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The Tesla Revolution: Why Big Oil Has Lost the Energy War [Book Preview]
Posted on June 12, 2017 by Charles Morris
Everybody seems to be piling on the poor oil barons these days. Just as Tony Seba’s latest paper predicting the doom of the industry is making the rounds, a new book explains their predicament from an even more Tesla-centric perspective.
Above: A new book explores Tesla and its potential impact on Big Oil and the energy paradigm (Source: GreenBiz)
The Tesla Revolution: Why Big Oil Has Lost the Energy War is by Rembrandt Koppelaar, a Senior Researcher at the Swiss Institute for Integrated Economic Research, and Willem Middelkoop, founder of the Commodity Diversity Fund. It examines the disruptive combination of electric vehicles and renewable energy, both fields in which our favorite California company is dominant. It’s a scholarly volume, with plenty of facts and figures, as the following brief excerpts will show (via GreenBiz).
The transformation of the world’s energy and transport systems that is just beginning will be a highly complex and unpredictable global phenomenon. However, its broad outlines are summed up rather neatly in Tesla’s corporate mission, and Tesla is “one of the very few companies today who is at the core of this revolution.”
The authors see the upcoming revolution occurring in four phases. We’re now in the first phase - the production of clean energy from wind and solar has been growing since 2000. Starting around 2020, growth in global energy needs will be met predominantly by renewable sources. Between 2050 and 2080, clean energy will become dominant in the global energy mix, and by 2100, virtually all energy generated will come from renewable sources, perhaps with a bit of nuclear thrown in.
Above: Tesla Model X (Instagram: miamiartcars)
Can EVs really take over the market by 2030, as Seba and others are predicting? The authors lay out some statistics on the world’s auto market:
The world is awash with cars, with over 1.2 billion on the world’s roads. In 2015, no fewer than 69 million cars were sold, versus 45 million just 10 years earlier, as car sales ramped up in China from 4 million to 21 million in 10 years’ time. In contrast, sales in the world’s rich OECD countries remained stable at around 30 million per year, with even the United States steady at 7.7 million except for a temporary drop due to the 2008-2009 financial crisis.
Almost two decades have passed since Toyota launched the world’s first mass-produced hybrid vehicle, the Prius, in 1997. By 2015, the hybrid vehicle market had grown to 2 million units. When looking at electric vehicles, sales still look pale in comparison with gasoline and diesel powered cars. In 2015, the total number sold was 550,000, including all-electric and plug-in hybrids, which brought the on-the-road total to over 1 million for the first time in history. According to a report by Goldman Sachs in 2016, the EV market could grow to over 2 million cars in 2020 and 4 million in 2025. Hybrid sales could rise to almost 14 million units. By 2030, those numbers could reach 10 million (EV) and perhaps 20 million (hybrid).
One of the drivers of EV adoption is the rapid innovation in battery technology, which is particularly booming in Asia.
Asian battery makers have around 50 GWh of production capacity, equivalent to 50 percent or more of global output, and have monopolistic shares of 50-80 percent of core component materials such as cathode materials and separators. Asian producers have also taken the lead in the development of next-generation batteries. Japan accounted for 53 percent of patent applications filed in 2002–2011, followed by the U.S. at 13 percent, Europe at 12 percent, Korea at 10 percent and China at 8 percent.
Above: Although Tesla Gigafactory is leading the way, China is ramping up quickly with its own lithium-ion battery megafactories (Image: Visual Capitalist)
The book details government efforts around the globe to increase the speed of EV adoption, guided by the 15-country global Electric Vehicles Initiative (EVI), which covers 90% of all car markets.
Germany’s transport minister, Alexander Dobrindt, recently rolled out a plan to bring 6 million EVs, or 10 percent of all German cars, onto the road by 2030. The plan was kick-started by a $4,500 subsidy plus motor vehicle tax exemption for up to 400,000 new cars sold in the next few years, combined with a rollout of 15,000 charging stations. The country is actually one of the latest, as China, the United States, France, Japan and many others already provide EV tax credits or exemptions, typically in the range of $5,000 to $10,000, and have subsidized charging points.
China alone has provided subsidies so far of $5.6 billion, with $10 billion more expected in the next few years. This massive financial stimulus is part of an ambitious target of no fewer than 5 million electric vehicles on the road by 2020. Politicians in Norway and India are even bolder as they are working on policies to get 100 percent of cars sold by 2030 to be all-electric.
The other driver of this revolution is of course the fast-declining cost of solar power.
Germany is a central part of this energy revolution as the second-biggest solar nation in the world. The cost of a 4 kW solar panel system, sufficient for a family household in Western Europe, has dropped from over $22,000 in 2009 to $7,500 by early 2016. This makes a private solar energy system cost-efficient for most households in Germany.
Even without subsidies, they pay a lower price for their electricity, a turning point that has been called grid parity. The total cost of a solar panel system is about $0.10 per kWh over its lifetime, versus $0.13 for grid connection and generation costs. When we include high taxes and levies, the comparison becomes even more favorable, as a German household normally pays $0.29 in total for grid-based electricity in 2016.
The cost reductions are even starker for industrial-sized solar parks. Record low costs for utility solar projects in the United Arab Emirates (UAE) have surprised even the strongest skeptics in the world. In November 2014, a 100 MW project was granted to the Saudi Arabian firm ACWA Power at a price of $0.06 per kWh, far cheaper than the natural gas generation price at $0.09 in the UAE. The record itself was shattered in 2016 when a price of $0.03 per kWh was contracted for the world’s largest 800 MW solar plant.
Above: Hawaii is also transitioning to clean energy due to compelling cost reductions when partnering with Tesla on solar and battery storage (Youtube: Vice News)
Of course, there are challenges. The authors foresee a massive increase in battery production, and therefore huge demand for minerals such as lithium and cobalt.
At this rate of expansion, three times more lithium needs to be mined by 2030 than today, and 25 times more by 2050. Cobalt production would need to double by 2030, and grow sixfold by 2050. Large investments in lithium mining, as well as battery recycling, are needed, as otherwise we will run out of known lithium in the ground at the end of this century. Currently known cobalt reserves would run out within a few decades at this pace of growth, with limited respite from the wider resource base. Substituting cobalt in batteries is thus essential for the long-term success of electric cars unless a virtuous battery recycling chain with low losses can be established.
Production capacity for solar and wind energy generating equipment will likewise need to ramp up quickly:
If we want to get to a world with a 50 percent or more share of clean energy in the electricity mix globally before 2030, and 75 percent by 2050, we need 10 and 20 times the installed number of solar panels and five and 10 times the installed wind power capacity existing today. Even if we assume the majority of coal and oil generation is phased out, electricity production would still double in this conservative scenario, while natural gas stays at its current share in electricity generation. The jump needed to make this happen is actually quite low. Current global manufacturing capacity for solar panels would need to quadruple in the next 15 years, windmill production triple and both would have to stay at those levels until 2050.