We’re optimistic about EVs, but there is still some uncertainty. We see three big questions:
When will EVs be fully adopted by the mass market? The cheapest models are still considerably more expensive than ICE-powered cars and aren’t available in volume.
How quickly will consumers become convinced of the cost and performance advantages? Interestingly, if a technology is perceived to be advancing, many consumers may defer adoption and push the curve out.
When will the infrastructure required to charge EVs be built at scale? There are as many charging technologies as there are EV manufacturers, and electric utilities may be reluctant to invest today in upgrades that may not yield immediate revenue.
The Critical Gas scenario assumes 41% marginal penetration for EVs by 2035. That’s slightly above the penetration we assume in The Long Goodbye scenario, substantially above the 22% penetration we assume in our Slow Peak scenario and well below the 100% market share we assume for EVs in our Meet Me in Paris scenario.
Speed of transition to renewable power
In our models, we measure the speed of transition to renewables by determining what proportion renewables and natural gas take, after we have accounted for demand growth, coal attrition and increases or decreases in nuclear generation. They are roughly 50/50 now. Meeting the goals of the Paris Agreement would require that the share exceed 100 percent: gas generation would need to be shut down and replaced by renewables.
In the Critical Gas scenario, we assume that renewables and gas will share the power generation market at the margin in 2035 and beyond. That’s roughly the case now, and it’s pessimistic as a forward-looking point of view. A recent study estimated that battery storage would have to fall to $20/kWh to make a 100% renewable power grid sustainable2. The current price is about $185/kWh. We’ll get there eventually, but no one knows when. We’re not necessarily predicting that outcome, but we consider it a plausible scenario.
Another question is financing. Today, power sector investment is almost entirely financed on government and corporate balance sheets. It’s a system that worked well, and power utilities (public and private) are among the best credit risks in the market. In an all-renewable world, we expect a large portion of that investment to shift to households. The numbers are substantial. The International Energy Agency contemplates about US$25t of investment in the power sector between 2018 and 2040 under its Sustainable Development Scenario.