When electric transport takes charge, will it fast-track opportunities?

By

Thierry Mortier

EY Global Innovation Lead for Power & Utilities

Innovative and creative leader. Curious accelerator and visionary. Technology enthusiast interested in agile, blockchain, artificial intelligence, mixed reality, Internet of Things, market and trends.

6 minute read 5 Apr 2019

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Energy companies will need to be well-positioned to fast-track opportunities and deal with threats if they wish to thrive in this new energy world.

The electric vehicle (EV) market is accelerating, with almost 40% of total global sales made in 2018 alone. A combination of technology improvements, public policy and political mandates is making EVs more attractive to drivers and spurring adoption. And, when it comes to price and performance, EVs will soon be on par with internal combustion engine vehicles.

China and Europe are on track to be the biggest adopters. China has put in place credits and subsidies that will see EVs account for more than one-quarter of the car market by 2030. In Europe, tightening emission standards and higher fuel taxes will grow EV market penetration to a similar proportion over the same period.

In the US, the International Energy Agency (IEA) anticipates rapid adoption in states with zero emission targets. Conversely, relatively low fuel taxes and the Trump administration’s intentions to scale back vehicle emission standards could obstruct growth.

A combination of technology improvements, public policy and political mandates is making EVs more attractive to drivers and spurring adoption.

Technology defines potential, but geography determines speed

Rapid developments in battery capabilities are bringing down EV costs, improving efficiency and mitigating driver anxiety about driving range limits. Over time, distributed ledger technology (blockchain) will support digital payments and shared driver resources. Meanwhile, artificial intelligence and vehicle-to-everything connectivity is sparking a move toward autonomous vehicles that will be the building blocks of future smart cities.

These technologies and others, the tightening of emission standards, new EV strategies from auto manufacturers, the shift to car-sharing and vehicle-as-a-service, and the expansion of charging infrastructure, are accelerating EV adoption. In fact, the IEA goes as far as to predict that EV ownership will balloon to 125 million by 2030.

However, the rate of adoption is occurring at different speeds. In developed countries, growth in renewable generation is expected to provide enough capacity to accommodate the additional load from EVs. However, the risk that power may not be available when needed could warrant a massive redesign of the grid.

Developing countries, meanwhile, will have to rapidly expand their generation capacity to accommodate increased demand. According to recent EY research, by 2050, around 10.2% of India’s total electricity demand will come from an expected 550 million EVs.

Irrespective of geography, large numbers of EVs plugging in to the grid simultaneously will create considerable extra load. Energy companies need to figure out how they will manage this in conjunction with the additional load that will also come from the electrification of buildings, heat and industry.

Collaborations inside and outside the energy sector

E-mobility presents a significant growth opportunity for energy companies, as traditional revenues fall thanks to consumer self-generation and storage solutions.

Looking to seize first-mover advantage, leading energy companies are already experimenting with EV business models. In most instances, success lies in collaborating and partnering with other players inside or outside of the energy industry.

Opportunities exist for energy companies to partner with others in the sector on investment opportunities; with local governments and cities on mobility solutions; with retailer or gas stations on EV charger installations; with EV makers on battery services; and with technology start-ups and upstream battery raw material suppliers.

Yet, even as industries converge, energy companies will need to keep an eye on competition from inside and outside the industry when setting up EV charging infrastructure and seeking energy distribution licenses.

There also is an emerging interest in the fleet management space. With higher annual mileage than privately used vehicles, and thanks to government mandates and incentives, the appetite for EV fleets is high. Opportunities for energy companies include setting up the entire charging infrastructure, battery leasing and maintenance services, fleet financing, telematics and optimization, and B2B/B2C vehicle-to-grid (V2G) services.

E-mobility presents a significant growth opportunity for energy companies, as traditional revenues fall thanks to consumer self-generation and storage solutions.

Fast-track opportunities by playing to strengths

Energy companies looking to quickly move into the EV space should play to their strengths. Opportunities include:

  1. Developing an e-mobility strategy. Energy companies need an in-depth understanding of the impact EVs will have on the energy system and what they need to do to address it, from generation, to transmission and distribution, to products and services. Once they understand this and the associated value pools, they should decide where to focus their efforts and invest accordingly.
  2. Collaborating to win customers. Electric mobility will demand that energy companies improve their ability to attract customers and keep them. Collaborating with stakeholders that already have the skills and relationships can help energy companies fast-track their customer relationship capabilities.
  3. Investing in data capabilities. Many energy companies are experienced in developing and installing the smart meter and grid technology that will help serve as the critical link between EVs and the power they need. They must now make certain they have the necessary skills and capabilities to harness the resulting data and develop tailored products and services.
  4. Finding trusted platforms to share data. Energy companies will be one part of a complex ecosystem and will depend on data from other parties to succeed. They will need to find ways to collaborate on data sharing within a secure architecture that maintains the trust of all stakeholders.
  5. Building charging infrastructure. The advantage energy companies have over other players is their considerable experience in owning, building and operating large infrastructure assets. However, rolling out charging infrastructure to support future mobility is a local challenge. Energy companies will need to scale their business models and infrastructure to reach new geographies, while remaining commercially viable. Providing integrated V2G and home energy management solutions will be key.
  6. Partnering to power smart cities. Governments around the world are seeking to encourage the shift to a cleaner environment through incentives and regulation, as well as the purchase and operation of EV fleets. Energy companies have a long history of working with regulators and governments to generate and distribute power. By partnering with players they already know, energy companies can help fast-track the smart city movement by providing complete mobility and energy solutions.
  7. Considering fractional ownership of assets. In a future energy world, assets, such as battery storage, will likely be disaggregated from EVs, charging poles, etc. A fractional ownership model could help energy companies to support pay-per-use revenue streams and manage the depreciation of assets. It will incentivize investment in e-mobility by assuring investors of more consistent returns.
     

Electric mobility will demand that energy companies improve their ability to attract customers and keep them. Collaborating with stakeholders that already have the skills and relationships can help energy companies fast-track their customer relationship capabilities.

Plugging in to the fast track

The e-mobility revolution is well underway. Early adopters looking to seize the opportunities this presents are already on the move. If energy companies want to get on the fast track, they will need to quickly establish which path they want to follow, how they want to get there, and who they want to partner with to accelerate their journey.

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Summary

The journey toward decarbonization has put the electrification of transport and mobility on an irrevocable path to dominance by the middle of this century. If energy companies want to take advantage of the opportunities this presents, they need to quickly establish which path they want to follow, how they want to get there, and who they want to partner with to accelerate their journey.

About this article

By

Thierry Mortier

EY Global Innovation Lead for Power & Utilities

Innovative and creative leader. Curious accelerator and visionary. Technology enthusiast interested in agile, blockchain, artificial intelligence, mixed reality, Internet of Things, market and trends.