RIYADH: Policy Horizons Canada, the foresight organisation within the Canadian government, is mandated to help anticipate emerging policy challenges and opportunities, explore new knowledge and ideas, and experiment with methods and technologies to support resilient policy development. With the growing Canadian role in energy sector, the group also keeps a tab on the fast changing global energy scenario.
Last week a talk was held at Policy Horizons office in Ottawa where the emerging energy scenario was discussed. Most analysts agree today, that while new oil and energy frontiers are emerging – all around – the global appetite for oil is slowing down. On the other hand, global economy is not in the best of the shapes impacting the demand adversely. And then the rising emphasis on efficiency also points to weakening fundamentals.
This then led to the very important question – why the markets continue to stand firm.
Though it was a rather confounding scenario – yet with fundamentals regaining market controls, most agreed that prices are in for a fall.
A subsequent query then was; how long these soft market conditions would sustain? And the recent PwC report, saying the crude markets are projected to remain somewhere between $33 and $50 lower in real terms by 2035, came in handy to handle the question. Policy Horizons too agreed. In its recent paper, ‘The Next Economy,’ it says: ‘Although liquid fuels are expected to remain the most popular form of fuel for at least the next 10 to 15 years, the global demand for oil is expected to flatten or decline according to ExxonMobil (by 2040), Shell (by 2026) and Deutsche Bank (by 2018). These estimates hinge on expected changes in the availability of alternative energy sources, hybrid cars, higher emissions standards, consumer incentives and the potential electrification of the global vehicle fleet.’
And this turned out to be a moot point for discussion; post the talk, last Monday.
Energy analysts all over the world converge on one point – the transportation sector is the prime consumer of crude oil. It consumes more than 70 per cent of all the crude that is used in the world today. Yet this could be in for a change.
Internal – combustion engines rule – until now. Cost remains a major concern in any transition. Lithium-ion battery packs in electric vehicles today can easily comprise up to 50 per cent of the cost of a new electric vehicle, making it prohibitive. The Tesla Motors Model S 85kWh battery, for example, is worth $12,000.
But this could be in for a change. Lithium-ion batteries are to be three times cheaper in 2020, analysts are pointing out. McKinsey Quarterly concludes in a report that the price of batteries, and more specifically the lithium-ion variety, will get a considerable reduction in price.
According to the study, the price could fall from $500-$600 per kWh, to as little as $200 by 2020, and, even lower by 2025, at $160. This should spur on the EV industry.
Sustainability & Resource Productivity Practice reports that with the falling battery prices, in the United States and with gasoline prices at or above $3.50 a gallon, automakers that acquire batteries at prices below $250 per kWh could offer electrified vehicles competitively, on a total-cost-of-ownership basis, with vehicles powered by advanced internal-combustion engines.
Sam Jaffe, research manager for IDC believes: “This (the emerging technological revolution) will lead to a dramatic reduction in price for Li-ion cells to as low as $400/kWh by 2015.”
Investment analysts at Deutsche Bank argue that the electric vehicle is a disruptive technology and its short-term potential is widely underappreciated. “Transportation is likely to change more in the next 10 years than over the last 50,” says Dan Galves, the bank’s chief car industry analyst.
The lithium-ion revolution is on, changing the global energy horizon and for good.