23 Jun 2016

Is The Future Electric?

Earlier this year I was invited to a seminar on changing technologies in the electricity sector (thanks to Forsyth Barr for organising) which focused on solar power, battery technologies and electric vehicles (or EVs). I’ll touch on solar and battery but to me the most interesting technology was EVs.

Solar installation is increasing in New Zealand though not at the rate seen in many other countries. This is due mainly to the fact that there are no subsidies in NZ to install solar, so economically solar investment has to stand on its own two feet. Does it do this? Generally speaking the answer appears to be no, though the cost differential is definitely getting smaller. For some larger commercial installations it makes more sense. For example, Silvia Park recently installed the largest NZ solar system at 3,000m2 and aside from scale, has the advantage over domestic installation in that peak demand tends to coincide with peak generation (i.e. highest air-conditioning load needed on sunny days).

Solar uptake appears to be currently driven more by its green credentials than pure financials. I can understand this in many countries that are still using predominantly fossil fuels for a large part of their electricity generation (e.g. Australia) but here in NZ our electricity is 80% renewable and that figure is likely to grow. I wonder how much of the NZ population is truly aware of how green our generation already is?

One potentially interesting side-effect of large solar uptake is the “Death Spiral” theory. As more people install solar but stay connected to the grid they buy less electricity from it, so they pay less transmission charges to maintain the grid. This means those remaining have to pay more, so more people are incentivised to install solar and the problem gets worse. This topic is on the Electricity Authority’s radar and it could be that future power bills will include a separate charge for transmission.

Battery technology is getting a lot of press at the moment with Tesla launching a home pack (and their local tie up with Vector). Battery technology has a natural fit alongside solar (storing power over the day to use at peak time, while watching Top Gear re-runs etc). Again, current costings don’t seem to stack up, but costs are falling quickly. It may be that if EVs take off, and as batteries age and are replaced, these are recycled into home use lowering the initial cost.

So onto Electric Vehicles (EVs). Firstly, let me state quite clearly upfront that I am a petrol head. Not in the Aussie V8 mould but I grew up watching Formula 1 (when there used to be overtaking) and enjoy nothing more than driving a fast car. So please bear this in mind as I go on to discuss electric vehicles in more detail.

As part of the seminar, Mighty River Power (who are leading the way in adopting EVs) helped in arranging an EV test drive session. Now, one of the interesting aspects of electric vehicles is the different types that are available. We have seen on our roads hybrids (Prius, Lexus etc) for quite some time. These use electric motors in conjunction with an internal combustion engine to power car. The power comes from fossil fuel with the battery used to store and recycle electricity from braking etc. This gives some fuel savings but it is not a game changer.

What we drove were plug in EVs. These crucially can be charged at home during the night or increasingly at charging stops around the country if the renewable highway plan comes to fruition. Using renewable electricity to charge is a fraction of the cost of fossil fuel (e.g. Nissan leaf estimated at ~$4 per 100km compared to say petrol at around $16). So onto the interesting bit of what we drove and what they were like.

Firstly, they were all surprisingly enjoyable to drive. Having an electric motor means you get 100% of torque as soon as you touch the throttle, so even in the lower powered cars they shoot away from traffic lights, but in an eerily silent way!   

 

Nissan Leaf

Probably the simplest of the cars in that it only has an electric motor, so if the battery runs out you are walking! Though with a daily range of ~175km it should do all but the most ardent of commuters. New, these are NZ$40k but with second hand models available for <$20k, by far the cheapest model.

BMW i3

To get around the range issue of the Leaf this has a small petrol engine that can charge the battery (but not power the car) giving range >300km. This could be straight out of a back-to-the-future movie in looks but for me not that enjoyable to drive (which I thought was odd for a BMW)! Price NZ$83,500

Audi A3 e-tron

 Audi have taken a different route to BMW in that this looks and drives like a “normal” Audi. Indeed apart from the silent running and impressive torque you quickly forget you are in an EV. The combo of electric motor and petrol engine mean you have no range problems at all. Price NZ$75k.

Mitsubishi Outlander

Like the approach Audi have taken this drives and looks similar to a standard Outlander. To me it felt like the petrol engine needed to kick in too much and not enough electric power, but would still be a greener way to move the kids and boat around! Price NZ$60k.

Tesla

Last but not least we got to drive a Tesla. After driving the others this was a significant step up in power, the ability of this to get from 0-100km will scare most supercars (see video of insane mode). The most impressive thing about this car is just how different it feels, for instance it is controlled by giant iPad rather than switches and knobs. Also no engine means huge luggage space in both front and back. Price A$120-180k depending on model.

 

Are these going to be a game changer in NZ? In short I think yes. NZ is perfectly positioned for electric vehicles – renewable generation sources (hydro, geothermal and wind) and the average daily drive in NZ is 30-38km. In Norway sales of electric vehicles have sky rocketed such that 1in 5 cars sold in 2015 is an EV. This has admittedly been driven by government help – no road tax, no VAT (our GST), free parking and use of bus lanes (how good would that be in Auckland!). Norway is an interesting test case for NZ as it too is one of the few places in the world that has predominantly renewable energy generation making it ideal for electric vehicles. 

 

Would I buy an EV then? Currently buying a second hand Nissan Leaf is a pretty compelling option, with very low running costs and never having to go the petrol station again. If you were in the market for an Audi A3 the e-tron would be a no brainer, if it were not for the significant cost premium over a standard model (though you can imagine this coming down over time). If money were no objective the Tesla is a game changer. Even for a petrol head this is an amazing car and it just seems perfect for NZ, clean green and can beat a Ferrari off the traffic lights!

As we currently stand then, the Leaf would be a very credible around town car, but you may need another to take the family away at the weekend. The others are just too high a cost premium over the standard models to make financial sense. Though, the premiums should come down and choice improve over time.

Investment wise this is a longer term trend to watch as, if our government follows Norway’s approach, then EVs could be a regular sight on NZ roads resulting in lower (imported) fossil fuel use and boosting demand for NZ’s clean electricity – a win-win in my book. We will just have to get used to silent cars when crossing the road!