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How the Electric Vehicle market could get a £2.5 billion boost and the UK can hit it’s CO2 targets.

You can’t fail to have noticed the rise of the Electric Vehicle market recently. The manufacturers are coming out with all the shiny new technology, the charging network is being installed and the UK government has announced hundreds of millions in investment and has asked the industry for ideas as to how it should be spent.

If Electric Vehicles are going to take off (and I personally hope they do) then the industry needs a kick start and below I am going to outline my ideas and to welcome your comments.  I could be mad but i could be on to something… You decide

Why Electric Vehicles

Without going into all the possible reasons and writing hundreds of pages of text, for me and many others the main reasons for EV is the reduction in CO2 and of course the reduction in running costs. Now I know all the naysayers will say that the energy production of electricity is only as green as the grid but let’s face it refinement of petrochemicals is not the cleanest either. For this brief overview we will be concentrating on exhaust CO2 of conventional vehicle vs an electrically propelled vehicle.

With EVs showing CO2 emissions of zero compared to almost 100g/km for even the most fuel efficient vehicles there is definitely a noticeable difference and here is where the story starts.

The Government Commitment to CO2 emissions and the Energy Company Obligation

These days most tax paying UK citizens will be aware of the so called “green taxes” that are levied on each of us every time we pay our energy bill. One of these so called taxes is the Energy Company Obligation or ECO.

ECO is the government’s umbrella term for its programme to make houses in the UK more energy efficient, it covers the affordable warmth obligation, the carbon saving obligation and the carbon saving communities obligation. The scheme replaced Carbon Emission Reduction Target (Cert) and Community Energy Saving Programme (CESP) that ended in December 2012.

As part of ECO, the government estimates that £1.3 billion per year worth of energy efficiency and heating measures will be delivered across Great Britain. The vast majority of these efforts are paid for through or energy bills and through taxes.

One of the main aims of ECO is to reduce carbon dioxide gasses to help the UK hit its CO2 targets.There are of course other reasons for ECO but if you enter the offices of any of the big 6 you will find their ECO team measuring CO2 reductions as one of its most important metrics.

Currently ECO does not consider the uptake of Electric Vehicles by it’s customers. However in most cases an electric vehicle will see the same CO2 reductions in just one year as many of the ECO initiatives might see in over the next 25 years.

The ECO Initiatives – The ins and outs of the schemes

Before we go into how CO2 targets could be smashed by the inclusion of EV into ECO (sorry for all the acronyms i used to work in finance) its worth understanding what initiatives ECO uses today

As already mentioned one of the main aims of ECO is to reduce CO2.  The main ECO initiative used by the big 6 is the insulation of homes and consequently it is where the majority of the budget is spent.  As it stands this can cost anything from £300 per house to more than £1000. I have it on good authority that this cost is usually much higher than expected often due to poor quality workmanship and also where houses are partially insulated it is often easier to remove the current insulation and replace with new rather than topping up.

The costs and associated CO2 reduction and insulation can be seen below:

Loft insulation costs
Installation/savings Installing loft insulation
(0-270mm)
Topping up loft insulation (100-270mm)
DIY installation
Cost From £250 From £150
Payback time About two years From six years
Professional installation
Cost Around £300 Up to £300
Payback time About two years Up to 12 years
Overall savings
Money saved per year Up to £180 Around £25
CO2 saved per year Around 730kg Around 110kg

Because most houses with no insulation have been insulated by now, it tends to be that houses are now topped up (100-270mm) rather than fully insulated (0-270mm). This results in cost of at least £300 for a CO2 reduction of just 110kg per year.  These figures have been taken from the EST web site and have been ratified by some of my contacts in the big 6.

The problem however with insulating homes is it does not always see reductions in CO2 that is expected. Many people simply use the same amount of energy and have a slightly warmer home for lower cost and same CO2.

Electric Vehicle and The Potential of CO2 Reduction

Before considering an electric vehicle lets consider the CO2 output of a conventional vehicle. If you have a look at the Energy Savings Trust fantastic CO2 calculator http://www.energysavingtrust.org.uk/Travel/Travel-Energy-Check you can work out you own car CO2 but let’s take an average vehicle travelling 12,000 miles per year. The calculator tells me that this vehicle would produce 3090 kg of CO2 per year so it goes to say that removing it from the road would save 3090kg of CO2.

If we ignore the argument about the CO2 footprint of the energy provision (and for this we are) the CO2 produced by a full electric vehicle is Zero. Therefore replacing a conventional vehicle with an EV (as per the example above) would see a reduction in CO2 of 3090 KG or jut over 3 tonnes.

I am sure by now many of you will see where I am going here…

If ECO enabled the big 6 energy suppliers to promote schemes that would encourage customers to take an EV and to then be able to count the CO2 reduction this generates, then we have an interesting opportunity.  In other words if an energy supplier put initiatives in place that could be actively seen as influencing an EV purchase then they should be able to count the CO2 reduction of the replaced vehicle.

[highlight1]The CO2 reduction of an Electric Vehicle is the equivalent to 28years of CO2 reduction from topping up insulation or the equivalent of 28 houses worth.[/highlight1]

Let’s consider the cost of the insulation. My understanding is that on average it actually costs an energy supplier around £450 per house which if you multiply by 28 houses equates to £12600.

Now there is a lot the energy suppliers could to with that £12600 but why not use that money to subsidise an electric vehicle.

The Nissan leaf is currently advertised on Nissans web site at £16490. If you take the 25% government grant £4122 and add it to the subsidy from the benevolent energy supplier then you have £16722 to spend. Essentially you could give away Nissan leafs to your customers and still meet your CO2 obligations. What’s more  it’s now much easier to measure  the CO2 reduction and we don’t have to worry about people having warmer homes, we just need to measure mileage travelled and from here we know the CO2.  Interestingly the more you travel the bigger the reduction in CO2 compared to your old vehicle.

Want to increase the benefit even more…Join a car sharing club and take some friends and you could double or triple the amount of CO2 you save.

OK I agree that this is somewhat utopian and I find it difficult to imagine any of the big six joining with the government to give away cars,  but I do feel there could be a half-way point where some of the savings is put towards electric vehicles.  If it happens it will almost certainly be far more complex than necessary.

To make any difference there would have to be changes to the ECO rules ECO, which won’t be quick (unless we all do some lobbying) but the numbers are tempting. The big six currently measure CO2 reductions from ECO over 20 years. Insulation produces just 2220 KG of CO2 in this time,  but the same period for an EV is nearly 62 tonnes.

Love em or hate em Electric Vehicles are around and many would say here to stay. For the right circumstances thay are great alternative to a convention vehicle and we should encourage people with the right kind of usage patterns to adopt the technology.  It could just be that this is a way of making them more affordable and more appropriate for more people.

Its difficult to say how much has been spent on ECO to date and how much more is still to spend (trying to do so attracts considerable controversy) but figures are generally in the billions rather than the millions. If the EV market had an extra couple of £billion thrown its way I am sure there would be an increased take up of the technology.

I welcome your comments. I cannot class myself as an expert, I just have a bit of knowledge in a few different areas. It could be there is a glaring hole in my ideas or it could be I am on to something. I have discussed it with some of the Big 6 already and they all agree with the concept they have just put it in the “too difficult basket” you decide. Please build on the idea and add your thoughts to the debate.

 

 

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About the Author

Alex Baker
"The reasonable man adapts himself to the conditions that surround him... The unreasonable man adapts surrounding conditions to himself... All progress depends on the unreasonable man."

One thought on “How the Electric Vehicle market could get a £2.5 billion boost and the UK can hit it’s CO2 targets.

  1. John Dennison - 11th July 2014 at 2:37 PM

    Alex: Not a bad article here and i think you could be on to something. It had never really occurred to me that the numbers were quite so large, i had to do my own research just to be sure. It seems you are right though 🙂 I think alas it may take a while for anything like this to be considered, I imagine that herding mice would be easier than getting the government and the energy companies to pull in the same direction.

    Reply

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