The soaring cost of raw materials for batteries and production challenges mean rising prices will push electric vehicles out of the reach of most Australians for many years.
If the role of government was limited to the production of glossy brochures and development of catchy phrases, such as “technology, not taxes” or “expand choices, not mandates”, then Australia’s citizenry could consider itself well served.
However, if the role of government is to address complex issues that have enormous impacts if the response is inadequate, then the citizenry should be extremely concerned. The recently released Future Fuel and Vehicle Strategy is yet another example of a government initiative that is big on rhetoric and light on addressing the underlying issues.
Back in April I described the Future Fuel Strategy discussion paper as being woefully inadequate for the scale and breadth of the liquid fuel/transportation predicament facing Australia. I concluded that much more was required in the strategy: more realism, more investment, more ambition, more urgency and more imagination. Disappointingly, what the government has released is more of the same, with perhaps the most consequential change being an expanded title. We now have not just a future fuels strategy but a future fuels and vehicles strategy.
The testing of just one critical assumption is enough to unravel the entire strategy. The assumption is that electric vehicle (EV) battery prices will continue to fall, helping EVs to reach price parity with internal combustion engine (ICE) vehicles, thus facilitating their rapid adoption.
Prices for EV batteries have fallen by around 90 per cent over the past decade, an achievement fostered by technological innovation and growing economies of scale. The government, relying on Bloomberg New Energy Finance (BNEF) modelling, expects battery prices to halve again by 2030. It also expects global lithium-ion battery production, based on forecast demand, to increase by over 750 per cent by 2030.
The strategy acknowledges there are risks to these forecasts when it states:
“It will be important to continue to monitor global supply chains to ensure there are no constraints, especially in the case of high growth demand scenarios, as tightening of supply could impact on model availability and costs across the globe.”
It is a great shame there is no evidence that any “monitoring” has been completed on a fundamental constraint that will impact on the future of EVs and renewable energy (RE) more broadly.
For example, an article by BNEF energy storage analyst James Frith in September reported that, for the first time since BNEF’s battery price survey began in 2012, EV batteries may actually rise in price this year. The reason? Surging prices for the raw materials, such as lithium (currently at its highest price ever), nickel (threefold price rise over the past five years), cobalt (price doubled over the past two years) and copper (price almost doubled over the past two years), required to manufacture an EV battery. (Price information obtained from Trading Economics.)
While considering the potential for alternate battery chemistries and other cost-saving measures, Frith recognises that “there is a chance battery price declines will stall for an extended period of time or could even rise for a few years”. This could well prove to be an optimistic assessment.
The body of peer-reviewed scientific literature (briefly examined in my previous article) indicating there will be major challenges in producing the enormous quantities of a broad range of minerals required for the large-scale transition to RE and EVs continues to grow.
Further recent research has identified major under-estimates in the number of EVs, batteries and hydrogen-fuelled vehicles required under a business-as-usual scenario (and hence the renewable energy capacity to support these vehicles). The total material requirement of an EV is twice that of an ICE-powered vehicle (with all of the difference being for the production of its battery) while the production of various metals needs to increase significantly (e.g. a doubling of nickel production and a tenfold increase in lithium production by 2050 from record or near record levels). With recycling rates for many minerals remaining insignificant, the enormous increase in mining will have significant environmental and social impacts Dr Simon Michaux’s sobering conclusion is:
“Replacing the existing fossil fuel powered system… using renewable technologies… will not be possible for the entire global human population.”
It is becoming increasingly apparent that the future prices and production of minerals are a countervailing force that pose a very real risk both to the planned transition to EVs and other new generation vehicles and to achieving net zero emissions.
With global oil demand approaching pre-pandemic levels, the chronic under-investment in the oil industry (more than halving in 2020 after large cutbacks in the last decade) and oil prices nearly doubling over the past year to levels where they are becoming economically painful, Australia faces quite a predicament.
Without a significantly more aggressive and urgent strategy, one which needs to be led by government rather than the market, the likely scenario for the foreseeable future is that the price of EVs will remain out of reach for the bulk of the population while the price and availability of oil becomes increasingly problematic. Or put another way, the vision of a primarily EV-based transport fleet is unachievable and the maintenance of the existing oil-based transportation system is unsustainable.
Economist Dr Tim Morgan, who models the economy as an energy system rather than a financial one, argues that when it comes to the RE transition, “consensus expectations and realistically probable outcomes have become polar opposites”. Australia desperately needs a realistically probable appraisal of just how fast and to what extent the RE/EV transition can occur. A bottom-up modelling approach based on physical and logistic constraints is required rather than top-down demand-driven modelling.
With these constraints ignored, the most likely outcome is that the strategy will be an abject failure in providing Australia with a functional transportation system into the future.
One likely conclusion from such an appraisal would be that replicating a business-as-usual vehicle fleet powered by RE is an unlikely proposition for many decades and perhaps for ever. It would then become apparent that car-based EVs are a very inefficient and inequitable method of transitioning away from fossil fuel-powered transport. However, by focusing on public transport the all-important scale factor becomes manageable. Replacing Australia’s 100,000 buses (or a multiple thereof to account for increased demand) with electric buses is a far more realistic goal than replacing 15 million passenger vehicles (by way of comparison, the Chinese city of Shenzen already has 16,000 electric buses in service). Such an approach would have the benefit of giving most Australians a choice, although not in the manner expected in the strategy.
The Australian, and global, economy is facing what has been described as a three-way conundrum: an “energy transition that seems more improbable every passing year, increasing environmental threats and the risk of unprecedented energy shortages and associated economic depression” over the next couple of decades. By no measure is the government’s strategy even close to being adequate given the nature, scale and urgency of the task before us.
With much more at stake than the unravelling of a strategy, and absent government leadership, preparation for “first-order structural perturbations” to the transportation system will have to start closer to home. It might not be a bad idea to buy a bike or scooter and plant some vegies!