What is at Stake at Country Level? Effects Regarding Energy Supply

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En provenance du cours de École des Ponts ParisTech

Electric Vehicles and Mobility

65 notes

École des Ponts ParisTech

Electric Vehicles and Mobility

65 notes

The purpose of Electric Vehicles and Mobility is to help you, whatever your profile, your training or your country, find your own answers to questions such as: - Will electric vehicles be the last to be allowed in megalopolises in the 21st century? - Does the environmental gain from vehicle electrification justify heavy investment in charging infrastructure? - Are electric vehicles only for wealthy people in developed countries? This course will allow you to acquire elements from engineering science, sociology, environmental science, political science, economics, management science, in order to evaluate, analyze and implement the diffusion of electric vehicles where their use is relevant. This MOOC is the English version of Mobilités et véhicules électriques; in the lecture videos, the teachers speak in French, nevertheless their presentation is in English and English subtitles are available. Groupe Renault and ParisTech schools have been working together for almost 15 years on topics related to sustainable mobility. Together, they created two Master programs (Transport and Sustainable Development in 2004, Mobility and Electric Vehicles in 2010) and the Sustainable Mobility Institute Renault-ParisTech in 2009, to support ongoing changes. Electric Vehicles and Mobility is the result of this shared history and was developed from a course delivered within the Master Mobility and Electric Vehicles, led by Arts et Métiers ParisTech in partnership with Ensta ParisTech, Mines ParisTech and École des Ponts ParisTech.

À partir de la leçon

Chapter 3 – Economic Analysis

<p>We will use in this chapter the economic analysis to shed light on the choice between thermal and electric car.</p><p>After presenting a few tools and concepts of economic analysis in the video <em>More on method</em>, we will use this analytical framework to evaluate the costs and benefits associated with the electrification of the fleet, from the point of view of the buyers as well as that of the producer, taking into account the cost of batteries and charging infrastructure, but also the environmental gains and tax revenue changes for the State.</br>Then we will discuss the macroeconomic issues of the electric vehicle before looking at the demand and potential demand for electric vehicles at the micro level.</p><p>The evaluation of this chapter, in the form of a graded quiz, is in the following section. This evaluation concerns only the videos <em>Lecture</em> and is required to obtain the certificate.</p>

More on method - The Issues of EVs for the Industry and Public Accounts3:12

What is at Stake at Country Level? Effects Regarding Industrial Production8:39

What is at Stake at Country Level? Effects Regarding Energy Supply12:16

Do You Know That? Oil Dependence of Transportation in The World3:05

Do You Know That? Fuel Poverty3:38

Rencontrer les enseignants

Émeric FORTIN
Head of the Master in Transport and Sustainable Development
Direction of Studies, École des Ponts ParisTech
Virginie BOUTUEIL
Researcher
LVMT (City Mobility Transport Lab), École des Ponts ParisTech

-This is the second video

analyzing the macroeconomic challenges of electric cars on a national scale.

It focuses on the effects linked to the energy supply.

The aim is to understand what are energy security and the energy bill

and the challenges of electric vehicles

regarding the energy supply for various categories of countries.

95% of the final energy consumption of transportation comes from oil.

But the production of oil is highly concentrated.

Only 50 countries or so produce oil.

Among them, producing over 500 million tons of oil a year,

the three main oil producers,

Saudi Arabia, Russia and the United States,

provide 38% of the world production.

The 9 next main producers, Iraq, Canada, Iran, China,

the United Arab Emirates, Kuwait, Brazil, Venezuela and Mexico,

produce between 100

and 220 million tons of oil each

and provide 36% of the world production.

The other producing countries provide the remaining 25%.

If we focus on geographical areas, the Middle East comes first,

with 34% of the world production. Then comes North America with 20%.

South America, Asia and Africa each produce 9% of the world production.

The European Union produces under 2% of the world oil production.

If we focus on oil consumption, however,

Asia comes first, with 35% of world consumption.

North America is still in second place at 24%.

The European Union comes third, at 14%

before the Middle East, 10%, South America, 7%, and Africa, 4%.

Oil, which is not exactly consumed where it is being produced,

is traded on international markets

which reveal equilibrium prices between oil supply and oil demand.

But oil production depends on the state of existing reserves

and on the evolution of reserve detection and extraction technologies.

It also depends on the economic and political situations and decisions

of the producing countries.

Lastly, it depends on the geopolitical negotiations and power struggles

between the member countries of organizations

such as the OPEC, the Organization of Petroleum Exporting Countries.

Oil consumption, however, mostly depends

on the economic situation

and the energy and environmental industrial decisions of the countries.

At the crossroads of a mixed supply and demand,

and under various influences,

oil prices, as reflected by the markets, vary widely,

often suddenly, both upwards and downwards.

These fluctuations are more linked

to geopolitical and macroeconomic issues

than the evolution of the production cost of the resources.

On the long term, we can remember the two successive oil shocks.

In 1973, it was caused by economic growth and inflation in the US

and geopolitical tensions in the Middle East.

In 1979, it was also caused by tensions in the Middle East.

The 2008 oil price crisis,

which started between 2003 and 2005 with a growing oil demand

from emerging countries,

was less temporary than what was referred to as oil shocks in the past.

The 2008 oil price crisis

will be remembered,

as oil prices reached a record of 145 dollars per barrel

in New York in July 2008.

This was followed by a rapid decrease to 30 dollars in December 2008,

after the start of the economic and financial crisis.

Then, they fluctuated widely between 2010 and 2014.

Oil prices have remained apparently durably under 60 dollars per barrel

since January 2015.

To illustrate the now characteristic volatility of oil prices,

we can see that since January 2017,

with an average of 77 dollars over 10 years,

oil prices were under 60 dollars per barrel for 30% of the time

and over 90 dollars per barrel for 38% of the time.

In a sector which still relies on oil

for 95% of its final energy consumption,

electric vehicles are a possible medium

to diversify the transportation energy mix.

Transportation energy mix diversification may have two upsides

for the economies of countries which commit to it.

First, it may provide the countries with more energy security

by making them less dependent

on a non-renewable energy such as oil, locally produced or imported.

And it reduces the exposition to supply risks,

especially with imported oil and its derivatives.

Transportation energy mix diversification may also enable

a country to have better control over its energy bill

by potentially reducing the oil bill, and/or by being less exposed

to the volatility of imported oil and derivative prices.

The argument regarding a decreased dependence

to oil as a non-renewable resource

is valid for both producing and non-producing countries.

To make it simple,

we consider the risks, for the future of a country and of the planet,

of depending on one energy source available in limited quantities

for an entire sector of activity, here transportation.

The risk is all the higher

as the consumption of this resource is irreversible.

A ton of oil which is consumed today can no longer be consumed tomorrow,

including if it could be more useful or indispensable tomorrow

for any economic sector.

So there is an opportunity cost

to the massive and growing consumption of oil in transportation.

This opportunity cost is hard to quantify

as we are not yet aware of the future potential uses for oil.

The argument of a decreased exposition to risks from importing oil

seems to resonate with a growing number of countries.

The unequal distribution of world oil reserves and production

puts the countries at risk for partial or complete breaks in supply

in case of strong geopolitical tensions or even of conflicts.

This is true for all countries which import high amounts of oil,

including those with their own production

which makes them less dependent on imported oil.

As a consequence of the two oil shocks of the 1970s,

this is especially true in developing countries

given the persistent instability in the Middle East.

It is also more and more true in emerging countries,

even producing countries,

as their oil demand is growing steadily

and faster than their production.

The 2010s were a turning point for the oil independence of the US

after it started exploiting shale oil.

The US oil production has been covering since 2010

a growing share of its consumption.

In 2015, US-produced oil represented 66% of its national consumption,

or the exact independence rate

that the US had before the first oil shock in the early 1970s.

In Brazil,

the national oil production grew alongside the consumption.

Brazil has been independent since the 2000s

for 90% of its national oil consumption.

In China, the steady growth of oil production

is unable to match the explosive increase in demand

due to its economic takeoff.

Two thirds of the country's consumption relies on imported oil.

France is an example of a non-producing country:

99% of its national consumption relies on imported oil.

China and France are two countries

which have high stakes in diversifying their transportation energy mix.

Imported oil dependence, mostly due to the transportation sector,

has a geopolitical cost for these countries

since their position in dialogues and negotiations

over many international issues

is tainted by the need to maintain their supply security.

This cost is hard to quantify

as it involves complicated arbitration processes,

which are more or less explicit or honorable.

It includes trade concessions to producing countries

on a variety of products,

and the cost of foreign operations to secure supplies.

However, the partial substitution of oil products by electricity

in transportation energy consumption

also raises the issue of electric independence

which also varies depending on the country.

Electric networks are balanced in real time between supply and demand

so the issue of energy independence in integrated networks,

on a European scale for instance, is complex.

France produces enough electricity

to cover more than its annual consumption.

Its exporting balance for electricity is positive.

And yet, France imports part of its electricity,

especially during peak hours.

And France's relative independence in terms of electric production

comes from its nuclear stations

which provide three quarters of the net electricity production.

These stations require ore, uranium, most of which is imported.

So this brings to the light again the issue of energy independence

on the medium and long term.

The control of energy bills is linked to energy independence.

The energy bill is the difference

between the price of energy imports and that of energy exports.

So it depends both on the volume of energy exchanges

and on the price of energy.

The concept of energy bill can be applied to any energy source

or we can consider the sum of all sources.

For oil net importers,

electric vehicles are the chance to reduce their oil bill

by reducing the volume of imported oil products.

But electric vehicles are also a chance to make themselves

less sensitive to oil price volatility,

which creates uncertainty on many derivative markets,

whose cost is hard to quantify but probably significant.

Analyzing the evolution of France's oil bill

shows strong fluctuations in recent years

which come more from the oil price volatility

than from the imported volumes fluctuations.

France's oil bill is traditionally over 80% of its total energy bill.

In 2015, it was over 32 billion euros

in a total energy bill of 40 billion euros.

Although lower than in 2014,

the 2015 oil bill was still about 1.5% of the national wealth

as measured by the GDP.

If we consider that transportation represents 75%

of the French oil product consumption,

and we apply the ratio to our oil bill to a first approximation,

the result is that the oil bill linked to transportation

was 34 billion euros in 2014 and 24 billion euros in 2015.

If electric vehicles allowed us to reduce

the oil product consumption of transportation by 10%,

it would lead to saving 2 to 4 billion euros on our oil bill,

depending on the year, based on the oil bills of the last 10 years.

One more thing,

the partial substitution of oil products by electricity

in transportation raises the issue of the electricity bill

and of the stability of its prices

which must be studied for each country.

To conclude,

electric vehicles can be tied to major macroeconomic challenges

with regards to energy, especially for oil importers.

It can help to improve the energy supply security

by reducing imported oil dependence.

There are real upsides, especially to the geopolitical balance of power,

which are hard to quantify.

Electric vehicles can also help reduce the oil bill

thanks to concrete short-term economic gains

and benefit from the upsides for the economy

of being less exposed to oil price volatility.

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