new energy vehicles their impact on oil demand, lessons of ... · mark campanale founder carbon...
TRANSCRIPT
Mark Campanale
Founder
Carbon Tracker Initiative
New Energy Vehicles – their
impact on oil demand, lessons
of innovation from the past
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Half the names that appeared on the Fortune 500 in 2000, have
now disappeared from the list
Technology-driven transition
Will history repeat itself?
• BP is projecting a 24% increase in oil use by 2035
• Exxon expects a 27% increase by 2040
• Shell’s ‘Current Outlook’ 37% to 2040
• OPEC is clinging valiantly to 54% to 2040
Are fossil fuel companies betting on
an uncertain future?
Companies are overstating energy demand, underestimating an increasing role for renewables and ignoring looming changes in
energy.
Sources: ExxonMobil (2016) The Outlook for Energy: A view to 2040BP (2016) BP Energy Outlook 2035Shell (2014) Carbon Asset Risk responseOPEC (2015) World Oil Outlook
“Forecasts are not always wrong; more often than not, they can be reasonably accurate. And that is what makes them so dangerous... They often work because the world does not always change. But sooner or later forecasts will fail when they are needed most: in anticipating major shifts in the business environment that make whole strategies obsolete.”
Pierre Wack, founder of Shell scenarios team
Forecasts can misread speed of
technology change
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IEA and IMF predict rapid EV take over
• IEA announced it’s forecast that the number of electric
vehicles on the road will hit 125 to 250 million by 2030
• Globally, EV fleet grew by 54% in 2017 to 3.1 million
• Oil and gas companies estimate there will only be 7-8
million EVs on the road by 2020
• 8 largest car manufacturers targets total 22.1 million EVS
on the road by 2020
• China leading the way:
• Sales of new electric cars surged by 72% in 2017
• Credits and subsidies will help EVs grow to account
for more than a quarter of the car market by 2030.
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Source: Riding the Energy Transition: Oil Beyond 2040, IMF (2017) Note: electric car graph line starts in 2011
IEA and IMF predict rapid EV take over
IMF forecast electric cars could replace motor vehicles in the
next 10 to 25 years
Beyond Horsepower
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• EV can compete with petrol cars on a total cost of ownership basis at battery pack costs of between $200-300 per KWh.
• And on a sticker price basis at a battery pack cost of $100-200 per KWh.
• We should be at these levels by 2020.
• The economics works even better in China and India than in the US because of higher fuel costs and shorter driving distances requiring smaller batteries.
Source: BNEF, CTI
BNEF EV calculator
Source: BNEF
EV costs $ per KWh and the ICE equivalent
When do EV beat oil cars
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2016 2018 2020 2022 2024 2026 2028 2030
2016 $ (thousand) and %
Battery
Powertrain
Vehicle
ICE medium0
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2015 2016 2017 2018 2019 2020
Battery Oil car high Oil car low
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✓ ICOEs lose market share to alternatives
1/3 of all vehicles could be electric by 2035
✓ Catalytic impact of
technological innovation✓ Exponential EV growth not dependent
on climate policy Source: Expect the Unexpected report, 2017
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EV’s make up all of incremental car sales by 2021
• Car sector is a live example of the importance of peak demand for incumbents.
• 2016 electric vehicles made up just 0.2% of the global fleet and 1% of global car sales. They were widely mocked (by the oil industry) as being subsidy-driven and tiny.
• However, EV also made up 14% of incremental car sales, and the rapid fall in battery costs means that they can shortly compete without subsidy.
• At current growth rates EV will make up all incremental car sales by 2021. This explains the move of a large part of the global car industry to embrace EV technologies over the last 12 months.
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EV ICE (1.0)
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EV ICE
Total car supply (m)
Source: IEA, TSRP estimates
Incremental car supply (m)
Source: IEA, TSRP estimates
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The results: Impact on oil demand
• Significant for sub-sector essentially accounting for 26% of oil demand • In excess of 2mbd marker
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Range of IPCC emissions scenarios (from
all sources) consistent with Paris goals
Shell “Oceans” scenario
BP “most likely”
Shell “Mountains” scenarioExxonMobil
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$1.6 trillion invested in unneeded projects?
Fossil Fuel firms should not overinvest based on a false sense of security but should expect a ratcheting up of international efforts
SDSSustainable
Development scenario
NPSNew Policy Scenario
2ᵒC
2.7ᵒC
$0.9 trn at risk
Compared to NPS, 33% ($1.6trn) of capex
is unneeded and at risk of becoming
stranded
Compared to NPS
Current policy scenario would see $4.7trn
of investment in oil, gas and coal
projects.
B2DSBelow 2ᵒC scenario
1.75ᵒC $1.6 trn at risk
Fossil Fuel firms risk wasting $1.6 trn by ignoring the low-carbon energy transition
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Our analysis at investor’s fingertips
In February 2017 Carbon Tracker released a 2˚C scenario analysis
tool on the Bloomberg terminal, powered by data from Rystad
The tool puts our in-depth analysis of companies’ exposure to a
2˚C future at investor’s fingertips
Features include, capex proportion within or outside of a 2˚C
budget and the affect of oil price change on upstream NPV
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Company level data
The 3 most and 3 least exposed companies
Source: 2 Degree of Separation report, 2017
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Our analysis at investor’s fingertips
For more information please visit:
www.carbontracker.org
@CarbonBubble
If you are interested in knowing more,
please get in touch:
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• The more dangerous moment for incumbents is when renewable costs break through the operating costs of fossil fuels.
• At this moment it becomes cheaper to put up a new solar or wind plant than to continue to operate an existing coal, gas or oil plant.
• The highest cost ones get closed first. But as the cots of renewables continue to fall, all fossil fuel generation becomes uncompetitive.
Source: CTI
LCOE of renewables v operating cost of fossils
How falling costs strand existing assets
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2010 2012 2014 2016 2018 2020 2022 2024 2026
Renewables Fossils high Fossils low
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• In the first instance, renewable costs break through the total costs of fossil fuels.
• This quickly kills capex on new fossil fuel generation.
• This is already happening. In 2016 for example, the IEA calculated that the run-rate capacity of new renewables was 75% of incremental electricity demand.
Source: CTI illustration
LCOE $/ MWh
How falling costs destroy growth of fossil fuels
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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Renewables Fossils
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• The more dangerous moment for incumbents is when renewable costs break through the operating costs of fossil fuels.
• At this moment it becomes cheaper to put up a new solar or wind plant than to continue to operate an existing coal, gas or oil plant.
• The highest cost ones get closed first. But as the cots of renewables continue to fall, all fossil fuel generation becomes uncompetitive.
Source: CTI
LCOE of renewables v operating cost of fossils
How falling costs strand existing assets
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2010 2012 2014 2016 2018 2020 2022 2024 2026
Renewables Fossils high Fossils low