Posted on Sunday, March 29th, 2009
First published in the The Independent on Sunday, 29 March 2009
‘The future has not been cancelled,” quipped BP chief executive Tony Hayward in a bullish presentation about the company’s prospects recently. But one thing the company has been forced to cancel, or at least postpone, is a reception to celebrate its centenary at the British Museum this week – shelved because BP feared disruption by climate campaigners gathering for the G20 summit.
A century on from the founding of the Anglo-Persian Oil Company, this may be the least of BP’s worries. Because along with the recession, the collapse of the oil price and the struggle to maintain output in the face of global oil depletion, BP and its peers face the rapid resurgence of an ancient rival: the electric car.
Invented in the 1830s, the electric car predated the internal combustion engine and the oil industry by decades, and dominated the car market into the early 20th century. It was only in the second decade that electric cars were overtaken by petrol and diesel models with superior range. But today a combination of factors – climate change, oil-price volatility and improving battery technology – are coalescing to make a powerful case for the electric vehicle once again. Mass-market models will be launched from later this year, the charging infrastructure is being rolled out, and electricity companies around the world are manoeuvring to claim a slice of the new automotive energy market.
Since about half the world’s oil production is turned into petrol and diesel, any shift to electric vehicles could ultimately cost the oil industry a vast chunk of its earnings. According to Dale Vince, chief executive of the wind generator Ecotricity, Britain’s cars could be powered by fewer than 5,000 wind turbines, and we are on the verge of a rapid shift to transport powered by renewable electricity. “The oil companies are dinosaurs,” he says, “and the comet is coming.”
It is a dra- matic turnaround, according to Chris Paine, the director of the documentary Who Killed the Electric Car?, which told the story of GM’s withdrawal of its EV1 model in the 1990s amid allegations of oil-industry lobbying and corporate chicanery. Today most major car manufacturers are developing battery-powered vehicles, GM is preparing to launch its Chevy Volt plug-in hybrid, and Paine is making a sequel: The Revenge of the Electric Car. “It’s totally different now we’ve had the shock of $150 oil, and the automakers are staring out at thousands of unsold gas-guzzlers. I am convinced the electric car will have its revenge.”
Until recently the only models available have been niche vehicles such as the tiny G-Wiz commuter car or the Tesla Roadster, but a slew of mass- market models will start to appear this year. The first to arrive in Britain will be Mitsubishi’s iMiEV, a four-door with a range of 100 miles on a single charge from a three-pin domestic socket. The cars will be relatively expensive to start with, at about £20,000, but the company says the price will come down as sales grow, and will be offset by min-uscule running costs. Lance Bradley, the new managing director of Mitsubishi UK, points out that the petrol needed to drive 10,000 miles per year costs about £1,000, whereas the electricity to drive the iMiEV the same distance would cost just £40, and electric motors require virtually no maintenance.
The iMiEV will be the first of many. In 2010 Vauxhall will launch the Voltera, the British version of the Chevy Volt, and Think will unveil an all-electric four-seater. In 2011 Renault will launch three electric cars including a large saloon and a van. New models are also due from Smart, Toyota, Nissan and Subaru. Thierry Koskas, director of Renault’s electric-vehicle programme, predicts that within five years electric cars could take 10 per cent of global car sales, even on current battery technology. With further improvements in range, he says that number “could easily double or triple”. The consultancy AT Kearney predicts battery and hybrid technology will take 50 per cent market share by 2020, assuming oil rises to $200 per barrel.
As climate-change forecasts become ever more alarming, the renaissance of the electric car is supported by a growing consensus that it is the only technology remotely capable of delivering zero-carbon private transport. According to Gary Kendall, director of climate change at SustainAbility, a London-based consultancy, and author of a report called Plugged In: The End of the Oil Age, biofuels will continue to rely on fossil fuel and fertiliser and so will not cut emissions enough, while producing hydrogen cleanly is far too energy-intensive. However, electric motors are so efficient, they would roughly halve car emissions, even if run on UK grid electricity that is heavily reliant on coal and natural gas. “Electric vehicles are the best way to cut car emissions quickly,” Kendall concludes, “and combined with zero-carbon electricity generation, they are the only realistic way to eliminate car emissions altogether.”
For that to happen would require a network of charging points, which is already starting to be rolled out in Europe and Japan. The Brighton-based company Elektromotive has developed a recharger that looks like a futuristic parking meter, and the firm is working with local authorities, such as Westminster City Council, and power companies, such as EDF Energy, to install them at on-street parking bays and shopping centres. London has 40 such “Elektrobays”, with another 60 being installed in the next two months. The company expects to have installed 300 around Britain by the end of the year, and managing director Calvey Taylor-Haw predicts that in 10 years “every street will have one”. Elektromotive has also installed rechargers in Germany and Sweden, where it is working with power firms to integrate billing systems, so that wherever the customer recharges a car, the cost will appear on their domestic electricity bill.
A range of 100 miles would more than cover most people’s daily travel needs, but would be awkward for longer trips. Better Place, a $200m (£140m) start-up founded in 2007 by a former software executive, Shai Agassi, plans to solve this problem by building a network of battery exchange stations powered by renewable electricity. Motorists would drive in and have depleted batteries replaced with freshly charged ones in an automatic process. In a business model adapted from the mobile phone industry, the batteries would be owned by the network, and motorists would be billed for the number of kilometres they drive. The company plans to launch its network in Israel in 2011, followed by Denmark, Australia, Can-ada, Hawaii and California, and is in talks with a dozen other countries.
The Better Place mission statement is extraordinarily ambitious, promising “a world living free from oil”, but business development executive Josh Steinmann says it could all happen much faster than people think. “I don’t think we are that far from it because all the technologies exist. The challenge is to persuade people there is another way. Within 10 years we can make a tremendous impact.”
The Better Place model relies on a series of deals with renewable generators around the world, and a similar alliance was forged in France last October between Renault and EDF, which plan to create “a large scale zero emission individual transport and travel system”. EDF generates almost all its power from low-carbon nuclear and hydro, and already runs a fleet of 1,500 electric vehicles. Renault and EDF are working with the French government, local authorities and Peugeot to develop a recharging infrastructure for Paris, and aim to produce a strategic plan by June. “This is a massive opportunity for electricity firms,” says Steinmann. “They stand to address an entirely new market.”
Another reason power companies will increasingly want to supply electricity for vehicles is that it could help solve the problem of balancing supply and demand as the proportion of wind generation grows. In Denmark, where wind penetration has reached 20 per cent, the country sometimes has to export power to its neighbours for next to nothing because the wind is blowing but domestic demand is too low, usually at night. Electric vehicles recharging overnight would create a new market for that power, which is why DONG Energy, Denmark’s biggest electricity generator, decided to invest in a €103m (£96m) joint venture with Better Place. According to Torben Holm, who devised the DONG strategy, other power companies round the world will face similar pressures as wind penetration rises, and are likely to follow suit. Meanwhile, the firm hopes a fifth of Denmark’s passenger cars will be electric by 2020. “It’s very ambitious”, says Holm, “but achievable.”
While new players circle the transport energy market, the oil companies seem determined to stick overwhelmingly to oil and gas. ExxonMobil has never had any truck with renewables, and Shell recently outraged climate campaigners by announcing it will invest no more in wind and solar following the slump in the oil price. Meanwhile BP, which the company claims stands for “Beyond Petroleum”, invested just $1.4bn in its Alternative Energy business last year, against total investment of almost $31bn.
A BP spokesman pointed out that the company is the largest wind generator in the US, and will have invested $8bn in renewables by 2015. He said the shift to electric cars would be “a decade-long process – if it goes that way”. And if it did, BP would still be involved in supplying the energy through gas-fired generation using carbon capture and storage (CCS). BP is currently considering two CCS projects overseas, but has abandoned its original project at Peterhead in Scotland, and pulled out of a government-funded competition to build a pilot plant.
Some analysts argue the problem for the oil industry is not so much that it is investing too little in renewables but too much in oil and gas. BP recently made much of the fact that it added reserves equivalent to 121 per cent of its production in 2008. But Gary Kendall of SustainAbility, which counts the world’s three biggest listed oil companies among its clients, says the industry’s resource base of hundreds of billions of barrels risks becoming a vast stranded asset. “Climate change means we can’t afford to burn all of this stuff, so at some point they will have to walk away from it with massive write-downs.” And the electric car could precipitate that crisis surprisingly quickly, he adds: “Twenty years ago nobody had a mobile phone, but nowadays, who doesn’t?”
The future may not have been cancelled for BP and its peers, but if they don’t reinvent themselves soon, it could be very much smaller.