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How Green are Electric Vehicles?

Bruce Low, Partner, Energy, Utilities and Transport Analyst
Bruce Low is a the Energy, Utilities and Transport Analyst, Back-up Portfolio Manager of the Core Strategy and Arnhem Partner. This is a financial news article to be used for non-commercial purposes and is not intended to provide financial advice of any kind.

Grid Electricity Generation Sources Differ by State/Territory
Fuel sources used to generate electricity differ significantly between the States and Territories of Australia. Exhibit 1 shows the kilograms of CO2 emitted per kilowatt hour (kWh) of electricity generated based on the fuel source generation mix for each state and territory, as provided in the Federal Government’s 2017 National Greenhouse and Energy Reporting (Measurement) Determination.

Exhibit 1: Indirect emission factors from consumption of electricity purchased or lost from grid

Source: National Greenhouse and Energy Reporting (Measurement) Amendment (Energy) Determination 20171

Victoria has the highest emission intensity due to its high proportion of brown coal generation, and Tasmania has the lowest emission intensity due to its high proportion of hydro generation (although in 2016 Tasmania experienced very low dam levels and needed to rush in emergency diesel generation to keep its lights on). NSW/ ACT and QLD are in between, and still rely on significant coal generation.

Electricity Usage and Emissions by Electric Vehicles
Exhibit 2 shows manufacturer data on battery size and range, enabling us to calculate the average electricity consumption per kilometre driven for these electric vehicles.

Exhibit 2: Range, Battery Size and Consumption per Kilometre for Electric Vehicles

Source: Manufacturer Specifications from Tesla Motors, Nissan and BMW

There is a slight variation by vehicle given that a heavier vehicle will require more energy to propel it per kilometre. However, as a substantial proportion of the weight is the battery itself, the variability is not huge. If we use the average from Exhibit 2 (0.164 kWh per km), as well as the emission intensities from Exhibit 1, we can calculate the average emissions as a consequence of an electric vehicle being charged from the grid in each State/Territory. The results are shown in Exhibit 3.

Exhibit 3: CO2 Emissions per Kilometres for Electric Vehicles charged from the Grid.

Source: Arnhem Investment Management, Australian Government, Vehicle Manufacturers

Emissions from Petrol and Diesel Combustion Engine Vehicles
The National Transport Commission of Australia publishes an information paper titled ‘Carbon Dioxide Emissions Intensity for New Australian Light Vehicles’6. In 2016, the average emissions intensity for passenger vehicles was 175g of CO2 per kilometre, and for all light vehicles (passenger plus light commercial) it was 182g of CO2 per km. The top 10 selling light vehicles have CO2 emission intensities as shown in Exhibit 4.

Exhibit 4: Carbon Dioxide Emissions Intensity for Top 10 selling Australian Light Vehicles in 2016

Source: National Transport Commission

Regarding fuel type, petrol vehicles had the lowest emissions (172g of CO2 per km), diesel the second highest (205g of CO2 per km) and liquefied petroleum gas (LPG) the highest (221g of CO2 per km). Australian made light vehicles in 2016 (Ford, Holden and Toyota) had an average emission intensity of 213g of CO2 per km.

Exhibit 5: CO2 Emissions (g per km) – Passenger & Light Commercial by Fuel Type and Country


Source: National Transport Commission.

Interestingly, the average emissions intensity for new passenger vehicles in European countries was 120g of CO2 per kilometre, about 46% lower than in Australia. This is due to the fact that the average passenger vehicle in Europe is smaller than in Australia.

Exhibit 6: CO2 Emissions (g per km) – Internal Combustion Engines vs Electric Vehicle by State


Source: Arnhem Investment Management, Australian Government, Vehicle Manufacturers, National Transport Commission

Key findings
• Electric Vehicles (EV’s) generally do emit lower CO2 per kilometre driven than a ‘typical’ or ‘average’ petrol or diesel internal combustion engine (ICE) vehicle, although EV’s are not always ‘greener’ and still result in a surprisingly high level of emissions, when charged in mainland Australia.
• An electric vehicle charged from the grid in Victoria actually results in greater CO2 emissions than the average petrol passenger vehicle.
• Vehicles charged from the grid in States or Territories with large renewable generation sources (wind, solar, hydro), such as South Australia but particularly Tasmania, and vehicles charged directly from roof top solar, generate significantly lower emissions than internal combustion vehicles.
• Hybrid vehicles emit significantly lower CO2 emissions than electric vehicles charged from the grid in all Australian States/Territories except for Tasmania.

Investment Views
From a CO2 emissions perspective, in countries like Australia, Hybrid vehicles are significantly less emitting than fully electric vehicles, which raises some questions around the growth expectations of pure Battery Electric Vehicle (BEV) manufacturers like Tesla Motors. Continental is at the forefront of new 48-volt Hybrid drive technology7,8. The company is working with Renault to achieve significantly reduced fuel consumption and carbon emissions. The battery of a Hybrid vehicle is charged from the car’s engine and not the grid. This analysis also suggests it’s worth conducting further research on the European auto manufacturers, who are very focused on emissions reduction and are working with companies like Continental to develop lower-emission Hybrid vehicles.

Limitations and Other Considerations
Our analysis looked specifically at CO2 emissions generated from kilometres travelled. Some studies have also considered the lifecycle emissions from a vehicle, including the emissions resulting from initial manufacture. Generally, research suggests that emissions from manufacturing are similar for ICE and EV vehicles, except for the battery – which adds about 15% to the manufacturing emissions for an EV9. So, the emission numbers for EV’s in the chart above would be higher if we compare lifecycle emissions on an apples-for-apples basis.
Petrol and diesel cars also emit nitrogen oxides, which are major pollutants and include nitrogen dioxide (NO2), a toxic gas that is linked to serious lung and health problems10.
This analysis assumes that electricity is purchased from the grid. If an EV user primarily charges their vehicle directly from their own roof top solar then emissions are substantial reduced or even eliminated.

References:
1. https://www.legislation.gov.au/Details/F2017L00829
2. http://www.theaustralian.com.au/news/inquirer/fighting-to-keep-tasmanias-lights-on-in-energy-crisis/news-story/38e96f65902d08f1e894bd0d42d29377
3. https://www.tesla.com/en_AU/models?redirect=no
4. https://www.nissanusa.com/electric-cars/2018-leaf/
5. https://www.drive.com.au/new-car-reviews/2017-bmw-i3-94ah-bev-new-car-review-20170220-guhguf
6. http://www.ntc.gov.au/Media/Reports/(35220AEE-C4EA-9AC6-1BB6-88D8C66D80F5).pdf
7. http://www.caradvice.com.au/564190/worlds-first-48-volt-mild-hybrid-system-in-production/
8. https://www.extremetech.com/extreme/247889-cars-moving-48-volt-electrical-systems
9. https://www.forbes.com/sites/quora/2016/04/22/the-carbon-footprint-of-tesla-manufacturing/#a45c70260964
10. http://www.eea.europa.eu/publications/air-quality-in-europe-2016/at_download/file

Bruce Low is a the Energy, Utilities and Transport Analyst and Back-up Portfolio Manager of the Core Strategy and Arnhem Partner. This is a financial news article to be used for non-commercial purposes and is not intended to provide financial advice of any kind.
This article has been prepared by Arnhem Investment Management Pty Limited ABN 17 129 606 775, AFSL 332484. It has no regard to the specific investment objectives, financial position or particular needs of any specific recipient. You should seek your own professional advice in relation to any financial product referred to. You should also obtain the product disclosure statement relating to any financial product referred to and consider the statement before making any decision about whether to acquire the financial product.

This article, including the information contained herein, may only be copied, reproduced, republished, or posted if done so in whole with original disclaimer included.
© Arnhem Investment Management, 2017