users in case it is purchased for city-driving with less 100-km a day distance.
Thus, the distance gap (~200-300 km) between expectations and reality is a major constraint from the consumers' point of view.
2.4. Expectations on the infrastructure
The first and foremost concern of potential electric cars' drivers is charging. Here are major points which could influence consumers' decisions to buy an EV.
We might assume that normal expectations are comparable to that of the experience ordinary driver who has his/her combustion engine car refueled/recharged the car in less than 5 minutes.
Nowadays electric cars have got an energy consumption level of 15kWh per 100km. Assuming a normal voltage of 230V and a current of 16A, it would take around 12 hours to completely charge such a battery.
Therefore, generally there is one only place to recharge an electric car - the place where drivers leave the car at night.
But at 400V and 25A, a driver could recharge in just two hours," says Professor Gernot Spiegelberg, who heads an electric mobility team at Siemens Corporate Technology. Every German household has 400-V potential because that's the voltage used by a normal three-phase current connection. (Innovations for new markets…)
2. New experience.
In Paul Jacobson's survey potential EV buyers mentioned that it could be a bit uncomfortable to recharge the vehicle every day as they used to different practice using conventional cars.
Moreover, charge anxiety, according to some opinions, may stay drivers away from electric cars. Tony Posawatz the vehicle director for the Chevy Volt, said: „When consumers plug in their vehicles at home, they will worry about disruptions from power outages, tripped circuit breakers or somebody monkeying with the cord.“ (Loveday Eric. Charge Anxiety Yet…)
On the other hand, almost every driver has got an experience in recharging the mobile phone connecting it to the plug for the whole night.
Another important point is the need for standards. A driver who has just bought an electric vehicle would not expect that the whole infrastructure would be available for his particular car, not a part of it.
About the agreement on the common plug - add!
2.5. Expectations on metering devices
Actually consumers' expectations on metering devices are mainly the expectations on the easiness and transparency of the billing system.
According Mr. Robert Pfluegl's, E.ON Metering managing director, opinion, the usage of metering devices for electric cars could be subdivided into three categories
- Installation of an additional plug in a garage with one bill for electricity;
- Installation of an additional plug in a garage. Separate calculations for electricity at home and for the car. Two bills;
- Smartmeters inside a car.
In Accenture report on electric utilities in the US they provide the foresight into the shifts in consumers behavior in the nearest future. These shifts actually represent major expectations on billing and metering systems:
- More accurate billing. This means the accuracy of the bill and more accurate bill forecasting;
- More reliability in the grid. Actually, it is not applicable in Germany as the outages here are very rare and the grid is reliable;
- Better price management.
Also “Building new generation utility …) - add more from Accenture report.
2.6. Expectations on other benefits buying an electric vehicle
There are some other benefits an electric car owner can get and potential buyers will also keep them in minds at the time of purchase. Often these benefits are the result of a local authorities' policy. To name a few main ones:
- financial assistances - tax initiatives, discounts, etc.;
- special carpool lanes for hybrid and electric vehicles that could be used regardless of the number of people in a car;
- cheaper parking, congestion charge. For example, the sales of G-Wiz, Indian-built electric vehicle, have been rising even during the turmoil of automotive industry. It could be explained by the fact that G-Wiz is not subject of the London congestion charge and parking for it is cheaper (Sales of electric cars defy the recession). London, Stockholm and Milan levy on congestion charge. According to the survey conducted by the South & West London Transport Conference (SWELTRAC) 14% listed exemption from the congestion charge as a key motivation. (Provision of Electric Vehicle Recharging…)
3. Industry progress
3.1. Cars in the market
Combustion engine will live long in the market. Phillip Goti, director of automotive consulting with Global Insights Inc. told he did not see a time without the internal combustion engine (Are electric cars…).
However, the future of electric cars market is not under question right now. Recent oil prices race and the threat of mandatory carbon dioxide emissions standards have made major car manufacturers prepare their electric variants for the future market. Some not big, innovative companies are also working on it. As small car manufacturer's Nice co-founder, ex-Lotus executive Evert Guertsen said: "There is no need to sit back and wait for the majors to come with EVs, This market is for new entrants." (Lewin. Electric vehicles …)
There are still some doubts in the market concerning small car producers such as Tesla and Fisker. There are doubts as they
- Do not have a large network of distributors which big automative multinationals do;
- Are not still able to lease the cars which is quite important for affluent people who would like to try an innovation;
- Do not produce a lot of components in-house (e.g., Fisker which outsources almost entire vehicle production). (Welch. A long bet on electric cars)
For instance, NICE, small car producer is under administration, from December 2008.
The number of electric cars in the streets depends on different parameters. However, some predictions are made. "I can see up to 3 percent of all cars being pure electrics by 2020, with a further 19 percent being plug-in hybrids," said Wolfgang Bernhart, a partner at Roland Berger Strategy Consultants in Stuttgart. (Lewin, Electric vehicles …)
Here are the models which are going to enter the market in the next several years or already there:
Table 1. Electric cars and hybrids on the roads and in the nearest future.
Electric cars and hybrids ( expected price, year and other characteristics )
Already in the market
On the verge
Z.E. (from zero emissions, 2010);
Project with Better Place (2011)
LEAF (2011, battery: 24kWh, estimated $35-43 000)
Mini E (EV, range: up to 250 km)
Smart (Berlin, battery: 14kWh, range: 115 kilometers, 100 for lease in London, €400/month, top speed: 100 km/h)
Smart (EV - commercial sales, 2012, 10 000 cars)
Hybrid - 2011
BB1 (EV, 2014, range: 115 kilometers,)
Chevrolet Volt (hybrid, $30 000, 2010), Ford Escape, Vauxhall Ampera (hybrid, up to 37 miles on batteries)
Stella (EV, $48 000)
i MiEV (EV, 2010, $48,000 - $15 000 (gvrntal subsidy) = $33 000, 160 kilometers on a charge)
(lithium ion batteries,
€10 000, range: ~200 km)
Saturn Vue (hybrid)
NICE mycar (lead acid batteries,
€10 000, range: ~100 km, top speed: 65 km/h)
NICE Ze-0 (lead acid batteries,
€16 000, range: ~100 km, top speed: 90 km/h)
Th!nk city (target: 10 000 cars a year)
G-Wiz(in the UK -the best selling fully electric vehicle)
Reva G-Wiz I (EV, lead acid batteries,
€9 000, range: ~75 km, top speed: 80 km/h) 950 cars sold from 2004
Tesla Roadster (EV, €112 000, range: 350 km, top speed: 200 km/h)
(130,000 plug-in hybrids by 2013)
Indica Vista EV
E3, E6 (EV, 2010, 300km to 400km without recharging)
Needs to be finished!!!
Volkswagen and Ford are still reluctant to go with electric cars right now. Here are the points spokespersons of both companies gave about electric cars.
"VW has a strategy for electric cars, but only in the long term. In the short term, we believe that other methods, such as hybrids, synthetic fuels and diesel and gas combined combustion engines have more potential."
About the range of current batteries which is around 100km. "When new battery concepts become available, VW will start doing more work in this area.”
At Ford: "All-electric cars are not off the agenda for Ford, but they are not at the top of the agenda. Ford has a lot of other priorities, for example hybrids." (Hall and Rowley. Are batteries in electric cars safe?)
Conclusion: there are a lot of cars going to the car market or already there. The most important is that the first electric cars were from small car manufacturers but now almost all big car companies prepare their electric vehicles.
3.2. Expectations on prices
To consider how the industry is going to fulfill the consumers' expectations on prices we need to understand what are and will be prices and what are will be charging and maintenance costs. These two factors combine the economic effectiveness of an electric car.
1. Car prices
Definitely, electric cars are priced higher than their conventional analogues.
The main reason for high prices are batteries which are the most expensive part of the car and count for up to 50% of the car price.
That is why car manufacturers still have not decided is it worth to include the battery in the price of the car or lease it. For instance, Nissan LEAF, an all-electric car, is going to come up in 2011 and the price is not announced yet. All is said that it will be at the range of a well-equipped C-class sedan. They have not made a decision on the battery which could add from $10 000 to $24 000. This is calculated from the usual suggestion that lithium ion cells cost anywhere from $450 to $1000 per kwh and Nissan LEAF is going to have 24 kwh battery. And there are a lot of pros for leasing the battery. As Carols Ghosn, CEO of Nissan-Renault, said: "The monthly cost of the battery, plus the electric charge, will be less than the cost of gasoline." If it is going to be true there will not be any incentive to include batteries in the price of a car at least for the first years of electric cars large commercial sales.
Additional reason why leasing batteries could be the best option is the fact that the most popular car models loose up to 50% of their initial price during the first three years of exploitation. Given that the batteries life is 2-3 years, it looks strange for an ordinary driver to buy a new battery which price is comparable to that of a car. Moreover, car drivers usually tend to underestimate the daily costs of possessing the vehicle which also is in favor of leasing batteries.
2. Charging and maintenance costs.
As for electricity prices, they are usually lower than the costs for gasoline. For instance, Daimler states "Based on German electricity prices it costs approximately two euros to drive the smart fortwo electric drive for 100 kilometres (even cheaper with off-peak electricity). This is less than the price of two litres of petrol. Electric power is much cheaper in lots of countries. The maintenance costs are considerably lower than those of a smart with a combustion engine as the battery, motor and other components of the electric drive are maintenance-free." (Graham Richard. Second-Generation…)
Conclusion/Prediction: it seems that leasing the batteries will be the most popular option when selling electric cars. At least, up to the moment, batteries' prices go down and won't affect a car's price as much as it gets now.
3.3. Expectations on the distance without recharging
The distance without recharging remains arguably the main constrain in the development of electric cars industry. The average distance without recharging for all-electric cars is 100-150 km.
Tesla Roadster could meet consumers' expectations and go 400 km without recharging (Pierce. Beyond gasoline…). However, this distance could be reached in a very economic way of driving or, in other words, in a quite slow and consistent pace. Usually it is around 200-250 km between charges.
This constraint seems so tight that the more reasonable solution looks like developing hybrids. Actually, they have already been in the market. However, hybrids are also sources of pollution as well as combustion engine cars. As Carlos Tavares, Nissan's executive vice president for product planning, explained why Nissan is going to develop its own electric car: „Certain European cities might someday set strict limits on the use of conventional vehicles inside the city limits. At such a time, wouldn't you want to market an electric city car? That's something we can anticipate. And it might not be limited to Europe. I would be blind if I didn't recognize this pattern." (Sedgwick. No need for pure …) Major automotive producers are ready or going to deliver electric vehicles to the market (Daimler and BMW up the pace…).
The main question is what to expect from the technical progress in batteries? Dr Paul Nieuwenhuis of the Centre for Automotive Industry Research at Cardiff University indicates that the main cost of a hybrid vehicle is in its battery - around £15,000 at present — the cost to produce the rest of the car is comparable. According to Dr. Nieuwenhuis, “It is probably reasonable to assume that by 2020, battery costs will have halved as a result of mass production — which will begin for plug-in hybrids, but pure battery-electric vehicles will also benefit.” (Jeffries. Are electric cars…) Right now the batteries costs are going down with 8% rate annually.
Right now the best offer in the market is lithium ion batteries.
They are used in so-called converted Toyota Prius cars - plug-in hybrids (Stoffer Lithium ion batteries…)
As Ulrik Grape, chief executive of EnerDel, the first and only US domestic manufacturer of commercial-scale automotive-grade lithium-ion battery systems, said:
“Lithium ion is the Holy Grail of batteries. It's the lightest metal and offers many attractive properties. Lithium ion holds a lot of promise because there are so many chemistries in the lithium ion family. You can develop very high-power chemistries needed for hybrid electric vehicles, the pure hybrids. Then there are modifications of those chemistries that provide advantages for plug-in hybrids and electric vehicles, where you're clearly going to need more energy density.” (Berman, The Quest for …) They've got lighter weight and taking up less space.
However, previously there were some security issues with lithium-ion batteries which cought on fire in mobiles and lap top computers. This is another reason why, for example, Toyota uses in its Prius model nickel metal-hydride batteries only introducing to the market Priuses with lithium-ion ones.
The probability is quite rare (1 of 5 or 10 million cells for mobiles) but for electric cars which will be likely to use 70-80 cells it could become a problem (Hall and Rowley. Are batteries in electric cars safe?). There is still no consensus in the market why batteries get overheated and explode. Right now batteries producers are working on better safety of lithium-ion batteries, mainly enforcing their frames and improving the chemistry of them. So it was recognized that lithium titanate could make the batteries more stable chemically, avoiding being overheat and ignite. But that imposes limits on the power and the ability to store energy and suitable for bigger vehicles (Shirouzu. Race to Make Electric Cars Stalled by Battery Problems). They claim that the batteries would be different and no accidents are expected as General Motors Vice-Chairman Robert A. Lutz said. (Welch. GM and Toyota's…)
Right now the leadership in batteries comes from Asia: BYD, Mitsubishi, Renault-Nissan, Tata are among the leaders in the industry. However, some experts think that the advantage in batteries production is not the determinant for occupying the market of electric cars. Gupta and Wang (Gupta, Wang. Electric cars. A wide-open race) compare this situation with that in PC some decades ago where Intel started with microprocessors and did not go with producing the whole computer. Therefore, the market has not formed yet and some changes could be expected.
To protect the first-comer position two main conditions should be satisfied
- the industry should be susceptible to rapid growth, so the late entrants would not be able to catch up with early entrants;
- other components (except batteries) should not be significant when a consumer makes a decision to buy a product.
In case of electric vehicles, of cause, cars are not only the pack of batteries wrapped up in plastic and metal. So, the first movers unlikely will get the advantage.
Add forecast on batteries
Prediction/conclusion: the distance without recharging depends heavily on the progress with lithium-ion batteries'' prices and capacity. For an energy company it is not a best option to buy a battery producer. At least, the company should think twice before deciding to acquire it.
3.4. Expectations on the infrastructure
One of the most important parts in electric vehicles value chain is the infrastructure. For combustion engines cars the infrastructure is there: drivers have gas stations, repair services. They have the easy algorithm what to do with the car if they need to recharge, if they need to repair it, if they need to sell or lend it.
For electric cars it is not that easy.
The model of conventional cars could not be copied easily as there are some constraints which are typical for electric vehicles only. Here are the major of them:
- Recharging technique.
New infrastructure to build recharging stations needs a lot of investments. However, it is not needed until researchers do not elaborate on the way how to recharge the car quickly, following consumers' expectations, in three-five minutes. Right now, as it was pointed out above, the average time to recharge batteries is hours. Therefore, there is no reason to build recharging stations all over the country as nobody would wait for so long.
One alternative is the way a company “Better place” is acting. Their conception is to own the batteries and build recharging stations to change the batteries, not to recharge them. In this case, drivers own cars without the batteries and change them as soon as batteries' level is low. This is an opportunity to charge batteries in the time of low tariffs. There is some critic to this approach. The network of battery-changing stations requires a lot of investment. In Denmark and Israel where “Better place” started to operate actively there is a huge support from the governments - Israel just boosted the sales tax on conventional cars to 60% and offered to buy old cars to get them off the road. (Hamm. A Better place …)
In fact, these countries are ones with the highest need for electric vehicles as gas prices are high there and small territories give a good chance to develop infrastructure in a quite short period of time and without spending too much. Better place orients the model towards a similar one in cell phone industry. While purchasing a car, a client is offered to subscribe to monthly services and he/she could recharge the vehicle at the stations and change batteries in a carwash-like service station in several minutes. Better Place people expect that after a smooth start of the program the cost of owning for a particular driver will be 50% lower than for a combustion engine car driver. Another concern about this model - what will happen at the time scientists and industry will find the way to recharge batteries in a very fast pace, at least comparable with the time needed to refuel combustion engine car? As Susan Cischke, group vice president of sustainability, environment and safety engineering at Ford Motor Company, said: “One thing that would change (Better Place's) model is if quick charging technology was available.” (Riddell. Five Better Place challenges …)
Another alternative is charge a car in approximately 20 minutes to 80% capacity. (Loveday. Quick Charge Stations To Become Primary…) This opens the door for different variants where to locate charging stations and give the opportunity to establish a lot of them as 15-20 minutes are hours and this period of time is not usually that critical for drivers. Better Place is also considering to establish charging stations in addition to their swapping stations. "If you look at our investment in the infrastructure, the majority would actually go to quick charge spots. There EV owners can top up their charge whenever and wherever their vehicles are parked… We'll put them down. A lot of them. Hundreds of thousands. " These are the words of Sidney Goodman, vice president of Better Place.
However, there are still several constraints that may postpone the introduction of these quick charging points at commercial scale. First of all, costs. This quick recharge needs operating at 50 kW compared to standard 220 V plug operating at 1.5 - 3.5 kW of power. And the costs differ dramatically for one unit: $50 000 for a quick one and $1 000 for an ordinary one. Secondly, fast-charging units have additional hardware requirements that would add costs to the car. Thirdly, fast charging could reduce the battery life as the additional heat could damage the battery and this fact also would add costs to the vehicle. In Ford's Director of Electrification Nancy Gioia's opinion: “We want to make sure any type of fast charge doesn't degrade the life or performance of cells. Technology probably won't be viable until at least second generation EVs hit the road." (Loveday. Should Ford Not Offering…)
- Recharging standards.
As drivers and their cars need unification in parts of infrastructure the main participants have already started establishing the standards. Leading automotive and energy companies agreed on a common plug to recharge electric cars at industrial technology fair in Hanover. Now this is a threeprong, 400V plug. (A common plug for electric cars)
3.5. Expectations on the metering (billing) system
The consumers expect the technology which will allow the consumers to receive comfortable receiving bills and knowing that they are not overpaying is in the market. However, first steps to adapt this cost- and timesaving technology are the most difficult as it requires a lot of effort and the „first mover“ advantage is not clear-cut.
The utility companies and car manufacturers are the key drivers. However, the main role in the point of view of general public belongs to energy providers.
There are some examples of car manufacturers that the industry is ready and waiting.
For example, Ford Motor Co. launched a technology that lets the drivers recharge electric cars when energy rates are low. In-car device allows a driver to control the level of recharging and postpone recharging, for instance, for the middle of the night where tariffs are lower and electric grid does not work in a “pick mode”. The owner uses a computer inside the car to choose these options: time, duration and price. This technology is going to be introduced next year when plug-in Chevrolet Volt comes to the market.
The problem with the smartmeters and billing system is not about technology. As Bill Ford, the Ford Motor Co.‘s executive chairman, said „Developing an electric vehicle was relatively easy compared with working with "our partners at energy providers“. As there only a few car manufacturers but a lot of utility companies (Dolan. Ford plans…). In Germany there are more than 900 electricity providers.
Actually, this is an example how car companies elaborate their own technology not waiting for the solution from the side of utility companies. Tony Posawatz, vehicle line director for the Volt program, said „“The point is some of our competitors will rely on technology that requires smart meters, which is years away,“ (Dolan. Ford plans…)
However, more and more energy companies introduce smartmeters which are different from place to place but have several common characteristics:
- Smartmeters are able to deliver interval data instead of getting monthly one only. This allows the company to create a lot of different tariffs and allows users to be very flexible and to choose the best variant to use the energy. The target is to allow customers as much choice as they have in mobile phone industry;
- With smartmeters there is no need to visit customers' houses to read a counter. The information is delivered automatically.
What also could do smartmeters is to allow vehicles providing energy to the grid when parked.
The environmental aspect of consumers' expectations could be fulfilled by the establishment of a smart grid and, as a consequence, the increased part of renewables in the energy mix. In this case the use of energy becomes more efficient and the use of renewable means that emissions are minimized, not relocated to power plants areas. (The German approach to electric mobility)
In this case, cars could be considered as mobile storage units and a usual driver would be able not only to buy the electricity from the grid but also sell it back to the grid. It is so called vehicle-to-grid (V2G) technology. In this case, helping saving energy electric cars could serve as grid integrators - not only climate protectors.
The alternative which could exist is another new technology called vehicle-to-house (V2H). The difference is that the vehicle in this case is connected to the house network, not to the grid.
Conclusion: energy companies and car manufacturers still have not decided who is going to be in a driver's seat for a process of a billing system establishment. Smartmeters are ready but not in the market. V2G solution could be helpful not only for an optimization of electricity costs for drivers but also for the benefits of renewables.
3.6. Industry expectations on other benefits buying an electric vehicle
1. Congestion charge
Renault-Nissan Chief Executive Officer Carlos Ghosn on electric vehicles in the market: "We think in cities -- Paris and London -- we think cars will be forbidden unless they are zero-emission" vehicles. He said Renault-Nissan's plans reflect a judgment that lithium-ion-battery technology will soon be mature enough to power purpose-built electric cars in cities. He stressed that Renault and Nissan don't plan to convert their entire fleets to all-electric power.
On the other hand, electric cars industry feels now and will feel in the future a sort of competition in the field of favorable legislation from the side of public transport, bikes and just walking. As, for instance, free or cheap electric cars parking could divert people from public transport, biking and walking in the center of the cities. As an example, the City of London recently revoked its decision to provide cost free parking for electric vehicle owners for the reason mentioned above. (Understanding existing…)
2. tax initiatives. They could differ from place to place; Right now in Germany there is no special financial discount for a driver to buy electric vehicle. However, in several countries there are such initiatives: (More!!!)
3. special carpool lanes. For instance, in Virginia, all hybrid and electric cars' drivers have the advantage of having these lanes for hybrid and electric vehicles could be used regardless of the number of people in a car. (Consumer reports. The dollars…)
4. E.ON current state and possible next steps
4.1. Current involvement in e. mobility compared to other big German energy suppliers
1. Testing project: Munich cars with BMW
The only E.ON current practical involvement in e-mobility is the rest project with BMW in Munich where they built 14 recharging stations for 15 all-electric E Mini cars. This involvement does not seem big compared to other big German energy suppliers (RWE, Vatennfall and EnBW).
E.On is still right now reluctant to be actively involved in e.mobility because a lot of uncertainties remain in this field.
2. Billing system as of now
E.ON billing system is based on SAP Warehouse database. The basic device is a counter which is not capable to send data automatically. There are also smartmeters and EDL-meters.
EDL-meters according to EU Directive 2006/32/EC on energy end-use efficiency are determined as “… competitively priced individual meters that accurately reflect the final customer's actual energy consumption and that provide information on actual time of use.”
Smartmeters could be imbedded in “smart homes” and with in-home display could show how the energy is spent on the computer (web-portal), kWh, prices for every 15 minutes.
The E.ON's involvement in recharging stations for electric cars is minimal and represented by the project in Munich (see above).
As for home recharging, technically it is possible to attach smart meters.
4.2. The other big German energy suppliers' current involvement in e. mobility
Here are the activities of the other three German energy suppliers.
RWE is to set up 500 special charging sites (supply points) at owners' homes, workplaces and in car parks and shopping centers. Owners will be automatically billed for recharging, similar to the way they pay mobile phone bills. These 500 spots serve 100 electric cars. The cars are all-electric Smarts (Daimler corporation). (Daimler, RWE to Roll out Electric Cars in Berlin). The project is going to be launched at the start of 2010.
RWE also built a series of recharging stations in different cities.
Vattenfall has made a joint project with BMW in Berlin, quite similar to E.ON's one in Munich but the number of cars is 50 with up to 50 recharging stations. (Electric vehicles: Using electricity for transport).
Vattenfall also signed a Memorandum of Understanding (MoU) in Berlin with leading industrial companies on the evaluation of the setup of a hydrogen infrastructure in Germany with the final aim to promote production of fuel cell vehicles. Other partners are of the initiative "H2 Mobility" are Linde, Daimler, EnBW, OMV, Shell, Total, Vattenfall and the NOW GmbH National Organisation Hydrogen and Fuel Cell Technology.
EnBW activity in new energy is more broad than for other big energy suppliers as it concentrates on global initiatives. EnBW also signed a Memorandum of Understanding (MoU). EnBW is a leader of another consortium called MEREGIO (“Minimum Emission Region”) which is focused on the development of a minimum emission certificate. The model region is Karlsruhe/Stuttgart. Actually, this project is aimed at smart grid development and will consequently add value to e-mobility. (EnBW, Siemens plan first ever…)
Conclusion: E.On's involvement in e-mobility is the lowest one compared to the other three big German energy suppliers by now.
4.3. E.ON readiness for next steps in e. mobility in five years
According to plans of car manufacturers - major and niche ones, no massive introduction of electric cars to the market will occur up to 2014.
4. Billing systems (Rewrite!!!)
EDL-meters will be used in new households. Metering is liberalized. There is a possibility for consumers to install a smartmeter for additional money (15 Euros as of today).
Only smartmeters could “understand” different tariffs. There are smartmeters which could read day and night tariffs, and there are tariffs which could read more than 2 two daily tariffs (e.g., morning, afternoon, evening, night tariffs)
There are two types of opportunities:
- DSL-driven (as in Italy, Spain, Sweden). Consumers install a smartmeter for 15 Euros/year or a bit more;
- E.ON-driven. E.ON installs smartmeters itself. Additional costs - 100 Euros per smartmeter;
E.ON has got a competitive advantage: international experience, overall experience, IT solutions as it would take a lot of effort to get this state of IT solutions for competitors. Dominant position on the market makes it possible for E.ON even influence the market and to create its own standards.
Short-term the introduction of smartmeters is not profitable for energy providers. It is more for better image among customers and keeping up with the competitors.
It could become profitable as long as more consumers will engage in smartmeters installation.
There are three possibilities:
- Install an additional plug in a garage. Still one bill for electricity;
- Install an additional plug in a garage. Separate calculations for electricity at home and for the car;
- Smartmeter inside the car.
a. E.ON needs to focus research on quick charging points to eliminate constraints and introduce best solution when market would be ready.
b. At home (smartmeters, smart homes). Thinking about smartmeters, E.ON should take into account the easiness of energy calculations for perspective drivers. As one of the main constraints in e-mobility field are high costs due to batteries prices, initial buyers, according to surveys (see chapter 1) will worry about the energy consumption. To offer the most suitable tariff for EVs drivers will be the order winner for the company.
c. Vehicles as storage units. Introduction of the smart grid.
Right now the E.ON position is as Mr. Robert Pfluegl, E.ON Energie managing director, said - technologically E.ON is ready for smart grid launch but batteries are expensive (10-30 th Euros per battery) and their life time drastically reduces if they are charged and recharged almost permanently. Therefore, he estimates the introduction of a smart grid in more than 5 years.
Marketing steps for E.ON in the next five years:
In case of any public awareness programs E.ON has to actively participate as this part seems to be one of the most important as in electric cars drivers face a new practice and several worries. It is very important to link the company's name with any sort of actions conducted in the field of e-mobility.
Any initiatives highlightening the energy consumption and infrastructure response for a particular car would be welcomed.
Some marketing steps proposed:
- it would be useful to contact Google to add E.ON charging points to Google and Nokia maps (German editions). The same could be applied to road navigators such as Garmin or TomTom;
- private E.ON columns in respected and popular magazines for car drivers with the main topic about energy for electric and hybrid cars (More!!!)
- (Think of more!!!)
What will or will not happen in the next five years:
No (won't happen):
- mass production of electric vehicles;
- fast cost reduction of Li-ion batteries;
- electric vehicles prices comparable to combustion engine cars';
- V2G (vehicle-to-grid) technology mass use, in other words, - no smart grid.
There is a high probability to happen:
- Big OEMs will get involved in electric cars production;
- Growing market of Lithium-ion batteries;
- Introduction of smartmeters, smart homes, advice on the best tariffs for different types of energy use.
Seems reasonable for energy suppliers to combine efforts with car producers to add a smartmetering system to the package when the buyer purchases an electric vehicle. The same holds true for commercial vehicles. Infrastructure is very important and should go first.
4. Increase in the population segment which is going to buy electric cars.
4.4. Going further. For what E.ON should be prepared in the next decade. (I am not sure I will fill it in - only in case, I've got time and enough thoughts)
Massive penetration of electric vehicles to the market could happen. The improvements in lithium-ion batteries could make EVs significantly cheaper. However a lot will depend on external factors such as legislation, marketing campaigns, oil prices.
- Longer range of vehicles
- Cars ready for quick recharging (80% capacity)
- Different schemes of cars' sales