Electric Vehicles Technology And Infrastructure Commerce Essay

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Martin Clark has over 18 years experience as an analyst covering the energy and power industries. As a freelance writer he has contributed extensively to the The Financial Times, The Economist, The Scotsman, The Sunday Telegraph and the Independent on Sunday. Specialising in technology, supply and logistsics, he has travelled extensively in Europe, Africa and the Middle East.

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Brief History of Electric Vehicles and Market Drivers

Interest in electric vehicles continues to grow steadily but the technology is not new, dating back to the early part of the nineteenth century. Since those early pioneering days, however, technology has progressed considerably.

Rising concerns over the environment and the impact of fossil fuels to the long-term future of the planet have heightened interest in clean energy technologies, including electric vehicles.

The technology behind electric vehicles continues to mature, with improved designs and battery power extending the speed and range of models, with commercial manufacturers taking a great interest in electric vehicle production.

Long-term projections, drawing on historical growth patterns, suggest that demand for oil will continue to rise, at least for the foreseeable future. A large slice of this new demand will come the transportation sector.

In the US, under the American Recovery and Reinvestment Act, President Obama pledged US$2.4bn in federal funding for EVs. Of this total approximately US$2bn is to be spend on developing advanced battery technology. Meanwhile, US$400m will be set aside for demonstration and deployment projects.

The IEA believes the number and type of hybrid electric cars available to the market will grow substantially through to 2015 albeit from this modest base. The global market for hybrid vehicles could more than triple by 2012, compared to 2007 sales.

Leading electric vehicle manufacturers & outlook

The EV industry encompasses a number of vehicle types, from gasoline-powered hybrid cars to innovative fuel cell cars. While the goal for many governments is to move to a future of full plug-in electric vehicles there is a role to play for hybrid cars - which involve the owner driving a vehicle with an internal combustion engine, with added electrical technology to improve fuel efficiency and performance. This remains an important bridging technology for the wider uptake of EVs.

Just as EVs are under constant development and refinement, so too is battery technology. Huge investment is pouring into new battery systems with the general remit to improve portability, power and performance. Lithium-ion batteries have emerged as a popular choice for auto makers in the current environment but fuel cell cars continue to intrigue. The advance of fuel cell technology means interest in these cars will also grow.

To some degree, we are entering a crucial period in the emerging EV industry. For all those involved, certainly the car manufacturers, the period up to 2012, while not make or break, will set the tone for the rest of the decade, as numerous new designs and models make their debut. How these are received by the market, and indeed how they perform on the road, could play a part in how quickly the general public is willing to embrace EV technology.

Car manufacturers do not exist in isolation when it comes to the development of EVs, but rather inhabit a universe populated by, among others, power utilities, oil companies and technology vendors. With multiple challenges to face up to in phasing in EVs as a potential long term replacement to traditional petrol-powered cars, it is essential that all parties continue to work together as closely as possible. All Executive Summary bullet points should start with a capital letter and end with a full stop.

Infrastructure for electric vehicles

The electric vehicles industry and its growth are inextricably linked to the expansion of the charging infrastructure. Some locations are more developed than others but as a rule the infrastructure remains embryonic. In theory, while car users already have all they need to charge their electric vehicle at home, with a simple plug socket, it will take much more than this before the industry can really start to gain critical mass.

Car charge points vary, from home-based connections through to public charge spots in the city. These spots can also vary widely depending on the source of electricity used - from the national grid, or through solar panels - to the extent of smart technology deployed inside. Smart charge points can enable motorists can select power tariffs, recharge timing and other value added services. These systems can also help utility providers plan supply and demand.

The growth in the EVs segment is expected to raise overall demand for electricity. By how much depends on many variables, including the pace of uptake. The fact that most cars will be charged at night should resulted in limited capacity expansions being needed.

There are a number of widely differing business models taking shape that could influence and play a part in the future development of the market. The growth of the EVs segment may not follow that of the conventional automobiles sector, with a greater role for utilities.

Smart grids & smart charging

The concept of a smart grid is already becoming a reality in many parts of the world. In the US, homes are being provided with smart metering technology to create a more interactive and responsive national electricity system. The same is happening in Europe and other parts of the world. The hope is that a more flexible and dynamic power system will not only help to meet future energy challenges, from rising demand to the need to build new generating plant, but also be a part of the solution to pressing environmental matters. The development of the smart grid will continue irrespective of the fate of the EVs industry.

Smart charging devices can take much of the strain of recharging vehicles away from the motorist. Simple smart chargers can help re-power the car at the most cost-effective times, or at any pre-set time outlined by the driver. More sophisticated chargers will talk wirelessly to host units to convey easy-to-understand tariff information, transaction processing and potentially many other value added services from traffic information to engine diagnostics.

Creating a two-way, real-time line of communication presents other opportunities. With potentially millions of electric vehicle batteries sitting idle overnight, the utility may be able to draw on this power to balance loads at any given time, recharging vehicles when it is convenient. This bi-directional flow of energy helps utilities, while motorists would be paid for any power sold back into the grid.

Being able to encourage consumers to charge their vehicles off-peak, where there is excess capacity, has huge advantages for utilities. US utility Portland General Electric (PGE), estimates that if 10% of EVs are plug-ins by 2020, and they can get 90% of the demand off-peak, then they would only have to build minimal generation capacity to support it.

Electric vehicles and distributed storage

Interest in distributed storage and distributed generation has grown in popularity in recent years as part of a wider solution to create a more versatile and energy efficient power system. This means moving away from a traditional centralized model of power supply, based almost solely around a small number of large-scale power plants and long transmission lines and toward a system that includes many small power plants. These power plants can be in the form of plug-in electric vehicles with advanced batteries that provide electricity close to the consumer.

Battery technology is moving fast and will continue to do so for some years to come. The US government is investing billions of dollars to push scientific research into new battery technology and indeed battery alternatives. This work could lead to a step change in battery power availability for both the vehicle itself and the wider power network when the machine is plugged in. More powerful batteries - which means greater driving range - will also stimulate public interest in the sector and encourage greater electric vehicle ownership.

Every electric vehicle on the road could play an active role in energy harvesting, sourcing some of its surplus energy produced, for topping up battery charge, and to return to the grid. EVs can already employ technologies such as regenerative braking, to repower while the car is in notion, but new technologies are pushing for commercial acceptance, from shock absorbers capturing energy from uneven road surfaces to large solar paneling on the car roof. All of these devices can aid in recharging the vehicle and play a role in feeding energy back into the grid system.

Future outlook

The total number of EVs and hybrid electric vehicles remains comparatively small in terms of the total global sales of vehicles worldwide. Yet this is an area that has already witnessed substantial growth in many markets of the world during the past decade. It is expected that this rapid growth will not only continue but accelerate as the new technology starts to become more commercial and competitive with gasoline-powered vehicles.

It is the major developed economies of the world that will lead this growth, with the US, Europe, Japan already among the frontrunners, but also high potential, high volume Asian markets such as China and India. Both of these countries are keen to move directly to a model supporting electric vehicles, with car sales rising fast among new buyers. There is broad support across these countries given their common challenges in fighting oil import dependency and pollution.

The next few years are critical years for the development of the electric vehicles industry as more models of cars become available to drivers from the major auto producers. These companies are taking forward technologies, with fuel cell vehicles under development and likely to be more widespread during the coming decade. It shows to what extent this is an industry that remains embryonic and in transition. Whatever direction technology takes, however, it is commercial realities that will most likely determine the pace at which the market develops.

This is new ground for all - for consumers, auto manufacturers, battery technology companies and the electricity providers. None of these entities exist in isolation which means that collaboration is likely to remain a key feature of the market as it continues to evolve and mature. The utilities will play a fundamental role in facilitating the uptake of electric vehicles, in whatever shape or form they may come, and in getting the message to the millions - potentially billions - of customers in all of the key developed and developing markets around the world.


Brief history of electric vehicles and market drivers

Brief History of electric vehicles and market drivers


Interest in electric vehicles continues to grow steadily but the technology is not new, dating back to the early part of the nineteenth century. Since those early pioneering days, however, technology has progressed considerably.

Rising concerns over the environment and the impact of fossil fuels to the long-term future of the planet have heightened interest in clean energy technologies, including electric vehicles.

The technology behind electric vehicles continues to mature, with improved designs and battery power extending the speed and range of models, with commercial manufacturers taking a great interest in electric vehicle production.

Long-term projections, drawing on historical growth patterns, suggest that demand for oil will continue to rise, at least for the foreseeable future. A large slice of this new demand will come the transportation sector.

In the US, under the American Recovery and Reinvestment Act, President Obama pledged US$2.4bn in federal funding for EVs. Of this total approximately US$2bn is to be spend on developing advanced battery technology. Meanwhile, US$400m will be set aside for demonstration and deployment projects.

The IEA believes the number and type of hybrid electric cars available to the market will grow substantially through to 2015 albeit from this modest base. The global market for hybrid vehicles could more than triple by 2012, compared to 2007 sales.

Brief history of electric vehicles

With five major manufacturers planning to release battery electric vehicles (BEVs) or plug-in hybdrid electric vehicles (PHEV) models by the end of 2011, these vehicles are rapidly entering the mainstream. Indeed, by 2012 the EIA is expecting sales of hybrid-electric vehicles to reach 2.2m units. Such a roll-out will force widespread changes to the infrastructure, ranging from the development of home-based and public charging systems to the further development of the smart grid. According to the Electrification Coalition the total cost of installing a public charging network could be between US$80bn and US$180bn by 2030.

Brief history of electric vehicles

While EVs are now commonly billed as part of our transport future, they are certainly not new. Their origins can, in fact, be traced back to the nineteenth century, when the use of electricity was a preferred method of powering early vehicles.

The first simple EVs date back to the 1830s and the Scottish inventor Robert Anderson using non-rechargeable primary cells for powering a crude carriage system. Around the same time, the American, Thomas Davenport, put together a first practical example of an electric vehicle, a small locomotive, on a railway system.

Technology improvements continued, including the development of the first rechargeable lead-acid storage battery, leading to the first successful electric car in the US towards the end of the century. Famous names at work during these pioneering days include Thomas Edison who spent years searching for a lasting battery system for powering commercial vehicles. Early inventions ranged from electric carriages for personal transport, including electric tricycles, to buses, trams and trains.

By the turn of the century, electric automobiles had matured significantly and gained in popularity. By 1900, it is estimated that more than a quarter of all US cars being manufactured were electric powered.

In the large eastern cities of New York, Boston and Chicago, EVs were commonplace on the roads, often regarded as a quieter and more reliable alternative to machines using rival technologies. Unlike gasoline-based vehicles, there was no gear change required and start-up times were short compared to steam-powered cars. The city environment was also ideal for the short distances covered by EVs.

But it was to be a false dawn for the electric car. In 1908, Henry Ford launched his Model T mass production gasoline-powered car to the world, an event that would shape the automobile industry for the rest of the century. Indeed, within a decade, such was the success of the gasoline car and the internal combustion engine that commercial interest in EVs began to wane.

The roads network expanded, linking the big cities, and calling for vehicles with a much higher range than that offered by the EVs of the time. At the same time, mass-produced gasoline cars cut the cost of vehicles, while the discovery of oil in Texas ultimately slashed the price of fuel for the average US consumer.

As the cost of mass produced vehicles fell, the price tag for an electric car - manufactured on a less industrial scale - increased in relative terms. By 1912, electric cars were around three times the price of their mass-produced gasoline equivalents. Around the same time, the invention of the electric starter motor ended the need for a hand crank on gasoline-powered vehicles, eliminating another major disadvantage.

For the middle part of the twentieth century interest in electric automobiles as a mode of personal transport all but dried up. It was only towards the 1960s and 1970s that interest returned, amid concerns over exhaust emissions and pollution and a growing awareness of US foreign oil dependency, plus rising fuel prices.

A number of companies, including General Electric, began to explore electric vehicle technology once again, although it remained very much a niche area. Pioneers of this era included Elcar Corporation and Sebring-Vanguard, producing small volumes of electric cars with top speeds of around 45mph and a range of up to 60 miles.

The cost of the vehicles during this time remained high, in comparison to more conventional alternatives, but interest was again on the rise. Soaring oil prices - peaking during the 1973-74 oil crisis - intensified this interest, with major test programs undertaken, such as that conducted by the US Postal Service, which brought in 350 electric jeeps for postal delivery work.

In 1976, the US moved to encourage such projects, when Congress passed the Electric and Hybrid Vehicle Research, Development, and Demonstration Act. The aim was to encourage the development of new technologies to improve the performance, running and the viability of EVs, and push them into the mainstream.

Such flagship projects remain vital to showcase EVs as a working technology. More than 30 years after the initial US postal trial, FedEx launched its first fleet of sole electric delivery trucks on the Los Angeles streets in 2010.

Drivers of renewed interest

The scene had been set for a revival of interest in EVs - and indeed all other energy and energy-consuming technologies - following the 1973 oil crisis, which served to highlight the US' growing dependency on imported fuel. Other developed nations, in Europe and the Far East, were facing a similar scenario, including higher fuel costs.

The growing effects of pollution and congestion from ever more crowded roads also helped rekindle political and public curiosity in the partly forgotten world of EVs. In turn, this sparked further interest from the commercial sector.

The same environmental and energy challenges that we now face today were beginning to be realized back then. Lobby groups campaigned and governments took action.

In the US, the 1990 Clean Air Act Amendment and the 1992 Energy Policy Act were passed, while proactive states took the matter into their own hands, California unleashing new air improvement regulations to curtail rising pollution and a smog that threatened to engulf Los Angeles. In 1990, California introduced the first real vehicle targets, with the Zero Emission Vehicle Mandate, calling for 2% of the state's vehicles to be emission-free by 1998, rising to 10% in 2003.

From the US, initiatives spread to a global scale, with the UN leading climate change action, seeking emission cuts from the world's main polluters. In the EU, this resulted in the the 20-20-20 renewable energy targets, which saught to reduce Co2 levles by 20% below 1990 levels by 2020, while also targeting renewable energy to take 20% of electricity generation by 2020. At the Copenhagen Conference in December 2009, China announced that it will reduce the carbon intensity emitted per unit of GDP by 40-45%. Meanwhile, the US pledged to reduce Co2 emissions by 17% of 2005 levoes by 2020.

These measures have fuelled inerest in how to clean up the transportation segment, one of the main culprits behind carbon emissions. Providing that electricity is generated from carbon-intensive generation, then the Co2 savings from EVs will be marginal at first, but with renewable energy becoming more ubiquitious the potential Co2 savings are much higher. Also, even in hybrid vehicles, the presence of an electric motor increases fuel efficiency, reducing the need for gasoline. Indeed, according to research by Clean Car Options, eliminating virtually all internal combustion engine vehicles would be the only way to reduce Co2 emissions to 80% of 1990 levels by 2050 - which is the US' long term targets.

There are other developments that point to a brighter future for EVs and indeed other clean energy alternatives. The rise in the world's population, plus growing affluence in large Asian markets such as China and India, with aspirational consumers seeking to follow the car-owning model in the US and Europe, means more cars are on the roads. Unless action is taken to reduce the impact, more cars means more carbon output and more congestion.

At the same time, the technologies involved - while still maturing - are more recognized today and the model of building a large-scale commercial electric vehicle market is beginning to be better understood and, arguably, to take shape. One major driver is the deep involvement of the large automobile manufacturers of the world, virtually all of which are running some kind of electric vehicle program. Many have already launched electric cars to the market and more plan to do so. Meanwhile the improvement of battery technology, especially Lithium-ion (Li-ion) batteries (see below) has been instrumental in creating viable EVs.

There appears to be greater recognition that this is a transition that will happen at some point, given the stress points currently faced, namely, concerns of oil supply/prices, the environment and an ever rising number of people and cars. It is a trend that can even be traced to the large international oil companies themselves, which have moved beyond hydrocarbons into renewable energy technologies, from bio-fuels to solar power.

Just as the oil companies have changed with the times, so too have the power utility providers, embracing clean energy targets in their generation portfolio. Significantly, these companies are now closely aligned with the electric vehicle market, as the providers of the electricity that will charge our new breed of cars. Utility providers will be integral players in the roll-out of any electric vehicle charging infrastucture. Slowly, the impediments to electric vehicle, production and adoption, continue to be eroded.

Increased range of Electric Vehicles

During the years EVs spent in the wilderness, and at times when their popularity returned, technology never stood still. Among other advances, the cars increased their range capacity, a fundamental flaw among early vehicles, and a point that is now being redressed by current vehicle makers.

This has been driven by improvements to the automobiles themselves, across many areas, but nowhere more so than in battery technology. This continues to evolve, of course, and rapidly, but huge strides have been taken in recent years to lengthen the amount of time an electric vehicle can spend on the road and the distance it can travel.

Lead acid was the most common battery technology for the majority of 20th century for EVs, but these batteries only have low energy densities of around 20 Watt hours per kilogramme (Wh/kg), according to the City of Westminster's commisoned report Understanding Electric Vehicle Infrastructure. Energy desnity is important for EVs as it dictates how much energy the battery can store, and therefore its range. Nickel metal hydride batteries are an improvement on lead acid with average energy densities of 50-70 (Wh/kg). However, Lithium-ion (Li-ion) batteries, however, have the highest energy density, averaging 75-125 (Wh/kg). The development of Li-ion battery technology has been instrumental to the rise of EVs, as in addition to improved energy density they also have longer life-times than lead acid batteries allowing them to be charged and re-charged more times before performance deteriorates. The first Li-ion battery was released in 1990 by Sony and since then huge advances have been made, with the batteries now used for many lap-top computers and mobile phones.

Indeed, if the top speeds of EVs had, by the 1970s, reached around 45mph, with a range of up to 60 miles, the latest breed of cars has at the very least doubled that. The Tesla Roadstar, which uses a Li-ion battery, is a high performance electric sports car, which can travel 236 miles and hit a top speed of 125mph. The car can do 0-60mph in just 3.7 seconds. But this performance comes at a price, retailing at a price far out of the reach of the ordinary motorist, more than $100,000.

There are more affordable EVs on the market but their performance does not yet match that of the Roadstar. Renault's first range of 100% electric cars, to be released in 2011-12, will have varying ranges, from 60 miles - and a top speed of 46mph - for the smallest, city-going model, to around 100 miles and a top speed of 87mph for the family saloon.

The UK's biggest selling car by 2010, the G-Wiz, had a range of up to 70 miles and a top speed of 51mph, on a single charge of between 6-8 hours. While this range may not yet compete on a par with gasoline cars, the technology clearly continues to evolve. An interesting analogy might be taken from the growth of the cell phones sector through the past decade or so, which to a large degree, depended on extended and improved battery life. The more electric cars are adopted, the deeper the involvement of the commercial sector, the greater the investment in technology improvements such as raising battery performance. As performance and specifications improve, the greater the uptake, and logically, the fall in the cost of purchasing EVs.

However, Li-ion batteries are still expensive, which is preventing the mass roll-out of EVs. Indeed, according to a report from the Department for Business Enterprise and Regulatory Reform in 2008 the price of Li-ion batteries will havre to fall by 50% in order to make them viable for the mass market. Meanwhile, according to the Boston Consulting Group unless there is a major breakthrough in technology, the driving range of EVs will remain at a maximum of around 250-300KM (160-190 miles) between charges, whichis far below the average range of petrol-driven car, which in the US averages around 27 miles per gallon.

Falling oil production/peak oil

One of the main long-term drivers pointing to the future growth of the EVs market is the simple truth that the planet's oil and gas resources are limited and an alternative must be found. The finite resources that are extracted and burned today can never be replaced.

The advent of peak oil theory in recent years recognizes this simple truth. At some point, now or in the future, the theory goes, the world will hit peak production of oil and, thereafter, start to record a decline. The theory has obvious appeal but what it cannot identify is when this will take place. Nor can geologists state precisely how much oil there is, which means forecasting its demise, is fraught with difficulty.

In terms of global demand, the world currently uses approximately 85m bpd a fugure that has been relatively static in recent years. Indeed, as shown by Figure 1.1, according to the IEA, total world demand for oil in 2009 averaged 85m bpd, slightly less than three years earlier, 86.3m bpd.

Demand in some countries, notably the higher growth economnies of Asia, such as China, has gone up during the three-year period, while that of Europe and North America has fallen. This also reflects diversification efforts where both Europe and North America have sought to dilute their oil dependence by switching to cleaner burning gas. The advent of an international market in chilled liqueified natural gas (LNG) during the past decade has made such a shift possible.

Oil production has likewise remained fairly static during these same years, broadly equivalent to the level of global demand. At a national level, there are differences. The UK is seeing gas from its North Sea territories decline, resulting in a growing reliance on foreign imports.

But new oil and gas exporting countries have emerged to plug these gaps. In West Africa, for instance, Angola now supplies more oil to the US market than Kuwait. Equatorial Guinea has grown from producing nothing in the late 1990s to becoming the region's third main energy exporter, and another big US supplier.

However, long-term projections, drawing on historical growth patterns, suggest that demand for oil will continue to rise, at least for the foreseeable future. A large slice of this new demand will come the transportation sector, though quite how much oil production and consumption will grow is hugely speculative.

Much depends on the price of oil, which is a factor of supply and demand. The development of alternative energy solutions, including EVs, is critical here in influencing these market factors.

The US Energy Information Administration, in its International Energy Outlook 2009, sees oil supply - which is broadly equivalent to consumption - rise from the current 85m bpd to 107m bpd by 2030 in its reference scenario, see Figure 1.1. The IEA cites strong new demand growth from emerging Asian economies, especially China, and the anticipated rise in the number of cars in that market.

Table 1.1: World liquids consumption by region (m bls/d), 2006-2030

Region 2006 2030

North America 25.1 26.2

Non-OECD Asia 16.0 30.2

OECD Europe 15.7 15.0

OECD Asia 8.5 8.7

Central and South America 6.1 9.4

Middle East 5.7 7.6

Non-OECD Europe and Eurasia 5.0 5.5

Africa 3.0 3.9

Source: EIA Business Insights Ltd

[This graph will be re-worked in Office 2003 to make sure formatting is correct]

Figure 1.1: World oiquids consumption by region, (m bls/d), 2006-2030

Source: EIA Business Insights Ltd

If oil prices are high, and demand is held in check, then potentially, oil supply may only increase slightly by 2030, to 90m barrels per day. However, if prices are low and demand thrives, then world oil production may have to jump to as miuch as 120m bpd. To achieve this, the EIA flags production growth both among OPEC and non-OPEC oil producing countries, as well as an increase in unconventional hydrocarbons.

However, the point may not be so relevant. Even if nothing changes in terms of world oil supply over the next 20 years, current production and consumption of crude is already vast. If oil supply remains at 85m bpd this is still a large drain on the planet's resources. Further, it will continue to have the same impact on the environment as it does today, unless of course new mitigating technologies are adopted widely and rapidly.

It has given rise to peak oil theory and concerns that oil production at some stage, now or in the future, will reach a tipping point. With a finite number of barrels locked away in the ground the show can go on only so long, the theory goes: at some point, production will hit a peak and thereafter start to decline.

The evolution of the EVs industry - not on its own but alongside other clean energy solutiuons, both in the transport segment and in other areas of life - may well play a pivotal role in making this a reality. The most pressing concern is whether we will hit peak oil when we are ready for it - when we have already started rolling out new clean energy alternatives, such as EVs, on a mass scale - or whether it is already happening, leaving the world scrambling for the remaining conventional energy sources.

Within this context, the further advance of EVs - from new technology development through to mass market take up - becomes even more important. The price of electricy to run an EV is significantly lower than than the cost of petrol needed to run an equivalent car (see below). What is more a study by the US Department of Energy's Pacific Northwest National Laboratory in 2005, estimated that if the country's fleet of small cars were replaced by PHEVs, it would reduce US imports of oil by 6.5bn bpd, or 52% of total imports. Therefore increasing EVs could significantly improve US energy security. According to McKinsey, assuming that by 2030, 30% of China's passenger vehicles are EVs, the country could reduce oil imports by 10%, or 700m bpd.

Gas and fuel prices

One of the primary drivers behind interest in EVs and other hybrid electric options is the price of fuel that customers pay at the pump. A hugely sensistive issue to consumers worldwide, angry motorists can exert a great deal of pressure on their governments at times when fuel costs start to exert great pressure.

At the market peak in 2008, crude oil prices could reached US$147, pushing up prices at the pump. It is not only crude oil supply though, but refining capacity, and many other factors that influence the final cost of fuel that the motorist pays.

Table 1.2: World oil price projections (US$), 2000-2030, reference price scenario

Year Oil price ($) Year Oil price ($)

2000 36.4 2026 122.8

2001 30.4 2027 124.6

2002 30.1 2028 126.5

2003 35.0 2029 128.4

2004 45.4 2030 130.0

2005 60.0 2011 87.7

2006 67.8 2012 96.5

2007 72.3 2013 101.3

2008 99.7 2014 106.4

2009 61.3 2015 109.8

2010 79.8 2016 110.9

2011 87.7 2017 112.0

2012 96.5 2018 113.1

2013 101.3 2019 114.2

2014 106.4 2020 115.4

2015 109.8 2021 116.5

2016 110.9 2022 117.7

2017 112.0 2023 118.9

2018 113.1 2024 120.0

2019 114.2 2025 121.2

2020 115.4 2026 122.8

2021 116.5 2027 124.6

2022 117.7 2028 126.5

2023 118.9 2029 128.4

2024 120.0 2030 130.0

2025 121.2

Source: EIA Business Insights Ltd

Figure 1.2: World oil price projections (US$), 2000-2030

Source: EIA Business Insights Ltd

In some countries, the government becomes especially exposed to pressure from irate motorists. In the UK, approximately one third of the final price of fuel is the actual cost of supplying the product to the consumer. The rest, around two-thirds, is taken in tax of one form or another by the government, resulting in criticism from motoring groups that UK petrol stations are little more than tax collectors for the authorities.

UK petrol prices reached a record high in 2010, despite weak demand arising out of the global recession. As well as the factors listed above, the weak price of sterling also contributed to the high price, with most oil typically purchased in dollars. Predicting the future price of gas and oil is equally fraught with difficulty. This can be evidenced in a simple look at prices through the years. Average oil prices stood at near $100 in 2008; just 10 years earlier, in 1998, they were closer to $18.

Going forward, the EIA, as shown in Figure 1.2, charts a steady rise in oil prices in its reference case scenario, with per barrel prices reaching $109.8 in 2015 and then $130 in 2030. There is a high case scenario in which prices are higher - in which prices top the $200 mark. This will impact the cost of petrol, with the EIA's short terms forecasts claiming that the price of fuel will go up from the current level of US$2.8/gallon, to US$2.84/gallon in 2010 and US$2.96/gallon in 2011.

So much here depends on supply and demand factors. Within this volatility, the EVs market must attempt to take root and grow. Although the growth in the number of EVs on the road may not be sufficient within this 20-year time period to radically affect oil prices, it could be one of the factors. Perhaps the most significant thing is the sheer volatility of fuel pricing, in itself another driver pushing interest in the EVs segment.

Indeed, according to the Electric Power Research, based on an average cost of electricity in the US of 8.5c/kWh, a plug-in hybrid electric vehicle runs on an equivalent cost of 75c of gasoline. This compares favorably with the average cost of gasoline, which was US$2.8/gallon in April 2010. Therefore the wider roll out of EVs could become increasing attractive based on the current oil proce forecasts.