Several times on a recent vacation in Vancouver, sleek vehicles with an unfamiliar model badge would catch my eye.
They turned out to be Teslas, electric cars made by the new company created by high-tech entrepreneur Elon Musk.
You tend to see a lot more high-end vehicles in Vancouver than you do in Saskatchewan and a lot more electric and hybrid cars like the Prius, Nissan Leaf and Chevy Bolt.
This got me thinking. I wonder when the number of electric vehicles will become so numerous that they will lower the overall demand for gasoline, and following from that, what would it mean for ethanol demand and the amount of grain used to create biofuel?
This won’t be a demand factor in the next few years, but it could be an issue in 20 years, or maybe much sooner.
Technological change can creep up unnoticed until what seemed like a sci-fi dream is reality.
To illustrate the speed of disruptive technological change in his presentations, economist, author and futurist Tony Seba uses a photo of a street in New York City at the turn of the 20th century. Fifth Avenue is packed with hundreds of horse drawn carts, wagons, cabs and trollies. Only a single internal combustion motor car can be seen.
A second photo shows the same street in 1913. It is still crowded but it is the car that dominates. Only one horse jostles in the traffic. It’s a huge change in just over 10 years.
The International Energy Administration says there were three million electric vehicles in the world in 2017, half of them in China. It forecasts that by 2030 there will be 125 million, and with a more favourable policy environment there could be 220 million.
A report by Bloomberg says almost 560 million cars, or one-third of all those on the road, will be electric by 2040. More than half of all annual new sales will be electric by that point.
Bloomberg forecasts that by 2030 electric vehicles will be cheaper to make than internal combustion engine cars.
Why? The most critical factor is the rapidly falling cost of lithium-ion batteries and their improving efficiency. Battery costs fell almost 80 percent from 2010-17. This development is also revolutionizing the power generation sector as solar and batteries become cheaper than fossil fuel generating plants. So electric cars will be able to run on clean, cheap solar-generated electricity.
Electric vehicle costs will also be driven lower by the host of new competitors just now coming on the market. A market now dominated by a handful of models will soon have many dozen as every major car maker in the world, including Chinese manufacturers that most of us in North America have never heard of, introduces the technology they have been working on for the past decade.
Government policies are also a factor. China currently leads in electric vehicle sales, partly because there are severe limits on how many internal combustion engine cars can be sold in its six largest cities that suffer from severe air pollution. However, the limits do not apply to electric vehicles.
Bloomberg forecasts that the world’s electric vehicles will displace 7.3 million barrels per day in transportation fuel by 2040.
In another report, Bloomberg forecasts that the oil consumption reduction from electric vehicles, an even bigger reduction coming from more efficient internal combustion engines and reduced demand because of the efficiency of self driving, or autonomous, cars will cause the amount of oil used in transportation fuel to drop to 15.9 million barrels per day by 2040 from 24 million today, even as the overall number of vehicles on the roads increases. That is a decline of about one-third.
As the amount of oil used for transportation declines, the amount of biofuel used could also decline if the inclusion rates remain the same.
The amount of corn, sugar and vegetable oil that goes into biofuel around the world is significant, supporting crop prices.
In the United States alone, 5.6 billion bushels of corn, or 39 percent of the crop, is expected to be processed into ethanol this year.
If ethanol demand fell by a third, similar to crude oil demand, that would put 1.86 billion bu. of corn back on the market in the U.S. alone.
Of course that is only speculation. The factors, from policy change to technology to economics to geopolitics over the next couple of decades, that would affect the course of biofuel demand are too numerous to comprehend.
And the more I research the coming revolution in the transportation sector and the transformation of electricity generation as the cost of solar and batteries plummets, I realize that calculating the effect on biofuel use is laughably narrow.
The impacts have the potential to be enormous, transforming the world’s economy and the way we live.
Seba argues that the transition to solar and electric vehicles will be much quicker than forecasts such as Bloomberg’s and that the decline in oil demand will come sooner and be deeper. Peak oil demand could happen as early as 2020 with declines following, he says.
Seba is an evangelist for the disruption in energy and transportation, and he is likely too optimistic in some of his outlooks. One aspect is his belief that most people will abandon car ownership in favour of cheap ride hailing services that use autonomous vehicles. I think that most people like the freedom that vehicle ownership provides, particularly in medium and smaller cities and rural areas. Also, lots of people own trailers and boats that they want to haul themselves.
However, that will not alter the overall direction of this technological revolution. It is coming sooner or later and probably within our lifetime.
It will yield a host of benefits, such as helping to prevent climate change, but the challenges must not be ignored.