by futurist Richard Worzel, C.F.A.
Suppose that there were no cars today, and we were just about to start building them. Also suppose that both Internal Combustion Engine vehicles (“ICE”) and electric vehicles (“EV”) were both where they are today in terms of development. If you had the power to decide which kind of vehicle our industrial base would support over the next 20-40 years, but could only pick one, which one would you choose?
This is a thought experiment: it can’t really happen, but can reveal some interesting insights along the way. Einstein used thought experiments to come up with his theory of relativity, for instance.
So, ignoring all the vehicles already on the road, which would prevail: EVs or ICEs? Or is there another candidate out there that would be even better? Both have advantages, but I suspect that EVs would prevail – which may provide interesting insights into the future of cars, energy, and climate change. Let’s look at comparisons between the two kinds of vehicles, then consider if there are other alternatives.
ICE vs EV
The advantages of ICE are:
- Gasoline is perhaps the most compact, energy-dense, highly portable energy source we have for transportation.
- There is an existing distribution system for petroleum fuels. You can buy gas almost anywhere there are roads.
- ICE vehicles have a distinctly longer range than EVs. Indeed, “range anxiety” is one of the main reasons why people don’t want to buy EVs.
- Fueling ICEs is faster than recharging EVs. For long trips, this is deemed to be the second most important barrier – people don’t want to have to wait long periods for their car batteries to recharge.
- EVs are more expensive for comparably-sized vehicles.
The advantages of EVs are:
- EVs are far more efficient than ICEs, so the amount of energy used to travel a given distance is lower. Electric engines can be between 80-90% efficient in their use of energy, whereas ICEs are typically closer to 20-30%. Hence, for a given amount of energy, EVs start with a real advantage.
- The cost-per-mile for “fuel” (i.e., electricity) is substantially cheaper. This is an off-shoot of the point above.
One assessment estimated that over the first 100,000 miles driven, an EV owner would save about $8,000 (all costs are in US dollars unless otherwise specified), and saved themselves the time involved in about 400 trips to a gas station since EVs are typically charged at home.[1] - While building charging stations for EVs will be a significant undertaking, the “fuel”, being electricity, already has a distribution system. It would be as if we needed to build gas pumps, but the gasoline was already at the fueling station. Charging stations can, and are, being built at stores, office buildings, and parking lots, as well as at the home of EV owners. Before long it will be more convenient to recharge than it is to gas-up an ICE vehicle.
- Maintenance is both easier and substantially cheaper on the much simpler drive train of an EV. EV owners don’t need to change the engine the oil, transmission fluid, the spark plugs, or the muffler, for instance. There are just fewer parts, and especially fewer moving parts in an EV, so repairs are typically cheaper.
- ICE cars are widespread, numbering in excess of one billion. This means that there are few, if any, economies, of scale to be achieved in their manufacture whereas EVs are relatively in their infancy, and are attracting a lot of attention and investment. As a result, I would expect that EVs will continue to get better, cheaper, and more efficient for decades to come. ICEs will get better, too, but don’t have the same upside, in my opinion.
- Meanwhile, EVs are relatively new to the consumer market, so they are scarce and typically expensive. Given the relative simplicity of EVs, as mentioned above, prices will come down as more models become available, and more assembly lines are devoted to producing them until they are cheaper to buy than ICE vehicles.
- And battery technology is improving steadily and rapidly, which is gradually alleviating concerns about both range, and recharging times. Indeed, most EV owners frequently say that these are no longer important issues to them today, that both range and recharging times are good enough that they don’t miss the more expensive maintenance of ICE cars.
- Between 2007 and 2018, the production cost of lithium-ion batteries fell from $1,000/kWh to less than $300/kWh, and based on economies of scale, you would expect that price to keep falling, especially with all the effort and money being devoted to the search for better power storage technologies.[2]
The Major Risk for EVs
Meanwhile, both EVs and ICEs have major, external, disadvantages.
Let’s look at the big one for EVs first: scarcity of some of the critical minerals necessary to make them. This makes sense for the simple reason that if the manufacture of EVs is going to ramp up rapidly, it will require a much more robust supply chain than is in place today. And this applies to two materials in particular: lithium and cobalt.
At the moment, EVs typically run on lithium-ion batteries, and use cobalt for the battery terminals. Both minerals have seen significant run-ups in price over the recent past. Lithium jumped from $5,000/ton in 2016 to $19,500/ton in 2017, one year later.[3]
However, lithium is a common element, and there are new mines about to come on-stream to supply the demand, which should, over time, reduce the price pressure.
About 70% of the world’s cobalt comes from the Democratic Republic of Congo, which is not a safe supplier, and for which there are genuine humanitarian concerns about child and slave labor. Future supplies of cobalt will come mainly as a by-product of nickel and copper, which means production will depend on the production of these metals.
One thing is certain, though: if the demand and the money are there, companies will find a way to produce the supply. Moreover, McKinsey Global Institute estimates that supply constraints would only raise the price per vehicle by about $100 between now and 2025.[4]
So, while there is uncertainty about the supply and sources of critical materials, it seems likely that demand will provoke supply, and overcome these issues. It’s still something to watch, and something that could restrain the emergence of EVs, but I doubt it will be a substantial roadblock.
The Major Risk for ICEs
Now let’s look at the major issue for ICEs. Sooner or later, humanity will have to wean itself off fossil fuels. Climate change will eventually force politicians to accept the obvious, that we have to change the way we live, and that specifically includes transportation, which produces 14% of global greenhouse gas (“GHG”) emissions. This could take decades, based on all the conventional projections, such as the ones produced by the International Energy Agency. However, I think it will happen much sooner than that, perhaps within 10-20 years, based on political demands of people who become concerned about climate change.
Popular opinion is hard to anticipate, particularly as there are people on both sides of this issue who are emotional about it. That makes it difficult to make an objective assessment of how rapidly humanity will wean itself off of fossil fuels. My take is that the political pressure to reduce GHGs, and specifically carbon emissions, will rise consistently, and potentially very quickly. This could kill demand – and profitability – for ICE cars, even as it drives up demand for steadily-improving EVs. Indeed, there is some evidence that this is happening already.
An October, 2019 article online for “Automotive News” indicated that the resale value of luxury ICE cars, specifically those from German manufacturers, is flagging, and attributes this to the rise in popularity of EVs, specifically Tesla’s Model 3.[7]At the moment, EVs are more expensive than comparable ICE cars, so the Model 3 competes with less expensive BMWs and Mercedes, and it is these cars whose resale value is flagging. If resale values lag, then eventually the demand for new cars will also drop as it will become effectively more expensive to buy them as you’ll get less of a resale or trade-in value when you swap them for a new car.
If this is, indeed, an indication of things to come, then manufacturing ICE cars will become less profitable, just as EVs start to proliferate, come down in price, and improve in performance.
Based on this assessment, if there were no cars on the road today, and I had to choose between one or the other of ICE or EVs, I’d chose EVs. They represent the future, rather than the past.
Are There Other Alternatives?
I set up a two-car race: electric vehicles vs. internal combustion engines. Yet, there are other possibilities. Are any of them likely to win out, eventually if not immediately? Let’s consider the possibilities.
- Hydrogen – The appeal of using hydrogen as a fuel is that when you burn it, the exhaust is water vapor. As far as I can see, that’s the only advantage – and I’m not even convinced it’s a real advantage because water vapor is a more potent GHG than carbon dioxide. Of course, the water vapor emitted probably comes from nature in the first place, so it’s not like a fossil fuel, which releases GHGs into the atmosphere from sources laid down millions of years ago. Despite this, it changes the locationof the water vapor, typically from a rural setting (near a renewable energy source) to an urban setting. Consider what would it would be like sitting in a traffic jam in a city on a hot, muggy day if all of the cars were emitting hot water vapor. It would be like a sauna – and we don’t need another way of adding or retaining heat in cities. They are already heat islands.As well, it is presently very expensive (in energy terms) to produce hydrogen. It’s typically done by electrolysis, taking water and splitting it into hydrogen and oxygen. Storing it, especially in vehicles, is difficult as it has to be very highly compressed in thick, heavy bottles to provide enough energy to avoid range anxiety.But perhaps the major cost factor for hydrogen is the complete lack of a refueling infrastructure. Unlike EVs, H2 powered cars would require new production facilities to produce the hydrogen, special high-pressure trucks to deliver it, and specially-designed, high-pressure fuelling stations to provide it safely to the car’s fuel tank. All of this would be hideously expensive – and I suspect that EVs would still be more efficient and less polluting. Accordingly, I don’t see H2 vehicles being widely used, although they will certainly find some applications.
And, of course, there is also the real and PR danger of explosions. Remember the Hindenburg![8]
- Carbon-capture gasoline – The problem with petroleum fuels, as far as climate change is concerned, is the production of greenhouse gases from fossil sources – i.e., petroleum that has been trapped under the Earth for millions of years, and is now adding CO2 to the air.But suppose the CO2 is taken from the air to create the fuel? In theory, this would make the use of carbon-capture fuel carbon neutral. The problem, of course, is cost. A recent development by a Canadian company, Carbon Engineering, has reduced the cost of capturing CO2 from the atmosphere to as low as $94/tonne, compared to recent pricing of as much as $600/tonne. So, it is cheaper, but not yet cheap.Perhaps the principal argument in favor of carbon-capture fuels is that they could fuel existing ICEs with minor modifications, as well as using the existing refueling infrastructure. Indeed, you could argue that one way to bring the petroleum companies onside is to encourage them to get into carbon-capture-to-fuel, as they would be able to continue to do most of the things they do today – everything except explore for, and pump petroleum from, the Earth.
Perhaps the biggest advantage of carbon-capture fuels is the massive existing stock of ICE cars. Most of them will stay on the roads for years, potentially many years, and having a fuel that didn’t add new carbon to the atmosphere would be a real plus – but only if it were cost-effective.
If we’re lucky, we’ll be proactive about the switch to new, more efficient vehicles, finding better solutions and moving to them as quickly as possible. If we’re slow and stupid about it, we may find ourselves jolted by the necessity to abandon fossil fuels without having first found reasonable alternatives. This is where foresight becomes critical.
© Copyright, IF Research, January 2020.
[1]https://insideevs.com/news/317307/ev-vs-ice-maintenance-the-first-100000-miles/
[2]https://www.globalfleet.com/en/safety-environment/global/features/fact-or-fiction-shortage-lithium-and-cobalt-evs?t%5B0%5D=Electrification&t%5B1%5D=Lithium%20ion%20battery&t%5B2%5D=&curl=1
[5]https://www.futuresearch.com/2013/11/04/why-you-should-believe-in-climate-change-and-what-we-will-do-about-it-part-i/
[6]https://www.futuresearch.com/2019/05/28/the-decline-and-fall-of-the-oil-gas-industry/
[7]https://www.autonews.com/used-cars/luxury-residuals-fall-some-cite-tesla
[8]The Hindenburg airship used hydrogen to float. It exploded in May, 1937, killing 36 people, and effectively killed the use of airships as well.
