Many in the industry are relying on electric vehicles (EVs) to reverse the downward trend in global electricity consumption. But a new report from Redburn, a UK research and investment company, suggests the growing energy efficiency of EVs means that the industry and investors may have to look elsewhere for significant boosts in demand for electrical power, says energy expert Fereidoon Sioshansi of EEinformer.

Until recently, the demand for electricity – like that of oil – was always rising. Over the years, as new electricity consuming gadgets were invented and commercialised on a massive scale – starting with incandescent light bulbs, radios, refrigerators, motors, fans, washers and dryers, dishwashers, TVs, air conditioning, electronic devices, personal computers, printers and so on – the demand kept rising.

Economic growth, wages, income levels and other factors would impact the rate of growth, but grow it did for over a century. The saying within the industry was that if you overbuilt and over-invested, all you had to do was to wait a few years for demand to catch up.

That maxim rarely failed, until the bottom fell out of demand growth. Consumers in developed economies already had all they needed or wanted – and as devices became more efficient, they used fewer kWhs. And as buildings became more efficient and better insulated, less electricity was needed to light, heat or cool them. Moreover, the pace of economic and population growth began to slow down – with declining birth rates and aging population in parts of Europe, Japan, the US and elsewhere.

Some in the industry are literally salivating at the prospects of EVs and, more broadly, the electrification of the transport sector to boost electricity demand

The question is what can we expect for demand growth moving forward? Will new uses for electricity – most notably to charge increasing numbers of electric vehicles (EVs) as well as the electrification of heating, industrial processes and other energy-intensive applications reverse this trend, and if so by how much and how soon?

Some in the industry are literally salivating at the prospects of EVs and, more broadly, the electrification of the transport sector to boost electricity demand in the same way that the commercialisation of air conditioning did in the 1950-70s – a trend that is still strong in many developing economies.

Gains in energy efficiency

That, however, may be wishful thinking, according to an analysis by James Moore, partner in capital goods research at Redburn in London. Moore and his colleagues, who have looked at the numbers, do not expect the electrification of the cars to dent the established trends towards reduced electricity consumption. The reason? Ever more energy-efficient lighting and motors will offset any gains in increased EV electricity consumption. This, of course, is not what people in the power sector want to hear.

According to Moore, roughly 60% of US electricity consumption comes from just four end uses:

• Lighting
• Heating, ventilation and air conditioning (HVAC)
• Machine drive
• Appliances

A closer look at these four categories reveals that the electricity-consuming component of HVAC, machine drive and some appliances – notably washing machines, tumble dryers and vacuum cleaners – is the motor.

In fact, Redburn’s research leads them to conclude that motors are the world’s biggest electricity-using product, ahead of lighting, accounting for an astonishing 30-35% of world’s electricity consumption. Not surprisingly, as motors get more efficient, demand for electricity can be expected to fall, all else being equal.

Since Moore and his colleagues work in the capital goods division of Redburn, they know who makes the big motors – a handful of big players including ABB, Siemens, Schneider Electric and many smaller component manufacturers and suppliers.

It turns out that these manufacturers and their suppliers are confronted by ever more efficient standards forcing them to make their motors, particularly the big ones, more efficient. Aside from that, customers who know how much electricity is consumed by big motors are demanding more efficient ones.

Moore and his colleagues, who have looked at the numbers, do not expect the electrification of the cars to dent the established trends towards reduced electricity consumption. The reason? Ever more energy-efficient lighting and motors

According to Redburn, the prevailing standard efficiency IE1 motors are being banned and premium efficiency IE3 motors will become mandatory around the world – saving as much as 13% depending on the size of the motor. Moore says it will take roughly 15 years for the entire installed motor base to be replaced with the new standard, which will reduce global electricity demand by 0.7% per annum.

A similar scenario applies to lighting – currently accounting for roughly 22% of the global electricity demand. Here again, significant reductions in consumption can be achieved by switching to more efficient types of lighting, such as light emitting diodes (LEDs), which currently account for 20% of new global lighting unit sales.

The savings can be significant – for example:

• 90% by replacing incandescent light bulbs with LEDs
• 75% by moving from compact fluorescent lights to LEDs

Lighting technology is getting brighter and cheaper

With incandescent light bulbs expected to fall from the current 80% of the installed base to 20% by 2023, Redburn expects the global lighting electricity consumption to halve in the next five years. This alone should reduce global electricity demand by 2.3% per annum. The pattern is already obvious in falling electricity sales in many parts of the world. You don’t need very many kWhs to enjoy many lumens of lighting.

Combined, these two end uses alone can reduce global annual electricity demand growth to roughly 3% below global real GDP growth in the coming five years – it is the sort of transformation described in DNV’s recent energy outlook. Of course, that is not the end of energy efficiency improvements.

EV electricity consumption

Won’t the expected rise of demand from EVs more than offset the gains from energy efficiency? The short answer, according to Redburn is, not necessarily.

The future of transport is electric

Examining several studies on the impact of EVs, Redburn expects average global electricity consumption from EVs to grow from around 8TWh in 2017 to 1,800TWh by 2040. While this is a massive increase, it represents only 5% of projected global electricity consumption in 2040 – not a huge percentage.

Why so little? The simple answer – which must be most annoying to utility executives the world over – is that EVs are incredibly efficient, certainly compared to internal combustion engines (ICEs).

“Investors seemed surprised that EVs will not boost electricity demand growth more, but no one has made any legitimate challenges to either Redburn’s methodology or the numbers”

According to Redburn: “Filling a vehicle with oil is one of the most expensive ways to purchase a usable unit of mobility: by a factor of 4-5x. This is because ICE vehicles are inefficient and fuel taxes are high, especially in Europe.

“Moreover, driving 100km in a conventional vehicle requires roughly 80kWh of energy, because ICEs waste some 75-80% of their fuel generating heat rather than mechanical energy – the clue is in the word ‘combustion’. Moreover, a typical ICE has as many as 1,000 moving parts as opposed to 70-80 or fewer for an EV.

“This means that the average EV needs as little as 25kWh to travel 100km, even after accounting for the energy lost during charging and ‘vampire losses’ as the battery mildly depletes over time. Divide 80kWh/100km by 25kWh100 km and the result shows EVs are 3.3x more efficient if not better.”

EVs are incredibly efficient, certainly compared to internal combustion engines

Redburn expects EV sales to take off after 2023 as:

• Battery costs continue to decline
• Range continues to improve
• Charging infrastructure becomes ubiquitous
• Fast charging is in place for autonomous EVs

By 2023, Redburn expects 61% of new car sales to be EVs with a fast rate of turnover, given that the global fleet of ICEs, on average, reaches retirement age in 18 years.

According to Redburn: “While the ‘peakiness’ of fast-charging load profiles of EVs will need to be managed by utilities, we only expect EVs to add 3% to global electricity demand by 2035, the equivalent of 0.2% per annum demand growth. As such, while many players in the power industry talk about EV as the next big thing, we do not expect the electrification of the car to in any way dent the electricity consumption reduction caused by more energy-efficient lighting and motors.” (emphasis added)

While Redburn’s projections on EV sales are in line with many other main-stream studies, their prediction that massive EV sales will not have much of an impact on electricity sales – due to the offsetting impact of energy efficiency gains – is surprising, contradicting those who expect a much bigger rise in electricity consumption.

To make sure we were not misinterpreting their findings, we contacted Moore, who responded that, “A number of investors seemed surprised that EVs will not boost electricity demand growth more, but no one has made any legitimate challenges to either Redburn’s methodology or the numbers.”

Asked what else may boost dormant electricity sales, Moore said Redburn is presently trying to determine to what degree data centres will increase electricity demand, given the growth of information and communication technologies, cloud computing, storage and the much-hyped Internet of Things.

Editor’s note

A longer version of this article was first published in the October 2018 edition of Fereidoon Sioshansi’s monthly newsletter EEnergy Informer and is republished here with permission.

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