EVs: the new transport era

MATHIAS STECK     Hello and welcome to the 12th series of the DNV Talks Energy podcast. I'm your host Mathias Steck. During this series, we'll be exploring the human impact of the energy transition, with our first episode touching on the energy needs of people across the world. In this episode, we focus on the introduction of electric vehicles and the seismic shift this will mean for motorists. The mandate of phasing out petrol and diesel cars globally is perhaps the biggest disruptor the auto industry has ever seen. And we discuss the impact this will have on individual choices, the accessibility currently available to motorists and what needs to be done to encourage uptake. I'm delighted to be joined by Graeme Cooper, Head of Future Markets at National Grid UK, working specifically on the pathway to net zero by 2050 and the decarbonization of transport with the introduction of electric vehicles. We hope you enjoy the episode.

Welcome to the DNV Talks Energy podcast, Graeme. It's a pleasure to have you with us today. Let's start with a brief introduction of yourself. You are currently the Head of Future Markets at National Grid. You actually started in telecom before you became a wind farmer. So, I'm intrigued to know more about your past and current experiences.

GRAEME COOPER     Yes. Thanks, Mathias. I guess the best way to describe my career is I'm in my third disruptive industry, so I graduated in 1997. I've got a degree in civil engineering, but I've never done civil engineering. But what was really exploding at the time was the growth in the mobile phone market. And what you realize is it's a really disruptive technology disruptor. It's pushed by government, is pulled by consumer. It has a lot of infrastructure involved and a strong regulator. And that was a really disruptive time, right? It had never been done before. But once the market started to mature and had lots of consolidation, I realized I was probably going to be working my way out of a job in building the network. So, I thought, quite simply, it is a bit like mobile phone mast, right? So, wind turbines they’re tall, and they're in remote locations just like mobile phone masts.  So, for me, there's a lot of transferable skills into building wind farms.

But if you think about the growth in renewables, Mathias, it was a technology disruptor pushed by government, pulled by consumer, lots of infrastructure and a strong regulator. So, the same themes pull through. Then when we think about the move to e-mobility, actually, it's another technology disruptor pushed by government, pulled by consumer with the need of a lot of infrastructure and a strong regulator.

So, that's why for me, it is disruptive, but it builds a lot of resilience.

MATHIAS STECK     So, we want to talk about the decarbonization of transport today, and we all know that it's not an easy thing to do. But in your view, how important is it to decarbonize globally and why?

GRAEME COOPER     Okay. So, if we think about it, making power historically has been the dirtiest thing we've done. And in many countries, making power is still the dirtiest thing that these countries do. But if you look at the next dirtiest thing, transport is the next dirtiest thing in almost every country, but also, theoretically, it's the easiest thing to fix. I'll give you a typical example. In the UK, a typical car will last thirteen point seven years. So, if you put an end date for the sale of petrol and diesel cars within thirteen point seven years, the market should be cleaner, right? And so from my perspective, that's why transport is the easiest thing to transition and actually gives us a bit of space and learning for the more difficult to fix things. I didn't say it was easy. It's just the easiest of the difficult things we need to do.

MATHIAS STECK     Graeme, we are shortly going to come on to how the decarbonization of transport will affect people and communities. But before we do this, could you give us a summary of how much progress has been made on EV rollouts so far? And do you see regional differences in that progress made?

GRAEME COOPER     I see huge differences. Very, very country-dependent. The one thing that is universally accepted is climate change and burning fossil fuels for the purposes of mobility is something that's going to have to change. So that's the universal piece, but you see different countries moving at different paces. So, if you want to look at the trailblazer, you know, you and I know that Norway is a particular trailblazer, 86 per cent of their car sales now are fully electrified vehicles. So, there are a real trailblazer. But you can't just copy Norway. You know, you got to take away the bits that you can transition. And every one of the jurisdictions we see the transition. You need a carrot and a stick. You need the thing to draw people into it, but you also need a line in the sand to the end of sales of. We see from a UK perspective the end of the sale of petrol and diesel cars by 2030 and hybrids by 2035. We even see it through the lens of, you know, trucking. Trucks under 26 tonnes. You won’t be able to buy a diesel truck after 2035. So, what you've got is you've got that stick that says “something needs to be done by a date”. That gives certainty for markets to be able to work out how that transition happens.

MATHIAS STECK     So, another topic you mentioned is that it is not the same to just fuel the petrol or diesel car than charge an EV, because the EV is more flexible in interacting with the infrastructure around it. So, I think there are two points to this. The first point is how do you think consumers will change the interactions they have with their energy supplier as they switch to the EVs and what changes must be made to the grid to allow this to happen?

GRAEME COOPER     Yeah, no. It's really, really good question. So, firstly, I've been 15 years in the energy industry and I learnt more about energy by owning an EV than I did through years of experience, because those in energy talk about kilowatts and kilowatt hours. You know, it's less tangible. So, the one thing I know now is that 250 kilowatts is naught to sixty in four point six seconds, but I also know that 75 kilowatt hours gives me about a 200 mile range. So, I now have a much better appreciation of a kilowatt and a kilowatt hour. And I'm somebody who's spent a long time in the energy industry and I've got an MBA in energy, but the car taught me so much. So, the one thing I think that we will see, certainly as we go forward, Mathias, is the car is an enabler almost of democratization of energy. Let me just explain this.

For our lifetime, we've had energy done to us. You don't see necessarily where you waste it or how you use it. You get a bill after the event and the bill is a sheet of numbers that you don't really understand. It looks like a tax return and there's a pain point you have to pay something at the end after the event. So, if by getting an EV or having access to one, I know you need to own one before having access to one, you suddenly get an understanding of energy. But it also means that you can then be a participant. So the first thing as an EV driver. You say, well, I need to charge it. Do I want a smart one or a dumb one? I want to be able to interact with the grid. The next thing you do is you then look for an energy supplier that has a time-of-use tariff, which means you can charge when it's cleaner and cheaper. Then the next stage on from that is then people say, I'm still spending money on energy, but I can make my own. So then people look to put solar on their roof and charge the car from it, and then the EV is almost like a like a gateway into democratization of energy. And what that then ultimately leads us to is by having smart and dynamic charging, by having some self-generation, actually, as we scale, we can better use the grid networks.

Grid networks are built to peak. But if we cannot add to the peak and we can fill up some of the troughs in energy, we get a much more efficient energy system, much better utilization of the grid. And people often think that's weird, but energy networks don't want to spend so much money on the grid. But let me give you a context.

In the U.K., we have the Committee on Climate Change, which gives guidance to government on policy, and they say that by about 2050, the U.K. will consume roughly twice the amount of electricity than today. That links to the need for four times the amount of clean generation than we have today. That means we need twice the grid capacity. Now, each of those - about twice the consumption, four times the generation, twice the grid - that is based on smart utilization of all of that.

So smart generation, smart networks and smart consumption. If we don't do the smart interaction, you're going to need more than twice the consumption, more than four times a generation and more than twice the grid capacity. So, there's actually a symbiotic relationship created. We can generate more clean energy, but we need smart consumption to optimize that. That then leads you to be able to invest more in that renewable and clean generation.

MATHIAS STECK     So for an individual, this is very difficult to understand what you just explained - that the success of EVs will come down to individual choice and how fast people can adopt and change. How do we incentivize all of these different interest groups to move towards an EV future?

GRAEME COOPER     Oh, it's a really good question. I think from my perspective, you can either force people to do something in which case they object or you show them an alternative and they take the step forward themselves. I use the example.

We talked earlier that my early days in the building telecoms networks. When I built telecoms networks, we didn't even have text messaging, right? And I use the example of a smart phone.

Nobody thought about a phone not having buttons and just being a screen. And then somebody showed us something and we went, Well, that's brilliant, right? So, I think part of the transition for me into EVs is, don't force people to do them. I mean, you need some certainty. That's why we have an end of sale. But show them, learn, talk to somebody who's charging their car, hire one, experience one and you realize how good they are. So that's how you tease people into that.

We already see a huge interest in people looking to get into EV. But what I also want to pick up on, you said the complexity around for the time of use and those sorts of things, but let's liken it to something else.

Back in the day, if you wanted to fly somewhere, there was one price for a flight from one place to somewhere else, and then someone like EasyJet, Ryanair had low-cost airlines and then you had surge pricing. So, if you want to go at a popular time, it's more expensive. If you want to go cheaply, you go at weird times of the day. We are actually used to the basis of surge pricing. Well, energy is exactly the same. So, I think the best way that we can help people in the transition is show by doing, show by experience, and then liken it to something that they've also done before. And then it's not so scary. The transition is, you know, people just naturally fear change. But if you can show them how they've been through this change before and the world is still okay, then it's quite a good way to do it. I'll show you an example.

I remember was it 14 or 15 years ago? Europe said, we're going to ban the sale of incandescent light bulbs. And everybody had an outcry. Oh, we're going to be in the dark! This is terrible! But today we're all sat here in light. It just happens to be an LED light bulb. And we've taken nearly 10 percent out of our peak demand for energy. And so, I think some of the transition that we're looking at, people fear it because they don't understand it, but actually very quickly, I think over the coming years, having an EV will be normalized. Now you'll talk about having a red one or a blue one. You won't talk about it being electric. It's just at the moment, we're still in the very early adopter stage. I mean, in the UK, about two percent of cars on the road are an EV, so we're still early adopter.

MATHIAS STECK     So some countries have already announced that they are phasing out petrol and diesel cars.  At the same time, at least today, electric vehicles tend to be a bit more expensive. How do we make EVs an affordable reality for everyone?

GRAEME COOPER     So in any technology disruptor, the first of everything is always more expensive, right? There are those at the moment who you could argue are paying a bit more to be pioneers, to be early adopters. But also, what we see because the running costs of EVs are so low, the whole life cost is actually, you know, we're almost at parity in most types of car with an EV already. But people are by human nature, just look at the windscreen price, they don't look at the whole cost. But what we're also starting to see, though, is some government policies are actually realizing that the best way to have a cheap or cheaper EV is through the process of depreciation. I'll give you an example.

In the UK, more than 50 percent of all new car sales are for companies for their staff. Now, in a lot of cases, it's the driver who gets to choose the car. You know, they have a long list and they pick what they like. What's really interesting in the UK is if you've got more than 50 percent of new car sales being companies, you want company car drivers to drive electric because in three years’ time, those expensive electric cars will be half price, you know, depreciated second hand cars. So you pump prime a second hand market. So actually, the way it's worked out in the UK is if you take a petrol or diesel car, you pay about a 26 percent benefit-in-kind you, you pay a percentage of the value of the car. But if you take an electric car in the UK, you're taxed at one percent. So, the real world experience as a company car driver is I get a brand new, very cool electric car and it feels like I get a pay rise. But the knock-on to that is that in three years’ time, my electric car will fall into the second hand market and it will have depreciated by however much it'll depreciate. So that brings affordability closer to others. But in that time, more electric vehicles will be produced. The price will fall with volume so there is a natural cost curve that is being introduced. But there are, in some markets, a little bit of pump priming to try and create that lower cost second hand market.

MATHIAS STECK     So, is this example you just gave that 50 percent of all EV sales are to companies for their fleet. What responsibilities do companies have to continue to drive this change?

GRAEME COOPER     That's a really good question. And we've had this debate in National Grid. In the UK now, National Grid, if you are lucky enough to have a company car, it can only be electric. But that's not driven just because we want to. If you actually look through big company, you know, we're a FTSE listed business, OK? We have a responsible business charter. So, it's not just about what we do as a business, it's about how we are a responsible citizen of the planet. And so our shareholders are expecting us to go above and beyond just being a profitable business. So actually, when we look at our footprint and what can we do to be cleaner, actually clean vehicles is the easiest thing for us to do. So it became quite easy. I mean, when I joined National Grid four years ago, I couldn't have a company car that was electric. But now, our policy is you can only have electric. And part of that is driven by the tax treatment, but also responsible businesses through their ESG strategies are actually trying to work out how they get cleaner, quicker and transport being one of the dirtiest things we do, and one of the easiest things to change has actually driven us. So, you know, to make that change. So as a business, we have more than 600 electric cars on our national grid company car fleet. That's given us huge learning. But it's also taken a huge bite out of our costs because whole life costs, as we said, are very comparable. But also, we know that when those cars come to the end of their life and fall into the second-hand market, our members of staff who aren't lucky enough to have a company car can go and buy them from a from a dealer as a depreciated vehicle.

We've also introduced as a business again as part of that ESG strategy. If you if you're not lucky enough to have a company car, you can actually get an electric car through a salary sacrifice scheme, you know, so it comes out of your salary before your tax deductions. And that's a very tax-efficient way of getting an electric vehicle. So, we've had huge uptake in people who don't have a company car getting an electric car via a salary sacrifice scheme. There are a number of ways that as a business, just by trying to be responsible that we're able to help that market move. And even by doing that, we're learning a tremendous amount. A lot of people say, well, you know, we're just trying to help people get into clean transport. Yes, but it's not right for us to tell people what to do. We need to be doing it ourselves and learning by doing. And so, for us, it's actually really important that we do this ourselves.

MATHIAS STECK     Graeme, we talked a lot about the benefits that EVs can bring, especially with regards to climate change. But what about other benefits, for example, job creation?

GRAEME COOPER     So I'd like to pick up on a couple of things. Firstly, before we talk about job creation, can I talk about air quality? The one thing that I think most of people listening to this podcast will acknowledge that when we had lockdowns in countries, wasn't it quiet and wasn't the air clean? So why would we not want that? I'll give you some stats. In the UK, nearly 40,000 people die prematurely every year from the impacts of poor air quality. And one of the biggest contributors to that poor air quality is transport. One of the value added benefits is as well as being cleaner and helping the planet, you're actually really benefiting that hyperlocal air quality. You're not shortening the lives of the people around you.

That brings me to another point, though, is that often people at the moment for the early adopters are saying, Oh, these elitist people, you know, they're buying electric cars and it doesn't benefit me. Hang on. They're not driving a combustion engine car, adding to the pollution where you live. So even if you're not old enough to have a driving license, even if you're not comfortable enough to own your own car, by others going electric, you will benefit directly from better air quality, quieter streets. So, I think it's really important to focus on those.

I think there's a there's a balance point about job erosion and job creation. So last year, I met in the UK, at the Institute of Mechanical Engineers and their head of automotive said to me, I'm really worried, there are forty-one thousand people in England who make engines. That's what they do as their job and you're outlawing it. It's not National Grid outlawing it. Governments have legislated for. But about a week later, I went to the Institute of Electrical Engineers and they said, in the next two years, we will be short of 44,000 qualified electricians to wire up charges and help fix cars. Well, surely that's an opportunity for education transformation. I think there's an element here that you could look only to the negative of erosion of jobs and there will be some. There is a huge opportunity for job creation. But also, let's think about the benefits of retraining and reskilling people. A highly skilled mechanical engineer is a really good start point to get a highly skilled electrical engineer because they are regimented around the right principles around engineering and process and how things work. So, I think there's a real opportunity here for this actually to be a good education story as well as a job creation story.

MATHIAS STECK     I want to slightly switch topic as you said, the emissions of EVs are far, far less than petrol or diesel cost, but you do hear criticism sometimes about the materials needed to make the batteries, for example. What would you say? How much greener is an EV compared to a traditional engine type car?

GRAEME COOPER     If you go onto the internet Mathias, there are a million and one studies of, you know, you need to do a million miles in an EV before it's cleaner. A diesel car is cleaner than the air that it drives in because of the clean burn, right? Most of those have been broadly debunked. I'm a firm believer in you need to look at the whole well-to-wheel. You often a lot of these studies only you look at the vehicle after it's produced.

You need to look at end-to-end. Where does the power come from to make it? Where does the power come from to power it? What happens to it at the end of its life? So well-to-wheel, lots of peer reviewed studies already conclude that an EV is cleaner than petrol or diesel.

Now, the important thing for me is that right is different by countries due to their energy mix. I'll give you an example in the UK. So it's obviously, you know, we have car producers in the UK. I mean, Jaguar Land Rover is a well-known car producer. So, when we think about the energy going into making a vehicle, they need a bit more energy to make a battery electric vehicle. But if in the UK, more than 50 percent of our energy now comes from clean sources and it's getting cleaner. So the miles you have to drive before it is cleaner is getting shorter. The other thing that we're seeing particularly and I'll use the UK as an example because it is my domestic market. What we're seeing is, higher wind periods and lower wind periods. So the grid is dirtier and cleaner at different times of the day. So actually, our government recognized that. And by June this year, all car charges that are deployed after June will have to be smart. So actually, they won't add to peak demand. They will fit into the trough so they take less pressure on the grid. But also, a lot of the electricity retailers are realizing that you can have very smart tariffs, so they actually incentivize you to charge your vehicle when the grid is cleaner and cheaper. And they do that by sending digital signals. National grid every day, every half hour broadcasts an API, a digital signal on how dirty the grid is right now, and it forecasts two days forward. My energy provider provides the price signal API. Now I don't have to do anything. I just set my charger to smart. And so it will only charge my car when the grid is cleanest and cheapest. So, what that actually enables is me to know that for every mile I do in my car, it's not the average grid carbon I'm using. It's a much lower grid carbon intensity that is going into my car. And so, I think when we think about this mass uptake, when we get from at the moment still early adopters into early majority, it's not about people having to understand and do. Just know that by ticking smart and outsourcing the clever technology, let technology support us. And that will actually make the transition a lot easier and mean that the miles driven in an EV will be cleaner, and the two miles you need to drive in an EV before they're cleaner than a petrol diesel will get much shorter. But they are already cleaner than their petrol or diesel equivalents.

MATHIAS STECK     I have one last question for you, and that one may be tricky. Can you touch upon the road ahead for transport in general? What do you think the next 10 years will bring on the journey to reaching net zero?

GRAEME COOPER     So I think, Mathias, if we look back in 10 years’ time, electric cars will be normalized. They will be not necessarily the majority of cars on the road, but most people will realize that if they're not in an EV now, their next car is likely to be an EV. I think when we will start to see a significant move towards decarbonization of trucking, the heavier fleets and logistics vehicles because actually, they will have to move by the nature of the companies they're supplying, have responsible businesses and shareholders wanting cleaner transport. So, I think we'll start to see in 10 years quite a significant move in those heavier commercial fleets. I think within 10 years, we'll actually see clean long-haul aviation. Now a lot of people say, how? How are we going to fly? Well, firstly, fly less is always a good start, but short-haul is likely to be batteries or supercapacitors. Medium distance is probably likely to be hydrogen-based and then long haul just on the basis of energy density is likely to be a synthetic fuel. I think what we will see is lots of innovation in business models. I think we will over the next 10 years. I think realizing that there is not one technology to get us where we're going. But anything that is cleaner than today should be better than what we did yesterday and realize that even in that 10 years, it's not a cliff edge. This is a transition.

MATHIAS STECK     Thank you, Graeme, for your time today. It's been a pleasure talking to you.

GRAEME COOPER     Lovely to talk to you, Mathias.

MATHIAS STECK     Graeme provided us with some unique insights, along with his own personal experiences to shed a fascinating light on the future of motoring and transport. We heard that there are reasons for real optimism over EV rollout and that progress is already strong.

We also heard a word of caution if we simply look to replace all existing cars with EVs, we have missed an opportunity to think smarter about the way we use cars and other modes of transport.

Join us next week as we focus in more detail what the energy transition means for jobs and skills, and how efforts are being made not only to protect existing jobs, but to create new ones in a clean energy future. To hear more podcasts in the series, please visit dnv.com/talksenergy.