This week, we're joined by Chris Nelder of the Rocky Mountain Institute and the Energy Transition Show podcast. Nelder chats about how cities and utilities can electrify transportation and how we may be seeing the end of Big Oil. Yes, your local gas station might disappear.
For those of you who prefer to read rather than listen, an edited transcript is below the podcast player:
Jeff Wood
You guys had the Rocky Mountain Institute put together a strategy for the municipal utility in Seattle. What are some of the things that utilities are doing to get ahead of the game?
Chris Nelder
Yeah, Seattle City Light was actually, in my view, quite forward thinking, you know, in terms of wanting to understand what kind of electric vehicle loads are going to show up on our system and when, and what kind of planning do we need to do internally to make sure that we're building out adequate capacity to supply these new charging stations. I think they were so forward thinking because there are municipal utilities that operate on behalf of the public and they're owned by the city, which is a very different business model from being an investor-owned utility.
And in many cases it's these municipal utilities, what we call Munis or cooperative utilities, which typically serve rural areas, the farming communities and that kind of thing, that have a lot more latitude to figure out where they want to invest in and why. And so a lot of them are actually sort of at the forefront of getting charging infrastructure planning underway, developing their own transportation, electrification roadmaps and doing capital planning to meet the load of these new vehicles. And so what we discovered was that Seattle City Light really wanted to focus in on understanding and anticipating the load for medium- and heavy-duty vehicles, not necessarily light-duty vehicles because they felt that the need for charging light-duty vehicles was essentially going to be met partly by their own existing charging stations and workplaces.
And so they've really felt like the need would probably be met for light-duty vehicles without any particular concern about expanding their own grid capacity or doing any special planning around that. What they did not feel they were adequately positioned to prepare for was the load of medium- and heavy-duty vehicles: service trucks, bucket trucks, flatbeds, garbage trucks, and then eventually the whole transit bus fleet.
But even more important, Seattle has a big port and there's a lot of Class Eight semi tractors that go in and out of that port, hauling containers back and forth every day. And it's those users that they really felt like they needed to focus in on. There's an intermodal, you know, there's a big rail yard that connect to the port and so on and Seattle. And so there's all sorts of equipment that's going to be electrified in time. That's with the rail operations, with the Seaport and with the connections to the the road system.
And so they engaged with us to understand which vehicles are going to electrify and when and how many and how can we forecast a load that those vehicles are going to put on our system? And then where do we need to build the charging infrastructure to meet that load? So we did a sort of a comprehensive analysis of where we thought all sorts of different classes of vehicles were going to show up on their system and when and and what kind of charging infrastructure would be built to meet those loads. And then what kind of distribution system expansion did they need to plan for it to accommodate that?
JW: How much of an energy load are these municipal utilities or utilities generally going to take off of the oil companies, which are providing gasoline and other fuels for vehicles? I mean it seems like such a huge shift of energy consumption and thinking about what that means for the utilities versus like oil companies. I know that's kind of a big question.
CN: You know, the oil companies are not taking this lying down. They are deploying their minions, people who work at their behest one way or another, or even people who they've managed to somehow convince to support their cause to oppose utility investment in charging infrastructure. For example, when a utility brings a rate case to a regulatory commission [the fossil fuel industry] puts out all sorts of propaganda about, "Oh you know, rare earth supply issues... Are we going to be able to make enough batteries or the social horrors that are involved in producing lithium in a place like the Congo." The oil industry has mobilized every potential, every conceivable talking point to try to resist the expansion of transportation electrification. So that's one element of this. Another element is that we don't really know how many vehicles or what kind are going to show up at any given place.
We can do models like the one that we did for Seattle City Light. We can make our best guesses, but you know, it's still very early days. Light-duty vehicles, you know, we're talking just passenger cars and trucks right now are about 2 percent of light-duty vehicle sales in the U.S. In terms of actual light-duty vehicles on the road, it's like 1 percent. So you can tell me that you have total confidence that you know, X percent of vehicles on the road are going to be electrified by Y date and then it's going to produce zero amount of load, but you know, when we're in such an early stage of this transformation, it's very hard to have much confidence in that.
So we don't really know, again. At the high end, we think that if we electrified all vehicles, all vehicles in the U.S. would probably increase electricity demand by about a third. But how much oil demand that would offset is a surprisingly more-difficult question to answer because first of all, there's a wide variety in the efficiency of different vehicles out there, right? I mean there's still plenty of vehicles on the road, older vehicles that get 15 miles to the gallon or even for that matter, you know, new trucks.
Whereas you know, a high efficiency light duty passenger vehicle, it might get 40 miles to the gallon or better at this point. So there's a wide variety of those efficiency factors to take into account. And then you know, when do each one of those vehicles get replaced by an EV? How much oil demand will that actually reduce? Hard to say. Meanwhile you have all these other things happening in the mobility space, right? You have the rise of the TNC is the transportation network, companies like Uber and Lyft. How much of the existing individual driver traffic is going to be replaced by them? And if those vehicles electrify before the rest of the fleet, you know, what is the implication of that on oil demand and so on and so forth.
There's just a billion questions that are formally impossible to answer. Now, some of the big, some of the big banks have actually tried to analyze this. They've put out reports in the past couple of years, you know, forecasting some scenario of vehicle electrification and then calculating how much oil demand will actually be eliminated because of it decades in the future. Again, you know, with such early days now I wouldn't give a plug nickel for any one of those models, but I do respect the courage that the modelers had and trying to produce them. That's a very difficult question to answer.
But you know, another thing to bear in mind really is that vehicle transportation, it's only a part of total oil demand. You know, globally, I think it's about maybe 40 percent or thereabouts. The majority of global oil demand is not related to powering vehicles with four wheels. So the impact on the oil industry remains to be seen. But there's no question that it will have a very significant impact. And you know, it's also true that the oil industry, very much in economic terms, operates at the margins. If you see global oil demand, you know, rising by a half a percent more next year than anticipated or being a half a percent lower next year than I anticipated, that can immediately impact the share price of the major oil companies that can immediately impact the spot price of oil being traded in the world.
The oil industry, it's extremely sensitive to small changes in demand either up or down. And so when you look at the total efficiency, kind of getting back to an earlier point I made, there's definite reason to be concerned here. You know Mark Lewis currently at BNP Paribas did a really interesting report a couple of months ago, which I featured in a recent episode of my podcast (A Death Toll for Petrol). He actually goes in great detail through the calculations of if you take $100 billion and you invested in producing oil and then you do all the calculations of getting that oil to a refinery, refining it into gasoline and diesel and getting that to a pump, getting that into a vehicle and then running an internal combustion engine, you know, how many miles of travel can you produce? And then doing the same thing on the transformation side, right? So take $100 billion invested in a combination of wind, both onshore and offshore, and solar, and then get that power into a transmission system, the transmission losses, the losses involved in getting it down actually to a charging station, the round-trip energy losses and charging and discharging a battery, the efficiency of the motor in the electric vehicle, and then how many miles you can go on that.
So he goes through this detailed calculation on, on both sides of this and depending on the type of fuel and and so on, you can actually see a 6X advantage, or better, for electric vehicles powered by wind and solar over internal combustion vehicles powered by oil. So when you've got that kind of an advantage, it eventually will translate into economic terms.
And it essentially spells the end of oil-based vehicular transportation.
And ultimately it could very well spell the end of the oil industry writ large.
Now that's decades in the future for sure, but anybody in the oil industry who is not paying attention to the very careful math that Mark Lewis presented there, ignores it at their own peril.
