2010 Commonwealth Budget private submission (DGJ)

To: Budget Policy Division
Department of the Treasury
Langton Crescent
PARKES ACT 2600

Coordination of policy and initiatives for the early adoption of electric vehicles

Public Submission to the 2010 Commonwealth Budget, submitted 29 January 2010

Background

Rapid developments in battery electric vehicle (BEV) technology are creating significant policy challenges and opportunities for all levels of Australian government. Until recently it was not expected that BEVs would play a significant role for at least another decade. It is now estimated that by 2020, where suitable infrastructure is available, BEVs could account for more than 50% of new vehicle sales.

It is conceivable that private, public and commercial BEVs could meet the full inner urban road transport task by 2015, with significant implications for reduction of carbon and other harmful emissions, reduced urban thermal loads and reduced dependence on fossil fuels.

BEVs fuelled with electricity supplied from renewable energy sources provide zero emission transportation at both the point of use and the energy source. BEVs fuelled with electricity generated from fossil fuels provide zero emission at the point of use and significantly reduced emissions at the energy source due to their high energy efficiency.

It is estimated that the substitution of BEVs fuelled with electricity from renewable sources for fossil-fuelled vehicles could achieve the following annual reductions:

• CO2 emissions: 5,000-7,000 tonnes per 1,000 vehicles
• fossil fuel consumption: 1.5-2.5 million litres per 1,000 vehicles

BEVs create a significant new class of demand for electricity generated from renewable sources:

• BEVs provide their own storage for variable-supply electrical energy sources (typically 10-35kWh per vehicle);
• the high energy efficiency of BEVs (typically 5-7 km/kWh) results in lower sensitivity to premium pricing for renewable energy (at 25c/kWh BEV direct energy costs are in the order of 2.5-5 cents per km, compared to 7-25 cents per km for fossil-fuelled vehicles)
• BEVs have (generally) complementary demand-supply patterns to other major uses of electricity for residential and commercial purposes;
• BEVs can operate as renewable energy generators when connected to the grid (Vehicle-To-Grid, 'V2G'), providing greater flexibility in the management of renewable electricity supply to residential and commercial consumers.

BEVs will benefit from and strongly complement energy efficiency initiatives such as the Australian Government's Smart Grid, Smart City initiative.

Within the last 12 months, most major car manufacturers have established strategic supply agreements with traction battery suppliers, and it is expected that over 40 new BEV models will be available globally in 2012, with 10 or more of these being available in Australia.

Limited production BEVs are already available from Australian suppliers, and Mitsubishi Australia expects to release the first mass-production BEV in Australia in mid-2010.

While the initial purchase price of BEVs is currently high (reflecting the high cost of batteries), BEVs are already close to price-neutral with conventional fossil-fuelled vehicles on a whole-of-life cost basis. Manufacturers anticipate that the cost of batteries will reduce significantly over the next 5-10 years, and that battery performance will continue to improve with respect to weight, range and durability.

Battery exchange systems such as those adopted by Better Place and Renault/Nissan remove the battery cost from the initial vehicle purchase, and amortise it over the life of the vehicle. Early indications are that this approach could make BEVs directly price competitive with conventional fossil-fuelled vehicles as early as 2012.

BEVs require suitable charging infrastructure, and several suppliers are now actively addressing this requirement. Better Place will rollout whole-of-country infrastructure in Israel and Denmark in 2010-2011. Better Place Australia will commence its rollout in Canberra in 2011-2012, with subsequent rollouts in Sydney, Melbourne and Brisbane.

Other suppliers (eg ChargePoint) are also entering the Australian EV infrastructure services market. It is anticipated that these developments will enable increasingly rapid transition to BEV fleets in Australia within the next few years.

Policy Initiatives

Globally national, regional and urban governments are implementing a wide range of initiatives to encourage the early adoption of BEVs, including:

• direct rebates for BEV purchasers (GBP 5,000 in the UK)
• reduced registration charges for BEVs
• direct and indirect public investment in charging infrastructure (GBP 50M in the UK)
• provision of public charging infrastructure in central urban areas
• reduced congestion charges for access to central urban areas
• conversion of government vehicle fleets to BEV operations

The ACT Government has recently indicated that it intends to progressively convert its 1,000 vehicle fleet to BEVs as suitable vehicles and infrastructure become available. Other Australian State and Territory governments are currently evaluating BEVs to assess their suitability for government fleet operations. Some Australian Government agencies are already using hybrid vehicles, but there does not appear to an Australian Government policy or strategy for BEV fleet operations at this time.

Policy Challenges & Opportunities

The availability of commercially viable BEVs and infrastructure within the next few years presents Australian governments with significant policy opportunities and challenges.

Policy opportunities include the potential to achieve significant reductions of:

• transport-related carbon emissions within the next 5-10 years at relatively low levels of public investment
• the import of liquid fossil fuels
• transport-related harmful emissions and thermal loads in urban areas

Other policy opportunities include:

• mining and production of new materials for BEVs (eg lithium)
• exploitation of BEV-related science and technology innovation

Policy challenges include:

• optimum incentive strategies for encouraging early adoption of BEVs at the lowest public cost
• early removal of barriers to BEV adoption, including implementation of national standards for BEV charging infrastructure and BEV safety (BEV electrical systems operate at lethal voltages)
• impacts on existing automotive industry (manufacturing and servicing)

Policy Coordination

The introduction of BEVs to the Australian vehicle fleet within the next few years will touch many areas of domestic and international policy, including:

• climate change
• energy
• environment
• transportation
• health
• urban development
• science, technology & innovation
• manufacturing
• mining & materials
• trade

It is proposed that:

• a cross-government committee with suitable representation from relevant Australian Government agencies be established to provide effective coordination of BEV-related Australian Government policy and initiatives
• a policy coordination unit be established within the Department of Prime Minister and Cabinet, to:
  • ensure that the Prime Minister, Cabinet, ministers and agencies are consistently and comprehensively briefed on BEV-related developments, trends and issues
  • provide support for the cross-government committee
  • provide appropriate coordination with COAG, state, territory and local governments
  • coordinate relevant research and analysis