By Dave Brown — Exclusive to Lithium Investing News
The International Energy Agency recently released its 2012 Tracking Clean Energy Progress report, which measures global growth in energy efficiency and advancing clean energy technologies. Combined national targets for electric vehicle adoption have been estimated at 20 million vehicles on the road by 2020; however, the report highlights that significant action will be required if this ambitious objective is to be achieved. Further analysis indicates that clean energy technologies, from electric vehicles to smart grid, can mitigate global warming impacts.
Setting high expectations
The report acknowledges that individual governments have set strong targets for electric vehicle deployment in the 2015 to 2020 timeframe; however, it cautions that to reach these targets sales must nearly double each year between 2012 and 2020, costs must decline, infrastructure must be developed, and consumer choice and confidence will require stimulus.
Lithium battery costs
While noting that lithium battery costs are often cited as a primary challenge for electric vehicle competitiveness with standard gasoline cars, the report recognizes that forecasting future battery costs is difficult. The Department of Energy has set aggressive targets for lithium battery advancement, establishing a cost target of $300/kWh by 2015. If technological improvements continue at the growth rate indicated in this report, the authors believe that future advancements could achieve $325/kWh or less by 2020. This amount could be sufficient to bring electric vehicles relatively close to cost competitiveness with vehicles with internal combustion engines.
Defining the targets for electric vehicle adoption: consumer vs. commercial
An earlier report from IBM indicates that for US consumers vehicle price may be the greatest driver for adopting electric vehicles. Fleet managers in the US have increasingly been considering electric vehicles to help manage fuel cost inflation in addition to emission reduction. Commercial demands will be looking beyond the higher initial purchase price. These fleet managers may focus on the total cost of ownership for the vehicle, including fuel and service costs, as well as corporate sustainability aspects. Electric vehicles will serve a function for delivery services, as predictable delivery schedules and routes make costs easier to forecast and charging easier to manage.
An incremental transition
In an interview with Lithium Investing News, Paul Scott, a Director at Plug in America, explained the progressive developments, commenting, “we are seeing the beginning of what will ultimately be a near complete transition in the energy that moves our personal transportation. Hundreds of billions of dollars are spent on petroleum for cars, trucks, and SUVs every year in the United States alone. As more vehicles are sold that use electricity, this flow of money to the oil industry will gradually subside at first, but the rate will accelerate once the OEMs [original equipment manufacturers] start building millions of plug-in cars.”
Ultimately, Scott believes that perception and market sentiment will play a critical role, explaining, “the rate of adoption will depend on the relative costs of the vehicles in the consumers’ minds. This will be a combined effort of the rising oil prices, either through taxation or peak oil/Mideast disruption, and lower battery costs. Much more work needs to be done in the battery and ultracapacitor sectors.”
Implications for lithium production and exploration companies
The overall context of the report provides support for critical additional research and development of lithium battery technologies as well as marketing for the adoption of electric vehicle architecture. In terms of research and development investment, commitments from China, Germany, and the US have the potential to advance progress for lithium battery chemistries and designs. Whether electric vehicle sales are driven by individual consumers or by commercial interests, positive global initiatives appear to be directed towards similar goals. International government aims and policy objectives provide energy implications that should directly support demand for lithium products. Higher prices for lithium would mean additional capital invested in bringing new lithium projects into production.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.