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http://ftalphaville.ft.com/2014/08/28/1947761/do-bank-analysts-dream-of-electric-cars/
Do bank analysts dream of electric cars?
Izabella Kaminska 20 comments |
Yes, yes they do.
At least the ones from UBS, who are out this week with a huge report on solar, batteries and electric cars and their capacity to re-shape the current electric system in the next few years.
Case in point, these charts:
And here’s a really good one showing the probable rate of electrical vehicle adoption in Europe:
The analysts’ most controversial point is that solar really is on the edge of becoming economically viable (without government subsidies) due in part to recent complementary developments in battery and electric vehicle technology.
From the report (our emphasis):
Solar panels and batteries will be disruptive technologies. Solar is at the edge of being a competitive power generation technology. The biggest drawback has been its intermittency. This is where batteries and electric vehicles (EVs) come into play. Battery costs have declined rapidly, and we expect a further decline of >50% by 2020. By then, a mass segment EV will have almost the same sticker price as a combustion engine car. But it will save up to €2,000 per year on fuel cost, hence, it will begin to pay off almost immediately without any meaningful upfront “investment”. This is why we expect a rapidly growing penetration with EVs, in particular in countries with high fossil fuel prices.
Thanks to EV-driven economies of scale, we also expect the cost of stationary batteries to drop c50% by 2020. Based on our proprietary analysis, battery storage should become financially attractive for family homes when combined with a solar system (and an EV). As a consequence, we expect transformational changes in the utility and auto sectors, which we discuss in this report.
Here in any case is how the cashflow from a collective investment in solar, battery and EV capex should break down:
Understandably, no report on solar, batteries and electric cars can go without a reference to those pioneering the technology on the automative side. According to UBS, that’s BMW and Tesla, both of whom are radically changing the way consumers think about electric due to their premium offerings:
We think this negligible EV penetration is about to change. Premium brands, such as Tesla or BMW, rather than ‘volume’ brands, are leading in terms of technology, but also in terms of sales, as the incremental cost of ‘going electric’ is providing less of a hurdle for premium brand buyers. In H1 14, BMW sold 5,406 i3 versus Renault selling 4,756 Zoe. For the period 2015-20, we expect growth will initially be dictated by regulation and OEMs needing to adopt electrification to meet the CO2 reduction targets set across major auto markets. Even assuming the efficiency of ICE engines continues to improve, we estimate CO2 compliance will require global sales of 3.2m EV by 2020-21, or a 140%-plus CAGR.
But there’s also the impact of decentralised power generation to consider. This, the analysts say, is going to be a big win for those companies that provide the infrastructure to distribute and control the energy flow, manage the smart grid and control the information flow from smart devices.
As suppliers of transmission and/or distribution equipment and software this is positive for Siemens, ABB and Schneider, in our view. In addition, decentralised power generation by renewable sources such as solar power increases the need for software and hardware to control and optimise demand/supply, again benefitting the three companies. The smart grid is to a great extent about information management. You gather live data on the ebbs and flows of electricity in the grid and use software to optimise the allocation of the energy in the system.
Those who used to be price takers will, thanks to the smartening up of the grid, in other words become price makers:
Do bank analysts dream of electric cars?
Izabella Kaminska 20 comments |
Yes, yes they do.
At least the ones from UBS, who are out this week with a huge report on solar, batteries and electric cars and their capacity to re-shape the current electric system in the next few years.
Case in point, these charts:
And here’s a really good one showing the probable rate of electrical vehicle adoption in Europe:
The analysts’ most controversial point is that solar really is on the edge of becoming economically viable (without government subsidies) due in part to recent complementary developments in battery and electric vehicle technology.
From the report (our emphasis):
Solar panels and batteries will be disruptive technologies. Solar is at the edge of being a competitive power generation technology. The biggest drawback has been its intermittency. This is where batteries and electric vehicles (EVs) come into play. Battery costs have declined rapidly, and we expect a further decline of >50% by 2020. By then, a mass segment EV will have almost the same sticker price as a combustion engine car. But it will save up to €2,000 per year on fuel cost, hence, it will begin to pay off almost immediately without any meaningful upfront “investment”. This is why we expect a rapidly growing penetration with EVs, in particular in countries with high fossil fuel prices.
Thanks to EV-driven economies of scale, we also expect the cost of stationary batteries to drop c50% by 2020. Based on our proprietary analysis, battery storage should become financially attractive for family homes when combined with a solar system (and an EV). As a consequence, we expect transformational changes in the utility and auto sectors, which we discuss in this report.
Here in any case is how the cashflow from a collective investment in solar, battery and EV capex should break down:
Understandably, no report on solar, batteries and electric cars can go without a reference to those pioneering the technology on the automative side. According to UBS, that’s BMW and Tesla, both of whom are radically changing the way consumers think about electric due to their premium offerings:
We think this negligible EV penetration is about to change. Premium brands, such as Tesla or BMW, rather than ‘volume’ brands, are leading in terms of technology, but also in terms of sales, as the incremental cost of ‘going electric’ is providing less of a hurdle for premium brand buyers. In H1 14, BMW sold 5,406 i3 versus Renault selling 4,756 Zoe. For the period 2015-20, we expect growth will initially be dictated by regulation and OEMs needing to adopt electrification to meet the CO2 reduction targets set across major auto markets. Even assuming the efficiency of ICE engines continues to improve, we estimate CO2 compliance will require global sales of 3.2m EV by 2020-21, or a 140%-plus CAGR.
But there’s also the impact of decentralised power generation to consider. This, the analysts say, is going to be a big win for those companies that provide the infrastructure to distribute and control the energy flow, manage the smart grid and control the information flow from smart devices.
As suppliers of transmission and/or distribution equipment and software this is positive for Siemens, ABB and Schneider, in our view. In addition, decentralised power generation by renewable sources such as solar power increases the need for software and hardware to control and optimise demand/supply, again benefitting the three companies. The smart grid is to a great extent about information management. You gather live data on the ebbs and flows of electricity in the grid and use software to optimise the allocation of the energy in the system.
Those who used to be price takers will, thanks to the smartening up of the grid, in other words become price makers:
With the smart grid, decentralised generation, mobile consumers, prosumers and renewables, supply and demand data that has historically been captive to the traditional power-generating utilities and grid operators will be made available to third parties, such as the equipment suppliers. This opens up for the creation of, for example, virtual power plants where a solution of equipment and software from, say, Siemens can match buyers and sellers of electricity.Managing the vast amount of data that will flow through the smart grid will be a challenge that requires significant investment. As mentioned earlier in this document, our colleagues in the utility team believe the European smart grid is a EUR 290bn capex opportunity. There is little doubt in our mind that Siemens, ABB and Schneider Electric will look to capture a significant proportion of that revenue opportunity.
The capex needed to process the vast amount of data flowing through the smart grid as well as its decentralised nature is worth bearing in mind, meanwhile, if you have even the slightest interest in the tech race underpinning Bitcoin.
As the UBS analysts go on to note, it all eventually comes down to the power of information to shock-absorb the swing factors that were previously unforeseeable and demanded excessive production to keep energy systems resilient.
Superior battery technology meanwhile is the key factor that allows for the consumption of solar power to be deferred to the point of most need. As the UBS analysts state:
The capex needed to process the vast amount of data flowing through the smart grid as well as its decentralised nature is worth bearing in mind, meanwhile, if you have even the slightest interest in the tech race underpinning Bitcoin.
As the UBS analysts go on to note, it all eventually comes down to the power of information to shock-absorb the swing factors that were previously unforeseeable and demanded excessive production to keep energy systems resilient.
Superior battery technology meanwhile is the key factor that allows for the consumption of solar power to be deferred to the point of most need. As the UBS analysts state:
Solar electricity so far is integrated into the power system – to be blunt – in a fairly dumb way. Thanks to generous subsidies, most owners of existing solar systems sell all their electricity at the time it is generated into the grid at fixed subsidised rates, no matter if there is under- or oversupply in the system. Because of that, utilities have to provide backup generation capacity, which adds to the total cost of the system. Key to the future is to consume the solar power on-site. This requires either, or a combination of: (1) storage capacity; and (2) a demand profile that matches supply. We believe batteries will play a dominant role in this context.
Things in any case are happening. We’ll bring you a few more detailed insights from the 55 page report later this week.
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