By Michael Liebreich
In my article this March entitled Beyond Three Thirds, The Road to Deep Decarbonization, I referred to the vast opportunities that beckon in clean energy and transportation beyond the core markets of wind, solar, batteries and electric vehicles. Today I want to take a deep dive into commercial transportation, aviation, shipping and trains.
The story so far: electric cars
Two years ago, BNEF Chief Editor Angus McCrone and I wrote a piece entitled Electric Vehicles – It’s Not Just About the Car. At the time, BNEF was forecasting 406 million electric cars by 2040, and our article described the profound implications such growth would have on different sectors of the economy, from oil companies to the electricity system, from city streets to ministries of finance. We also predicted that other parts of the transport industry would go electric, noting that “there are already 200 million electric bikes in China alone, and their use is spreading worldwide. Improved battery, motor and power control technology will challenge the dominance of small fossil-fuel engines in every light sector: motor boats, lawnmowers, snowmobiles, mopeds and motor cycles.”
At the start of 2016, fewer than one million EVs had been sold in the history of the world, now there are four million, and the next million will hit the streets in just six months. The news today is full of cities and countries banning internal combustion vehicles, and of car companies launching electric models every other week. There may still be some who are convinced that battery electric vehicles will never catch on, or that the world’s drivers will wait for hydrogen cars, but their numbers are dwindling.
Most mainstream energy and transport forecasters are coming around to our 2016 bullishness. At the start of 2016, the International Energy Agency were predicting just 23 million electric cars on the world’s roads by 2030; by this year it had upped its figures to 127 million in 2030, and 280 million by 2040. BP has upped its forecast for 2035 from 72 million to 210 million. Even OPEC has moved – from 46 million EVs, to 253 million in 2040. See the article by our Head of Advance Transport Analysis, Colin McKerracher.
Just as the rest of the world’s energy cognoscenti try to catch up, it has become clear that our 2016 predictions were in fact too conservative. In its latest annual forecast, published in May, BNEF said there would be 560 million electric cars by 2040: over one third of the fleet and over half of all new car sales (client link here).
Buses, which were under the radar in 2016, have started going electric faster than light-duty vehicles. There are nearly 400,000 electric buses on the road already, 99 percent of them in China; BNEF expects electric buses to have a lower total cost of ownership in almost all charging configurations by 2019. By 2030, it expects 84 percent of all municipal bus sales globally to be electric, and by 2040, some 80 percent of the global municipal bus fleet will be electric. Clients can see the work by Aleksandra O’Donovan, head of our electric vehicle team, here and here.
Over the past two years we have also seen the beginnings of the electrification of commercial vehicles, starting, as expected, with light vans. A few years ago DHL Deutsche Post couldn’t find a manufacturer willing to sell it any short-range electric post vans, so it bought a company called StreetScooter and started to make its own; this year it opened a second StreetScooter factory to meet third party demand. UPS is doubling the number of electric vehicles in its London fleet to 170. Renault and Nissan got a bit of a head start in the market for electric delivery and trade vans, based on their electric car platform, but Volkswagen, Daimler, Ford and all other vehicle makers are rushing to catch up.
We are also starting to see that the trend will not be confined to light vehicles, as many thought. I have been saying for a few years that the real barrier for electric vehicles is not weight, but distance: if an electric car can compete with internal combustion on a total cost-of-ownership (TCoE) basis for a given route pattern, an electric bus or truck will too. And since bus and truck purchasers are driven almost entirely by TCoE, not sticker price or branding, once break-even is achieved, the switch to electric will be as fast as the supply chain and charging infrastructure will allow.
Keep on trucking
Elon Musk kicked things off in July 2016, revealing his plans for the Tesla Semi, a 500-mile-range battery-powered Class 8 semi-trailer truck. In his Q1 2018 earnings call, he announced that the company had secured 2,000 pre-orders, although Tesla still has to prove that it can produce these vehicles at the stated price points. Musk is not having it all his way: this summer, Daimler’s Freightliner subsidiary unveiled the eCascadia, a Class 8 semi-trailer with an initial range of 250 miles, aiming to beat Tesla to market. Earlier this year Daimler had already launched its Fuso e-Canter 7.5 metric-ton electric truck in Europe, delivering the first units to the U.K.’s logistics leader Wincanton and to leading baker Hovis. Volvo has launched its FL Electric 16 metric-ton platform, suitable for logistics, garbage trucks and other uses, and is working on a 27 metric-ton GVW vehicle for heavier deliveries. Scania, Paccar, Cummins and every other major truck manufacturer are rushing electric designs into production at every weight class.
The lure of the sea
The past two years have also seen another sector come alive: shipping. Much of the commentariat still dismisses the idea of the electrification of ships, citing the long distances that tankers, cruise liners and container ships travel. But they are missing the point: there are plenty of ships that never travel long distances: ferries, short-haul freighters, tugs and service ships, inland ships working waterways and lakes, and of course a vast range of tenders and smaller commercial and leisure craft. They will all go electric in due course.
Rolls-Royce has completed 15MWh of battery-powered systems for ships since 2010, and is targeting to double that in 2019. Swiss battery provider Leclanché is working on what are intended to be the largest and the fastest electric ferry projects as part of EU-funded Horizon 2020 projects. Marine battery system leader Corvus Energy, responsible for the first electric ferries in Norway, is already expanding its production capacity to 600MWh per year.
Energy innovation in shipping is not confined to main propulsion systems. Norsepower has installed its Flettner Rotor Sail Solution on three ships of different types – one Ro-Ro (roll-on, roll-off), one cruise liner and one tanker – and is documenting the resultant fuel savings. Climeon, a 2018 Bloomberg NEF Pioneer winner with a technology that generates electricity from waste engine heat, has won contracts with Viking Line and other shipping companies. Others are integrating regenerative braking into cranes, to reduce another wasteful use of energy, and designing electric oil platform positioning craft.
What we have seen time and again in clean energy is the value of getting started in sectors that can be served today, and using the resulting volume to spur innovation and drive down costs to meet the needs of tomorrow’s markets. The lithium-ion snowball is rolling and picking up new sectors and applications along the way. The opportunity is enormous, and future market leaders will be creating defendable positions over the coming few years.
Holy flying taxis
Aviation is a much more challenging sector. You might think it would be immune to the march of electrification, but you would be wrong. My personal view is that, before our careers are over, most of us will fly in planes whose main propulsion system will be electric.
The concept that has got Silicon Valley hot under its chinos is urban air mobility VTOLs (short for vertical take-off and landing) – otherwise known as flying taxis. While flying cars have captured the imagination for over a hundred years, Uber torqued global interest off the scale in 2016 with the release of its Uber Elevate white paper – laying out the company’s vision for an affordable aerial taxi service designed to beat urban congestion.
Aerodromes around the world are now buzzing with at least 50 different experimental VTOLs from 43 companies – effectively drones powerful enough to lift a human cargo, some incorporating fixed wings for faster and more efficient flight, some not. Well-funded start-ups include the U.S.’s Zee Aero, Kittyhawk and Blackfly (all backed by Google co-founder Larry Page), SkyRyse and Joby Aviation, Germany’s Volocopter, China’s Ehang and Geely-owned industry veteran Terrafugia. Established aerospace companies are determined not to be left on the runway: Airbus’s Vahana successfully completed its first test flight this year while Boeing has acquired pioneer Aurora Flight Sciences; these two, along with Embraer and Bell Helicopters, are among the companies working most closely with Uber.
If the hype around flying taxis closely resembles the hype around driverless cars, it’s because the two are intimately related: the business case for flying taxis absolutely requires them to be pilotless. While pilotless aircraft may be easier to design than driverless cars (there are fewer and clearer obstacles in the air), the regulatory environment is several orders of magnitude more challenging. There are already strict rules almost everywhere in the world that restrict planes and helicopters flying low over buildings, roads and infrastructure – for good reason when you think about the safety and security implications. While there may be cities that are prepared to unleash swarms of flying cars over their streets, most will not, at least until the technology is proven at scale – unlikely this side of 2030.
If the problems can be overcome, however, the economics are mouth-watering. Uber has calculated that while a helicopter might cost $8.93 per passenger mile, a shared, pilotless electric VTOL would cost only $1.84, one fifth of the amount, perhaps falling over time to $0.44 with economies of scale in manufacturing and deployment.
In it for the long haul
Electrification of aviation is not just about flying taxis: another 10 companies are working on longer-distance aircraft, and the U.S. Federal Aviation Authority has plans in place to certify the first aircraft for passenger use by 2020.
Lithium-ion batteries offer just 2 percent of the energy density of jet fuel, so we are not going to be flying across the Atlantic in battery-powered planes – much less the Pacific. But hold the skepticism for a second. Jet engines are only around 30 percent efficient, compared to battery cycle efficiencies of over 90 percent, so the goal just got two-thirds easier. In addition, a variety of lithium-metal solid state batteries are on the brink of commercialization, offering a two- or three-fold improvement in energy density over lithium-ion in the coming decade. Combine these two factors and battery energy density improves to the equivalent of nearly 20 percent of that of jet fuel. Still not enough to cross an ocean, but enough to power flights of 200 or 300 miles. Improvements in aerodynamics, weight and air traffic control could plausibly extend that to 400 miles.
Last year Easyjet announced a partnership with U.S. start-up Wright Electric, aiming to deploy a fully-electric equivalent to an Airbus A320 within a decade. They calculated that a 300-mile range would be sufficient to serve 20 percent of Easyjet’s European route network.
While a range of 300 miles may still be on the short side for scheduled flights, it would be sufficient to take a bite out of the general aviation market. Pipistrel of Slovenia is already selling electric versions of its two-seat training aircraft. André Borschberg, the Swiss designer and co-pilot of the Solar Impulse plane that recently flew around the world on solar power, will be launching a two-seat trainer this autumn. A team from China’s Shenyang Aerospace University has flown a similar machine. Meanwhile, in Germany, a well-funded start-up called Lilium is testing a four-seater, which it claims will have a range of 200 miles and a speed of 200 miles per hour, “enough to travel from London to Paris in an hour.”
For longer and faster flights, the solution lies in hybrid systems. Airbus holds patents for hybrid-electric aircraft engines and recently announced a cooperation with Rolls-Royce and Siemens for the development of the E-fan X, a flying testbed to be based on a BAe 146 plane, intended to fly by 2020. One of the most advanced designers of hybrid aircraft is Zunum Aero, backed by Boeing and JetBlue Ventures. They are promising to deliver a 12-seat, 700-mile range plane by 2022, with ducted electric fans driven by batteries, supplemented during take-off by a gas turbine generator that can shut down during cruise. Their plan is to follow up with a 50-seat, 1,000-miles-range aircraft.
Zunum is promising a 40 percent reduction in runway length, a 75 percent reduction in noise levels and an 80 percent reduction in emissions – though it is not clear if that relates to overall savings, savings during cruise only, or long-term target savings. NASA, however, is quite clear about the potential promise of its X-57 “Maxwell” Electric Research Plane. Using 14 electric motors mounted in front of the wing, it is able to take off more quickly and more quietly, climb more steeply, and then shut 12 motors during cruise – when it will use just 20 percent of the power of a normal aircraft. With potential benefits that large, you can be sure aircraft manufacturers and airlines are paying attention, even if investors and policy-makers are too busy focusing on flying taxis.
But, but, hydrogen!
At this point, I am sure any die-hard fans of hydrogen must be practically jumping out of their chairs. Because, yes, if you are talking about hybrid aviation options, hydrogen is one of the potential fuels that you could use. And, yes, you could use a fuel cell to convert it to electricity to replenish the on-board battery, though a turbine could work perfectly well too. While I continue to be scathing about the benefits of hydrogen for short-distance transport – anything under, say, 250 miles, whether by road, rail or air – longer-distances are where hydrogen might have a chance (as might biofuels).
Long-distance rail travel is another sector balanced between the benefits of electrification and hydrogen. With electrification of railway tracks costing as much as $2.5 million per mile, connecting up long-distance routes becomes prohibitively expensive. Hydrogen offers a potential way of reducing CO2 emissions and air pollution. In November 2017, Alstom signed a deal with the transport authority of Lower Saxony for 14 iLint hydrogen fuel cell trains, along with 30 years of maintenance and fuel, and the first train was certified for passenger use by the German Federal Railway Authority this summer.
However, hydrogen is not the only option (leaving aside the fact that if the hydrogen is generated from methane you might as well run the train on compressed natural gas, or CNG, as is occasionally done in India). Another way to eliminate emissions without electrifying the whole track would be for the train to carry a battery and recharge periodically en route, as proposed by Bombardier, U.K.-based start-up Vivarail and others. This might well end up cheaper and simpler than the hydrogen option, particularly for short and middle-distance routes.
For long-distance trucking, the electric rapid-charge concept is facing real competition from hydrogen. Feisty start-up Nikola is promoting a 1,000-mile hydrogen truck, for which it has 800 pre-orders from Anheuser-Busch. Call me skeptical until they have proven they can build vehicles, but most major truck manufacturers are also developing hydrogen concept trucks.
Where does all this leave us? A couple of thoughts.
Where there is innovation there is hope
First of all, the electrification of commercial vehicles, shipping and aviation would give us the right to remain hopeful about our chances of limiting the impact of climate change. Transport as a whole accounts for 14 percent of global emissions; decarbonizing the non-car segments over the coming decades would help bend the curve toward the Paris target of a zero-carbon economy before the end of the century.
Since replacing expensive fossil fuels with cheap electricity should save money as well as reducing emissions, it may not require much more than short-term pump priming and regulatory alignment, rather than long-term subsidies or a carbon price.
A huge market opportunity, that moves us closer to hitting the Paris goals, and that should not require long-term subsidies or a carbon price. What’s not to like?
Energy and transport hubs reinvented
Second, deeply electrifying transport and logistics might help resolve some of the difficulties in decarbonizing the electrical grid.
So far, the operating assumption is that the power required to electrify vehicles will be needed at the edge of the grid, to power charge points on streets, in car parks, driveways and petrol stations. In many places the distribution network will be a bottleneck, and the costs of strengthening it could be huge. However, when you look at the delivery of power to commercial vehicles, train lines, ships and aircraft, it may make more sense to connect directly to the transmission grid.
Airports, ports, train stations, logistics centers and the like could become energy hubs – offering low-cost charging, batteries to smooth demand, and ancillary grid services, resilient power for server farms and the like, maybe even heat and cooling to local businesses and homes. That is, as well as transport hubs, offering a range of transportation and logistics services, mass transit, car-sharing and flying taxi terminals. Fanciful? Think about the impact of autonomous technology: why bother building vehicle charging infrastructure at the edge of the grid if vehicles can self-drive to an energy hub for a charge whenever they need one – or whenever the price signal is attractive?
We have always had energy and transport hubs, whose nature and location has changed as technology has changed. Dating from the closing decade of the 14th century, Geoffrey Chaucer’s Canterbury Tales begin at the Tabard Inn in Southwark, South London. It was a frequent assembly point for pilgrims and travelers heading toward the south coast of England and across the Channel to continental Europe, offering food and lodging for travelers and their horses (as well as saucy entertainment banned across the River Thames in the City of London!). Built in 1307, it was located at the junction of two Roman roads, so it is likely that a range of services had been provided to travelers at the same location for millennia. It was the energy and transport hub of its time.
The Tabard was eventually demolished in 1873, rendered irrelevant by the building of Victoria Railway Station, which choked off the flow of long-distance travelers through South London. The arrival of the railway created new energy and transport hubs wherever it went – not just stations but whole towns – and rendered old ones irrelevant. In the U.K., Peterborough and Swindon prospered as rail towns, while Frome and Kendal languished. Chicago and Los Angeles shot into the top tier of global cities when they were selected as hubs for the U.S.’s burgeoning rail network.
The internal combustion engine created the suburbs, but it also created rural communities huddled around petrol stations and shopping malls sprawling along roads. Urban mass transit had a decisive influence on property values, and hence on every aspect of how cities and neighborhoods developed. Most recently, it has been key to reclaiming our inner cities after decades of post-war neglect.
It’s an intriguing thought: could we be about to see the start of a new stage of development in our physical geography: one deeply centered on low-carbon, mass-accessible transportation and logistics? The presence of energy and transport hubs scattered at the edge of the transmission grid would make it far easier to achieve deep penetration of variable renewable energy. National Grid certainly thinks so, with its plans for 45 transmission-grid connected, battery-equipped vehicle charging hubs.
In closing, let me repeat and re-emphasize the closing message of the piece Angus and I wrote two years ago: “No list of potential impacts of the Transformation of Transportation can be complete. However, if our predictions for the uptake of electric vehicles are anything like correct, there is no part of the global economy which will not, in some way, be affected.”
Michael Liebreich is founder and senior contributor to Bloomberg NEF. He is a former board member of Transport for London, and an advisor to Shell New Energies.