Electric vehicles (EVs) are rapidly moving from curiosities to the transportation mainstream. It’s a profound shift with the potential to address some of the most urgent challenges facing our cities, human health and the planet.

We’re already seeing the disruptive influence of EVs across the automotive sector, within supply chains – and in the utility sector

The massive growth in renewable energy generation is also changing the role of EVs. They’ve always been a low-pollution alternative to internal combustion engines (ICEs). Now they can become a major factor in overall emissions reduction. Renewables delivered 33% of UK power last year, compared to just 6.7% in 2009– meaning not only the car but also its ultimate power source are emissions-free.

“There are huge investment opportunities in this market,” says Investec’s Marc Elliott. “We’re already seeing the disruptive influence of EVs across the automotive sector, within supply chains – and in the utility sector, where it is driving an unprecedented level of innovation in energy storage, transmission and distribution.”

Elliott says equity markets do not currently reflect the long-term potential to profit from the enormous amount of investment being made in each of these sectors, as markets focus on near term economic uncertainty and the disruptions to incumbents.  Yet there are some companies that have the right strategy that is apparent today.

Spanish utility Iberdrola is an excellent example of a firm benefiting from early adoption that fits with changing government policies. “It embraced renewables way ahead of its peers, so while European utilities have traded sideways or slightly down, it’s up 50%-60% over the same time period,” says Elliott. Better yet, it’s stolen a march on rivals by reshaping its business model before European policy amendments forced them into hasty changes.

Similarly, shares of innovative companies that dominate the supply of advanced technology to the auto industry, such as Infineon and Umicore, are due for recovery as macro-economic concerns in Europe fade.

The market is already responding to the positive signals. In 2017, sales of EVs globally passed 1 million. In its recent report, Deloitte predicted that would top 2 million for 2018 – and hit 4 million in 2020. The consultancy predicts a tipping point in 2022 when the total cost of ownership for EVs starts to dip below internal combustion engine (ICE) vehicles.

Presenters at Investec’s seminar agreed that the phasing out of the ICE represents the best hope for limiting the worst effects that carbon emissions and air pollution are having on public health.

“The evidence is overwhelming,” says Stephen Holgate, MRC Clinical Professor and Consulting Physician at University of Southampton.

“Air pollution is linked to chronic health conditions, including lung cancer, heart disease, stroke, high blood pressure, premature birth and other ailments – causing 36,000 premature deaths a year in the UK alone, at an estimated cost of £20bn a year.” Diesel exhaust alone causes 12,000 of these deaths – and he adds that there’s no question that “electric is going to rule the roost” in coming years.

That’s good news for residents of cities such as London. According to Shirley Rodrigues, London Deputy Mayor for Environment and Energy, the air quality in the city is at “crisis levels” that require a simultaneous tightening of private vehicle restrictions, major investments in clean buses and taxis, and increased access to alternative transportation – including freezing fares on most public transport. 

“This is a critical time for action on air pollution and CO2 emissions,” she adds, noting that PM2.5 particle pollution levels in all areas of London breach global standards, with 50% of this output being transport-related.

Rodrigues also points out that a big challenge for EVs in London is infrastructure. The availability of rapid charging points for the growing number of EVs coming into the city is limited by land constraints, inconsistent policy at the national level and uneven local council support

Even so, she says, mayor Sadiq Khan remains “absolutely committed” to raising the number of rapid charge points from 153 currently to 300 by 2020.

Peter Stephens, Nissan’s head of UK External and Government Affairs, also underscores the need for a consistent policy in support of EV, including the use of incentives. Beyond policy support, he adds, “developing comprehensive and accessible infrastructure for charging vehicles in urban areas and across the country is an important challenge – but also an opportunity for industry.”

Access to low-cost renewable energy will be just one of many drivers for the EV industry’s growth

Exploiting that opportunity means manufacturers selling more economy models – right now, too many EVs in development are luxury-focused. “We must capture people leaving diesel,” he says, “particularly as these cars are removed from circulation. That requires that the car industry address the current EV supply constraints while also finding ways to lower the cost of entry into the market.”

How does upstream power affect EVs?

Dramatic changes that are underway in the energy industry itself will have an impact on EV adoption. Emma Pinchbeck, Executive Director of the energy trade association Renewable UK, reckons advances in offshore wind turbine technology in particular have helped to shift the energy sector rapidly in the direction of renewables by drastically lowering the cost.

“This technology progression has driven cost reduction faster than we could have ever predicted,” she says, particularly for large infrastructure at the transmission end of the energy system. Additional technology breakthroughs in the distribution side of the system – such as smart grids –could drive costs even lower. 

And as EVs become the norm, they start to be able to soak up off-peak renewable capacity from, for example, wind farms and tidal barriers. Analyst firm Brattle Group estimates that aggregating energy across one million EVs amounts to 50 to 100 GWh of storage capacity.

Access to low-cost renewable energy will be just one of many drivers for the EV industry’s growth, accelerating its adoption in conjunction with advances in demand-side electrification, distribution and storage of energy. And together these drivers are flipping the narrative on renewables and EVs.

“There is huge commercial risk in not taking any of this seriously,” Pinchbeck concludes. “No-one wants to be the Kodak of utilities or transport.”