“Driving an EV is an entirely different ball game to driving an internal combustion engine (ICE) vehicle. You’re dealing with kilowatt hours, not gallons or litres. You don’t fill up at a designated location, but charge at home, in the street, wherever you park, whenever you want. It requires a very different mindset. People are not yet aware of the possibilities; they don’t know what the new system will look like in the future. But whatever it looks like, it must work for the customer.”
– says Andrew Horstead, Global Energy & Resources Lead Analyst at EY in our latest e-mobility report.
The vehicle itself, however, is only part of the story. It must be supported by adequate charging infrastructure, in the places and spaces where people need it. It must be enabled by a smart grid that allows the two-way flow of green energy and supported by digital technologies that make EV ownership simple, flexible and likeable. Get these essentials right, and e-mobility becomes the new normal for road transport.
But before looking at how to unleash each component of the e-mobility ecosystem, let’s see where e-mobility is at in its path towards mass adoption across the world.
Electromobility state of play
E-mobility is gaining pace in Europe as well as in the rest of the world. Globally, EV sales increased by 55% in 2022 compared to 2021 reaching 10 million units and 40% of all car sales.
China is leading the EV race reaching a 27% EV adoption in 2022. Last year, over 60% of global EV sales were made in China. Europe has seen two consecutive years of strong growth, reaching 17% in 2021 and just over 20% in 2022 and is today the second biggest EV market. The US is quickly catching up, with the Inflation Reduction Act strongly incentivising new EV purchase through appealing tax credits.
In emerging economies the EV turn is taking more time, shows the Internal Energy Agency (IEA). Electric motorcycle are generally more prevalent although EV sales are beginning to take off in some countries such as India, Thailand and Indonesia.
Let us now delve deeper in the European EV market.
E-mobility in Europe – a success story?
E-mobility is making its way into the transport sector in Europe which today accounts for a quarter of total emissions. Several factors have enabled this e-mobility revolution.
Supportive regulation
In the past five years, the European Union has adopted several regulations to support transport electrification as part of its Green Deal climate objectives. The most prominent one came from the decision to phase out internal combustion engines (ICE) by 2035. This means that in less than two decades EVs will be the only choice for customers who want to buy a new car.
Another clear political signal was the Alternative Fuel Infrastructure Regulation, which aims at speeding the rollout of the charging infrastructure needed dot support EVs uptake in Europe. The regulation sets mandatory deployment targets for electric recharging and hydrogen refuelling infrastructure for the road sector, for shore-side electricity supply in maritime and inland waterway ports, and for electricity supply to stationary aircraft.
Extending the decarbonisation scope to heavy-duty vehicles, the EU also agreed more ambitious CO2 reduction standards for trucks, vans and buses to 45% by 2030 and 90% by 2040.
Thanks to these policies, the EU has now a clear regulatory framework for the e-mobility industry to take action. Global EV subsidies and incentives reached US$30bn by the end of 2021 and carried over into 2022. In Europe, nearly all Member States now offer some form of fiscal support to stimulate market uptake of EVs
A critical pre-condition of success is however a speedy implementation of such policies across the EU.
Private investments
Global automakers continued to buy into e-mobility, committing investments of nearly US$1.2tn by 2030 to production facilities, technology, EV batteries, new products and the future supply of raw materials (primarily semiconductors and battery materials).
Utility investment in EV infrastructure and customer programmes continued to grow, driven by customer demand, revenue opportunities and sustainability goal.
Improved performance
Another factor who is supporting Europe’s EV-olution is better vehicle choice as more car makers introduce new models on the market, shortened charging times and better understanding of e-mobility technology.
Battery production is also getting cheaper and the charging infrastructure is starting to pick up the pace. But that’s not the full picture.
Globally sales are on the rise but rising more slowly in Europe and the US. So far, demand has been propped up by corporate fleets rather than individuals. Yet, as this market saturates, it will be harder to convince individuals to keep up the pace.
This begs the very simple question: why should you buy an electric vehicle? Let’s look at its benefits…
What are the benefits of electromobility?
Among the most important benefits of purchasing an electric vehicle is climate mitigation. Today the transport sector accounts for a quarter of total EU greenhouse gas emissions. Switching to an electric vehicles can significantly decarbonise the sector as it does not need polluting fossil fuels to be operated. Their carbon footprint is further lowered if the vehicles run on power coming from clean and renewable energy sources.
As EVs replace traditional cars, consumers as well as society will also benefit from lowered noise pollution and better air quality.
When looking at the benefits of EVs to the electricity system, their batteries on wheel can turn into flexibility assets for balancing electricity networks.
Last but not least, transport electrification can also significantly improve Europe’s energy security by lowering dependence on fossil fuel imports from unreliable trade suppliers.
“Getting our transport sector off its fossil fuel addiction is critical to achieve energy independence. The key to achieve that is to make the EV ecosystem the obvious choice for the consumer” – says Eurelectric’s Secretary General Kristian Ruby.
Where does the consumer stand?
Why are consumers buying an EV?
The EY Mobility Consumer Index finds environmental concerns are the main reason for choosing electric (38%), with penalties on gasoline vehicles also a persuading factor (34%).
The Index also finds that:
- Fifty-two percent of respondents are leaning towards a fully electric, PHEV or hybrid vehicle as their next purchase — up from 20% in 2020. This is the first time that the balance has tipped in favour of EVs.
- Preferences for fully electric cars have tripled, from 7% in 2020 to 20% in 2022.
- The geographical split has narrowed. European customers are most likely to buy an EV (55%), compared with 54% in the Asia-Pacific region and 39% in North America.
- Twenty-seven percent of respondents say the upfront cost of an EV is a concern, down from 50% in 2021.
- Fifty-four percent of EV owners say retail locations are the most convenient non-residential places to charge.
However, customer sentiment is split.
Some customers take an interest in energy security and sustainability and want to play an active role in the future energy system. They are alert to solutions that cut petrol and gas consumption and deliver economic and environmental value. They are the early adopters, who have got behind EVs, boosting global sales to 13% of total vehicle sales.
There are then the reluctant adopters, a good 20% of consumers who switch to EVs not because they want to, but because they have no choice.
Other customers might like an EV or solar panels to offset the impact of rising inflation and higher energy costs. But they are too expensive. Yet it is precisely these customers that EVs must reach if adoption is to accelerate, and the associated benefits of reduced carbon dioxide (CO2) emissions and a cleaner planet are to be realised. These mass-market consumers — the next 60% of drivers yet to be fully persuaded. They need a few ticks in the right boxes before they commit to a purchase.
The three biggest concerns for mass-market consumers are in particular the availability of charging infrastructure, range anxiety and high upfront costs. Fixing these would unleash a much higher demand for EVs.
Which factors challenge the uptake of e-mobility in Europe?
Tensions are simmering between the European Union, the United States, and China over the race for dominance in electric vehicle (EV) production. While China and the US lead in the number of EV sales, in the EU, the road to EVs uptake is getting bumpy amid political resistance to the agreed 2035 phase out of internal combustion engines, heated debates on a binding EV mandate for corporate fleets, growing power grid challenges, and supply chain bottlenecks.
From a consumer angle, the three biggest concerns are the availability of charging infrastructure, range anxiety and high upfront costs. Fixing these would unleash a much higher demand for EVs. Although the e-mobility revolution has already begun in Europe, if the rest of the ecosystem is neither ready nor sufficiently scaled, EV adoption could stutter and fail.
Beyond, external factors, today a new challenge is emerging within the e-mobility ecosystem: data interoperability.
EVs run on power but their hidden fuel is data
EVs data is kept in silos today as a valuable commodity for car manufacturers’ competitive advantage. This is hampering the efficiency of the entire e-mobility ecosystem. Opening access to data across e-mobility service providers, charging operators, EV makers, and grid operators, can optimise their services, cut costs, and improve EV users’ experience.
How to break this data lock?
Eurelectric together with EY will launch a joint report on how to accelerate EVs uptake in Europe with data interoperability at EVision 2024 on 6-7 March at Autoworld in Brussels. Stay tuned!
The six essentials of e-mobility
Accelerated EV adoption must start with setting the ambition and supporting it with mandates or regulation. If that happens, the market can advance with certainty and attract the investment needed to secure a resilient supply chain. Only then can EV costs begin to come down, making them more available and more affordable for all.
1. Resilient supply chain
The EV market in Europe is hampered by supply chain constraints. It competes with other energy transition technologies for critical minerals and raw materials that are needed to manufacture EV components. Tightened supply drives up prices, creating challenges for automakers in meeting EV production targets and, ultimately, in delivering affordable vehicles for businesses and households.
Ensuring resilient supply chains is key to scale production, bring down prices and push EV into mass market adoption. To do so, the EU should:
- Encourage investment in domestic raw material production, incentivising companies to explore cobalt, lithium and/or nickel mining on European soil to reduce reliance on imports and have full control over the applied environmental standards. In cases where the domestic extraction of such materials should not be possible due to geological features, the EU should nonetheless strive for developing the necessary European processing value chains, which are currently almost entirely monopolised by China. The Commission’s new Critical Raw Materials Act should help develop a more resilient value chain and ensure a steady supply of these materials for electric vehicle (EV) production.
- Foster recyclability, sustainability and responsible extraction – in consideration of environmental and social impacts through international cooperation. Initiatives such as the Net-Zero Industry Act must reflect these prerogatives. Given the global nature of the EV industry and the reliance on complex international supply chains, access to critical raw materials should be regulated by policymakers in a way that identifies and addresses the bottlenecks and challenges of securing these essential materials from third countries by reflecting this in legislation such as the Corporate Sustainability Due Diligence Directive.
- Support research and development (R&D) for alternative battery technologies to reduce the reliance on critical minerals, improve the efficiency and performance of batteries, and ultimately reduce the overall cost of EV production. The Green Deal Industrial Plan needs to encompass all fields of cleantech development opportunities within the EV sector.
2. Clean and Green Power
Clean energy makes transport cleaner. Currently, however, just over 3% of the transport sector runs on renewable energy and most of that is biofuels. With global electricity demand predicted to increase more than twenty-fold by 2030 compared with 2021 levels, EVs are set to become the biggest buyers of clean electricity. This is confirmed by our Decarbonisation Speedways study who expects the biggest share of electricity demand to come from the transport sector by 2030 and beyond.
However, to effectively decarbonise the grid, renewables must be available. Globally, governments are taking steps to expedite the transition to cleaner and lower-carbon generation, in order to improve local energy security and reduce costs to consumers in the long run. The US aims for 100% carbon pollution-free electricity by 2035. The EU’s Renewable Energy Directive, agreed after Russia-induced gas crunch and energy crisis, now targets 42.5% renewable share in the EU final energy mix by 2030 to reach the Union decarbonisation targets as well as its energy security needs. The Directive also creates incentives for a rapid roll out of renewable projects through faster permitting processes and energy efficiency targets.
This regulatory framework, however, is only effective if polices are transcribed into national legislation and properly implemented by European Member States. Implementing the Green Deal should therefore be a clear priority for the next legislative mandate. As the EU very success in reaching carbon neutrality depends on concrete action on the ground.
“We owe it to the next generation to deliver on the promises of the Green Deal and transform the rules and laws into actual change on the ground.”
– says Eurelectric’s Secretary General Kristian Ruby in our Election Manifesto.
3. Accessible charging infrastructure
Making charging infrastructure accessible and convenient for all is another essential. The average EV battery range is currently 326 kilometres. That is more than enough for everyday use, as passenger cars travel, on average, 45 kilometres a day, most drivers — around 80% — charge at home or at work.
However, full-scale EV commercialisation depends on a public network of direct current (DC) fast chargers for the 20% of drivers who can’t charge at home or at work, as well as for long-distance drivers and those in need of a quick top-up. Within the next 10 to 15 years, charging infrastructure must be deployed across home, work and public environments, and cater for fleet and commercial use cases too. Deployment must also address the uneven distribution of charging points across Europe.
Five countries — Germany, France, Italy, the UK and the Netherlands — account for 71% of all European charging locations. In the US, the pace of current installation needs to be tripled to meet the goal of installing 500,000 public chargers by 2030.
Policies that regulate the number of charging stations and their dispersity – such as the AFIR and the Energy Performance of Buildings Directive (EPBD) – set ambitious and market-based targets for the number of charging stations needed to support EV adoption, and ensure they are conveniently located for all drivers. Lawmakers must prioritise installing charging infrastructure in areas where there is currently a lack of charging options.
Streamline permitting and approval processes to reduce delays in installing charging infrastructure is also needed. Legislators could provide funding for local authorities to speed up these processes, while developing regulations that require new construction projects to include EV charging infrastructure. This would incentivise charging point operators (CPO) to install stations, particularly in areas where there is a lack of infrastructure and along major highways needing DC fast-charging stations. Tax credits or subsidies will reduce costs for installation and ongoing maintenance while providing companies with enough vital funds for an uptake in technological development.
4. Smart grid technologies
In the US, electricity demand from EVs is expected to add 153TWh by 2030, rising to around 430TWh in 2035. By then, EVs will account for 10% of overall US power demand. In Europe, demand for electricity from EVs is expected to increase by 200TWh, accounting for approximately 5% of total demand by 2030. Analysis by the IEA reveals that when EV stock exceeds 20% of electricity demand, the need for grid adaptation becomes significant. Other source and load complications arise from increased renewables generation and the rollout of heat pumps. To cope with increased load and minimise the need for grid upgrades, alternative mechanisms and smarter solutions are emerging.
They include:
- Flexible connection agreements
- Procurement of distributed flexibility
- Network tariffs, including time-of-use (ToU) tariffs to incentivise EV owners to charge their vehicles at off-peak hours (at the end of 2021, 139 ToU tariffs and services were available across Europe, specifically for EV smart charging).
- Demand-response capabilities
- Renewable energy and energy storage system
- Bidirectional charging technologies – including smart charging and vehicle-to-grid technology
- Integrated charging networks
- Consumer and fleet management incentives to encourage them to share their charging status.
Promoting the development and deployment smart charging in particular would significantly ease EV integration into the grid, by optimising EV charging times and reducing peak demand on the grid. Advanced tariff structures and innovative promotional schemes will encourage consumers to charge at non-peak times (e.g., time of use tariffs) and mitigate the risk of overloading the grid. To achieve this, subsidies should be provided to companies and individuals investing in smart charging infrastructure and encourage public-private partnerships (PPPs) to enhance the deployment of smart charging stations.
Policymakers should also encourage the development and deployment of solutions such as bi-directional charging technologies. These would allow energy stored within an EV battery to be exported and used in homes or other buildings, or directly back to the electricity grid, as in the case of the vehicle-to-grid (V2G) technology. The latter enables to push and pull energy to and from connected vehicles when demand threatens supply, thus shaving peak demand and contributing to balance the electricity grid. This will require investments in research and development, as well as partnerships between automakers, utilities, and other stakeholders.
To know more about smart charging read our article on smart charging.
5. Digitalisation
By the time millions of EVs hit the road over the next decade, the term “data highway” will take on a literal meaning. A complex EV ecosystem, interlinked by data flows, is emerging. Data is generated at primary nodes — in EVs, at public and private chargers and by CPOs — within the e-mobility ecosystem. This data connects with other ecosystems, such as energy, buildings, public and civil organisations, and becomes a single cohesive “ecosystem of ecosystems.” Digital platforms and mobile applications, for instance, provide customers with information on available chargers, best tariffs, and nearby amenities.
Given this is a relatively nascent yet complex EV ecosystem, data management is emerging as a major challenge. It raises issues around data storage, ownership, usage and regulation.
It become therefore crucial to harmonise and standardise protocols to support a neutral and seamless data exchange between different stakeholders in the EV ecosystem, such as EV manufacturers, charging point operators, and utilities. Connectivity should enable the sharing of data on charging station availability, energy consumption, and pricing. Utilities can leverage these insights to develop additional services for customers, create personalised product offerings, and expand EV infrastructure into non-core markets.
In addition, the creation of a digital twin of the grid to model traffic density, grid network capacity and potential for renewable integration, and to identify suitable sites, land usage requirements and permits should be encouraged. Investments in the creation of a digital twin should be enhanced to improve the efficiency and smart capabilites of the grid as a way to make not only the networks, but the energy system as a whole, more intelligent, and hence create better services for consumers.
6. Skilled workforce
The shift toward electric cars and trucks is creating economic opportunities along the auto-manufacturing value chain and in related industries, while disrupting legacy business models. But the transition is forecast to create more jobs than it displaces. In the US, a net gain of two million jobs would be realised in 2035 if all new car and truck sales were electric. Similarly, if all EU fleet is fully electric, around 1.1 million permanent jobs would be created by 2050. The European battery industry needs 800,000 qualified workers by 2025.
Meanwhile, utility staff are being poached by tech start-ups for their industry know-how, while staff close to retirement are opting to leave early. To guarantee a talent pipeline, automakers are safeguarding jobs by re-skilling and providing opportunities to adapt to electric powertrains.
Some are pledging to retain every worker on the road by creating an all-EV line-up. Other companies are creating tailored training pathways, teaming up with technology partners, universities, community colleges, industry experts and learning platforms. However, government must get behind education too. Investment in apprenticeships, retooling and retraining, as well as recognised qualifications, are fundamental to making this transition happen.
Lawmakers should guarantee EU-funded apprenticeship programmes, incentivising companies to create and implement training programmes that equip young people with the necessary skills for the EV industry. This will further enable regulators to create a standardised and recognised training pathway for workers seeking to enter the EV industry, making it easier for them to transition into the industry. This is especially true for those coming from underrepresented groups, such as women and minorities.
Governments must offer tax incentives to companies investing in employee training and upskilling. This would encourage companies to make the necessary investments in training their workforce for the EV industry. Finally, policymakers should help foster PPPs with educational institutions to develop courses and curricula that train students for the EV industry. This could include both vocational schools, and university level education.
With these six essential in places, mass-market e-mobility will take off at warp speed.
Serge Colle, EY Global Energy & Resources Industry Market Leader concludes: “Success hinges on a multi-stakeholder response and the role of utilities in maintaining the momentum cannot be underestimated. Collaboration around the six essentials is key, as failure could result in missed net-zero targets, unresolved air quality issues, wasted investments, and an extended transition period.”
Eurelectric stands ready to play its part with its EVision business hub.
Contact us to know more about our activities.
Disclaimer: This article is for informative purposes only and may not entirely reflect Eurelectric official positions. For formal positions, please consult our position papers here.