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America's Electric Vehicle Future, Part 1: 65%-75% Of Light-Duty Vehicle Sales By 2050

Rapid battery cost declines, rising commitment from major automakers, strong policy support from state and local governments, and low operational costs (including discounted charging tariffs from utilities) have put electric vehicles (EVs) on track to pass gasoline-powered vehicles. Indeed, U.S. EV sales have grown an average of 32% annually from 2012-2016 and 45% over the year ending June 2017.

Considering these advantages, automakers and investors face several big questions: How fast can we expect EVs to increase market share in the United States?  What penetration will they achieve, by when?  How will these outcomes be affected by external factors like oil prices and government policy support?

Energy Innovation has released an updated version of the Energy Policy Simulator (EPS) computer model.  This tool can assess the impacts of dozens of policies on emissions, cost/savings, early deaths from particulate pollution, and now, the composition of the U.S. vehicle fleet. By analyzing multiple scenarios in a new research note, the EPS forecasts EVs will make up 65% of new light-duty vehicle sales by 2050 , and EV sales could reach up to 75% by 2050 in the event of high oil prices or strong technology cost declines.

U.S. electric vehicle deployment forecast to 2050

A Powerful Tool For Estimating Electric Vehicles In The Future U.S. Vehicle Fleet

The EPS can estimate the market share of EVs in the U.S., both in the business-as-usual (BAU) case and in scenarios with a variety of relevant policies (such as a carbon tax, vehicle fuel economy standards, EV subsidies, an EV sales mandate, a low-carbon fuel standard, and more).  Figure 1 compares the EPS’s projections of EV sales as a share of sales of all U.S. light-duty vehicles (LDVs; meaning cars and similar vehicles) to projections from the U.S. Energy Information Administration’s Annual Energy Outlook 2017(the “no Clean Power Plan” side case) and Bloomberg New Energy Finance’s Electric Vehicle Outlook 2017.

BNEF projects a slow increase through 2021, faster through 2025, and then a dramatic acceleration through 2035, by which point, well over half of all new LDVs sold will be EVs.  The EIA projects a very slow increase through 2026 and that the share will remain essentially flat after that point.  Our EPS projection is closer to that of BNEF.  The EPS projects a slower start than BNEF, but with similarly rapid growth in EV market share after 2026.  By 2050, EVs are projected to make up 65% of new U.S. LDV sales.

High Potential Energy, Emissions Savings Put Electric Vehicles On Track For Growth

The transportation sector is a major energy consumer, accounting for roughly 29% of primary energy use in the United States.  80% of this energy is for on-road vehicles, which are predominantly powered by petroleum gasoline or diesel.  Unfortunately, petroleum-powered vehicles have a number of downsides.  They are inefficient: a typical gasoline car converts only 17%-21% of the chemical energy in the fuel into useful work.  Petroleum fuels are expensive per unit energy compared to other fuels, and they would be even more so if the U.S. government did not subsidize oil production by more than $4 billion per year.  They emit carbon dioxide (CO2), causing global warming.  And vehicle emissions are the biggest contributor to particulate pollution: tiny particles that lodge in people’s lungs and kill 200,000 Americans each year.

Given their host of problems, petroleum-powered vehicles are ripe to be reformed, by making them far cleaner and more efficient, and ultimately, displaced.  However, petroleum-powered vehicles are a mature technology, benefitting from decades of refinement and economies of scale that have driven down costs.  It is not enough for a new technology to have the potential to be cheaper and better-performing than petroleum-powered vehicles.  To compete effectively, electric vehicle technology must climb its own learning curve, driving down costs and improving performance, to the point where it is more attractive than petroleum-powered vehicles.

Battery electric vehicles (EVs) are on track to achieve this break-out.  They already enjoy a number of advantages:

  • EVs are three times as efficient as gasoline vehicles: 59%-62% of the electrical energy is converted into power to turn the wheels. Their efficiency means that they cost little to operate: a typical electric vehicle can travel 43 miles for $1 worth of electricity .  This is about one fourth of the fuel cost of typical 2016 gasoline-powered cars and SUVs.
  • EVs have far fewer moving parts than vehicles with internal combustion engines, so they are more reliable and require less maintenance.
  • EVs can accelerate faster than gasoline cars, for a variety of engineering reasons.
  • The electricity for EVs can be generated using zero-emissions technologies, such as solar PV, wind, hydro, or nuclear power, saving lives and reducing climate change impacts.

Future Factors Will Affect Electric Vehicle Adoption

Given these advantages, why don’t most new car sales today consist of EVs?  One reason is price: though EV costs are falling rapidly, and battery costs could decline to $73 per kilowatt-hour in 2030 according to BNEF, it is still cheaper today to purchase a fossil fuel-powered car.

Forecast electric vehicle battery cost projections to 2030

Additionally, not all regions have abundant EV charging infrastructure, and some people (such as people without an off-street parking space) may have difficulty charging their vehicles at home.  Nonetheless, strong demand exists for EVs among some consumer segments.  Policymakers, desirous of the public health and environmental benefits of EVs, are using a variety of policies to help promote them.  Examples include subsidies for EV buyers, access to restricted travel lanes on highways, and public charging infrastructure deployment.

Part two of this analysis examines the effect that factors like EV purchase price, petroleum prices, and fuel economy standards will have upon EV adoption, as well as how EV adoption will increase total U.S. electricity demand.

By Jeffrey Rissman, Energy Innovation’s Head of Modeling & Energy Policy Expert

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