The analysis itself does not produce recommendations for government policy action, AECOM noted. However, by testing different scenarios, and the sensitivity of the model to particular factors, the analysis reveals areas where intervention may be warranted:

• The capital costs associated with vehicle purchase, in relation to the costs for conventional vehicles;
• Supply constraints in the Australian market; and
• The provision of charging infrastructure.

The analysis also provides some indications of the likely timelines for uptake of electric vehicles in the Victorian market.

The report comes in the context of Victoria’s 5-year Electric Vehicle Trial (EVT), launched in 2010 (earlier post). The EVT will collect real-world information on the use of electric vehicles in Victorian conditions, including information on the market for electric vehicles, both initially and as it matures; impacts of the use of electric vehicles on driver behavior, recharging, vehicle performance and efficiency; and the potential implications of electric vehicles for electricity consumption, management of electricity demand, greenhouse gas emissions and air pollutant emissions.

The AECOM analysis considers three scenarios against a base case. The characteristics of these four scenarios are:

• Base Case. Assumes there are only Internal Combustion Engines (ICEs) and Hybrid Electric Vehicles (HEVs) available, with no Plug-in Hybrid Electric Vehicles (PHEVs) or pure Electric Vehicles (EVs).

• Scenario 1. Assumes there is Level 1 household charging. Level 1 charging only requires a standard power outlet.

• Scenario 2. Assumes there is Level 1 and Level 2 household charging, and Level 2 public charging in the Victorian Metropolitan region. Level 2 charging requires a charging interface to be wired into a building’s electricity supply to provide the necessary protections from higher voltages.

• Scenario 3. Assumes there is Level 1 and Level 2 household charging, Level 2 public charging in the Victorian Metropolitan Region and electric vehicle service stations that offer quick charge or battery replacement.

The analysis also differentiates between vehicles on the basis of size (small, medium and large), distance travelled (high, medium and low), and vehicle type (passenger, light commercial, or taxi).

Vehicle choice. The vehicle choice model forecasts the proportion of market share for new vehicle sales for each of the different vehicle types (ICEs, EVs, PHEVs and HEVs). The analysis is based on central forecasts of oil price, electricity price and carbon pollution reduction scheme (CPRS)/carbon tax policy, and known information about the historic drivers for consumers in the vehicle market.

The model found that in all scenarios (except the base case), the take-up of PHEVs is stronger than that of EVs in the early years due to superior range and the ability to use both electricity and gasoline as a fuel. However, in later years there is a shift towards EVs as purchase prices converge to parity with ICE, battery improvements result in increased vehicle range and higher fuel prices make EVs more competitive.

In summary, the vehicle choice model suggests:

• A transition to HEVs in the near term (5-10 years); PHEVs over the medium to long term (10-20 years) and EVs over the long term (15 years plus).

• Take-up of PHEVs and EVs is sensitive to the year in which parity with ICE vehicles is achieved and any supply constraints into the Australia market.

• The provision of charging infrastructure (both public charging units and commercial stations) as represented through the different scenarios, has a significant impact on the sales of EVs.

• There are increased sales of HEVs in the near term. This occurs as supply becomes unconstrained and there is no requirement for charging infrastructure, and importantly, prices are expected to converge to values similar to those of ICE vehicles as early as 2020. However, as EV and PHEV prices gradually reach parity, vehicle range improves and more charging infrastructure becomes available, larger vehicles and vehicles that travel large distances tend to purchase a higher proportion of EVs. This is primarily due to increased operating costs (as global oil prices rise) inducing these vehicle owners to switch to more efficient technologies to achieve fuel cost savings, the report found.

Economic and Financial Analysis. AECOM’s economic and financial analysis utilized the results from each scenario considered in the vehicle choice model. The analysis is cumulative, and discounts both future costs and benefits, on the premise that costs and benefits which accrue in the distant future should be valued less than costs and benefits which accrue in the present or near future. The analysis also values externalities, such as the avoided costs of air pollution and greenhouse gas emissions.

Significantly, under all scenarios, the electric vehicle market is both economically and financially strong in the long run. The net present value becomes positive after 2031 in all scenarios (at a discount rate of 5% real pre-tax). Over a 30-year evaluation period, the economic benefits range from $1.8 billion in Scenario 1 to $23.4 billion in Scenario 3. This is largely driven by decreasing vehicle purchase costs of non-ICE vehicles, at the same time as operating cost savings increase. In addition there are large savings in greenhouse gas and air pollution emissions.

The net benefits increase with the level of charging infrastructure, as this increases the take-up of EVs. Higher levels of charging infrastructure also bring forward the breakeven year.

—Forecast Uptake and Economic Evaluation of Electric Vehicles in Victoria

Broad conclusions. The AECOM report also draws a number of broad conclusions, including:

• To ensure the successful take up of EV technologies in Victoria, the Government, automotive industry, electric utilities and other stakeholders should work together to formulate common goals.

• Reducing EV purchase costs in the short term through research and development (R&D) investment is critical for market entry and acceptance of EV technology. Industry also has an important role to play here in focusing R&D effort on addressing resource issues and establishing secure supply chains. Policy makers have the opportunity to develop policies that stimulate R&:D and technology innovation aimed at reducing production costs and increasing supply of new technology. Such supply policies are mostly beneficial in early stages of innovation processes during the R&D stages.

• Public awareness campaigns for consumers can be used to address informational barriers about energy efficient technologies. Consumer willingness to change behaviours and accept different types of vehicles (and perhaps driving patterns) will be an area of uncertainty and one that industry can play a significant role in assisting to address.

AECOM’s analysis indicates that even without government action, within 10 to 15 years, non-ICE vehicles will achieve a significant presence in all segments of the Victorian vehicle market, with a significant role for PHEVs and EVs, particularly in later years as vehicle prices fall and infrastructure availability increases. Between 2025 and 2030, the accumulated economic impact of this transition will provide a positive economic benefit, even when future financial and environmental savings are discounted.

The results of this study are necessarily qualified by the accuracy of the input data – in particular data in relation to the main drivers of consumer preference. The Victorian Electric Vehicle Trial presents a significant opportunity by which to collate a more robust data on revealed consumer preferences, which over time could enhance the accuracy of the modelling.

In analysing the costs and benefits, there is considerable uncertainty around the future path of key variables; in particular fuel and technology costs. Sensitivity testing reveals that the outcomes are highly sensitive to the price of oil, the rate at which the price of non-ICE vehicles declines to become on a par with conventional ICE vehicles, and supply constraints. Whilst unremarkable in themselves, these results suggest areas for further analysis within five years as electric vehicles become commercially available; either to refine the data or to analyse policy interventions by which real-world conditions might be altered.

—Forecast Uptake and Economic Evaluation of Electric Vehicles in Victoria

AECOM concluded that the key variables affecting the rate and timing of the transition to EVs in the state are:

• The capital costs associated with vehicle purchase, in relation to the costs for conventional ICE vehicles;

• The effect of world oil prices upon fuel prices for ICE vehicles;

• Supply constraints in the Australian market (world manufacturing capacity, and supply of imported vehicles to Australia as opposed to other countries); and

• The provision of charging infrastructure in the medium term to support EVs.

Although the first variable is unlikely to be impacted by the decisions of Australian policy makers, AECOM said, the latter three variables could be addressed by government. Although governments cannot easily influence world oil prices, AECOM suggested, they can reduce consumer’s reliance on them and hence exposure to price fluctuations.

Further analysis may be warranted to probe the costs and benefits of any such action. However, the significance of price premiums in influencing consumer choice suggests that price parity may constitute a “tipping point”; a necessary prerequisite for the large scale deployment of non-ICE vehicles. Interventions to support the deployment of non-conventional vehicles should be cognisant of this possibility, and care taken to optimise the timing of any intervention.

—Forecast Uptake and Economic Evaluation of Electric Vehicles in Victoria

Headquartered in Los Angeles, California, AECOM is a global provider of professional technical and management support services to a broad range of markets, including transportation, facilities, environmental, energy, water and government. A Fortune 500 company, AECOM serves clients in approximately 125 countries and had revenue of $7.3 billion during the 12 months ended March 31, 2011.

Resources

• Forecast Uptake and Economic Evaluation of Electric Vehicles in Victoria

• Electric Vehicle Trial website