Summary Report. Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle FINAL REPORT. A study prepared for the European Commission

Transcription

1 Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle Summary Report FINAL REPORT A study prepared for the European Commission DG Communications Networks, Content & Technology Digital Agenda for Europe

2 This study was carried out for the European Commission by AEA Technology plc The Gemini Building, Fermi Avenue, Harwell IBC, Oxon OX11 0QR Internal identification Contract number: 30-CE /00-51 SMART LEGAL NOTICE By the European Commission, Communications Networks, Content & Technology Directorate-General. Neither the European Commission nor any person acting on its behalf is responsible for the use which might be made of the information contained in the present publication. The European Commission is not responsible for the external web sites referred to in the present publication. The views expressed in this publication are those of the authors and do not necessarily reflect the official European Commission s view on the subject. The Publications Office of the European Union. European Union, 2012 Reproduction is authorized provided the source is acknowledged

3 Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle Summary Report Report for the European Commission, Directorate-General for Communications Networks, Content and Technology (DG CONNECT) AEA/R/ED57083 Ref: SMART Issue Number 2 Date 05/11/2012

4 Customer: European Commission, Directorate- General for Communications Networks, Content and Technology (DG CONNECT) Customer reference: SMART Contract start\end dates: 5 th October th November 2012 AEA Contact: Matthew Morris AEA Technology plc Marble Arch Tower, 55 Bryanston Street, London W1H 7AA t: e: matthew.morris@aeat.co.uk AEA is a business name of AEA Technology plc AEA is certificated to ISO9001 and ISO14001 Confidentiality, copyright & reproduction: This report is the Copyright of the European Commission and has been prepared by AEA Technology plc under contract to the European Commission dated 6 th October The contents of this report may not be reproduced in whole or in part, nor passed to any organisation or person without the specific prior written permission of the European Commission. AEA Technology plc accepts no liability whatsoever to any third party for any loss or damage arising from any interpretation or use of the information contained in this report, or reliance on any views expressed therein. Authors: Matthew Morris, Duncan Kay, Dan Newman, Lena Ruthner, Gena Gibson, James Norman, Stephanie Cesbron, Charlotte Brannigan Approved By: Nikolas Hill Date: 05 November 2012 Signed: AEA reference: Ref: ED Issue Number 2 Disclaimer: This study has been produced by outside contractors for the European Commission Directorate-General for Communications Networks, Content and Technology (DG CONNECT )and represents the contractors views on the matter. These views have not been adopted or in any way endorsed by the European Commission and should not be relied upon as a statement of the views of the European Commission. The European Commission does not guarantee the accuracy of the data included in this study, nor does it accept responsibility for any use made thereof. Ref: AEA/ED57083/Issue Number 2 iv

5 Table of contents 1 Project Overview Aims and Objectives Methodology Scope Summary Objective A: landscape analysis The ICT opportunities in the FEV system The anticipated value chain in ICT for FEVs European value chain competitiveness The European market for FEVs The FEV industry in other world regions Objective B: the enabling role of ICT Patenting activity in ICT for FEVs R&D investment in the EU and Other Regions Technical capabilities Cross-industry fertilisation Feasibility of EU manufacture of FEVs and components Objective C: hurdles and roadmaps Barriers to electric vehicle deployment Solutions to overcome hurdles Solutions offered by ICT Roadmaps for FEV deployment Objective D: environmental and health impacts The vehicle life cycle Life cycle analysis for present-day vehicles Future developments in environmental & health impacts The role of ICT in the environmental & health impacts of FEVs The role of FEVs in decarbonising the European transport sector Objective E: analysis of socio-economic impacts Qualitative assessment of the socio-economic contribution of FEVs Quantitative assessment of the socio-economic contribution of FEVs Socio-economic contribution of potential ICT applications Objective F: conclusions and recommendations Overview of recommendations Recommended objectives...58 Appendices Appendix 1 Expert interviews AEA 1

6 List of figures Figure 1: Applications of ICT in the FEV...10 Figure 2: Shifts in the automotive value chain bought by FEVs...12 Figure 3: Evolution versus revolution: two contrasting views on the future of electric vehicles...13 Figure 4: Automotive ICT for FEVs value chain...14 Figure 5: Key competitive strengths of the European value chain for ICT in FEVs...15 Figure 6: SWOT analysis for European value chain competitiveness in ICT for FEVs...16 Figure 7: Comparison of annual sales projections for FEVs in Europe...17 Figure 8: Sales projections for electric vehicles across world regions (source: IEA)...18 Figure 9: Strengths and weaknesses of the FEV industry in other world regions...19 Figure 10: High-value EV-ICT patent applications by region of origin, Figure 11: SWOT analysis for European companies and their intellectual property strategies 23 Figure 12: Sales vs. R&D spend for the top OEMs (data extracted from the 2011 EU Industrial R&D Investment Scoreboard)...24 Figure 13: Seven success factors for European FEV manufacture...29 Figure 14: Resource risks associated with FEVs...33 Figure 15: Five insights into consumer reaction during field trials...34 Figure 16: The role of ICT in overcoming hurdles to electric vehicle deployment...36 Figure 17: Comparison of FEV deployment targets from different roadmaps...37 Figure 18: Different approaches found in FEV roadmaps...38 Figure 19: Overview of a vehicle lifecycle...40 Figure 20: Overview of energy chain efficiency in BEVs (top) compared to diesel ICEVs (bottom). [Source: adapted from Swiss Federal Office of Energy]...41 Figure 21: External cost for whole life cycle, split by stage in 2015 ( per 1,000v-km)...42 Figure 22: External cost for whole life cycle, split by emission type in 2015 ( per 1,000vkm) 43 Figure 23: Key factors affecting the environmental and health impacts of FEVs...44 Figure 24: The role of ICT in improving environmental and health benefits of FEVs...45 Figure 25: Abatement potential of FEVs under three scenarios (compared with businessas-usual) 47 Figure 26: European flagship policies considered in this study...49 Figure 27: Qualitative assessment of the socio-economic contribution of FEVs through development of a strong European FEV market...50 AEA 2

7 Figure 28: Qualitative assessment of the socio-economic contribution of FEVs through development of a competitive European FEV manufacturing and service industry...50 Figure 29: Comparison of projections for growth in FEV registrations showing AEA s SULTAN scenarios...52 Figure 30: Quantitative metrics for the socio-economic contribution of FEVs in Europe..53 Figure 31: Areas for recommended objectives and desired impacts...57 AEA 3

8 1 Project Overview 1.1 Aims and Objectives The European Commission, Directorate-General for Communications Networks, Content and Technology (DG CONNECT) has commissioned AEA to undertake a service contract entitled "Impact of ICT R&D in the Large Scale Deployment of the Electric Vehicle. This project aims to collate and analyse the growing body of knowledge in European efforts for the application of ICT and smart systems in fully electric vehicles (FEVs) to support policymaking in this area. The project started in November 2011 and is approximately one year in duration. The objectives of this project are to: A. Analyse the existing landscape of European R&D, manufacturing and deployment in the domains of ICT and smart systems and architectures for the fully electric vehicle, and draw comparisons with other world regions; B. Assess the future potential for these domains within Europe, and the enabling role of ICT and smart systems in the deployment of the fully electric vehicle; C. Identify barriers and hurdles to development and deployment of the fully electric vehicle in Europe, drawing on experience from trial deployments to date, and evaluate roadmaps towards overcoming these hurdles; D. Assess the environmental and health impacts of the deployment of electric vehicles compared with other types of vehicle, assess weaknesses and threats, and evaluate the role of ICT and smart systems in bringing about potential environmental and health benefits; E. Analyse the potential contribution of the fully electric vehicle towards achieving European socio-economic goals; F. Collate the above work in order to provide policy advice on European strategies for R&D in the area of ICT and smart systems for the fully electric vehicle, in particular for R&D lighthouse projects to accelerate the development and deployment of electric vehicles in Europe. The project is divided into six work packages, each of which addresses one of the six objectives. 1.2 Methodology The study team have the overall task of collecting and collating information from a wide range of sources, analysing the information and presenting conclusions and recommendations to decision makers and stakeholders. This is achieved through the following processes: Literature review of recent studies, publications and conference notes published by academic, commercial and public sector sources in Europe and beyond. All literature sources are fully referenced in this report. AEA 4

9 Stakeholder consultation by face-to-face and telephone interviews with key experts, together with presentation of draft results at workshops/conferences. Further information on the stakeholder consultation undertaken by the study team is provided as an appendix to this report. Analysis and presentation of the results in written reports such as this one, and in presentations to stakeholders. 1.3 Scope Fully Electric Vehicles (FEVs) An increasing range of vehicle types utilise electricity for motive power and electrical storage systems within their powertrain. This study focuses on Fully Electric Vehicles (FEVs). The project s definition for FEVs as set out in DG CONNECT s (formerly DG INFSO s) 2011 report ICT for the Fully Electric Vehicle, as follows: Fully Electric Vehicles (FEVs) means electrically-propelled vehicles that provide significant driving range on pure battery-based power. It includes vehicles having an on-board fuel based electrical generator (Range Extender based on Internal Combustion Engine or fuel cells). Furthermore, this study is restricted to passenger cars only. The study team have not considered smaller (e.g. e-bikes, quadricycles) or larger (e.g. vans, trucks) vehicles. Information and Communication Technology (ICT) The particular technology focus of the study is on the role of ICT and smart systems in the fully electric vehicle. We define ICT / smart systems as any system or subsystem utilising electrical or electronic components. This can include sensors and actuators, electronic controllers, embedded systems, power electronics, and wireless communications. Our study investigates the enormous scope for such systems in the fully electric vehicle. Vehicle-side technology One particular feature of the fully electric vehicle is the potential for innovation and new value chains in related areas such as smart infrastructure/grids, intelligent transport systems, and interaction with an ever-increasing cloud. Whilst our study inevitably considers these possibilities, the detailed technology focus is on systems and innovations within the fully electric vehicle itself. AEA 5

10 2 Summary This document summarises the research findings of the six work packages undertaken in this DG CONNECT-funded project. Each work package also has an individual report that provides more detail on the research and analysis undertaken. These reports are available separately. The project aims to provide substantiated advice on strategy for EU funding under the next Framework Programme, Horizon Drawing on the analysis carried out under Objectives A-E of the project, the study team arrived at twenty recommendations. The following diagram and tables outline our headline recommendations; more detail is provided in the final section of this report. Developing technologies and services Stimulating innovation in Europe ICT for FEVs ICT for FEVs Supporting a European value chain User acceptance Recommended objectives Desired impacts AEA 6

11 Developing technologies and services ICT in the fully electric vehicle 1 2 European OEMs to be amongst the leaders in the development of third generation ground-up designed FEVs with a revised ICT architecture Maintain leadership in the research, development and manufacture of automotive semi-conductors and power electronics for FEVs 3 Build on an existing strong communications infrastructure to become a world leader in after-sales software and services, extracting the maximum value from connected vehicle systems for FEVs Establish a European value chain for the research, development and manufacture of batteries, their management systems and their integration into FEVs Develop expertise in energy harvesting technologies Become a leader in the application of vehicle health management for FEVs Related technologies where ICT can play an important role 7 Become the acknowledged world leader in integrating range extender technologies into fully electric vehicles, with advanced powertrain control systems 8 9 Achieve the successful full integration of FEVs with the electricity grid through the use of bi-directional smart charging Ensure the environmental impacts of the production and disposal elements of an FEV s life cycle are minimised Supporting a European value chain 1 Assist European OEMs to adapt to the electric vehicle value chain, keeping inter-company collaboration within Europe to supply ICT in FEVs AEA 7

12 2 3 4 Encourage and support innovative SMEs in the field of ICT for FEVs Create regional centres of excellence for key FEV technology areas, combining research, development and commercialisation activities Address skills shortages in electrical, electronic and mechatronic engineering disciplines Stimulating innovation in Europe Create a uniform single market for FEVs, components and services across Europe by adopting common standards and harmonising incentives Support later stages in the innovation cycle Co-ordinate and streamline public R&D funding at a European and Member State level Investigate the role of patenting in FEV technology, with a view to incentivising patenting if necessary User acceptance Ensure a continued strong development of a European FEV market as a route to securing a European value chain Develop business models and technologies that reduce the upfront cost and/or total cost of ownership for FEVs Educate the mass vehicle owner market on the realities of FEV ownership AEA 8

13 3 Objective A: landscape analysis The aim of Objective A: Landscape Analysis is to provide a picture of the current European situation regarding ICT and smart systems in electric vehicles, in the context of what is happening globally in this sector. Three specific aims were identified within this analysis: To examine the opportunities that exist in ICT for fully electric vehicles (FEVs), and to review European commercial activities in this area; To understand Europe s current capability and global competitiveness in ICT for the fully electric vehicle; To identify where the strengths, weaknesses, opportunities and threats lie for Europe when compared to other world regions. 3.1 The ICT opportunities in the FEV system Fully electric vehicles (FEVs) offer multiple opportunities for the application of ICT. In the drive train alone, sophisticated systems will be needed for battery management, control of electric motors and their associated power electronics, and management of range extenders and energy harvesting. This can be achieved using a combination of separate control units, embedded systems or new centralised architectures. A ground-up redesign of the electric vehicle, particularly the ICT component, could improve functionality and efficiency, reduce cost and lead to entirely new vehicle concepts. Electronics has been described as the enabler and driver behind 60% of all current vehicle innovations 1 and other sources suggest that for premium vehicles the figure is 80%. 2 Electric vehicles are coming to market at the same time as technologies in other sectors, which also make extensive use of ICT. The near future will be shaped by what has been named the internet of things. Smartphones, tablets, laptops, buildings, personal vehicles and other mobility solutions will all be connected and will be able to share location, status and activity information to enable smarter and more efficient use of energy. 1 Oliver Wyman, 'A comprehensive study on innovation in the automotive industry', Available online at: 2 Federal Ministry of Economics and Technology, 'The Software Car: ICT as an Engine for the Electromobility of the Future', Available online at: AEA 9

14 Figure 1: Applications of ICT in the FEV Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle Optimising charging Optimising charging strategy Ensuring charging safety Enabling contactless charging Billing and payment systems Range extender integration Range extender engine control systems Optimising integration into vehicle powertrain system Drive by wire / safety Intelligent cruise control Autonomous braking systems Collision avoidance systems Advanced driver assistance Dynamic light assist Pedestrian and cyclist protection systems Fully autonomous operation Powertrain efficiency Improved inverters / converters System efficiency &integration Motor control optimisation Vehicle diagnostics Condition-based maintenance Servicing software Grid integration (V2G) Bi-directional charging Grid communication Transport system integration (V2V & V2I) Cooperative driving Integration into intelligent transport system Battery management Thermal management Electrical management cell balancing, monitoring, switching Failure and crisis management Diagnostics state of charge, battery ageing Super/Ultra capacitor control and integration Driver interface Intelligent routing / navigation Range management information Pre-booking recharging infrastructure Infotainment systems / WiFi / 3G User definable seating / control feel Active load management Coordination and optimisation Energy harvesting systems Optimised energy capture from regenerative braking systems Optimisation and control of energy recovery from suspension, tyres, solar photovoltaics and waste heat. Notes: V2G = vehicle to grid; V2V = vehicle to vehicle; V2I = vehicle to infrastructure Photo courtesy of GM 3.2 The anticipated value chain in ICT for FEVs The most significant change in the automotive value chain over the last two decades has been the impact of the introduction of ICT technologies. 3 Customer expectations for high technology, combined with the need to address concerns regarding range and recharging availability mean FEVs are likely to have the highest ICT content and connectivity of any vehicles on the market. ICT for FEVs is therefore likely to see strong growth in value in the future. ICT could account for up to 40% of value in a FEV ICT currently accounts for perhaps 15-20% of the total vehicle value in an FEV. However this figure could be substantially higher if battery costs reduce (ICT in the battery management system makes up only a small proportion of total battery cost). Existing batteries add around 6,000 to 16,000 to the cost of a vehicle, but in the longer-term this could decrease to around 3,000 to 4, If this were to happen, it is expected that ICT could account for as much as 30-40% of total vehicle value in the future. 5 3 EC JRC, 'Is Europe in the Driver's Seat? The Competitiveness of the European Automotive Embedded Systems Industry', Available online at: 4 ETC, Environmental impacts and impact on the electricity market of a large scale introduction of electric cars in Europe, Available online at: 5 Figures based on stakeholder interviews AEA 10

15 Almost all FEVs will be connected vehicles Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle Plug-in electric vehicles are expected to lead the way in terms of use of telematics in the automotive sector. Purchasers of FEVs in the next 5-10 years are likely to be more affluent and technologically aware. 80% of FEVs are expected to offer connected vehicle telematics with services such as live traffic information, weather, streaming of information from the internet and cloud computing. 6 Whilst connectivity of all vehicle types is expected to increase, some connectivity opportunities are unique to FEVs for example, communications for range management and the location, reservation and use of charging infrastructure, and managing the vehicle s relationship with the electricity grid. FEVs change the automotive value chain: from mechanics to electronics FEVs introduce substantial changes in the value chain. The added value associated with the conventional internal combustion engine and transmission a key area of strength for Europe s OEMs is significantly reduced or removed. At the same time, FEVs introduce a new high-value electric powertrain that utilises many technologies outside OEMs traditional core competences. In an FEV, the battery is key for customer satisfaction At present, the biggest single cost of a battery electric vehicle (BEV) is the battery itself. Customer satisfaction will be strongly influenced by the performance of the battery. It is fundamental to vehicle performance, range, reliability, degradation over time and resale value. This is unlike the situation with conventional vehicles, in which petrol and diesel fuels conform to universal quality standards, and owners can expect vehicle performance to be largely independent of the fuel they use and its storage system (the fuel tank). As a result, electric vehicle batteries could represent a severe reputational risk for OEMs. OEMs must decide which key FEV components to bring in-house The powertrain of a vehicle has traditionally been a key brand differentiator and source of value for OEMs. Some have argued that for FEVs, this value may shift to battery manufacturers and other suppliers of electric powertrain components, with global megasuppliers selling standardised products to multiple OEMs. 7 It is important that OEMs build up a detailed understanding of electric powertrains in order to ascertain which areas they wish to develop in-house and which they can safely outsource without risk to their brand. It is not clear which elements of FEVs will be standardised and which will be bespoke FEVs could present a change in the balance of using large-scale standardised components and subsystems and engineering bespoke elements using in-house know-how. It is not clear which elements of FEVs will be used to differentiate the vehicle, or whether suppliers or OEMs will provide these differentiating features, but the outcome will help to define the new value chain. New participants will enter the automotive sector value chain through FEVs New participants will be attracted into the automotive sector by the growth in FEVs. This may be particularly true in three areas: 6 Pike Research, Electric Vehicle Telematics, Available online at: 7 Deloitte, Charging Ahead: Battery electric vehicles and the transformation of an industry, Available online at: %20Summer%202010/us_DeloitteReview_ChargingAheadBatteryElectricVehicles_0710.pdf AEA 11

16 Power electronics equipment and high voltage equipment companies with experience in this area will see opportunities given the existing automotive sector s inexperience. Control units and modules as these become more standardised consumer electronics companies may be attracted to start supplying the automotive sector. Low-cost manufacturing countries such as India and China may take an increasing share of this market. Vehicle OEMs designing and developing a BEV requires little of the engineering know-how necessary for the internal combustion engine powertrain. This reduces the barriers to entry to this market, although existing OEM know-how in other areas (design for safety, long-term reliability and understanding the consumer needs) remains important. Software and service suppliers the move towards software- rather than hardware-based ICT will allow more interaction between different applications within a vehicle, and combined with enhanced connectivity, facilitate a variety of mobilitybased services. If hardware and software platforms are standardised, new, innovative players could enter the market. Figure 2: Shifts in the automotive value chain brought by FEVs Large increase Energy storage systems up to 60% of the vehicle value for a BEV and a key vehicle differentiator (range, charge time etc) Power electronics and electric motors with a high ICT content Connected vehicle hardware and services possible new aftermarket value chains utilising connectivity, with software and services adding value Energy harvesting and energy management enabled by a fully electric powertrain and high ICT content Internal combustion engines still used as range extenders but increasingly not key brand differentiator. A key strength for European OEMs Large decrease Aftermarket components FEVs have fewer moving parts and less mechanical wear. Currently a significant source of income for OEMs ICEV powertrain gearbox, transmission etc does not normally feature in FEVs The OEM landscape: Evolution or revolution? The literature review and stakeholder interviews highlighted differences of opinion regarding the likely nature of future uptake for FEVs. These can be broadly grouped into two alternatives scenarios: evolution or disruption. These scenarios are described in Figure 3. AEA 12

17 The future is likely to contain elements of both these scenarios, and it will be important for Europe to ensure that it adopts policies which will allow it to remain competitive regardless of how the market develops. Figure 3: Evolution versus revolution: two contrasting views on the future of electric vehicles Evolution Traditional OEMs continue to dominate, leveraging their brand power and gradually moving into the FEV market OEMs use brand power, experience and consumer understanding to repel challenges from new entrants and strong suppliers to maintain control over the value chain OEMs initially produce FEVs that are adapted from existing vehicles and share production lines to minimise risk and maintain flexibility As demand increases, there is a gradual transition to fully redesigned FEVs with their own production lines Models evolve from hybrids to plug-in hybrids and finally to battery electric vehicles, as technology performance and cost improve Revolution New innovative vehicle concepts using electric powertrains emerge, first in the small city car segment New market entrants are quick to innovate with new business models and novel vehicle concepts enabled by electromobility Innovation creates entirely new services and value chains with a rapid pace of development Major OEMs struggle to keep up, hindered by their size and large investment in ICE technologies Major OEMs lose significant market share as the value chain rapidly changes structure A graphical presentation of the overall value chain for the ICT in FEVs sector is presented in Figure 4 below. AEA 13

18 Figure 4: Automotive ICT for FEVs value chain Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle Software suppliers Supply software products to tier 1 to 3 suppliers, OEMs and connected vehicle service suppliers Energy suppliers Provide energy services (via charging providers) and smart charging markets Tier 3 suppliers Provide specialist components and knowledge in niche areas Highly innovative Smaller, regional operators Tier 2 suppliers Provide components for sub-systems Cross-fertilise innovation from other sectors Can sometimes act as both tier 1 or tier 2 Tier 1 suppliers Provide vehicle subsystems Integrate functions, systems and components Work with OEMs to introduce innovations Drive out cost OEMs Understand customer needs Specify vehicle characteristics Integrate vehicle systems Manage brand image Consumer Purchase vehicles & mobility services Feedback satisfaction to industry Ownership experience shared with social networks Semiconductor suppliers Supply semi-conductors to tier 1, 2 and 3 suppliers Connected vehicle service suppliers Supply services across vehicle lifetime via mobile networks or cloud computing solutions Location based service suppliers Provide location-specific data to support telematics, V2I, V2V and ADAS services Telecoms suppliers Provide data transmission networks 3.3 European value chain competitiveness A review of the European value chain in ICT for the fully electric vehicle yielded the following key findings: Europe has companies operating in all sections of the FEV value chain, many of which are market leaders or have unique added value offerings. There are two broad categories of company in today s value chain: major automotive players who are moving into the sector (by technology cross-over, acquisition etc.), and smaller companies who are currently niche players overall but who have a focus on ICT for FEVs. The majority of European companies involved in this sector are large enterprises (over 1000 employees), but for most of these, FEV/ICT is only a small part of their overall business. There are several examples of small or medium-sized European companies that specialise in FEV and ICT technologies and have world leading solutions. In terms of company headquarter locations, three European countries dominate: Germany, the UK and France. However, the majority of companies identified operate multi-nationally if not globally. Our research highlighted key competitive strengths that give European companies an advantage over their international competitors in ICT for electric vehicles. However, the value chain also has weaknesses and threats to its competitiveness. These are outlined below in Figure 5 and Figure 6. AEA 14

19 Figure 5: Key competitive strengths of the European value chain for ICT in FEVs Europe Large OEMs with powerful brands: Volkswagen Group is the world s second largest vehicle manufacturer Very strong presence in the (ICT-rich) premium vehicle segment: BMW, Mercedes-Benz and Audi are major players Brands willing to commit to FEVs: Renault-Nissan has shown the greatest commitment to BEVs of any major OEM World-class Tier 1 suppliers: Bosch is the world s largest, Continental and Magneti Marelli are in the top five Leading automotive semiconductor suppliers: ST Micro, Infineon and NXP are three of the largest in the world Five of the top 10 automotive sensor suppliers are European Four of the top 10 mobile phone network operators are European AEA 15

20 Figure 6: SWOT analysis for European value chain competitiveness in ICT for FEVs Strengths Strong FEV market growth projections due to long-term policy direction and incentives Strongest Tier 1 suppliers of any world region, with higher electronics capability than OEMs World-leading in premium OEMs with a strong hitech product offering and buoyant exports World-leading in automotive semiconductors and automotive sensors Electricity Utility companies that understand the potential of FEVs Very strong on combustion engine technology (for range extenders) especially diesel Flexible value chain with close OEM - Tier 1 relationships Widespread ownership of smartphones Automotive industry invests more on R&D than any other world region Very strong academic centres leading to high quality research and strong tech skills base World-leading standard in safety, quality and reliability Opportunities Build on success of AUTOSAR to develop leading position in automotive software development Europe Weaknesses European auto market saturated so net growth must come from other world regions Lagging behind in both the development and manufacturing of battery technology Having to catch up or partner on hybrid technology, particularly for intellectual property Most connected vehicle services are provided by non-european companies OEMs are relatively weak at co-ordinating R&D activities throughout global centres Extreme weakening of the small supplier network plus the threat of further consolidation Weak consumer electronics industry Slow decision making processes (including public strategy, regulation and technical standards) Low co-ordination of Member State export policies Non-integrated EU market; regional competition versus complimentary networks Complicated and dispersed R&D funding processes, historically not commercially focussed Threats Other regions adapt, develop standards, and support nascent industry players more quickly Trade/ IP and skills in ICEVs / form alliances to rapidly gain battery capabilities Potential to demonstrate EVs in combination with renewable electricity generation and smart grids Build on academic battery R&D to establish future battery industry Supply of sensors to foreign OEMs Utilise EU telecoms / ICT expertise to focus on high-value connected vehicle services sector Encourage greater industry cooperation / reduce concerns about anti-competition laws A healthy mix of existing experienced OEMs and dynamic new players specialising in FEVs Development of new services and business models to generate growth Asian consumer electronics companies acquire significant part of EV-ICT value chain Locked out of key battery and hybrid technologies due to Japanese / Korean / US patents Continuing reliance on importing batteries and rare earth elements Chinese government encouraging foreign OEMs to make FEVs in China (in partnership with Chinese OEMs) leading to gradual offshoring Foreign OEMs targeting European market Foreign investment funds acquiring European companies to gain expertise and access to the market European OEMs manufacture in growth markets and export back to the EU AEA 16

21 FEV annual sales, millions 3.4 The European market for FEVs Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle In 2010, FEVs plus hybrids accounted for less than one per cent of European passenger car sales The current market for FEVs as a percentage of total passenger car sales is very small. Including hybrid vehicles (which dominate the figures), total 2010 sales in Europe were just 0.7%. The markets with the largest shares are Japan (11%) and USA (2.5%). China s market lags considerably at less than 0.1% of 2010 sales. As with any disruptive technology that has yet to hit the market fully, predictions of future sales are difficult as they depend on future policy support; infrastructure deployment; speed of technology innovation and cost reduction; and economic drivers such as oil prices. Despite these uncertainties, experts generally agree that electric vehicles will represent one of the key options for individual mobility in the future. Where disagreements arise is in the timing of this development. Estimates for European sales of FEVs in 2020 vary between 0.5 and 3 million Figure 7 compares predictions of annual FEV sales in Europe. By 2020, at the bottom end of the scale, ACEA s lower estimate assumes that 500,000 units will be sold. In comparison, Roland Berger s The future drives electric scenario estimates annual sales could reach 3 million. This scenario foresees higher oil prices, accelerated battery cost reductions, stronger government support and a broader product range in the next five to ten years, making electric vehicles a very attractive alternative by Figure 7: Comparison of annual sales projections for FEVs in Europe Roland Berger * 2 Roland Berger ** ACEA Communication San Sebastian ERTRAC Sum of Member State targets (IEA 2009) Europe may account for 25% of global FEV sales in Frost & Sullivan Strategy Analytics (pessimistic scenario) Strategy Analytics (optimistic scenario) *Potential EV customers based on car buyers who have access to infrastructure and a compatible mobility profile ** "The future drives electric" scenario - higher oil prices, accelerated battery cost reduction, stronger government support and a broader FEV product range in the next five to ten years Europe s share of the total global car sales market is expected to decline in the future due to growth in car sales in developing regions. Its position for FEVs may be different, as electric AEA 17

22 vehicle sales in the short and medium-term are more likely to be concentrated in wealthier countries. This is in part because of their cost premium compared to internal combustion engine vehicles, and in part because of demand-side policies driven by regulatory pressure to address carbon reduction and air quality issues. Figure 8: Sales projections for electric vehicles across world regions (source: IEA) 8 These projections suggest that Europe will experience amongst the strongest growth in sales for FEVs of any world region to 2020, despite stagnating growth in overall car sales. A strong domestic market would likely benefit European OEMs and stimulate a European FEV manufacturing capability. However the strong growth of emerging markets, particularly China, may counterbalance this. A conservative estimate of the global market value for ICT in FEVs is around 15 billion by Combining the various projections of FEV sales with predictions of the expected value of ICT content in all types of future vehicles, it is possible to derive an approximate estimate for the market value of ICT in FEVs of around 15 billion by However, this could be conservative. FEVs are likely to be the most connected vehicles on the road and expert estimates of the total ICT value within a next-generation FEV range from 15% to 40% of the total vehicle value. At the upper end of this estimate or with higher deployments of FEVs, the total value of the sector could be several times this. 3.5 The FEV industry in other world regions Our analysis suggests that four world regions stand to compete most strongly with Europe in the emerging FEV market. This section gives brief summaries of strengths and weaknesses of the FEV industry in these regions. 8 IEA, 'Technology Roadmap: Electric and plug-in hybrid electric vehicles', Available online at: AEA 18

23 Figure 9: Strengths and weaknesses of the FEV industry in other world regions + Third largest producer of motor vehicles in the world, one of the most successful exporters Japan + Leads the world in hybrid vehicle systems with dominant IP, manufacturing and brand position particularly Toyota + Strong internal market for efficient vehicles and new technology + World leader in battery technology design and manufacture - Strength of the yen makes inward investment unattractive + Substantial government funding has stimulated FEV industry USA + Strong track record in high tech R&D with silicon valley hub + Startup OEMs and component (esp. battery) suppliers targeting FEVs - Support at the state level is inconsistent - Consumers still favour larger gasoline vehicles with long range + The largest global growth market for passenger cars + Attractive conditions for manufacturing vehicles and components China + Strong government intent to support the FEV industry + Industrial policy that favours domestic producers - Low FEV demand today with a cost-constrained consumer base - Lower vehicle quality standards currently leads to weak exports + Strong in Li-ion battery R&D and manufacturing industry + Second only to Japan in Li-ion intellectual property S. Korea + Strong government support for industrialisation of FEVs + Free trade agreement with the EU since Low FEV demand today with a cost-constrained consumer base AEA 19

24 4 Objective B: the enabling role of ICT The aim of Objective B: The Enabling Role of ICT is to build on the work in Objective A by examining the future potential for a fully electric vehicle (FEV) industry in Europe, and the enabling role for ICT. The specific aims were: To understand how ICT and smart systems might feature in the future FEV industry in Europe, both in their enabling role in vehicles and as a contribution to Europe s industrial economy; To analyse the R&D spend, and emerging results, in Europe compared with other world regions; To investigate Europe s potential in the future in terms of infrastructure, skills, and the potential for cross-industrial fertilisation. 4.1 Patenting activity in ICT for FEVs Patenting activity (both applications and granted patents) in the cross-over area between electric/hybrid vehicles and ICT (EV-ICT) was analysed. Key conclusions are presented below Patent applications Patent applications can take anything from three to eight years to reach grant stage. Analysis of recent applications can be used as a measure of productive research activity. National patent applications are influenced by many factors, including differences in culture, local industry, government incentives, economic climate and intellectual property laws. Due to these issues, our analysis focused primarily on high-value patent applications. These are defined as applications that are either: 1. Made through the Patent Cooperation Treaty (PCT); or 2. Triad applications (made at the European, US and Japanese patent offices). Figure 10 below shows the change in volume of high-value patents in EV-ICT by the region where the patents originated, over the decade to 2008 (the latest year for which data are available in this detail). AEA 20

25 High-value patent applications Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle Figure 10: High-value EV-ICT patent applications by region of origin, Other EU (drop likely due to delay in translation) Note: The apparent drop in applications from Japan in 2008 is likely an artefact due to translation delays. Japan accounts for 45% of high-value patent applications in EV-ICT ( ) A major portion of this activity is from Toyota, which files over a third of Japanese applications. The other two major Japanese OEMs are some distance behind. Honda files 11% of Japanese applications and Nissan 9%. The majority of EV-ICT applications from European companies originate in Germany From 1998 to 2008, around 17% of high-value patent applications originated from Germany, with Tier 1 suppliers Bosch and ZF Group registering the most applications in EV-ICT. Despite growth in German applications, the number is on average only half that of Japanese applications. France takes a distant second place at 5%, led by Renault, Peugeot and Valeo. The US accounts for around 16% of applications, China for only 2% Although US activity has shown a gradual increase, the rise has not been as steep as in other countries. Chinese applications are mostly limited to the domestic market, and therefore do not feature strongly in the analysis. Overall, applications from China account for only 2% of the total high-value applications, and mostly originate from R&D facilities owned by non-chinese OEMs (Toyota and Mitsubishi are the top two companies). Other regions including Korea, India and Brazil each account for less than 1% of applications. Toyota is pursuing an aggressive patenting strategy in EV-ICT Toyota dominates the number of patents in this area. All other applicants lag behind by a significant margin. Honda and Bosch, in second place and third place respectively, each have only one third of the number of applications. Toyota s patenting strategy could create barriers to other firms that wish to enter the EV-ICT value chain. China has joined Europe, the US and Japan as a key market for patent applications Between 2000 and 2004 the proportion of patent applications seeking protection in China grew very strongly. Since 2004, China has joined Europe as the third most popular region in AEA 21

26 which to register EV-ICT patents, after the US and Japan. This reflects China s growing market importance Granted patents Granted patents will have been originally filed around three to eight years ago, so do not include the latest innovations. However, they can provide an indication of market advantage. Triad patents (covering US, Europe and Japan) were analysed as these are typically of higher value. Japanese companies hold the largest EV-ICT triad patent portfolios Toyota has accumulated a significant patent portfolio over the past two decades, which makes it more difficult for competitors to patent similar technologies. It holds 1,500 highvalue patent family applications in EV-ICT areas. Honda is in second place, with 420 and in third, the highest-ranking European company was Bosch, with around 380 patents. Japanese companies hold around three-quarters of total triad grants over the past two decades. Even in patents covering Europe only, Japanese companies are more active than European firms, accounting for just below 40% of total patent grants. Germany and France have the most triad patents of European countries German companies hold 11% of total triad grants and France holds 3%. The European companies with the biggest portfolios are: Bosch (a supplier); Daimler (an OEM); Renault (an OEM) and Siemens (a supplier). US companies hold around 8% of triad grants. Number of patents held does not directly translate into market power Large patent portfolios can be an indicator of strength in the market, but the advantages of patenting must be considered in light of the significant costs incurred during patent filing and prosecution, investments in research and litigation costs against infringers. It appears that Toyota s extensive patent portfolio has slowed or excluded other manufacturers from the hybrid market, enabling Toyota to gain a majority market share of hybrid vehicle sales. 9 It has also enabled Toyota to license and cross-license hybrid technology. Experts we interviewed acknowledged that Japanese firms have the strongest EV-ICT patent portfolios, but many thought that the ability to trade IP and the fast pace of technological development would mean that European firms would not necessarily be disadvantaged as a result Position of Europe compared to other world regions Europe remains behind Japan in terms of patent generation, but there are other opportunities to ensure access to intellectual property In the automotive sector, it is very common to cross-license (trade patent rights) and litigation over patent infringement is relatively rare (compared to, for instance, the recent spate of high-profile mobile technology patent cases).given the speed of technological change and the faster rate at which competitors can bring imitations to market, it may be that firms are choosing other strategies. Alternatives may include keeping trade secrets or public research disclosures. 9 Griffith Hack (2009) Who holds the power? AEA 22

27 Figure 11: SWOT analysis for European companies and their intellectual property strategies Strengths S Opportunities European companies appear to be focussing on their home markets, where they hold around a third of grants. Germany, in particular, shows strong activity being the country with the second highest number of high value patent applications in EV-ICT technology. Forming alliances. The Renault-Nissan alliance is an example of past success. Opportunities to license or buy technology; O the market is highly dispersed, with many small start-ups who could be open to collaboration. The fast-moving technology areas of ICT may lend themselves more to strategies other than patenting, which may undermine the apparent lead of Japanese companies. Expensive new technologies such as these are normally first introduced in premium brands where Europe has a strong position. IP generation Weaknesses W European companies hold a relatively small patent portfolio compared to Japan, both domestically and globally. Recent research trends indicate that despite increased effort, European companies remain well behind Japanese companies in filing patent applications. Threats Toyota s extensive patent portfolio could present a challenge for European companies. In the past, it has slowed or excluded other Tmanufacturers from the hybrid market, helping Toyota to gain a majority market share of hybrid vehicle sales. European companies must be mindful of infringement risks. Current and past activity appears to focus more on hybrid technology as opposed to fully electric vehicles, which could be problematic if the market moves towards electric vehicles 4.2 R&D investment in the EU and Other Regions Europe has the highest automotive industry R&D spend of any world region The European automobiles and parts sector spent almost 30 billion on R&D in Japan is close behind with 23.6 billion and the USA is third with 11.6 billion. Figure 12 shows a clear correlation between sales and R&D spend, but it is not clear whether there is a causal link between the two. OEMs spend more on R&D than suppliers; Toyota spends the most, followed by VW OEMs spend more on R&D than automotive suppliers. Eight of the top ten automotive company R&D expenditures globally are OEMs, Bosch and Denso being the only suppliers. Toyota spends the most on R&D at 6.7 billion in 2011, with the Volkswagen Group close behind with 6.3 billion. However Toyota s R&D spend as a percentage of sales revenue is 3.8% - less than VW, which spends 4.9% of its sales revenue on R&D (see Figure 12). It is not possible to identify private sector R&D spending on ICT for FEVs Companies do not divulge specific information on R&D strategies or how their R&D budget is split between different priorities. As a result of the development cost and diversity of new technologies, OEMs are increasingly forming joint ventures. AEA 23

28 R&D Spend ( m) Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle Figure 12: 8,000 Sales vs. R&D spend for the top OEMs (data extracted from the 2011 EU Industrial R&D Investment Scoreboard 10 ) 7,000 6,000 5,000 4,000 3,000 2,000 1, , , , ,000 Sales ( m) The US provides 1,658 billion public funding for automotive R&D, closely followed by Europe at 1,611 billion Public sector automotive R&D funding was investigated by the FP7 project, EAGAR (European Assessment of Global Publicly Funded Automotive Research). The US spends the most globally, followed by the Europe. Japan, China, Korea and India are far behind. Automotive companies are locating new R&D centres in growth regions such as China and India. Silicon Valley is becoming a focus for telematics R&D Many automotive companies are opening R&D centres in China and India. This is primarily to ensure they understand customer requirements in these growing markets, and not to outsource R&D for European markets. Silicon Valley in the US is a growing location for telematics R&D due to the existing ICT expertise located there. Industry experts voiced a number of suggestions for improving R&D investments The experts we interviewed believed that European R&D is world class, but is under threat from emerging economies, which are quickly developing their capabilities. They suggested several options for improving the quality of R&D: Further use of public-private partnerships (PPPs) to manage public R&D funding; The creation of regional centres of excellence for key technology areas; Foundation manufacturing facilities for use by SMEs to reduce development costs; Specialist research centres with close academic and industrial ties; 10 EC JRC, The 2011 EU Industrial R&D Investment Scoreboard, 2011, Available online at: AEA 24

29 Facilitate funding projects closer to market by facilitating partnerships that represent likely supply chains rather than pre-competitive research partnerships. 4.3 Technical capabilities Europe s automotive industry has some of the best technical skills in the world European automotive technical and engineering skill levels are comparable with the developed automotive nations of Japan and Korea. Experts believe that on average, Chinese engineers do not currently exhibit the same skill levels, but they are improving. Some key automotive nations in Europe currently have a skills shortage in electrical, electronic and mechatronic engineering which is expected to increase The shift to electric vehicles will require a different skill base in the automotive industry: from mechanical engineering to electrical, electronic and mechatronic engineering. The UK and Germany currently have a shortage of skills in these areas; this shortage is expected to increase as the industry develops in this direction. There are expected to be an additional 193,000 engineers employed globally in the electronics element of the automotive industry by Some 50,000 of these are likely to be in Europe. 11 Europe needs to attract young talent into automotive engineering Europe is suffering from an ageing engineering workforce. One suggestion to combat this trend is to adjust immigration policy to remove the barriers to allow skilled foreign engineers to gain employment. To attract emerging talent, the automotive industry needs to become an appealing career option for a young, diverse new breed of Generation Y engineers. Along with a skilled workforce, Europe possesses FEV friendly infrastructure Many European countries (particularly in North-western Europe) rank highly in assessments of their network readiness. 12 An existing network and communications infrastructure is a prerequisite for V2X (vehicle to vehicle, grid, and infrastructure) communications. This makes it more likely for a V2X market to develop early in Europe, particularly compared with emerging markets that have less well developed communication infrastructure, standards and regulations. 4.4 Cross-industry fertilisation Technological synergies exist between the automotive, aerospace, microelectronics, microsystems and embedded systems industries. Europe is one of very few regions in the world to have players in all these industries. Examples of potential cross-industry fertilisation that could benefit the automotive sector include the following: A move to a new modular architecture for ICT could improve quality and reduce costs The aerospace industry has moved away from segregated, function-specific electronic control units towards a new modular architecture. This move was motivated by the potential for the use of commercial off-the-shelf components, increased reliability and fault tolerance and reduced maintenance requirements. A similar move could benefit the automotive sector in FEVs. 11 McKinsey & Company, 'Boost! Transforming the powertrain value chain - a portfolio challenge', Available online at: 12 INSEAD, 'The Global Information Technology Report , Transformations 2.0', Available online at: AEA 25

30 Increased use of virtual testing could reduce vehicle development costs Virtual testing is an industry norm within aerospace, where full physical testing is often cost prohibitive. Advanced simulation and modelling technologies are widely used for mechanical and electronic systems, shortening development cycles and reducing the cost of prototyping. While virtual testing already occurs in the automotive sector, greater use could boost overall industry competitiveness and exploit synergies with the EU computing industry. A systems approach to diagnostics could reduce costs and address battery concerns The aerospace industry focuses on on-board diagnostics, where an on-board maintenance system computes information to give relevant warnings. This significantly reduces the need for additional complex off-board diagnostic systems and services. Automotive diagnostic troubleshooting focuses on individual components, but a systems approach could give cost advantages, increase vehicle utility and improve the overall ownership experience. A prognostic approach could be of particular benefit to FEVs, where the battery s health and future value represents a significant risk to the owner. Further integration of X-by-wire systems will enhance active safety capabilities X-by-wire has reached a significant level of maturity within the aerospace industry, but wide use of control with no mechanical connection in the automotive sector still faces cost, regulatory and acceptance barriers. Further development of steer-by-wire offers improved crash response of vehicles, optimised design of the engine bay and improved ergonomics. Replacing other mechanical components with electronic counterparts can eliminate high-cost components, reduce vehicle weight and introduce active safety functionality Improved microelectronics will increase FEV efficiency and range The insulated gate bipolar transistor (IGBT) is a critical component for high-voltage, highcurrent coupling between the power source and traction motor in an FEV. The frequency at which IGBTs can perform high-voltage switching and the temperature limits at which they can operate will be a key determinant of efficiency. Component manufacturers are developing composite semi-conductor materials that offer increased thermal performance and a reduction in energy consumption. Multicore microcontroller units (MCUs) may simplify architectures and improve safety Automotive microcontroller units (MCUs) for vehicle systems may be integrated into a single controller. New functions demand greater computing power and OEMs are gradually shifting to multicore MCUs in their electronic systems architectures. These offer the ability to consolidate control of multiple systems, and for more segregation between safety critical functions and general-purpose functions to enhance vehicle safety. 13 A similar transition has already been seen in the telecoms industry. Improved MEMS technology will improve driver safety and navigation systems Micro-electro mechanical systems (MEMS) are miniaturised sensing and actuation devices, including gyroscopes, accelerometers and electronic compasses. The huge appetite for smart phones and tablet devices is spurring rapid innovation and driving down component costs, with Europe at the forefront of development. The implications of these developments for automotive applications include enhanced offerings to predictive and adaptive cruise control, advanced driver safety systems and navigation. However, new safety standards in 13 Monet, A., Navet, N., Bavoux, B. & Simonot-Lion, F. Multi-source software on multicore automotive ECUs - Combining runnable sequencing with task scheduling Available online at: AEA 26

31 the automotive industry means that manufacturers of MEMS for consumer electronics may face regulatory barriers to supplying into safety-critical automotive applications. Model-based software development can reduce development time and costs Embedded systems are forecast to grow to 35% of total vehicle value by 2015, with development costs outstripping all other vehicle R&D areas. Software development time is growing because of the rising number of functions, whereas development time in all other vehicle areas is decreasing. Model-based development has the potential to shorten development times but large investment requirements may pose a barrier to uptake Feasibility of EU manufacture of FEVs and components Electric vehicles will continue to be manufactured within Europe if a market exists There is a trend for expanding vehicle assembly facilities in growth regions such as China, but analysis suggests vehicle assembly within Europe is secure and the concern that manufacture will move exclusively to emerging economies is overstated. 15 However, the FEV value chain shifts the value-add activities upstream, particularly with batteries, and it is not clear how much of this will occur in Europe. Automotive manufactures increasingly aim to manufacture vehicles in the target market. Europe s medium-term FEV market growth is predicted to be as strong as any world region, despite overall flattening of car sales volumes. Europe needs to increase battery manufacturing capabilities Most European OEMs currently import batteries. Domestic manufacturing would have the advantage of shortening supply chains, reducing risk and the capital tied up in shipping. 16 In the long term, battery and motor production is expected to be highly automated, meaning highly skilled labour is more important than a low cost workforce. Large investments will be needed for Europe to become a major manufacturing centre for FEV batteries, but participation is important to keep the FEV value chain in Europe. European OEMs are expected to increase in-house motor production Most European manufacturers currently outsource their electric motors from suppliers but many are now looking to develop them in-house. Analysis indicates that about 60% of the OEMs that are outsourcing motors are planning to bring the capability in-house. 17 Examples include a Daimler-Bosch joint venture to manufacture electric motors in Germany, and a joint venture between BMW and Peugeot-Citroen to produce FEV components in France. 18 Europe leads the automotive semiconductor industry but faces growing competition As the home of three top suppliers, Europe has a strong position in automotive semiconductors, holding 36% of the market in This advantage was developed due to the presence of luxury automotive brands, which lead in introducing new ICT technology. 14 Kirstan, S. & Zimmermann, J. Evaluating costs and benefits of model-based development of embedded software systems in the car industry Results of a qualitative Case Study Available online at: 15 IBM, 'Automotive 2020: Clarity beyond the Chaos', Available online at: 16 Roland Berger, 'E-Mobility a promising field for the future: Opportunities and challenges for the German engineering industries', Available online at: 17 Frost and Sullivan. Hybrid and Electric Vehicles to boost market for Electric Motors Available online at: 18 PSA Peugeot Citroen. BMW Group and PSA Peugeot Citroën to Invest 100 Million Euros in Joint Venture on Hybrid Technologies Available online at: AEA 27

32 However, competition is increasing as new players enter the market, stimulated by sales growth in China and India. Much of the hardware is small enough to be shipped economically across the globe, so production could move to lower-cost regions. Semiconductor suppliers have tended to keep their hardware and first level software in the same region. However, beyond 2015 European suppliers could move their hardware design out of Europe to reduce costs. There is a further risk that the embedded software competence will follow. 19 Europe s automotive telematics sector is under threat The telematics market is changing rapidly, with the consumer demanding the same functionality from their car as they can get in the consumer electronics products. Consumers are used to smart products with common operating systems, and expect automotive telematics to work in this way. The greatest added-value will be in the services that can be accessed, hardware specification being less important to consumers than the software interface. 20 US companies are producing some of the most advanced telematics systems. New entrants into this market include connectivity companies such as Airbiquity, Qualcomm, and Hughes Telematics. Hughes Telematics is currently producing the telematics for some of the major German OEMs - Daimler, Volkswagen and Audi. If Europe is to succeed in this sector, it is likely that this success will come from new automotive industry players such as TomTom / Octo Telematics or WirelessCar, rather than the traditional Tier 1 suppliers. These companies are flexible and entrepreneurial enough to adapt to the marketplace and can produce products within short timescales. Success factors for European FEV manufacture Collating opinion from industry stakeholders and automotive literature, a number of potential success factors for European manufacture have been established. These are shown in Figure 13 below. 19 EC JRC, 'Is Europe in the Driver's Seat? The Competitiveness of the European Automotive Embedded Systems Industry', Available online at: 20 Tech Crunch. The Death of the Spec Available online at: AEA 28

33 Figure 13: Seven success factors for European FEV manufacture Factors that can help secure a European FEV manufacturing industry 1 Europe must ensure that it retains its position at the top of global automotive R&D; the industry must invest heavily in new FEV technologies, and public R&D spending should be comparable with, if not leading, the other major automotive regions. 2 Europe needs to create a strong single market for electric vehicles by harmonising incentives and acting to address the barriers to their deployment (discussed in more detail in Objective C - barriers to FEV deployment). This includes issues with market and regulatory fragmentation in Europe due to varying Member State regimes. 3 Europe needs economic stability, and the Eurozone to remain in place, to create the right conditions for private investment in the region. 4 Europe needs to support SMEs that specialise in electric vehicle solutions. These small companies are sufficiently flexible and innovative to adapt to the new mobility challenge and are likely to drive growth into new value chains. Support could be in the form of early or late-stage investment project financing. 5 To be able to compete with the low labour cost economies, Europe must ensure that its factories are highly automated and supplied with highly-skilled labour that cannot easily be found in emerging economies. 6 To close the skills gap, Europe needs a recruitment drive to encourage students to study engineering, in particular electrical, electronic and materials engineering. This could also involve employing skilled non- European engineers. 7 Europe should aim to create favourable conditions for automotive companies looking to develop manufacturing facilities in Europe (likely if the European FEV market is strong). This may include financial incentives, as offered in the US and China. AEA 29

34 5 Objective C: hurdles and roadmaps The aim of Objective C: Hurdles and roadmaps is to identify barriers and hurdles to development and deployment of the fully electric vehicle in Europe drawing on experience from trial deployments to date and evaluate roadmaps towards overcoming these hurdles. The specific aims are to: Identify barriers to development, industrialisation and deployment of electric vehicles, both in terms of their successful deployment on Europe s roads and the forming of a competitive electric vehicle industrial value chain in Europe. Identify and assess possible solutions with a particular focus on the potential role of ICT and smart systems in mitigating or overcoming the hurdles identified; Review existing roadmaps to overcome the identified hurdles, prioritizing solutions with realistic targets, milestones and timescales. 5.1 Barriers to electric vehicle deployment Many independent research studies foresee a major role for electric vehicles in the long-term decarbonisation of the road transport sector, reducing dependence on fossil fuels and meeting local air quality targets. However, without government support, electric vehicles are unlikely to gain significant market share. There are a number of barriers that prevent mass uptake; some of the most important factors are discussed here, including: Vehicle costs; Battery charging solutions; Standards and regulations; Access to raw materials; and Consumer expectations Vehicle costs The biggest barrier to consumer take up of electric vehicles is the high upfront cost Current FEVs are substantially more expensive to buy than an equivalent petrol or diesel vehicle. However, studies have found that few private car purchasers are willing to pay a significant premium for an FEV. 21,22 For fleet managers, who have a higher focus on the total cost of ownership, high capital cost is a less significant barrier. Higher upfront costs for FEVs are primarily due to the current cost of batteries For current FEVs, the battery can represent up to 50% of the cost of the vehicle. 21,23,24 Future reductions in battery costs may be hampered by the high cost of skilled labour for 21 Deliotte, 'Unplugged: EV realities versus consumer expectations', CENEX, 'The Smart Move Case Studies', Available online at: 23 An exchange rate of 0.76 has been used throughout the report to convert US$ into. 24 AEA (2010), Market outlook to 2022 for battery electric vehicles and plug-in hybrid electric vehicles (report for the Climate Change Committee) AEA 30

35 manufacture and the rising cost of material inputs. Expected reductions in battery unit costs may also be offset by manufacturers offering larger batteries to increase vehicle range. The total cost of ownership (TCO) for an FEV is expected to reach parity with conventional vehicles in between one and five years time in some regions. Studies of vehicle TCO indicate that in some countries, the higher purchase cost of FEVs could be offset by lower running costs compared to a conventional ICE vehicle in one to five years time without subsidies. 25,26 More conservative estimates indicate TCO may not be comparable for electric and conventional vehicles before Calculations depend on the future prices for fossil fuels, electricity, and FEV batteries, all of which are highly uncertain. Private consumers do not consider the total cost of ownership, are concerned about depreciation and expect FEVs to have high running costs. Private car buyers typically only take the first three years of fuel use into account when making purchase decisions. 28 This means that they are less likely to purchase vehicles with a higher upfront cost, even if the total cost of ownership is lower. Uncertainties about long term value and depreciation are mentioned as a barrier for purchasing an electric or plug-in hybrid car. Consumers also tend to assume the maintenance costs of electric cars to be higher, although experts anticipate the contrary Charging solutions Successful business models for charging infrastructure need to be developed Financing charging infrastructure (particularly in public places) is a major challenge. Significant capital expenditures are needed to provide sufficient density of charging points. The high capital costs, low energy prices and initial low utilisation for FEV charge stations require a completely different business model to petrol refuelling stations. The payback time can exceed the lifetime of the outlet (typically 10 years). 30 Total grid capacity is not a major issue, but unmanaged peak loading could be Even a complete electrification of the European vehicle fleet (which is not predicted in even the most optimistic scenarios to 2050) would only result in additional electricity demand of 10-15%. It is very likely that generating capacity will be able to meet the additional demand, at least in the short to medium term. 27 However, uncontrolled charging can significantly increase peak load, with effects at the distribution and generation level. In member states with relatively weak electricity infrastructure, even small scale EV introduction can cause local power-outages if charging is uncontrolled. Fast charging applications, which place greater strain on electricity grids, could lead to bottlenecks in all Member States The Boston Consulting Group, 2011: Powering Autos to 2020: The Era of the ElectricCar? Available online via: 26 International Energy Agency s EV Technology Roadmap 27 CE Delft, 'Impacts of Electric Vehicles (5 separate deliverable reports + summary)', Available online at: 28 EU DG for Internal Policies, 'Challenges for a European Market for Electric Vehicles', Available online at: 29 LEI, CE Delft, Fraunhofer ISI 2011: Behavioural Climate Change Mitigation Options Domain Report Food 30 Electrification Coalition (ELCOA). Economic Impact of the Electrification Roadmap 31 Grid for Vehicles (G4V), Work package 3 / Deliverables 3.3. List of identified barriers and opportunities for large scale deployment of EV/PHEV and elaboration of potential solutions. Available online under: AEA 31

36 There are technical and cost barriers to smart charging of FEVs Smart charging of FEVs, where charging is automatically scheduled to take place at an optimum time for grid energy and power balance, faces several barriers in Europe according to stakeholders. This includes technical barriers to implementing the required market systems, and high costs preventing a viable business model from being developed Standards and regulations Further work is required on standards and regulations for data protection and safety European standardisation and regulation for vehicle charging and type approval has made significant progress but there is still work to do in areas such as data protection, safety requirements; communications between vehicles and the grid; and other communications standards. Industry experts were concerned that overregulation and slow progress could hamper European competitiveness Raw materials FEV motors and batteries currently utilise materials that could pose resource risks. In particular, rare earth elements are only mined in a few locations, and supply is expected to outstrip demand in the future, leading to significant price rises. Figure 14 describes the resource risk for four materials used in FEVs. Advanced manufacturing techniques may be able to limit the amount of rare earth elements needed, but to date it has been challenging to eliminate them entirely. AEA 32

37 Figure 14: Resource risks associated with FEVs Material Application Risk Most critical Dysprosium High efficiency permanent magnet motors Limited substitutes currently exist. Demand expected to grow strongly due to FEVs. Current reserves mainly in China; other mines due to come on stream around 2015 but add less than 15% to current production. China is restricting exports. Neodymium High efficiency permanent magnet motors Limited substitutes currently exist. Demand expected to grow strongly due to FEVs and other motor/generator applications (e.g. wind turbines). Demand likely to exceed production in the short term. Current reserves mainly in China; other mines due to come on stream around 2015, but supply will remain tight. China is restricting exports. Least critical Lithium Cobalt Li-ion batteries Battery cathodes Sufficient reserves exist, but supply may not be able to scale as quickly as demand, leading to short-term price rises. Sufficient reserves exist, but supply may not be able to scale as quickly as demand, leading to short-term price rises Consumer expectations Surveys of consumer attitudes towards FEVs 21,32 typically find that expectations on range, charge times and purchase price far outstrip the current reality. However, evidence from field trial results suggest that consumer views change when they participate in FEV trials. Some key insights reported by field trials are shown in Figure TSB, 'Initial findings from the ultra-low carbon vehicle demonstrator programme', Available online at: AEA 33

38 Figure 15: Five insights into consumer reaction during field trials Consumer views: insights from field trials 1 2 Consumer perceptions are changed by practical experience of FEVs. Initially trialists have concerns on range, reliability and safety but post-trial surveys reveal that these concerns are significantly reduced by the end of the trials. However, private consumers remain unwilling to pay a significant price premium for an FEV. Whilst few faults are reported in the vehicles themselves (and significantly, no safety issues), problems were reported with the integration of communications between vehicle, charging infrastructure and support services. This undermined consumer confidence. 3 Most trialists had access to home charging, and typically relied on this to recharge the vehicle. Despite this, survey results show that they still view public recharging infrastructure as an essential requirement. A strong motivator for both private and commercial trialists to try electric 4 vehicles is their perceived eco friendliness. For this reason, there was a strongly positive response when vehicles were provided with a green electricity tariff so that they were charging on low-carbon electricity. 5 In general, fleet operators were more open to FEVs than private individuals because they placed more emphasis on total cost of ownership (over capital cost), they saw marketing benefits in the green image of FEVs, and they were willing to modify their management processes to accommodate the charge and range restrictions. Inconvenience of charging is cited as a main barrier to buying an FEV. 29 Most consumers expect an electric vehicle to recharge its battery in two hours or less. 21 This is substantially shorter than today s typical charge times of 6-8 hours. However, practical experience can shift expectations: after a three month trial, three quarters of consumers felt charging speeds suited their daily routine. 22 Most charging currently occurs at homes and workplaces; however users appreciate the security and flexibility offered by public recharging stations. 5.2 Solutions to overcome hurdles A number of technological solutions to the hurdles of FEV cost and performance are detailed in Objectives A and B. In addition to these, there are a number of business models that seek to address the key barriers of vehicle cost and availability and use of recharging infrastructure. Leasing of vehicles \ batteries could insulate the consumer from the high capital costs Leasing avoids both the high up-front costs of purchasing an FEV and the risks associated with ownership. Vehicles can be leased under a service contract for a fixed rate; this model is already employed in the commercial fleet segment but is uncommon in private vehicles. AEA 34

39 Alternatively, the battery can be leased and the rest of the vehicle sold as normal. A subscription service model, where the lease includes access to charging infrastructure or swap stations (and possibly electricity), is another option. The service provider has full control over the maintenance of the batteries, reducing the risk of unreliability and depreciation to the consumer. The hurdle to both leasing systems is developing a business model where the service provider takes on an acceptable risk for the return, whilst providing the service at an attractive price for consumers. A range of business models will be needed to give comprehensive charging infrastructure coverage Public infrastructure requires significant upfront investment for the purchase and installation of charging points, and will have an extended payback period as the charging price needs to be kept low to guarantee usage. Infrastructure usage is likely to be unpredictable and the model could increase the peak load on the local distribution grid, which could cause problems if the network is close to capacity. Private infrastructure represents an investment decision and, therefore, seeks a return. The cost to the consumer will be at a higher price over public charging, but is expected to offer additional benefits such as convenience of location and/or integrated IT services. End-to-end or network operator solution offers the consumer a single point of contact and provides the full service from the vehicle purchase through to its operation (charging) and maintenance (battery and vehicle). Consumers are offered a contract where they will pay a set fee each month for the running and maintenance of their vehicle. Contracts vary but can include in-vehicle services, managed charging and battery swap. 5.3 Solutions offered by ICT ICT applications offer a range of solutions to overcome hurdles to FEV take-up. ICT can facilitate technological enhancement, or facilitate new business models or value chains in FEVs. Figure 16 summarises the ICT applications that contribute to overcoming hurdles. AEA 35

40 Figure 16: The role of ICT in overcoming hurdles to electric vehicle deployment Optimising charging Improving the ease and convenience of charging, and reducing charging times, will improve consumer acceptance Range extender integration Reduces range anxiety by improving the driving range of the vehicle Drive by wire / safety Battery safety systems help address concerns over battery stability and crash safety Powertrain efficiency Helps reduce the size and cost of the battery (for a given vehicle range) by improving vehicle energy efficiency New motor designs using ICT can reduce the reliance on rare earth elements Grid integration (V2G) Could reduce running costs of FEVs, by charging at off-peak rates and/or generating revenue through demand-side management; alleviates grid capacity concerns Smart battery control Helps to reduce battery cost by maximising potential of cells Helps to improve battery depreciation through increased battery lifetime Could also facilitate battery leasing models by feeding back battery health information Driver interface Helps reduce range anxiety by providing drivers with intelligent information on vehicle range and recharging options Active load management Helps reduce the size and cost of the battery (for a given vehicle range) by improving vehicle energy efficiency Energy harvesting systems Helps reduce the size and cost of the battery (for a given vehicle range) by improving vehicle energy efficiency Photo courtesy of GM 5.4 Roadmaps for FEV deployment Europe, along with many other world regions, has developed a number of roadmaps for overcoming the barriers to FEV deployment. The study team reviewed and compared a range of roadmaps from the major automotive markets. All roadmaps target a very significant acceleration in deployment rates around 2020 Figure 17 compares deployment targets from different roadmaps. The period around 2020 is almost universally seen as a key milestone, when deployment of FEVs enters the mass market. This has implications for the Horizon 2020 programme: it will need to prepare European industry for mass production of FEVs, not only to achieve European targets but to be positioned for the growing export potential. The roadmaps agree on the main barriers and technology areas for development The consensus from roadmaps was that battery cost is the main barrier to deployment, and accordingly battery technology development is one of the key focus areas. This is also seen as a key strategic technology by many regions. Other common themes include provision of public charging infrastructure, development of standards, and improvement of components including motors and power electronics. ICT, and the development of a revised vehicle architecture, are also commonly referenced. AEA 36

41 Figure 17: Comparison of FEV deployment targets from different roadmaps IEA, 2011 (global) 1.1m EV/PHEV sales 7m EV/PHEV sales 18m EV/PHEV sales 106m EV/PHEV sales ERTRAC / EPoSS, 2010 (EU) 1m EV/PHEV on the road 5m EV/PHEV on the road ICT4FEV, 2012 (EU) 1m EV/PHEV on the road 20m EV/PHEV on the road USA, m EV on the road Canada, m EV on the road South Korea, m EV/PHEV produced EU roadmaps are strong on technology development, but other world regions more openly target commercial imperatives The European roadmaps reviewed gave a comprehensive and detailed view of the technological development needed, and identify R&D needs. However, there is less emphasis on maintaining Europe s competitive position. Roadmaps from other regions were more explicit in this area, as described below in Figure 18. In the future, European roadmapping exercises could integrate technology roadmaps with roadmaps for value chain development and securing a competitive industrial position, drawing closer links between technology and competitiveness. AEA 37

42 Figure 18: Different approaches found in FEV roadmaps - The roadmaps reviewed were strongly focused on technology - R&D needs are identified in detail by technology domain EU - Technology maturity targets are set by technology - Deployment targets are set by number of vehicles on the road - Sets targets for the cost, power density and specific power of battery systems, and the efficiency of the electric drive train USA - Similar technological focus to EU roadmaps - Sets a target for the Canadian content (in parts and manufacture) of FEVs Canada - Sets targets for factors influencing uptake, e.g. cost of ownership - Specific chapters on new business opportunities and new business models - Has roadmap targets for production as well as R&D S. Korea - Socio-economic impacts estimated including job creation and domestic and export sales value - FEV strategy integrated into industrial policy (e.g. move towards high value manufacturing activities) China - Identifies FEVs as one of seven strategic emerging industries - Environmental benefits seem secondary to strategic importance AEA 38

43 6 Objective D: environmental and health impacts The aim of Objective D: Assessment of Environmental and Health Impacts is to assess the environmental and health impacts of the deployment of electric vehicles compared with other types of vehicle. The specific aims were: To assess the environmental and health impacts of the widespread deployment of electric vehicles vs. petrol, diesel and hybrid vehicles To identify weaknesses and threats to the potential environmental and health benefits of electric vehicles To investigate the role of ICT and smart systems in overcoming these weaknesses and threats 6.1 The vehicle life cycle Emissions of greenhouse gases (GHGs) and air pollutants have harmful effects on human health and the environment. These emissions are produced at various stages of a vehicle life cycle, from its manufacture to its disposal or recycling. Figure 19 shows the vehicle life cycle. Our lifecycle analysis compares four types of vehicle: Petrol internal combustion engine vehicle (ICEV): A car utilising an internal combustion engine fuelled by gasoline; Diesel ICEV: A car utilising an internal combustion engine fuelled by diesel; Petrol hybrid electric vehicle (HEV): A full hybrid-electric car utilising an internal combustion engine fuelled by petrol in parallel with an electric motor and battery, allowing for limited vehicle operation in pure electric mode and regenerative braking but not external charging of the battery; Battery electric vehicle (BEV): A fully electric car utilising an electric motor powered exclusively by a rechargeable battery. We compared the impacts of each vehicle over the life cycle, in the following areas: Global warming potential due to the emissions of greenhouse gases; Acidification potential, eutrophication potential, photochemical pollution, and particulate matter concentrations due to the emissions of air quality pollutants. The impacts were monetised using well-established estimates of their external costs, in order to compare the complete impacts of each vehicle and life cycle stage on a like-for-like basis. AEA 39

44 Figure 19: Overview of a vehicle lifecycle Fuel production Production Processing Transport & distribution Vehicle production Raw materials Assembly Transport Vehicle operation Tailpipe Tyre & brake End of life Disposal During vehicle manufacture, the type and size of battery is likely to be the most important factor influencing differences between vehicle types ICEVs typically have a relatively small lead-acid battery, whereas BEVs have a much larger battery to provide motive power. The extraction and processing of the various raw materials needed to make the battery can lead to significant emissions; therefore in general BEVs have higher embedded emissions compared to ICEVs. External costs from the manufacturing stage of a BEV could be over 75% higher compared to a conventional ICEV, and around 11% higher compared to a HEV. Based on a typical European electricity generation mix, the fuel production impact for BEVs is higher compared to impacts from petrol or diesel production. The impact of the fuel production stage for BEVs is heavily influenced by the electricity generation technologies used. Electric vehicles use electricity from the grid to recharge their batteries, which leads to emissions of air pollutants upstream at power stations. These emissions can vary widely depending on the electricity generation mix. Based on the present day EU-wide mix, the fuel production impact from BEVs is around 15-30% higher than for ICEVs. As the grid decarbonises, the impact of electricity production is expected to significantly reduce. BEVs are significantly more energy efficient than ICEVs over the full fuel cycle In a typical fuel cycle for a diesel ICEV, only around 15-20% of total primary energy is turned into motive power, whereas for a BEV around 40% is turned into motive power. Figure 20 shows the energy losses over the fuel cycle, from fuel production to motive power. Reductions of in-use emissions are an important advantage of using electric-powered vehicles even compared to the strictest tailpipe emission standards ICEVs The by-products of combustion in ICEVs include many harmful pollutants that are expelled through the vehicle s exhaust pipe. In contrast, the in-use (tailpipe) emissions of BEVs are zero, so their only impact arises from particulate matter generated by tyre/road wear (nontailpipe emissions). This means that the external costs from the in-use stage are reduced by over 90% for BEVs compared to ICEVs. AEA 40

45 Diesel Vehicle Energy Input 100% Electric Vehicle Energy Input 100% Impact of ICT R&D on the Large-scale Deployment of the Electric Vehicle Figure 20: Overview of energy chain efficiency in BEVs (top) compared to diesel ICEVs (bottom). [Source: adapted from Swiss Federal Office of Energy 33 ] ~36% Power generation ~8% Fuel production ~5%: Elec. transmission CO 2 ~6%: Battery ~4%: Electric motor ~4%: Mechanical drivetrain Useful work ~40% ~9% Fuel production ~64% Diesel engine CO 2 ~7%: Mechanical drivetrain Useful work: ~15-20% The treatment of batteries is a key difference between the end-of-life impact of ICEVs and BEVs However, vehicle disposal accounts for only a small percentage of overall lifecycle impacts. Some studies also include the impacts of recycling, as this could offset emissions during the manufacturing stage. Battery recycling in particular could significantly reduce the lifecycle impacts of electrically-powered vehicles with a large battery. 33 Swiss Federal Office of Energy, Accounting for EVs in EU CO 2 regulation from cars: a Swiss Perspective. AEA 41

46 6.2 Life cycle analysis for present-day vehicles Our analysis compares vehicles in 2015, once the Euro 6 vehicle emission standards come into force. In 2015, all new vehicles sold in the EU will have to comply with stricter Euro 6 standards on emissions of air quality pollutants. Since these vehicles will have a significantly lower environmental impact than older vehicles, it is appropriate to compare electric vehicles with ICEVs complying with this standard for a clear view of future benefits. The total life cycle external costs are lower for a BEV than other vehicle types. External costs (for impacts covered in this study) for BEVs are 28% lower compared to a petrol HEV, and around 40% lower compared to petrol and diesel ICEVs. HEVs achieve around 10-20% lower impacts than ICEVs. FEVs are likely to be between these two extremes, depending on the configuration and electric-only range. In-use emissions have historically had the largest impact; however for BEVs the manufacturing stage is more significant. Traditionally, the in-use emissions are responsible for a large proportion of a vehicle s overall environmental impact. However, as in-use emissions are very low for BEVs, the other stages of the life cycle become more important. Around half of life cycle external costs from a BEV arise during the vehicle manufacture. In the future, with the decarbonising of electricity production leading to a reduction of in-use emissions in particular, this share is likely to increase. Figure 21: External cost for whole life cycle, split by stage in 2015 ( per 1,000 vehicle-km) Vehicle manufacture Fuel production In-use (Tailpipe) In-use (Non-tailpipe) End of life ICE Petrol 17% 23% 51% 19.2 ICE Diesel 16% 19% 56% 20.5 HEV Petrol 33% 19% 43% 16.7 BEV 49% 42% Impacts from all stages of life cycle ( per 1,000 vehicle-km) Notes: All vehicles are assumed to meet or exceed Euro 6 emission limits. Non-tailpipe emissions include particulate matter generated by tyre, road and brake wear. Greenhouse gases (GHGs) are the largest external cost for all vehicle types. AEA 42

47 For BEVs, GHGs account for 49% of external costs; this rises to 56-60% for HEVs and ICEVs. Historically it has been the air pollutant emissions from vehicle operation that have received the most attention, due to the visible impacts they had in surrounding areas (e.g. smog and poor air quality in cities), but tighter emission standards have dramatically reduced the emissions of air pollutants from modern vehicles. Figure 22: External cost for whole life cycle, split by emission type in 2015 ( per 1,000 vehicle-km) Global warming Acidification Eutrophication Photochemical oxidation Particulate matter ICE Petrol 60% 10% 20% 19.2 ICE Diesel 56% 9% 26% 20.5 HEV Petrol 59% 15% 17% 16.7 BEV 49% 23% 18% Impacts from all stages of life cycle ( per 1,000 vehicle-km) The lifecycle GHG emissions are lower from a BEV than other vehicle types Life cycle GHG emissions from a BEV are 45% lower than an ICEV running on petrol or diesel and 37% lower compared to a petrol HEV. BEVs have far higher GHG emissions from vehicle manufacture around 70% higher than ICEVs but this is more than compensated for by the lower in-use emissions. 6.3 Future developments in environmental & health impacts The lifecycle analysis found that BEVs are expected to have smaller environmental and health impacts compared to other vehicle types. Figure 23 outlines five key factors that could affect the net costs and benefits of electric vehicles in the future. AEA 43

48 Figure 23: Key factors affecting the environmental and health impacts of FEVs Key factors that will affect net costs and benefits of FEVs Electricity generation Optimized recharging Additionality of GHG reductions Battery production & lifetime Performance and uptake of biofuels The EC aims to reduce of GHG emissions from electricity production by 54-68% by 2030, and 93-99% by 2050 relative to 1990 levels. If these targets are achieved, in-use GHG emissions of an electric vehicle would be dramatically reduced. Even if manufacturing and end-of life GHG emissions remained constant, the planned electricity decarbonisation would reduce the lifecycle GHG emissions of a BEV by 18% in 2030 and 43% in Optimized recharging is central to the environmental case for FEVs. Without recharging optimisation, FEVs could cause an increase in net emissions, since higher emission generating sources would be needed to meet the additional peak electricity demand. Optimized recharging would decrease net emissions for all levels of FEV penetration, and could improve the utilisation of intermittent renewables by charging during periods of over-supply. The European Commission has mandated that from 2020 onwards, the average emissions from a new car fleet will not be more than 95g CO 2 /km. This will mean that car manufacturers will have to implement numerous technologies to achieve these fleet wide reductions. The introduction of some FEVs into the fleet would allow manufacturers achieve this target in a more cost effective manner (particularly with super-credits), but may not lead to GHG reductions beyond that which would have been achieved anyway. Shared vehicle ownership and mass integrated public transportation offer alternatives to vehicle ownership that could improve societal health and makes efficient use of space. Therefore it is important to understand what type of transport is being displaced by electric vehicles to assess the net impacts. The vehicle battery accounts for over 40% of the embedded emissions of an EV, and over 40% of emissions from battery production are from electricity consumption during manufacture. Replacement batteries (if more than one battery is required during the vehicle lifetime) significantly increase the lifecycle GHG emissions of an EV, in the order of 20%. Utilising the BEV battery for bi-directional charging for grid balancing could also have a detrimental impact on the battery life due to the additional charge/discharge cycles the batteries would undertake. There is significant uncertainty as to the volumes of sustainable biofuel that may be available in the future and the net GHG savings, primarily due to issues surrounding indirect land use change. If lowcarbon biofuels are available in large quantities at low cost, the environmental benefits of electric vehicles over ICEVs will be eroded. AEA 44

49 6.4 The role of ICT in the environmental & health impacts of FEVs ICT can improve the environmental performance of FEVs in a number of ways, as shown in Figure 24: Figure 24: The role of ICT in improving environmental and health benefits of FEVs Smart charging To ensure that low-carbon electricity can be used, and as part of a strategy to facilitate a low-carbon grid mix Battery management Maximising the utilisation, lifetime and performance of batteries to reduce the environmental footprint of battery manufacture Vehicle efficiency Improving the overall efficiency through advanced control and power management and a centralised architecture Driver aids Optimising route and driving style decisions to reduce energy consumption Advanced & regen. braking More precise control could mean that the level of tyre wear could be reduced through the development of specific FEV traction control system that minimise some of the causes of tyre wear, such as skidding or wheel spinning. Photo courtesy of GM ICT is needed for smart charging to improve emissions from electricity generation The optimal charging strategy to minimise emissions is through a controlled or bidirectional strategy that maximises the use of charging at times of low demand / high supply, and that can be to inject energy into the grid for local load balancing. ICT can maximise the battery life and usable capacity through thermal and electrical management ICT can monitor and respond to temperature changes in different cells of the battery, to maintain an environment that is optimal for battery life and energy release. The battery management system can preserve cells by charging and discharging them more evenly. A centralised ICT architecture can improve vehicle efficiency and simplify manufacture and recycling Different functional systems could installed as software, as opposed to being managed by separate control units. This would increase the efficiency of the vehicle and also reduce the manufacturing and recycling needs caused by multiple control units. AEA 45

50 ICT can provide driver aids to improve driving efficiency When driving a vehicle, the largest variable impacting on vehicle efficiency is the driver; by helping the driver through various nudges, the in-use efficiency can improve. This could extend to semi-autonomous or autonomous driving. Advanced regenerative braking would reduce in-use energy consumption and also reduce the PM emissions from tyre and brake wear If utilising an electric motor and electric steering, an FEV offers an additional level of control over that of an ICEV. More precise control could mean that the level of tyre wear could be reduced through the development of specific FEV traction control system that minimise some of the causes of tyre wear, such as skidding or wheel spinning. 6.5 The role of FEVs in decarbonising the European transport sector To assess the role of FEVs in wider attempts to decarbonise the EU transport sector, several scenarios, adapted from previous European Commission scenario modelling, were compared. AEA s Sustainable Transport (SULTAN) Illustrative Scenarios Tool has been used to perform this analysis. Scenarios run to 2050, and all modes of transport are included, though only passenger cars are analysed in detail. Three scenarios were investigated, all compared with a business-as-usual (BAU) scenario where no further policies or measures are implemented. The scenarios were: Core GHG reduction scenario: This scenario is consistent with achieving the target of 60% reduction in GHG emission included in the 2050 Roadmap and the Transport White Paper. In passenger cars, FEVs account for 5% of new vehicle registrations in 2020, rising to 23% by 2030 and over 50% by This scenario is broadly comparable with European Commission scenarios published as part of the Transport White Paper analysis. Low biofuel performance scenario: This scenario investigates the risk the availability of, or GHG reductions achievable from, biofuels is lower than currently anticipated. The scenario assumes that both biofuel deployment levels and GHG reduction potential stay at the level attained in 2020 through to This leaves a significant shortfall in GHG reductions; this gap is closed by increasing the penetration of FEVs to 13% of new vehicles in 2020, 62% by 2030 and virtually all new vehicle sales in This represents a likely upper case for FEV deployment. Low electricity decarbonisation scenario: This scenario investigates the risk that European policy to reduce the GHG emissions from the electricity sector is partially unsuccessful, achieving a 65% reduction on 1990 levels rather than the planned 93% reduction. As a result, FEVs will achieve less GHG emission savings than in the core scenario. The results are summarised in Figure 25: The blue line shows the total abatement achieved in the passenger car sector under the core GHG reduction scenario. Core GHG reduction scenario (solid green line): Under this scenario, FEVs could contribute to GHG emission reduction of approximately 889 MtCO 2 e across the AEA 46

51 period 2010 to This equates to around one quarter of all GHG emissions reduction from the passenger car sector, or around 9% of the total abatement from the transport sector as a whole. The resultant savings in monetised external costs provided by FEVs is estimated to be 7.4 billion per annum by Low biofuel performance scenario (upper dashed line): The significant increase in FEV deployment compared with the core scenario (114% between 2010 and 2050) means that they account for 90% of the total savings resulting from passenger cars between 2010 and 2050, and nearly one third of the savings achieved from the entire transport sector. Low electricity decarbonisation scenario (lower dashed line): Total GHG emission savings from FEVs in the period 2010 to 2050 are approximately one third that of the savings achieved in the core GHG reduction scenario. In this scenario, FEVs account for around 5% of total abatement in the transport sector in Figure 25: Abatement potential of FEVs under three scenarios (compared with business-as-usual) Total abatement from cars to meet 60% reduction target Abatement from FEVs: low biofuel performance scenario Abatement from FEVs: core GHG reduction scenario Abatement from FEVs: low electricity decarbonisation scenario Comparing our results with other market deployment projections, our central core GHG reduction scenario appears to be a conservative estimate for the deployment of FEVs, and it seems likely that FEVs will provide over a quarter of the total abatement from passenger cars in the period between 2020 and This equates to around 9% or more of the abatement needed from the transport sector as a whole to achieve 2050 targets. AEA 47