Navigant Research Blog

China’s EV and EV Batteries Policy: An Update

— April 25, 2016

BatteriesWith some of the worst air pollution on the planet, China has been aggressively pushing for emissions reductions and sustainable development since the launch of its 12th Five-Year Plan. In March 2016, the 13th Five-Year Plan covering 2016 to 2020 was released. Some of the key goals include a 15% energy intensity reduction and an 18% carbon intensity reduction compared to 2015 levels. With air quality in the country being at such poor levels, the government is highly interested in new energy vehicles (NEVs)—referring to battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs)—to curb emissions.

Backed by government support, the Chinese EV market has made headlines in recent years. The country is on track to achieve its goal of putting 5 million electric passenger vehicles and buses on the road by 2020. Over 300,000 NEVs were sold in 2015, amounting to approximately 500,000 in cumulative deployment by the end of 2015. Plus, the government plans to increase the share of NEVs in government fleets from 30% to 50% in 2016.

New Stance on Subsidies

Although the Chinese EV market has made significant progress thanks to generous subsidies, the handouts have encouraged subsidy frauds as well. Finance Minister Lou Jiwei expressed concerns over the NEV industry’s heavy reliance on subsidies in January 2016. NEV development appears to be driven by policy incentives more than technological breakthroughs, to the extent that there has been a spate of media coverage about subsidy frauds in China in the last few months. For example, a company might assemble substandard NEVs and sell them to its own car rental company with the intent of receiving subsidies. The deficient NEVs are then left in parking lots and not put into actual use. Another common scheme is to sell license plates on the black market.

Consequently, the central government launched a fraud investigation and vowed to severely punish those involved in fraudulent schemes. Additionally, the government plans to end NEV subsidies after 2020 to encourage technological innovation. China plans to cut subsidies by 20% between 2017 and 2018 from 2016 levels and by 40% between 2019 and 2020, eventually leading to a phaseout after 2020.

Battery Technology Strategy

Chinese leaders are aware of the need to improve the country’s EV battery technology in order to stay competitive in the global NEV market. Therefore, the government’s decision to suspend subsidies for electric buses using nickel manganese cobalt (NMC) batteries is rather surprising. While most Chinese companies manufacture lithium iron phosphate (LFP) batteries, the global market prefers NMC or lithium manganese oxide (LMO) batteries for their superior performance and efficiency. Some Chinese manufacturers are making NMC batteries but have not yet mastered the technology yet—there were six reported cases of EVs with NMC batteries catching on fire last year.

This policy change is expected to affect NCM battery manufactures in China since subsidies can account for nearly 40% of the price of an NEV, and buses represent nearly half of the NEV market. In particular, South Korean battery manufacturers made major investments in new NMC battery production facilities in China. LG Chem formed a joint venture with two state-owned enterprises in August 2014 with plans to generate $1 billion in revenue by 2020. Samsung also formed a joint venture with Anqing Ring New Group and real estate investor Xian with plans to invest $600 million by 2020. Since subsidies will continue to be given for less-advanced LFP batteries, many Chinese battery manufactures will enjoy government support in the short run. However, China’s long-term battery technology strategy remains uncertain.

 

IoT and Wireless Communications

— March 7, 2016

Network switch and ethernet cables,Data Center Concept.Whenever the Internet of Things (IoT) and building automation solutions are considered, the topic of wireless communications protocols is bound to enter the discussion. Wireless technology is gaining traction for a host of reasons—there’s no need to run wires, buy conduit, or drill holes into walls when going wireless. It also costs less to install wireless systems compared wired systems. Plus, a wireless system makes a compelling economic case in retrofit situations.

While going wireless may be an easy decision to make, there is a myriad of wireless communications protocol options from which to choose. Depending on the application, factors such as range, data requirements, security, power demands, and battery life often dictate the choice of a wireless communications protocol.

Wireless Communications Protocols

Wi-Fi has been the ubiquitous means for delivering connectivity for most in-building applications. However, Wi-Fi is not necessarily well-suited for IoT applications—it requires too much power and provides too much bandwidth for many applications. Over the past few years, several competing wireless standards have emerged to enable communications between devices for an IoT world. Currently, ZigBee is seemingly emerging as a leader through several collaborations. The standard and its proponents are cutting through the myriad of associations and alliances and attempting to establish a foothold in IoT communications.

Notably, ZigBee inked an agreement with the Thread Group to implement the former’s application library over the latter’s IP networking layer. Additionally, ZigBee and EnOcean announced a collaboration to develop interoperable, self-powered IoT solutions over the 2.4 GHz frequency band in December 2015. This is important because if industry coalesces around a single standard and IoT really takes off, the shipment volume of whatever that standard will be has the potential to dwarf the shipment volume of Wi-Fi.

ZigBee and EnOcean Collaboration

The collaboration between ZigBee and EnOcean is an exciting endeavor. Considering that ZigBee is more prominent in North America and EnOcean is more popular in Europe, the technical specifications that combine the ZigBee solution with the EnOcean equipment profiles will allow wireless device manufacturers to access both the North American and European markets. These manufacturers will also be able to explore additional fields of applications to grow their business for self-powered innovations. The definition of this technical specification is pending completion by the second quarter of 2016.

 

Hopes to Spur EV Growth in South Korea

— February 8, 2016

moving white carElectric vehicle (EV) sales in South Korea reached 2,821 units in 2015, compared with 1,183 units in the year prior. Considering that the 2015 goal was to have 5,000 units on the road in the country, the EV adoption rate has been rather low in South Korea, mainly due to the lack of charging infrastructure available in the country and consumer perceptions of the vehicles. Nonetheless, the central government and municipalities are introducing plans to push more EV sales. For example, the central government mandated that 25% of the government’s new vehicle fleet must consist of EVs starting in 2015. In addition, the city of Seoul and Jeju Island are aiming to deploy 50,000 EVs respectively by 2017.

Government Plans for 2016

In December 2014, South Korea’s Ministry of Trade, Industry and Energy (MOTIE) announced its goal to deploy 200,000 EVs and 1,400 fast-charging stations by 2020. In line with this goal, the latest press release from the Ministry of Environment states that the government will subsidize sales for 7,900 EVs, 30,400 hybrid electric vehicles (HEVs), and 3,000 plug-in hybrid electric vehicles (PHEVs) in 2016.

According to the press release, an EV driver can receive up to ₩12 million ($9,928) in purchase subsidies, along with a ₩4 million ($3,309) tax incentive and ₩4 million ($3,309) for the charging equipment. Eight EV models are eligible for this program – the Kia Ray, Kia Soul, Renault Samsung SM3, Chevrolet Spark, Nissan LEAF, BMW i3, Hyundai Ioniq, and Labo Peace (a heavy duty vehicle). HEV and PHEV drivers can receive ₩1 million ($827) and ₩5 million ($4,137) in purchase subsidies, respectively, as well as ₩2.7 million ($2,234) in tax incentives. Applicants are selected on a first-come, first-served basis or by a random drawing.

Charging Infrastructure Development

On the charging infrastructure side, there are currently 337 public fast-charging stations in the country with the goal of having 1,400 stations by 2020. That said, the government plans to build 150 stations this year. In addition, some public fast-charging stations may be privatized since the government is encouraging private participation in developing EV charging infrastructure.

 

Buildings and Climate Change

— November 6, 2015

According to the United Nations (UN) Environment Programme, the buildings sector is estimated to be worth 10% of global gross domestic product (GDP), or roughly $7.5 trillion. Currently, buildings consume about 40% of global energy, 25% of global water, and 60% of global electricity. Buildings also emit more than 30% of global greenhouse gas (GHG) emissions. Under the business-as-usual projection accompanied by rapid urbanization, emissions caused by the buildings sector may more than double by 2050.

However, the buildings sector has among some of the most cost-effective and proven solutions for reducing energy consumption and GHG emissions. There are commercially available technologies that can reduce energy demand in buildings by 30% to 80%. Investment in building energy efficiency will lead to significant savings that will help offset incremental costs, providing a quick return on investment. Also, because existing buildings perform far below efficiency potentials in general, there are enormous opportunities for reducing energy consumption. Meanwhile, due to population growth and increasing urbanization, a new construction market is growing in developing countries, where construction activities account for up to 40% of GDP and provide opportunities for adopting energy efficient technologies.

UN Buildings Day

The buildings sector can play a critical role in mitigating climate change by reducing energy consumption and GHG emissions. Consequently, for the first time in the history of climate negotiations, a Buildings Day will be held on December 3, 2015 at the COP21 UN conference on climate change in Paris. This meeting is a mandate from the Lima-Paris Action Agenda of 2014, and it aims to discuss ways to limit global warming to a maximum of 1.5°C to 2°C. The Buildings Day at COP21 will showcase actions already taken by the buildings industry and will serve as an opportunity to encourage communications, collaboration, and implementation among various stakeholders.

In addition, a Global Alliance for Buildings and Construction consisting of governments, companies, financial institutions, organizations, academia, associations, professionals, and user networks will officially launch on that day. By putting the buildings and construction sector on the below 2°C path, the alliance commits to helping countries realize their Intended Nationally Determined Contributions, which are essential drivers for achieving the ambitious global climate goal.

 

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