Horses dominated transportation for more than 6,000 years, even after steam-powered automobiles came along in 1769. It was the invention of the internal combustion engine (ICE) that revolutionized transportation in the 1800s. It took only a few years for ICE vehicles to disrupt the entire transportation industry, including in the water and air.
Between 1900 and 1913, the dominant mode of transportation in New York City went from being all horses to cars. This is how fast disruption can take place: from all horse carriages and just one car in the 1900 New York Easter Sunday Parade to all cars and just one horse carriage in the 1913 New York Easter Sunday Parade.
Just as cars disrupted transportation by horse in the early 20th century, light-duty electric vehicles (EVs) — passenger cars, motorcycles and e-bikes, for example — have a significant potential to displace traditional cars.
However, there are substantial challenges for EVs for commercial use, namely buses and semi trucks. The charging infrastructure is lacking, prices are high and there are limitations with heavy tonnage (battery weight) and range.
Widespread displacement of any kind requires technological innovations as well as robust and supportive policies.
What is disruption?
Disruption means one thing is interrupted so that another can thrive. It means a technology that challenges the business status quo and hegemony of industry leaders. Disruption occurs when technology and business models combine to create products that create markets and help transform an industry.
To predict whether EVs will disrupt the transportation industry, we need to answer three questions about disruptive technologies:
- Do EVs create a new market (by targeting customers who don’t use or can’t afford the existing product)?
- Are EV makers motivated to enter higher-performance segments (commercial segments like trucks and buses)? And are ICE vehicle makers motivated to fight them?
- Can EV makers improve performance fast enough to keep pace with customers’ expectations while keeping costs low?
Today, EV sales are increasing, battery costs are coming down and charging solutions are expanding.
Many experts believe EV disruption of the transportation sector will be driven by EVs’ high efficiency in converting battery power to mobility and shrinking battery costs, along with the lower total cost of ownership.
Cost is not just the sticker price of the vehicle anymore. Customers are beginning to understand the concept of the total cost of ownership: how much less it costs to charge an EV each year compared to the cost of using gas or diesel, as well as the reduced maintenance costs.
Even if battery cost shrinks, however, broad consumer acceptance could remain a challenge, with the lower total cost of ownership unlikely to be accepted by the mass market even under optimistic EV integration scenarios. There’s a belief by some experts that vehicles with internal combustion engines will remain an essential part of the transportation sector even as they lose market share to EVs.
In my opinion, it will be difficult for ICE vehicles to compete with the near-zero maintenance model of EVs. In Norway, for example, EVs have reached price parity, and this model can be replicated elsewhere in the world.
It is evident that urbanization and population densities are rapidly increasing. Transportation services must also grow to cut down on travel time, resources and pollution.
Therein lies the significant potential for light-duty EVs to disrupt the traditional car industry. Most trips made by people in Canadian cities total fewer than 50 kilometres per day, which can be easily covered by EVs. In addition to the environmental benefits, EVs can eliminate virtually all pollution-related ailments. This is important given the scary statistics that say the cost of pollution-related health problems in Canada in 2015 hit at least $39 billion — about $4,300 for a family of four.
Under these circumstances, light-duty EVs meet the essential criteria for disruption because they can provide vital services at a lower price than is possible with ICE vehicles, particularly in urban areas. Consequently, many customers who need cheaper options might be drawn away from ICE vehicles and toward EVs due to the lower total cost of ownership.
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For commercial vehicles such as buses, trucks and vehicles that transport a large amount of cargo, it will be an enormous challenge for EVs to achieve disruption.
It’s estimated that more than 1 million commercial vehicles operate in Canada. Each one consumes 30 times as much fuel as the average car. It’s a sector that offers vast potential for reducing fuel consumption, which would cut fuel costs and emissions. China leads the way on this front, with close to 400,000 electric buses on its roads, representing 99 percent of the world’s electric buses.
However, EV makers will have to provide a compelling economic case for businesses to adopt them. How will manufacturers address the trade-off between prices, tonnage and range?
For example, an electric truck with a range of 965 kilometres would require a 31,000-pound battery costing $300,000. That is 50 times heavier than a battery for an average passenger car. The Nissan Leaf’s battery weighs 600 pounds and has a range of 250 kilometres. Even if battery prices came down by half, that big truck battery would still cost $150,000, a considerable price tag.
Think of why horse-pulled carriages were once mainstream transportation rather than elephant-pulled carriages even though elephants could easily transport heavier goods. Elephants take up more space, need more fodder (fuel) and cost more to maintain. Likewise, space, weight, cost and range are constraints that shape today’s transportation sector.
A lack of charging infrastructure is one of the most significant barriers to near-term EV disruption for buses and heavy trucks. It is a chicken-and-egg situation. Businesses hesitate to build charging infrastructures before they have electric trucks in place. On the flip side, automakers are reluctant to ramp up production until charging infrastructure is in place.
Furthermore, charging commercial EVs is going to put more demand on the grid. For example, charging the 550 kWh battery of the Freightliner eCascadia semi truck using a DC fast charger will require tremendous power — at least 1 megawatt. The power needed to recharge one semi truck in one hour would power up to 20 typical Canadian homes for a day.
This much demand will significantly strain the electrical grid. Commercial chargers require eight times more power than those for light-duty EVs. The challenge for utilities is to increase their grid capacity at a faster pace. Across Canada, utilities are starting to plan for the increased demand from commercial EVs.
Innovation and policy changes needed
For disruption to take place with heavy-duty vehicles, innovation will have to bring down the cost and size of high-capacity batteries. Commercial EVs can’t carry and tow cargo at a reasonable price. It would take a 44,000-pound battery to deliver the same energy as a 2,000-pound diesel fuel tank.
Above all, for commercial EVs to disrupt the industry in Canada, there must be robust supply-side policies that require automakers to sell them. A federal-level zero-emission vehicle mandate needs to be developed to send a clear, long-term signal to all stakeholders, including automakers, that EV disruption is under way.
Robust demand-side policies are also needed, offering substantial incentives for businesses to purchase commercial EVs — such as this one in British Columbia. And additional policies favouring massive investments in charging infrastructure are also required.
Norway has demonstrated disruption in the passenger transportation sector, and China has shown it in the commercial sector. Canada should follow suit.
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