Hello friends! Here’s my monthly take on the five most interesting developments in future fuels and vehicles trends. Items I selected include:
Check out the honorable mentions as well with more on the IMO’s desulfurization regulations and what it could mean for some refiners, Neste’s new acquisition, car bans and more.
1. Electrek: Oil Industry Is Finally Starting to Be Affected By Norway’s Rapid Electric Car Adoption ― This article makes the point that Norway’s pivot toward electric vehicles, which now represents 50% of all new vehicle sales, is leading to a “slow down” of gasoline and diesel sales and this is a harbinger of what’s to come globally as the electric vehicle-oil demand tipping point occurs. It pays, though, to dig a bit deeper and beyond the hype. Not only does this article fail to do that, it selects data to make a point and ignores other data that might controvert it. For example, in addition to electric vehicle sales (and Norway is a small vehicle market as readers know), last year there was a 16% biofuel content in the gasoline and diesel pool, according to Statistics Norway.
Electric vehicles represented 5.3% of the passenger vehicle stock in 2017, up from 3.7% in 2016. Nowhere mentioned in the article but nevertheless important is that hybrid vehicles represented 5.3% of the vehicle stock. Moreover, the diesel passenger car stock is continuing to grow, according to Statistics Norway, and diesel sales outpaced gasoline sales for the first time. In fact, the largest reduction in petroleum products is in heavy fuel oil and marine gas oil, which is being driven by the IMO’s sulfur reduction requirements. This is shown in the figure below.
Norway is often touted as the green example other countries should follow, particularly when it comes to EVs. It does have the largest EV market share in the world and its electricity is 98% renewable, and it ranks third as the lowest carbon intensive economy in the world (behind Sweden and Switzerland). But, as this article notes, when you factor in its oil exports Norway goes from least to one of the most carbon intensive economies in the world. True carbon accounting is a big issue that will more and more come to the fore as countries continue to be pushed to do more to reduce carbon under the Paris Agreement:
“The significance of this carbon accounting trick? Well, these numbers directly influence how we think about who has the moral duty to tackle climate change the most — and those moral debates get very real very quickly when countries like Norway have specific emissions targets under European environmental rules as well as the Paris climate agreement. ‘Norway doesn’t accept responsibility for these [exported] emissions,’ says Robbie Andrew, a senior researcher at the Center for International Climate Research in Oslo. ‘I struggle to find a good analogy that doesn’t piss people off, but it’s like selling arms to a country that’s at war and committing atrocities,’ and not taking responsibility because you’re not the one pulling the trigger, he says. Crucially, this shows that counting emissions just by how much is released within a country’s borders doesn’t make sense in a globalized economy where consumption is so interlinked.”
2. EIA: Autonomous Vehicles: Uncertainties and Energy Implications ― This article uses modeling results from two scenarios related to the Annual Energy Outlook 2018 (AEO2018) to help quantify the potential effects on energy of widespread adoption of autonomous vehicles in the U.S. EIA’s “Autonomous Battery Electric Vehicle” case assumes more widespread use of light-duty autonomous vehicles than the Reference case and that these vehicles are increasingly battery electric. Its “Autonomous Hybrid Electric Vehicle” case also assumes more widespread use of light-duty autonomous vehicles than the Reference case and that these vehicles are increasingly hybrid electric. In both cases, households and shared-use mobility providers purchase autonomous vehicles, mass transit use is affected, and fleet operated long-haul trucking begins using automation technology.
There is much more detail and analysis in the article, but the upshot is that transportation energy demand in 2050 is higher in both scenarios compared with the Reference case but still remains lower than 2017 transportation energy demand. Energy use from higher light-duty vehicle (LDV) miles traveled are partially offset by greater fuel efficiency from rising sales of more energy-efficient battery electric and hybrid electric vehicles. The changing sales mix by vehicle powertrain type affects transportation fuels, and motor gasoline and electricity use vary among the Reference and scenario side cases. In addition, more widespread use of autonomous vehicle technology changes the energy consumption by mass transit modes and, more modestly, by trucking. The figure below compares LDV sales in the three cases.
3. Centre on Regulation in Europe: Gas and the Electrification of Heating & Transport: Scenarios for 2050 ― This report identifies the possible impact of increased electrification of road transportation and domestic heating and cooking on the energy system (electricity and gas), as well as on CO2 emissions and on GDP. It is based on a set of scenarios for 2050 on the implications of a possible gradual electrification in five European countries: Austria (AT), Belgium (BE), France (FR), Germany (DE) and the Netherlands (NL). Three scenarios were considered: the first where electrification remains limited, the second where the residential and road transport sectors are virtually fully electrified by 2050, and a third intermediate path.
A primary conclusion is that while electrification in transport (and heating) will happen and reduce the consumption of fossil fuels, the demand for power increases and therefore the use of natural gas will grow as an energy resource of last resort to ensure reliability since the electricity supply, as it transitions to more renewables, will be more weather dependent. In addition, in a full electrification scenario, by 2050 the electricity grid capacity would have to increase in BE by 70%, in NL by 50%, in AT by 34%, in FR by 35% and in DE by 37%. Except for NL and possibly BE, the capacity of the gas networks will have to be extended. Further, CO2 emissions will be shifted to the power sector.
In 2050, with a full electrification scenario, CO2 emissions from the residential, road transport and electricity sectors together in BE would decrease only by 11% relative to the corresponding 1990 levels, in AT by 62%, in DE by 70%, in FR by 48%, and in NL by 40%. Meantime, the social costs of a full electrification path towards 2050 vary significantly, ranging from 0.5% of GDP in FR to close to 7% of GDP in NL, with intermediate rates for AT (2%), DE (4%) and BE (4.5%). The cost per ton of CO2 reduction would be €250 for NL, €146 for BE, €142 for DE, €78 for FR and €54 for AT.
4. Reuters: African Cities Pledge to Cut Climate Emissions to Zero by 2050 ― Eight African cities ― Accra, Tshwane, Dar es Salaam, Addis Ababa, Lagos, Dakar, Cape Town, Durban and Johannesburg ― have pledged to cut their carbon emissions to zero by 2050. Nairobi and Abidjan are expected to join these cities. It will not be an easy task from the transport perspective. First, Africa is expected to account for half the world’s global population by 2050, while some of these same cities have some of the worst air pollution, transport systems and fuel quality in the world. Power generation is lacking and many families use diesel power generators for power. Perhaps more importantly, and from my own experience working with countries in Africa, many are heavily dependent on oil and gas revenues. Exxon is projecting a more than 100% increase in energy demand for transportation from 2014 to 2040 (or 5 to 10 quadrillion BTUs), representing an annual growth of about 3%. Aside from India, the African continent will experience the most growth in energy demand at 83%, according to Exxon.
5. Automotive News: Political Window Opens for High-Grade Fuel Standard ― “For the first time, the auto, petroleum and retail fuel industries are on the same page and engaging the ethanol sector to agree to a 95 Research Octane Number — roughly equivalent to 91 octane today — as the nation’s baseline fuel. Under the proposal, the Renewable Fuel Standard would fall away, and vehicles made after, say, 2023 would be engineered to run on 95 RON. Advocates say everyone would win…” I know plenty of folks in the industry that won’t budge unless it’s 98 RON.
Who are the big winners in the IMO’s sulfur reduction regulations slated to take effect in 2020? Some refiners, according to this article. “Refiners have the hammer: they can choose from multiple crude suppliers based on price and quality, and squeeze those that are most vulnerable or expendable.” Meantime, the UK government (after heaps of litigation and criticism) has come out with a new clean air strategy that would, among other measures, end the sale of conventional gasoline and diesel vehicles by 2040 (which it had already announced last year anyway). Germany’s top administrative court ruled German cities are entitled to ban older diesel vehicles from streets with immediate effect to bring air pollution levels in line with European Union rules.
Argonne, the Fraunhofer Institute for Systems and Innovation Research ISI and German Aerospace Center in Germany reviewed 40 PEV market studies from 16 countries that modeled the decision factors that drive consumer purchases. “The value of the models is not in their predictive power, but in connecting ‘important’ factors in a way that enables us to construct some possible future based on what we know about consumer behavior and other factors,” said the study leader. Meantime, there is now as much hype about electric buses as there is with LDVs. But all is not well on the electric bus front: ” A Times investigation found its buses stalled on hills, required service calls much more frequently than older buses and had unpredictable driving ranges below advertised distances, which were impaired by the heat, the cold or the way drivers braked.”
Finally, in the race toward lower and lower CI feedstock, Neste will acquire IH Demeter B.V., a trader of animal fats and proteins, and will have sole control and 51% of the shares, making it the controlling shareholder. The transaction is awaiting for and is subject to regulatory approval. Meantime, REG launched its REG Ultra Clean Diesel. And finally, the Renewable Fuels Association, National Corn Growers Association, American Coalition for Ethanol and National Farmers Union, with support of Farmers Union Enterprises, sued EPA on its granting of three recent small refiner waivers, arguing the agency did not publish in the Federal Register what were final actions by the agency. But you knew that was coming, right?
Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.