4 minute read 28 Oct 2019
Electric car charging

How Canadian energy companies can prepare for electric vehicles

Authors

Lance Mortlock

EY Canada Strategy Partner and Oil and Gas Leader

Forward-thinker. Strategist.

Daniela Carcasole

EY Canada Assurance Energy Leader; Canadian Power & Utilities Leader

Reimagining the auditor and our commitment to innovating the profession. Influencer of startup female entrepreneurs. Lifelong student of pilates, barre and yoga. Lover of the arts.

Contributors
4 minute read 28 Oct 2019

A dramatic shift to electric vehicles would fundamentally transform how Canadians consume energy products, and change the industry forever.

Over the past 10 years EVs have become increasingly common across the world, and here in Canada. They make up less than 3% of the global vehicle stock today, but have grown at a rate of 63% between 2017 and 2018. Today, Canada is the 10th fastest adopter of EVs in the world, trailing only China, the US, Japan and several European countries.¹

We know there will be an eventual shift toward the increased use of electric vehicles, but what remains uncertain is when, how rapid and how big the shift will be.
Lance Mortlock
EY Canada Strategy Partner and Oil and Gas Leader

While the adoption of EVs has already had an obvious effect on the automobile industry, this transition will also impact other sectors, including both oil and gas (O&G) and power and utilities (P&U). We know there will be an eventual shift toward the increased use of EVs, but what remains uncertain is when, how rapid and how big the shift will be. It’s also still uncertain when and if EVs will wholly replace internal combustion engine (ICE) vehicles, and there are many opinions on when and how significant any shift toward EVs will be.

To help illustrate how both O&G and P&U companies in Canada may be affected by the transition toward EVs, and how urgent it is for both types of companies to respond, we have used a scenario planning approach. Each scenario is determined by the outcome of several uncertainties in the current business landscape, and applies a calculated methodology to determine the impact on the Canadian energy industry.

Download the full report to view details on each scenario and implications for the Canadian energy sector.

EV adoption scenarios

The three possible scenarios for EV adoption — rapid, moderate and slow —provide a view of what transportation in Canada could look like in 2030.

1. Rapid adoption

In the rapid adoption scenario, where EVs account for 30% of vehicle stock in Canada, both O&G and P&U companies are facing serious disruption, and those that don’t respond quickly cease to be relevant. O&G companies lose significant demand for their products and must look to diversify their portfolios to focus more on clean energy, while looking to new markets to consume their products. On the flip side, P&U companies are facing unprecedented demand, which requires a significant investment in existing grid infrastructure to provide consumers with the ability to charge at home and at new commercial locations. The two types of companies necessarily converge, and face new competition from unconventional players, as they both move toward becoming energy providers as opposed to abiding by their previous delineations.

2. Moderate adoption

The moderate scenario shows a slower transition toward EVs, capturing 15% of the Canadian car market (by stock) by 2030. This results in less urgency to adopt, but still requires adjustments for both types of companies. In this case, the lack of urgency and resultant inertia for a response from either type of company creates an opportunity for organizations that take a proactive approach. This involves developing strategic alliances or making acquisitions that prepare these companies for an EV future, while still enjoying the benefits of their traditional business.

3. Slow adoption

Finally, in the slow adoption scenario, both types of companies continue relatively unaffected by EVs and focus their efforts on other priorities and megatrends that they are facing today. EV adoption will remain a niche market for a select number of consumers, accounting for only 3% of the Canadian vehicle market by 2030. This means current growth trajectories would have to slow significantly to make this scenario a reality.

Impact of electric vehicles on Canadian industries

The rate of adoption in Canada and Canada’s energy export partners will have a significant impact on Canada’s energy industries. As demand for electricity begins to replace demand for oil, O&G companies will need to intensify their pursuit into electricity markets. These companies are already beginning to rebalance their portfolios.

In the context of EV charging, new entrants, such as hotels and restaurants, will flood the P&U space to meet the dynamic needs of a growing and changing market. P&U companies will not only need to respond to increased demand, but also to opportunities to partner with, merge and acquire new market players and identify opportunities around public charging, network optimization, EV fleet management and battery repurposing.

Increased demand in the P&U sector will require investment in existing and aging infrastructure, a digitization in infrastructure and demand management. P&U companies will manage demand through surge pricing, base loading, reliance on natural gas supply and potential emerging vehicle-to-grid (V2G) systems to increase grid stability.

We know that a dramatic shift to EVs would fundamentally shift how Canadians consume energy products and impact both O&G and P&U industries forever. It is indisputable that change in Canadian energy industries is accelerating, and the risk of disruption is increasing. Standing by and observing is no longer a viable business strategy.

  • Show article references

    1. Global EV Outlook 2019: Scaling up the transition to electric mobility, 2019, International Energy Agency.

Summary

EVs have become increasingly common across the world, and are seen as a disruptive force by many industries. Even though Canada ranks 10th in EV adoption, it is influenced by political, technological, economic and environmental factors. They influence consumers’ cost-benefit perceptions and ultimately dictate whether and when they’ll choose to buy electric. These factors can be seen as either enabling or inhibiting EV adoption.

About this article

Authors

Lance Mortlock

EY Canada Strategy Partner and Oil and Gas Leader

Forward-thinker. Strategist.

Daniela Carcasole

EY Canada Assurance Energy Leader; Canadian Power & Utilities Leader

Reimagining the auditor and our commitment to innovating the profession. Influencer of startup female entrepreneurs. Lifelong student of pilates, barre and yoga. Lover of the arts.

Contributors