More than 7.5 million plug-in electric vehicles (PEVs) will be sold between 2013 and 2020, according to Navigant Research forecasts.  All of those vehicles need to be charged somewhere, which is why the electric vehicle (EV) charging supply equipment market has attracted more than 120 companies, large and small.

These vendors would like each new PEV owner to buy a home charging unit.  Due to a variety of factors, though, the percentage of consumers that choose to do so in future years will shrink.  According to Navigant Research’s 2012 Electric Vehicle Charging Equipment report, the portion of PEV buyers that will purchase a residential charging station will fall from 63% in 2013 to 47% in 2020.  The primary factors influencing this decline include:

• Increasing sales of plug-in hybrid vehicles (PHEVs) with smaller battery packs that can be fully charged via a standard 110-volt outlet overnight
• A greater share of PEV owners living in multi-unit dwellings without dedicated parking spots
• Increased reliance on workplace and other public charging

As the relative sales of residential electric vehicle supply equipment (EVSE) go down, sales of commercial (non-residential) EVSE will by necessity rise.  The chart below illustrates that annual global sales of commercial EVSE will grow to more than 1.5 million units annually while residential EVSE sales will rise to less than 823,000 units.

Residential and Commercial EVSE Unit Sales, World Markets: 2013-2020

                                                                                                 (Source: Navigant Research)

To reach the forecast volume of residential EVSE sales, the cost of purchasing and installing a home charger must go down.  We are starting to see residential EVSE priced in the $600 to $650 range for basic units; the average selling price should fall below $500 by 2016.

Simplify, Please

EVSE maker AeroVironment is reducing the immediate financial impact of buying and installing a residential EVSE by working with dealers to bundle the EVSE cost into the vehicle’s purchase cost.  Through the program, dealers approve potential customers for financing above the price of the vehicle and the EVSE, warranty, and installation costs are added as a capital item.  AeroVironment is launching the program with dealers selling the Nissan LEAF and will expand it to dealers of other brands over time.  The company expects the installation to take 4 days or less, including the time for an inspection.  AeroVironment will also be busy installing residential EVSE in California.  The California Energy Commission recently granted AeroVironment $2 million to install 770 residential EVSEs across the state.

Depending on which state or city an EV owner resides, the permitting process can be a lengthy and onerous process for purchasers and electrical contractors.  According to Navigant Research’s recently published Electric Vehicle Supply Equipment Permitting report, some regions allow a permit to be filed online and offer same-day inspections.  In other places, differences in city and county rules can significantly slow the process.  Currently, very few states have attempted to standardize the process.  Yet, for sales of EVSE to grow as forecast, more states will have to simplify the process.

For some time, BMW has been promising to launch the i3 in 2013.  At the 2013 Geneva Motor Show, the company unveiled a three-door version, the i3 Concept Coupe.  It will be one of the first production vehicles to be made using BMW’s new modular electric architecture.  The standard version is expected to cost around €40,000 (about $52,000) when deliveries start in November, which is at the upper end of the current 3-series price bracket.  It should be eligible for government electric vehicle (EV) incentives, such as the U.S. federal tax incentive of $7,500, though the vehicle has not yet been formally tested and approved.

The BMW i3 has some interesting differences from most of the other EVs on the market.  Most volume-selling EVs and hybrid electric vehicles (HEVs), such as the Toyota Prius, the Nissan LEAF, the Mitsubishi i-MiEV, and the Renault ZE range, are designed for economical motoring and as such are front-wheel drive.  The i3 is rear-wheel drive, as is the Tesla Model S, which coincidentally also has a list price of about $52,000 (with a 40 kWh battery pack).  The focus for BMW remains on driving enjoyment and the target customer will be those who appreciate the BMW brand image and want to switch to clean fuel.

A Spare Engine in the Boot

Research carried out by BMW over the last few years has led to the conclusion that a 100-mile range is optimum for the majority of people, and most can get by recharging only every second or third day.  Those that regularly need a daily range greater than this would be better off, for now, buying a car with an efficient internal combustion engine.  It’s good to hear an OEM publicly acknowledge that its EV is not trying to appeal to everyone.  However, BMW has introduced a number of features to address range anxiety.

One factor is the dynamic range calculation from the integrated navigation and telematics system that takes into account current traffic and the topography of the roads ahead.  Selected drive mode and average driving style are also factored in, and nearby charge stations can be identified and potentially reserved if necessary.  The i3 also offers LED lighting (inside and out) and a climate control system that uses a heat pump principle to warm and cool the interior – measures that BMW says results in 30% energy savings in city driving when compared to conventional electric heating and lights.

But the most interesting optional extra is the range-extender feature, a built-in 600cc motorcycle engine with a 2-gallon fuel tank.  This will give owners peace of mind that they will not be stranded by making available an additional 80 miles of range after the battery runs out of energy.  The feature, which takes up a part of the luggage space, is expected to be priced at about €3,000 ($4,000).

While initial purchase price remains the main obstacle to major growth in EV sales, range anxiety is still one of the primary concerns of the car buying public.  BMW has addressed these concerns in its design, but the most effective solution is better education about the realities of owning an EV.  At the start of the testing run by BMW with its ActiveE and Mini E vehicles in Asia Pacific, Europe, and the United States, more than 70% of users said that access to public charging stations was very important to them.  In actual practice, however, public infrastructure was used for less than 10% of all charging.

On March 20^th, a group led by major natural gas drilling companies Chevron, CONSOL Energy, EQT Corporation, and Shell announced that they have negotiated a set of voluntary environmental standards for shale gas hydraulic fracturing.  The new coalition includes five environmental groups and two foundations that have environmental interests.  The new Center for Sustainable Shale Development (CSSD) certification will include 15 performance standards for fracking operations.

This effort is encouraging because, until now, the arguments about fracking have been largely based solely on two voices: the drillers claiming that the technology is absolutely safe and the environmentalists claiming it is irreparably flawed.  While the truth is grayer than these positions, the bottom line has been that America’s thirst for energy has trumped any environmental concerns, until politicians get an earful from constituents and ban fracking altogether.  The CSSD standards have been compared to the LEED certification for certifying construction of environmental buildings and are likely to help relieve some of the tension surrounding fracking.

Mostly Marcellus

The CSSD standards are a good first step, but I see a few flaws that are likely to undermine some of their effectiveness.  For the most part, these new standards cover groundwater, the water used for fracking, the flaring of natural gas, and the type of diesel fuel that can be used at drilling sites.  The standards do not seem to make any effort to address the air pollution associated with drilling or the land use.  Most of the time, the air pollution surrounding fracking operations is substantially worse than other areas.  What’s more, the CSSD standards ignore the pollution impact of all the motors running on a drilling site.

Drill motors are almost always considered non-road diesel engines by the U.S. Environmental Protection Agency, and therefore, have different requirements than the diesel trucks that are used on the road.  Natural gas-fueled motors for drilling operations are starting to come into play, but these remain few and far between and the CSSD standards are unlikely to push that front.

Another challenge with the CSSD standards is one of geography: these standards (so far) only apply to the Appalachian area and the Marcellus shale gas region.  Whether they’ll be accepted by drillers in Wyoming and western states remains an open question, though it should be noted that Chevron and Shell both drill in those areas as well.  This geographic limit is likely driven by the number and location of environmental partners in the CSSD, but it gives the impression of more political posturing.

Still, the fact that drillers and environmentalists came together to put together some standards that appear to help reduce the impact of fracking is huge.  So, the billion dollar question is: will voluntary CSSD standards be enough to quell the fracking concerns and stave off additional legislative regulations?  Don’t bet on it.  The Sierra Club has already blasted the voluntary nature of the standards, and the Environmental Defense Fund has come out saying that these should complement, not replace, regulations.  Ultimately the success of these new standards will rest in the court of public opinion, and the public, right now, shows little inclination to limit the natural gas bonanza.

Speaking today at Argonne National Laboratory, outside Chicago, President Obama laid out the details of his “Energy Security Trust,” a proposal to direct $2 billion in federal revenue from oil and gas leases to R&D for clean transportation technologies.  Following up on the pledge made in his State of the Union Address, to confront global climate change, the plan unveiled today should add momentum to a cleantech market surge that’s already underway.

In that sense, the new funding will mean that the federal government, under a Democratic administration, is catching up to broader social and economic shifts.

Eighty-four percent of Americans now understand that carbon emissions from human activity are “probably” or “definitely” causing global climate change, according to a February survey by Duke University.  Two-thirds support limitations on greenhouse gas emissions from power plants, factories and cars, and government-imposed requirements for utilities to generate more power from low-carbon sources.  The public has long since moved beyond denial on climate change and the future of the world’s energy system, and is well into acceptance that something – even if it involves raising taxes and putting a price, in some form, on carbon – must be done about it.

Obama’s plan is relatively modest – the congressional Budget Office estimates that proceeds from federal oil and gas leases on public lands will total $150 billion between 2012 and 2022, so the president is talking about shifting 1.3% of that money to advanced vehicles.  But the Energy Security Trust reflects a clearer understanding that market forces and public attitudes are quickly tipping the balance away from fossil fuels and toward renewable and other forms of low-carbon energy, including the natural gas boom that is helping to power an accelerating economy.

Boardroom Realization

Not everyone in Washington, of course, agrees.  But the market itself is moving ahead of policymakers.

• Driven by falling turbine prices and the rush to take advantage of production tax credits (which were set to expire but were renewed by Congress in early January), wind energy was the fastest growing source of new electricity generation in the United States in 2012.  Nationwide wind generating capacity increased by 13.1 gigawatts last year – up 28 percent from 2011, according to the American Wind Energy Association.
• The solar industry also enjoyed a record year, as new installations of solar photovoltaic systems grew 76% over 2011, to total 3.3 GW in 2012, with an estimated market value of $11.5 billion, according to the Solar Energy Industries Association.
• According to our forthcoming Market Data report on microgrids, revenue from worldwide deployments of microgrids – many of them harnessing distributed renewable energy resources – will reach $8.3 billion in 2013, increasing to more than $40 billion annually by 2020. That is sharply higher than previous market forecasts.
• The move away from coal and nuclear power continues to gain momentum, as power generators in the Midwest, like Dominion, shutter aging reactors and sell off coal plants.

Most of these trends will continue to unfold regardless of government intervention. Indeed, there are signals that the mental shift away from a carbon-based economy is happening even in the boardrooms of the oil majors.  In a new report from its Scenarios Group, Royal Dutch Shell – which exited the solar sector in 2009, saying it would focus on biopower instead – acknowledges that solar power could become the world’s biggest source of energy by the second half of the 21^st century.

“These scenarios show how the choices made by governments, businesses and individuals in the next few years will have a major impact on the way the future unfolds,” commented Shell CEO Peter Voser in a statement on the new report.  What Obama’s new smart-transportation plan will do is add Washington’s imprimatur to a cleantech economy already poised for growth.