The Coming EV Revolution

This post was co-authored by Brad Thompson and Nicole Candelori.

“Disruption” is a term that tends to be used casually when attempting to describe an industry or technological change on the horizon. Although the term may be overused in many contexts, it is hard to formulate a better word to describe the looming disruption that is certain to emanate from the increased adoption of electric vehicles (EVs).

There are numerous projections as to the anticipated volume and rate of movement away from internal combustion engines (ICEs) and towards EVs. According to one of those projections – a 2018 Bloomberg New Energy Finance report – global EV sales are expected to increase almost tenfold in just eight years: from 1.1 million in 2017 to 11 million in 2025, and later to 30 million in 2030. [1] Regardless of whether this forecast proves to be accurate on the timeline predicted, one trend line is undeniable: EVs are coming, and at some point relatively soon, the ICE will soon become a dying breed of vehicle transportation on the road.

There are certainly numerous factors contributing to the increasing and inevitable wave of EV adoption. Although “go green” environmental motivations may have played a role in some early adopters of EVs, the mass market transition to EVs will boil down to one single factor: money. EVs have historically cost substantially more than their ICE counterparts; however, those costs are rapidly declining. As with all technological innovations over time, costs will continue to decline.

Remember when flat screen televisions were first offered at a retail price of several thousand dollars? Just as those prices declined dramatically as the technology was widely adopted, the coming mass market transition to EVs will further accelerate an increasingly cheaper cost curve, driving economically-rational consumers to choose EVs over ICE vehicles.

Because EVs have far fewer moving parts than an ICE engine (roughly 20 moving parts in an EV as opposed to over 2,000 in an ICE), the lifetime maintenance costs are cheaper for an EV as compared to an ICE vehicle. [2] Because of this phenomenon alone, fleet-based companies are beginning to transition their fleet vehicles from ICE to EV-based technologies. For example, last year, IKEA announced that they will transition 100% of their home delivery fleet to EVs by 2030. [3]

As transformative as this coming transition will be on the automotive industry, its impact across the energy industry will be hard to overstate. Most directly, the decrease in demand for refined gasoline will have ripple effects across the traditional oil and gas business. Also, even though the “energy trade” of a gallon of gasoline for a kilowatt hour of electricity is not 1 to 1, there will certainly be a much higher demand for electricity (as a fuel source) and for power infrastructure (as a distribution network). Add on the expectation for fully autonomous driving (which is already being beta tested in many jurisdictions), and the disruptive impacts become even larger.

Ironically, many doomsayers predicted the looming death of the traditional electric utility due to the rapid increase of renewable energy, reasoning that the uptick in grid integration of wind and solar generation resources would damage utilities. Now, the automotive industry could end up being the knight in shining armor to save the electric utility business, which will have to build (and charge customers for) increased infrastructure and power generation capacity to meet increased EV demand. Since EVs will be dispersed throughout the grid ecosystem, it is expected that more demand for generation (namely, solar generation by day, and wind generation by night) will be needed as the most cost-effective marginal unit of electric generation. So although rooftop solar and wind generation was once viewed as a potential death knell to the traditional utility, the coming EV revolution could end up making utilities the largest renewable energy developers and proponents due to the same factor that will drive the trend towards EV adoption: money.

Additionally, the EV revolution invites tremendous opportunity for the development and protection of intellectual property (IP). Unfortunately, this opportunity also brings the potential for infringement (intentional or innocent) of such IP. While automotive companies have placed a strong focus on lowering the cost of EVs to increase their market share, they are also concerned about protecting their technological developments. In addition to depending on the cost of EVs, the future of EV market share will heavily depend on the prevalence of charging stations, making the IP related to charging stations and ancillary services for the EV industry that much more valuable. [4] It is clear that automakers have noted this fact as a number of well-known players in the industry, including Honda, Toyota, and Bosch, have already obtained patents in 2019 for EV charging stations.

For example, Honda was recently issued U.S. Patent 10,189,362 which is directed to an EV charging station that repurposes old energy storage units that are no longer usable in EVs. According to the patent, when incorporated into a charging station, these old energy storage units allow for fast charging of an EV because they can be pre-charged before an incoming vehicle is predicted to arrive, thereby alleviating a burden on the electric grid. The patent notes that traditional wait times for fully charging EVs can range from 4-8 hours, which Honda’s invention seeks to trim. Notably, Honda’s patent describes that fast-charging stations can reduce charging times to under 30 minutes.

While patenting an invention does not guarantee the success of the technology, it does potentially provide leverage over competitors and open doors to licensing agreements, which can be particularly lucrative if there is a large industry demand for the technology. Currently, there are roughly 2,000 U.S. patents classified in the “Charging Station for Electrically Powered Vehicle” space, and this number is likely to increase significantly in the coming years as the EV industry as a whole requires an increased prevalence of efficient charging stations.

 

References:

[1] See Salim Morsy, Global Sales Outlook, Bloomberg New Energy Fin., https://bnef.turtl.co/story/evo2018?teaser=true (last visited Feb. 21, 2019).

[2] See Leslie Shaffer, Electric Vehicles Will Soon Be Cheaper Than Regular Cars Because Maintenance Costs Are Lower, Says Tony Seba, CNBC (Jun. 14, 2016, 8:07 AM) https://www.cnbc.com/2016/06/14/electric-vehicles-will-soon-be-cheaper-than-regular-cars-because-maintenance-costs-are-lower-says-tony-seba.html.

[3] See Katie Fehrenbacher, It’s Electrifying: How Do We Speed Up the Transition to 100 Percent EV Fleets?, GreenBiz (Sep. 20, 2018, 12:45 AM) https://www.greenbiz.com/article/its-electrifying-how-do-we-speed-transition-100-percent-ev-fleets.

[4] See Salim Morsy, Global Sales Outlook, Bloomberg New Energy Fin., https://bnef.turtl.co/story/evo2018?teaser=true (last visited Feb. 21, 2019).