The Electrification CoalitionRevolutionizing Transportation and Achieving Energy Security
EIA Slide From December 1998Department of Energy was concerned that oil prices, which had fallen.sharply from historic lev...
Economist Cover, March 1999Conventional wisdom was that oil was plentiful and likely to remain cheap.for the foreseeable f...
Global Oil Market Dynamics—Demand   The United States is the world’s largest oil consumer, accounting for one-   fifth of ...
Global Oil Market Dynamics—Demand                           Rising demand for mobility in emerging markets has placed subs...
Global Oil Market Dynamics—Demand                    Oil consumption within the world’s most developed economies has peake...
Global Oil Market Dynamics—Supply                    Conventional oil production outside of OPEC is reaching a plateau.   ...
Global Oil Market Dynamics—Supply    Oil prices are set in an open market, but that does not mean there is a free    marke...
Oil Supply Cost Curve    Resources in the Middle East and North Africa will be the least expensive to    produce. However,...
Oil Supply Cost Curve    Budget requirements have ballooned in recent years in OPEC nations and    Russia, essentially inc...
U.S. Oil Dependence Petroleum fuels account for approximately 40 percent of U.S. primary energy demand, more than any othe...
U.S. Oil Dependence: ImportsU.S. oil supplies are acquired from a variety of sources, including domesticcrude oil and natu...
U.S. Oil Dependence: Macroeconomic Costs                                    Since January 2007, the United States has run ...
U.S. Oil Dependence: Price Volatility     The volatility of liquid fuels is the key threat from an economic security     p...
U.S. Oil Dependence: Household Impact     The average U.S. household spent a record $4,000 on gasoline in 2011.     Since ...
U.S. Macroeconomic Costs: U.S. Oil Intensity               and Spending on Oil               High oil prices experienced t...
U.S. Oil Dependence: Total Economic Costs               The economic costs of U.S. oil dependence reached nearly $500 bill...
Electrification OverviewElectrification of transportation is the best solution for reducing U.S. oildependence, insulating...
Electrification Overview: ChallengesWhile electrification has promise as an energy strategy, it can only succeedif GEVs ar...
Electrification Overview: Power Sector              A 2007 DOE study found that existing offpeak electrical generating cap...
Electrification Overview: Battery Costs     We are nearing the end of the first phase of battery cost reductions related  ...
Charging Infrastructure: Getting Ready forPlug-In VehiclesWhere vehicles spend their timeSource: SAE                      ...
Charging Infrastructure: Business Model Investment in widespread public (shared) charging infrastructure is a risky propos...
TEPCO Fast Charge ExperimentInfrastructure Is Critical for EV Adoption, Even if it is Not UsedExtensively                 ...
Electrification Overview: Vehicle Supply    Automakers worldwide are developing plug-in hybrid and electric vehicles.    B...
Electrification Overview: Vehicle Demand  As the market for the current generation of PEVs enters its second full year  of...
U.S. Hybrid and Plug-In Vehicle Sales                400                                                                  ...
The Electrification CoalitionRevolutionizing Transportation and Achieving Energy Security› Online www.electrificationcoali...
Global Oil Market Dynamics—Reserves Proved conventional oil reserves have generally declined in most developed economies o...
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Electrification Coalition BSAS Presentation

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Ron Minsk's presentation at the April 24th, 2012 Boston Security Analysts Society session on the electrification of transportation

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Electrification Coalition BSAS Presentation

  1. 1. The Electrification CoalitionRevolutionizing Transportation and Achieving Energy Security
  2. 2. EIA Slide From December 1998Department of Energy was concerned that oil prices, which had fallen.sharply from historic levels, would not recover for years 1
  3. 3. Economist Cover, March 1999Conventional wisdom was that oil was plentiful and likely to remain cheap.for the foreseeable future “ . . . a normal market price might now be in the $5-10 range.” “$10 might actually be too optimistic. We may be heading for $5.” 2
  4. 4. Global Oil Market Dynamics—Demand The United States is the world’s largest oil consumer, accounting for one- fifth of global oil demand. The majority—70 percent—is used in transport. TOP WORLD OIL CONSUMERS, 2010 › At 19.1 million barrels per day, the U.S. was U.S. Transport U.S. the world’s largest China consumer of petroleum Japan in 2010, with oil India accounting for 37 Russia percent of primary Saudi Arabia energy demand. Brazil › The U.S. transport Germany sector alone consumes South Korea more oil than any Canada national economy in Mexico the world—13.0 mbd. Iran 0 5 10 15 20 Million Barrels per DaySource: BP, plc., Statistical Review of World Energy 2011 3
  5. 5. Global Oil Market Dynamics—Demand Rising demand for mobility in emerging markets has placed substantial strain on oil suppliers in recent years. This trend is expected to accelerate. › Chinese oil demand increased by 90 percent › Passenger vehicle sales and vehicle stock are 2000-2010. The increase was equivalent to soaring in emerging markets. Non-OECD stock adding another Japan to the market. is on pace to surpass the OECD around 2030. CHINESE LIQUID FUEL DEMAND (HISTORICAL) LIGHT-DUTY VEHICLE SALES AND STOCK 10 120 1200Million barrels per Day Others Fuel oil Sales (Lhs) Stock (Rhs) 100 1000 8 Middle distillates Light distillates Million Vehicles Million Vehicles 80 800 6 60 600 4 40 400 20 200 2 0 0 2010 2020 2030 2035 2010 2020 2030 2035 0 1990 1995 2000 2005 2010 OECD Non-OECD 4 Source: BP, plc. Source: IEA, World Energy Outlook 2011
  6. 6. Global Oil Market Dynamics—Demand Oil consumption within the world’s most developed economies has peaked. Emerging markets account for 100 percent of demand growth going forward. WORLD OIL CONSUMPTION (HISTORICAL AND FORECAST) › World oil demand is set to grow by about 22 100 percent over the next 20 years. 80 › One hundred percentMillion Barrels per Day of that growth is in 60 China, India, and other emerging economies. 40 And 97 percent of it is in transportation. 20 0 1980 2010 2015 2020 2025 2030 2035 OECD China and India Other Non-OECD Other Source: International Energy Agency, World Energy Outlook 2011 5
  7. 7. Global Oil Market Dynamics—Supply Conventional oil production outside of OPEC is reaching a plateau. Increases in regions like North America are being offset elsewhere. › Going forward, most WORLD LIQUID FUEL PRODUCTION (HISTORICAL AND FORECAST) mainstream scenarios 120 60% rely on increases in OPEC supplies to meet 100 50% rising demand. › Two key questionsMillion Barrels per Day 80 40% illustrate the downside risk to growth in future 60 30% liquid supplies: 40 20% 1. Who will have access to low-cost conventional reserves? 20 10% 2. What will reserves 0 0% replacement cost for 1980 2010 2015 2020 2025 2030 2035 IOCs? Source: IEA OPEC Non-OPEC OPEC Share 6
  8. 8. Global Oil Market Dynamics—Supply Oil prices are set in an open market, but that does not mean there is a free market for oil supply. TOP OIL AND GAS FIRMS BY PROVED RESERVES (2007) › More than 90 percent of global proved oil reserves NIOC are held by national oil Saudi Aramco companies (NOCs) that Gazprom are either partially or fully INOC controlled by QP governments. Adnoc PDVSA › While a handful of NOCs KPC operate like private firms, NNPC many function essentially as a branch of the central Sonatrach government, depositing LNOC CNPC oil revenues in the treasury from which they Petronas are diverted to social ExxonMobil programs instead of being 0 50 100 150 200 250 300 reinvested in new projects. Billion barrels oil equivalent 7Source: International Energy Agency, World Energy Outlook 2008
  9. 9. Oil Supply Cost Curve Resources in the Middle East and North Africa will be the least expensive to produce. However, they may also be the least accessible to IOCs. LONG TERM OIL SUPPLY COST CURVE Production Costs (Real $2008 per Barrel) COAL TO LIQUID ARCTIC OIL SHALES CO2 - EOR GAS TO LIQUID DEEPWATER HEAVY OIL & EOR BITUMEN OTHER CONV. MIDDLE EAST OIL PRODUCED NORTH AFRICA Resources (billions of barrels) 8Source: International Energy Agency, World Energy Outlook 2008
  10. 10. Oil Supply Cost Curve Budget requirements have ballooned in recent years in OPEC nations and Russia, essentially incentivizing higher oil prices for much of global supply. BREAKEVEN COSTS FOR SELECTED PRODUCERS (MID-2011) 120 VENEZUELA Production Costs (Dollars per Barrel) Budget 100 Breakeven ECUADOR NIGERIA RUSSIA ANGOLA IRAN ALGERIA IRAQ SAUDI ARABIA LIBYA 80 UAE 60 KUWAIT QUATAR 40 Production 20 Breakeven 0 0 5 10 15 20 25 30 35 40 45 50 Oil Production (million barrels per day) 9Source: International Energy Agency, World Energy Outlook 2011
  11. 11. U.S. Oil Dependence Petroleum fuels account for approximately 40 percent of U.S. primary energy demand, more than any other fuel. › Approximately 70 percent of U.S. oil consumption occurs in the transportation sector, with 40 percent in light-duty vehicles. › Transportation is 94 percent reliant on oil-based fuel for energy, with no scaled substitutes.U.S. PRIMARY ENERGY DEMAND, 2009 PETROLEUM FUEL DEMAND BY SECTOR, 2009 20% Autos 39% Oil 24% Light-trucks 27% Natural Gas 28% Other Transport 23% Coal 22% Industrial 9% Nuclear Energy 2% Commercial 3% Hydro electric 4% Residential 1% Electric Power 10Source: BP, plc., Statistical Review of World Energy 2010
  12. 12. U.S. Oil Dependence: ImportsU.S. oil supplies are acquired from a variety of sources, including domesticcrude oil and natural gas liquids, biofuels, refinery gains, and imports. U.S. OIL CONSUMPTION (HISTORICAL AND FORECAST) › Net imports, once a small fraction of 25 U.S. supplies, still meet half of total 20 U.S. liquid fuel demand.Million Barrels per Day 15 › Amid rising domestic liquids 10 production and flat demand, net import volumes have 5 declined substantially since - 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 their peak in 2005. Net Imports Adjustments and Domestic Biofuels Processing Gain and Stock Changes Domestic NGLs Domestic Crude Source: DOE, EIA, AER 2010 11
  13. 13. U.S. Oil Dependence: Macroeconomic Costs Since January 2007, the United States has run an aggregate $1.4 trillion deficit in crude and petroleum product trade, exporting vast capital abroad. › The portion of the U.S. TRADE DEFICIT IN PETROLEUM AND OTHER GOODS AND SERVICES trade deficit driven by 80 100% petroleum imports Petroleum Share of Total Trade Deficit 70 90% generally exceeds theMonthly Trade Deficit ($billions) 80% imbalance we run in 60 70% other goods and 50 60% services with trade partners like China, 40 50% NAFTA, and the EU. 40% 30 30% › A high trade deficit 20 exerts downward 20% pressure on the dollar, 10 10% which in turn may be 0 0% helping to prop up oil 2000 2002 2004 2006 2008 2010 Deficit in Petroleum Deficit in Goods and Services prices, resulting in a Petroleum Share of Total Trade Deficit vicious circle. Source: U.S. Census Bureau, Office of Foreign Trade Statistics 12
  14. 14. U.S. Oil Dependence: Price Volatility The volatility of liquid fuels is the key threat from an economic security perspective. This volatility is driven by events beyond our control. › Oil price volatility is FUEL VOLATILITY INDEX (HISTORICAL) driven by events in the 5.0 global oil market, and oil Crude Oil - WTI is priced at the margin— Diesel 4.0 meaning that even if the Gasoline U.S. produces more Ethanol (Nebraska Rack) domestically, it cannot 3.0 Electricity avoid volatility. Index: Jan 2000 = 1 › All liquid fuels are affected, including 2.0 biofuels. › The solution has to be to 1.0 transition toward non- liquid fuels where economically rational. - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 13Source: DOE, EIA
  15. 15. U.S. Oil Dependence: Household Impact The average U.S. household spent a record $4,000 on gasoline in 2011. Since 2000, the increase in spending has offset numerous stimulus efforts. AVG. HOUSEHOLD SPENDING ON GASOLINE (2000-2011) › Household spending on gasoline increased by 3.75 5,000 $2,008 dollars between Gas Spending/Household 2001 and 2008. 3.00 Gasoline Price (Lhs) 4,000 › Income tax cuts over the same period increased Dollars (Nominal) household income by 2.25 3,000 $1,900. Thus, rising fuel $/gal prices fully offset the benefit 1.50 Increased gas 2,000 of tax cuts. › We saw the same effect in spending 0.75 1,000 2011 with the payroll tax cut, which increased Americans income by $110 billion while 0.00 - spending on gasoline 2000 01 02 03 04 05 06 07 08 09 10 2011 increased by $104 billion. 14Source: DOE, EIA, Annual Energy Review 2010; ORNL, Transportation Energy Data Book; SAFE Analysis
  16. 16. U.S. Macroeconomic Costs: U.S. Oil Intensity and Spending on Oil High oil prices experienced throughout 2011 contributed to weak consumer spending and slow economic growth in the United States and elsewhere. Oil Spending, Share › At more than 6 percent of 1.5 of GDP 10% GDP, consumer spending Barrels of Oil per on petroleum fuels Consumer Expenditures on Pet. Fuels, Share of $1,000 GDP reached levels typically 1.2 8% Recessionary Period associated with recession in 2011.Barrels of Oil per $1,000 GDP 0.9 6% › Increased spending on gasoline by consumers— particularly in Q1 and GDP 0.6 4% Q2—crowded out other spending. 0.3 2% › Price volatility 2011 Estimate contributes to an 0.0 0% uncertain investment 1970 1975 1980 1985 1990 1995 2000 2005 2010 climate for businesses. Source: EIA, AER 2010; Department of Commerce, Bureau of Economic Analysis; SAFE Calculations 15
  17. 17. U.S. Oil Dependence: Total Economic Costs The economic costs of U.S. oil dependence reached nearly $500 billion in 2008. Since 1970, total economic damage exceeds $5 trillion (real dollars). › In addition to staggering wealth transfers, high and volatile oil prices generate significant uncertainty for households and businesses. The result is lost economic opportunity. ECONOMIC COSTS OF U.S. OIL DEPENDENCE 600 Wealth Transfer Transfer Dislocation Losses Losses Loss of Potential GDP 500Billions ($2008) 400 300 200 100 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 16 Source: DOE, EERE; ORNL
  18. 18. Electrification OverviewElectrification of transportation is the best solution for reducing U.S. oildependence, insulating consumers and businesses from oil price volatility.› Electricity is generated from a diverse portfolio of domestic fuels.› The power sector has substantial spare capacity.› Electricity prices are stable.› The network of infrastructure already exists.U.S. ELECTRICITY GENERATION BY FUEL, 2010 U.S. ELECTRICITY DEMAND BY SECTOR, 2010 49% COAL 38% RESIDENTIAL 22% NUCLEAR 37% COMMERCIAL/OTHER 17% NATURAL GAS 24% INDUSTRIAL 11% RENEWABLES 1% TRANSPORTATION 1% PETROLEUM Source: EIA, AEO 2010 17
  19. 19. Electrification Overview: ChallengesWhile electrification has promise as an energy strategy, it can only succeedif GEVs are attractive to the mass market and can integrate into the grid.› Batteries and Vehicles With the advent of lithium-ion battery technology, the largest obstacle to widespread consumer adoption of these vehicles will be cost, though performance and raw material supply chains are also important to consider. Need innovative business models, manufacturing scale in gen-1/2, and R&D for Gen-3.› Charging Infrastructure A profitable business model for public charging points has not been reliably demonstrated, and we do not yet know how much public charging will be needed.› Electric Power Sector Interface While “smart” charging will make electric vehicles an asset to the grid, “dumb” charging will make them a liability.› Consumer Acceptance GEVs represent a significant shift in technology. In order to change mainstream consumer attitudes, GEVs must offer a compelling alternative to conventional IC engines on either cost or performance grounds. 18
  20. 20. Electrification Overview: Power Sector A 2007 DOE study found that existing offpeak electrical generating capacity could power 158 million vehicles for up to 33 miles of driving per day. › PJM Interconnect: The 61 gWh of excess › Petroleum prices have exhibited significant available capacity in a typical summer week volatility for the past several years. In contrast, could charge 62 million Nissan Leafs each night. retail electricity prices have been stable. PJM CAPACITY AND LOAD (7-1, 7-2, 2009) CHANGE IN RETAIL ENERGY PRICES (2000-PRESENT) 180 140 5.0 Crude Oil - WTI 160 Diesel Wholesale Real Time Price 120 Installed Capacity Gasoline 140 4.0 Available Capacity Load Ethanol (Nebraska Rack) 100 120 $ Per Megawatt Hour Electricity 80 3.0 100Gigawatts Index: Jan 2000 = 1 80 60 2.0 60 40 40 1.0 20 20 0 0 - 12:00 6:00 12:00 6:00 12:00 6:00 12:00 6:00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 AM AM PM PM AM AM PM PM 19 Source: PJM Source: DOE, EIA
  21. 21. Electrification Overview: Battery Costs We are nearing the end of the first phase of battery cost reductions related to today’s EVs and PHEVs. Scale and volume production are key today. › The cost of the battery contributes as much as one-third of the cost of light-duty electric vehicles. The share is higher in truck applications. LARGE FORMAT LITHIUM ION BATTERY COST ($/KWH) $1,200 $1,000 $/kWh $800 $600 $400 $200 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Stage 1 Stage 2 Stage 3 - Limited Capacity - Over-capacity - Sustainable industrial volumes - Limited Suppliers - Slow Volume Ramp-up - Consolidated Competitors - Pilot Volumes - New Market Entrants - Operational Improvements - Technical Advances - Continued Technical Advances 20Source: EC Roadmap; PRTM Analysis
  22. 22. Charging Infrastructure: Getting Ready forPlug-In VehiclesWhere vehicles spend their timeSource: SAE 21
  23. 23. Charging Infrastructure: Business Model Investment in widespread public (shared) charging infrastructure is a risky proposition. The appropriate strategy and business models are unknown. PAYBACK PERIOD FOR A SINGLE PUBLIC CHARGER IN A ‘BUSINESS AS USUAL’ CASESource: EC Roadmap; PRTM Analysis 22
  24. 24. TEPCO Fast Charge ExperimentInfrastructure Is Critical for EV Adoption, Even if it is Not UsedExtensively Source: TEPCO R&D Center Study 2008
  25. 25. Electrification Overview: Vehicle Supply Automakers worldwide are developing plug-in hybrid and electric vehicles. By 2013, more than 30 models could be available to consumers. › Global automakers are rolling out a › Production volumes are expected to scale up substantial number of PEV option in the as supply chains become mature and coming years. consumer demand becomes predictable. EXPECTED PEV LAUNCHES BY MAJOR GLOBAL OEMs ANNOUNCED PRODUCTION CAPACITY OF GLOBAL OEMs 900,000 800,000 PHEV PHEV 700,000 6 EV 600,000 EV 500,000 400,000 1 300,000 8 2 200,000 5 1 3 100,000 1 0 2010 2011 2012 2013 2011 2012 2013 24Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance
  26. 26. Electrification Overview: Vehicle Demand As the market for the current generation of PEVs enters its second full year of sales, there have been some encouraging signs amid obvious challenges.› There are currently 23,698 GM Volt › U.S. PEV sales were 17,813 in 2011. This total customers on waitlists throughout the exceeded the number of traditional hybrids United States. sold in 2000—HEVs first full sales year.GM VOLT WAITLIST BY STATE—TOP 20 U.S. MARKETS U.S. SALES OF PEVs: 20114,500 12,0004,000 10,0003,5003,000 8,0002,500 6,0002,0001,500 4,0001,000 2,000 500 0 0 PA WA VA AZ FL OH GA TX NJ CO CA NY MI IL NC IN MD MA MN MO Chevy Volt Nissan LEAF Smart ED Mitsubishi i 25
  27. 27. U.S. Hybrid and Plug-In Vehicle Sales 400 Mercedes S400 Mercedes ML450 Mazda Tribute Honda CR-Z 350 Ford Lincoln MKZ BMW X6 BMW ActiveHybrid 7 300 Sierra/Silverado Lexus HS 250h Mercury Milan Ford Fusion 250 Dodge DurangoThousand HEVs Chrysler Aspen Cadillac Escalade 200 Chevy Malibu GMC Yukon Chevy Tahoe 150 Saturn Aura Lexus LS600hL Saturn Vue Nissan Altima 100 Toyota Camry Lexus GS 450h Mercury Mariner 50 Toyota Highlander Lexus RX400h Honda Accord Ford Escape - Honda Civic 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Toyota Prius (2010 for (2011 for Honda Insight 26 PEVs) PEVs) PEVs
  28. 28. The Electrification CoalitionRevolutionizing Transportation and Achieving Energy Security› Online www.electrificationcoalition.org› Download Reports www.electrificationcoalition.org/electrification-roadmap.php› Office Contact 1111 19th Street, NW Suite 406 Washington, DC 20036 202.461.2360
  29. 29. Global Oil Market Dynamics—Reserves Proved conventional oil reserves have generally declined in most developed economies over the past several decades. OPEC reserves have grown. GLOBAL OIL RESERVES BY SOURCE › OPEC’s share of global 1,600 100% oil output (40 percent) sharply lags its share of 1,400 reserves (80 percent). 80% 1,200 › This might make sense if OPEC resources were Billion Barrels 1,000 60% highest cost, but in fact 800 the opposite is true. 600 40% › Geopolitical issues, 400 20% cartel politics, and 200 weak investment regimes are key 0 0% 1980 1984 1988 1992 1996 2000 2004 2008 challenges. OPEC Other non-OPEC OECD OPEC Share of Reserves OPEC Share of ProductionSource: BP, plc 28

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