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Demand for electric cars could crash the Grid

World electric vehicle (EV) sales grew by nearly 60% last year according to a new report from the Frankfurt School.

Although EVs only make up a tiny fraction of vehicles on our roads, the fact that sales have grown in the face of low oil prices suggests that they could have a significant impact on energy industries in the near future.

As battery technology becomes cheaper and more effective, and as European taxes on fossil fuels impact on the cost of petroleum vehicles over the next decade, sales of EVs may well reach a critical mass.  This process is expected to be impacted and affected by rebounding oil prices.  On the one hand, the anticipated rise in oil prices back above $100 per barrel as a result of the current failure to invest in exploration and future production will increase demand for EVs.  On the other hand, if sufficient EVs are sold, demand for oil will slump; forcing the price of oil down once more.

The bigger concern about EVs, however, is not their impact on oil prices.  At present, electricity accounts for just 20 percent of the energy that we consume.  Heating and cooling our buildings accounts for another 40 percent.  The remaining 40 percent is used to power our vehicles.  Any significant switch to EVs would mean shifting the energy balance between transport and electricity, so that the Grid would somehow have to provide perhaps double the energy currently produced.  The trouble is that the Grid is struggling to meet current demand.  Moreover, likely delays to new nuclear and gas power stations, coupled to the rapid closure of coal plants means that UK consumers will have to cut our electricity use in future, not add a fleet of EVs to the mix.

The only market mechanism available to prevent a transition to intermittent energy supply is to increase prices to consumers.  So it is more likely that the cost of running an EV will rise in line with the cost of running a petrol or diesel car.  In the end, the majority response to rising oil prices will not be new “disruptive technology”; it will be more walking and cycling, more public transport use and, crucially, less driving.

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