As countries around the world continue to place stronger restrictions on automobile emissions and electric vehicles reach cost parity with traditional cars,1 the widespread adoption of electric vehicles (EV) will significantly increase the demand for clean energy such as solar.
EV technology has historically delivered value via environmental impact; reducing air pollution and greenhouse gas emissions.2 Whilst there is a global sense of urgency to promote technology that reduces reliance on fossil fuels, it is the improved economics of EVs that will ultimately drive consumer adoption.
Batteries make up a third of the cost of an electric vehicle.3 In recent years the costs of batteries have fallen rapidly, enhancing the economics of EVs.4 Improved economics helped EV sales grow an impressive 60 per cent worldwide between 2014 and 2015 alone, with recent forecasts predicting that EVs will overtake traditional vehicle sales by 2038.5 If those predictions bear out, EVs could number as many as 530 million, or a third of the global vehicle fleet, by 2040.6
The demand for electricity by all of these EVs means that clean, renewable and inexpensive energy sources are more important than ever. To quantify the impact of electric cars on the solar market, a recent report noted that extensive global demand for EVs could lift power demand by 2 to 3.5 per cent, with at least half of that being supplied by solar.7
Forecasted annual electricity consumption from electric vehicles
So, what's behind this explosive EV sales growth prediction?
The Australian Electric Vehicle Association points out five factors that, when achieved, could lead to widespread adoption: familiarity by consumers, adequate usable range of the vehicles, perception of adequate infrastructure to fuel the vehicles, a variety of models to meet consumer demand, and comparable cost.8
That last point is especially important. Environmental benefits aside, consumers make big-ticket purchase decisions with their wallets, and industry experts point to the falling sticker price of EVs as a major factor in their growing popularity. According to Liam Thomas, Head of Investments at New Energy Solar, EVs are expected to be at cost parity with fossil fueled cars in just five years.9 And once this parity occurs, exponential EV growth is expected, especially if gas prices spike. In the European Union, a leader in the adoption of EVs, Bloomberg New Energy Finance is currently predicting that parity will occur by 2025.10
EU 5-year total cost of ownership comparison for battery electric vehicles (BEV) vs. internal combustion engines (ICE)
Some countries are taking a particularly proactive stance in encouraging the transition to EVs by banning fossil-fueled vehicles entirely. Germany, home to several of the world's biggest automakers, has passed a resolution that bans internal combustion engines by 2030. Norway is banning fossil fuel cars by 2025 and requires that significant numbers of vehicles be zero-emission by 2030. India also hopes to institute a ban by 2030, while the U.K. and France have set their sights on a 2040 deadline.11
A thriving EV market and significant developments in utility-scale solar projects make this an exciting time for solar energy investment. As Thomas sums up, "We think solar has a big role to play in meeting this increase in electricity demand as electric vehicles replace internal combustion."
John joined New Energy Solar as Managing Director and CEO in May 2017. He brings a wealth of experience and capability to the role after more than two decades of experience in corporate advisory and investment banking, with a focus on the infrastructure, energy and utility sectors.