electrification coalition bsas presentation

The Electrification Coalition Revolutionizing Transportation and Achieving Energy Security

EIA Slide From December 1998

.

1

Department of Energy was concerned that oil prices, which had fallen

sharply from historic levels, would not recover for years

Economist Cover, March 1999

.

2

“ . . . a normal market price might now be in

the $5-10 range.”

“$10 might actually be too optimistic. We may be heading for $5.”

Conventional wisdom was that oil was plentiful and likely to remain cheap

for the foreseeable future

The United States is the world’s largest oil consumer, accounting for one-

fifth of global oil demand. The majority—70 percent—is used in transport.

› At 19.1 million barrels

per day, the U.S. was

the world’s largest

consumer of petroleum

in 2010, with oil

accounting for 37

percent of primary

energy demand.

› The U.S. transport

sector alone consumes

more oil than any

national economy in

the world—13.0 mbd.

TOP WORLD OIL CONSUMERS, 2010

3

Iran

Mexico

Canada

South Korea

Germany

Brazil

Saudi Arabia

Russia

India

Japan

China

U.S.

0 5 10 15 20

Million Barrels per Day Source: BP, plc., Statistical Review of World Energy 2011

Global Oil Market Dynamics—Demand

U.S. Transport

Rising demand for mobility in emerging markets has placed substantial

strain on oil suppliers in recent years. This trend is expected to accelerate.

CHINESE LIQUID FUEL DEMAND (HISTORICAL) LIGHT-DUTY VEHICLE SALES AND STOCK

› Chinese oil demand increased by 90 percent 2000-2010. The increase was equivalent to adding another Japan to the market.

› Passenger vehicle sales and vehicle stock are soaring in emerging markets. Non-OECD stock is on pace to surpass the OECD around 2030.

4

Source: IEA, World Energy Outlook 2011


0

200

400

600

800

1000

1200

0

20

40

60

80

100

120

2010 2020 2030 2035 2010 2020 2030 2035

OECD Non-OECD

Millio

n V

eh

icle

s M

illi

on

Ve

hic

les

Sales (Lhs) Stock (Rhs)

0

2

4

6

8

10

1990 1995 2000 2005 2010

Mil

lio

n b

arr

els

per

Da

y

Others Fuel oil

Middle distillates Light distillates

Source: BP, plc.

5


WORLD OIL CONSUMPTION (HISTORICAL AND FORECAST)

Oil consumption within the world’s most developed economies has peaked.

Emerging markets account for 100 percent of demand growth going forward.

› World oil demand is

set to grow by about 22

percent over the next

20 years.

› One hundred percent

of that growth is in

China, India, and other

emerging economies.

And 97 percent of it is

in transportation.

0

20

40

60

80

100

1980 2010 2015 2020 2025 2030 2035

Mil

lio

n B

arr

els

per

Da

y

OECD China and India Other Non-OECD Other

Source: International Energy Agency, World Energy Outlook 2011

6

Global Oil Market Dynamics—Supply

WORLD LIQUID FUEL PRODUCTION (HISTORICAL AND FORECAST)

Conventional oil production outside of OPEC is reaching a plateau.

Increases in regions like North America are being offset elsewhere.

› Going forward, most

mainstream scenarios

rely on increases in

OPEC supplies to meet

rising demand.

› Two key questions

illustrate the downside

risk to growth in future

liquid supplies:

1. Who will have access

to low-cost

conventional reserves?

2. What will reserves

replacement cost for

IOCs?

0%

10%

20%

30%

40%

50%

60%

0

20

40

60

80

100

120

1980 2010 2015 2020 2025 2030 2035

Mil

lio

n B

arr

els

per

Da

y

OPEC Non-OPEC OPEC ShareSource: IEA

Oil prices are set in an open market, but that does not mean there is a free

market for oil supply.

TOP OIL AND GAS FIRMS BY PROVED RESERVES (2007)

7


ExxonMobil

Petronas

CNPC

LNOC

Sonatrach

NNPC

KPC

PDVSA

Adnoc

QP

INOC

Gazprom

Saudi Aramco

NIOC

0 50 100 150 200 250 300

Billion barrels oil equivalent

› More than 90 percent of

global proved oil reserves

are held by national oil

companies (NOCs) that

are either partially or fully

controlled by

governments.

› While a handful of NOCs

operate like private firms,

many function essentially

as a branch of the central

government, depositing

oil revenues in the

treasury from which they

are diverted to social

programs instead of being

reinvested in new projects.

Global Oil Market Dynamics—Supply

8

PRODUCED MIDDLE EAST

NORTH

AFRICA

OTHER CONV.

OIL

EO

R

CO

2 -

EO

R

DE

EP

WA

TE

R

AR

CT

IC

HEAVY OIL &

BITUMEN

OIL SHALES

GAS TO LIQUID

COAL TO LIQUID

Pro

du

ctio

n C

ost

s (R

eal $

20

08

per

Bar

rel)

Resources (billions of barrels)

Oil Supply Cost Curve

LONG TERM OIL SUPPLY COST CURVE

Resources in the Middle East and North Africa will be the least expensive to

produce. However, they may also be the least accessible to IOCs.


9

0

20

40

60

80

100

120

0 5 10 15 20 25 30 35 40 45 50

Pro

du

ctio

n C

ost

s (D

olla

rs p

er B

arre

l)

Oil Production (million barrels per day)

Budget requirements have ballooned in recent years in OPEC nations and

Russia, essentially incentivizing higher oil prices for much of global supply.


VE

NE

ZU

EL

A

QU

AT

AR

KU

WA

IT

UAE

LIB

YA

SAUDI ARABIA

AL

GE

RIA

IRAQ

AN

GO

LA

NIG

ER

IA

EC

UA

DO

R

IRAN RUSSIA

Budget

Breakeven

Production

Breakeven

BREAKEVEN COSTS FOR SELECTED PRODUCERS (MID-2011)

Oil Supply Cost Curve

Petroleum fuels account for approximately 40 percent of U.S. primary

energy demand, more than any other fuel.

› Approximately 70 percent of U.S. oil consumption occurs in the transportation sector, with

40 percent in light-duty vehicles.

› Transportation is 94 percent reliant on oil-based fuel for energy, with no scaled substitutes.

10

U.S. PRIMARY ENERGY DEMAND, 2009 PETROLEUM FUEL DEMAND BY SECTOR, 2009

U.S. Oil Dependence

39% Oil

27% Natural Gas

23% Coal

9% Nuclear Energy

3% Hydro electric

Source: BP, plc., Statistical Review of World Energy 2010

20% Autos

24% Light-trucks

28% Other Transport

22% Industrial

2% Commercial

4% Residential

1% Electric Power

11

U.S. Oil Dependence: Imports

U.S. OIL CONSUMPTION (HISTORICAL AND FORECAST) › Net imports, once a

small fraction of

U.S. supplies, still

meet half of total

U.S. liquid fuel

demand.

› Amid rising

domestic liquids

production and flat

demand, net import

volumes have

declined

substantially since

their peak in 2005.

U.S. oil supplies are acquired from a variety of sources, including domestic

crude oil and natural gas liquids, biofuels, refinery gains, and imports.

-

5

10

15

20

25

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Mil

lio

n B

arr

els

per

Day

Net Imports Adjustments and Domestic BiofuelsProcessing Gain and Stock Changes Domestic NGLsDomestic Crude

Source: DOE, EIA, AER 2010

12

U.S. Oil Dependence: Macroeconomic Costs

U.S. TRADE DEFICIT IN PETROLEUM AND OTHER GOODS AND SERVICES › The portion of the

trade deficit driven by

petroleum imports

generally exceeds the

imbalance we run in

other goods and

services with trade

partners like China,

NAFTA, and the EU.

› A high trade deficit

exerts downward

pressure on the dollar,

which in turn may be

helping to prop up oil

prices, resulting in a

vicious circle.

Since January 2007, the United States has run an aggregate $1.4 trillion

deficit in crude and petroleum product trade, exporting vast capital abroad.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

10

20

30

40

50

60

70

80

2000 2002 2004 2006 2008 2010

Pe

trole

um

Sh

are

of T

ota

l Tra

de D

efic

it

Mo

nth

ly T

rad

e D

efi

cit

($

bil

lio

ns

)

Deficit in Petroleum Deficit in Goods and Services

Petroleum Share of Total Trade Deficit

Source: U.S. Census Bureau, Office of Foreign Trade Statistics

13

U.S. Oil Dependence: Price Volatility

FUEL VOLATILITY INDEX (HISTORICAL) › Oil price volatility is

driven by events in the

global oil market, and oil

is priced at the margin—

meaning that even if the

U.S. produces more

domestically, it cannot

avoid volatility.

› All liquid fuels are

affected, including

biofuels.

› The solution has to be to

transition toward non-

liquid fuels where

economically rational.

The volatility of liquid fuels is the key threat from an economic security

perspective. This volatility is driven by events beyond our control.

-

1.0

2.0

3.0

4.0

5.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Crude Oil - WTI

Diesel

Gasoline

Ethanol (Nebraska Rack)

Electricity

Index: Jan 2000 = 1

Source: DOE, EIA

› Household spending on

gasoline increased by

$2,008 dollars between

2001 and 2008.

› Income tax cuts over the

same period increased

household income by

$1,900. Thus, rising fuel

prices fully offset the benefit

of tax cuts.

› We saw the same effect in

2011 with the payroll tax cut,

which increased Americans

income by $110 billion while

spending on gasoline

increased by $104 billion.

U.S. Oil Dependence: Household Impact

The average U.S. household spent a record $4,000 on gasoline in 2011.

Since 2000, the increase in spending has offset numerous stimulus efforts.

14

AVG. HOUSEHOLD SPENDING ON GASOLINE (2000-2011)

Source: DOE, EIA, Annual Energy Review 2010; ORNL, Transportation Energy Data Book; SAFE Analysis

Incre

ase

d g

as

sp

en

din

g

-

1,000

2,000

3,000

4,000

5,000

0.00

0.75

1.50

2.25

3.00

3.75

2000 01 02 03 04 05 06 07 08 09 10 2011

Do

llars

(No

min

al)

$/g

al

Gas Spending/Household

Gasoline Price (Lhs)

15

0%

2%

4%

6%

8%

10%

0.0

0.3

0.6

0.9

1.2

1.5

1970 1975 1980 1985 1990 1995 2000 2005 2010

Co

nsu

me

r Expe

nd

iture

s on

Pet. Fu

els, Sh

are o

f G

DP

Bar

rels

of

Oil

pe

r $

1,0

00

GD

P

Oil Spending, Shareof GDP

Barrels of Oil per$1,000 GDP

Source: EIA, AER 2010; Department of Commerce, Bureau of Economic Analysis; SAFE Calculations

20

11

Est

imat

e

Recessionary Period

High oil prices experienced throughout 2011 contributed to weak consumer

spending and slow economic growth in the United States and elsewhere.

U.S. Macroeconomic Costs: U.S. Oil Intensity

and Spending on Oil

› At more than 6 percent of

GDP, consumer spending

on petroleum fuels

reached levels typically

associated with recession

in 2011.

› Increased spending on

gasoline by consumers—

particularly in Q1 and

Q2—crowded out other

spending.

› Price volatility

contributes to an

uncertain investment

climate for businesses.

U.S. Oil Dependence: Total Economic Costs

The economic costs of U.S. oil dependence reached nearly $500 billion in

2008. Since 1970, total economic damage exceeds $5 trillion (real dollars).

› In addition to staggering wealth transfers, high and volatile oil prices generate significant

uncertainty for households and businesses. The result is lost economic opportunity.

16 Source: DOE, EERE; ORNL

ECONOMIC COSTS OF U.S. OIL DEPENDENCE

0

100

200

300

400

500

600

1970 1975 1980 1985 1990 1995 2000 2005 2010

Bill

ion

s (

$2

00

8)

Wealth Transfer Transfer Dislocation Losses Losses Loss of Potential GDP

› Electricity is generated from a diverse portfolio of domestic fuels.

› The power sector has substantial spare capacity.

› Electricity prices are stable.

› The network of infrastructure already exists.

Electrification Overview

17

Electrification of transportation is the best solution for reducing U.S. oil

dependence, insulating consumers and businesses from oil price volatility.

49% COAL

22% NUCLEAR

17% NATURAL GAS

11% RENEWABLES

1% PETROLEUM

38% RESIDENTIAL

37% COMMERCIAL/OTHER

24% INDUSTRIAL

1% TRANSPORTATION

Source: EIA, AEO 2010

U.S. ELECTRICITY GENERATION BY FUEL, 2010 U.S. ELECTRICITY DEMAND BY SECTOR, 2010

Electrification Overview: Challenges

› Batteries and Vehicles

With the advent of lithium-ion battery technology, the largest obstacle to widespread

consumer adoption of these vehicles will be cost, though performance and raw material

supply chains are also important to consider. Need innovative business models,

manufacturing scale in gen-1/2, and R&D for Gen-3.

› Charging Infrastructure

A profitable business model for public charging points has not been reliably demonstrated,

and we do not yet know how much public charging will be needed.

› Electric Power Sector Interface

While “smart” charging will make electric vehicles an asset to the grid, “dumb” charging

will make them a liability.

› Consumer Acceptance

GEVs represent a significant shift in technology. In order to change mainstream consumer

attitudes, GEVs must offer a compelling alternative to conventional IC engines on either

cost or performance grounds.

18

While electrification has promise as an energy strategy, it can only succeed

if GEVs are attractive to the mass market and can integrate into the grid.

Electrification Overview: Power Sector

A 2007 DOE study found that existing offpeak electrical generating capacity

could power 158 million vehicles for up to 33 miles of driving per day.

PJM CAPACITY AND LOAD (7-1, 7-2, 2009) CHANGE IN RETAIL ENERGY PRICES (2000-PRESENT)

› PJM Interconnect: The 61 gWh of excess available capacity in a typical summer week could charge 62 million Nissan Leafs each night.

› Petroleum prices have exhibited significant volatility for the past several years. In contrast, retail electricity prices have been stable.

19

0

20

40

60

80

100

120

140

0

20

40

60

80

100

120

140

160

180

12:00AM

6:00AM

12:00PM

6:00PM

12:00AM

6:00AM

12:00PM

6:00PM

$ P

er M

egaw

att Ho

ur

Gig

awat

ts

Wholesale Real Time PriceInstalled CapacityAvailable CapacityLoad

Source: PJM Source: DOE, EIA

-

1.0

2.0

3.0

4.0

5.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Crude Oil - WTI

Diesel

Gasoline

Ethanol (Nebraska Rack)

Electricity

Index: Jan 2000 = 1

Electrification Overview: Battery Costs

We are nearing the end of the first phase of battery cost reductions related

to today’s EVs and PHEVs. Scale and volume production are key today.

Source: EC Roadmap; PRTM Analysis

LARGE FORMAT LITHIUM ION BATTERY COST ($/KWH)

20

$0

$200

$400

$600

$800

$1,000

$1,200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$/k

Wh

Stage 1 - Limited Capacity - Limited Suppliers - Pilot Volumes

Stage 2 - Over-capacity - Slow Volume Ramp-up - New Market Entrants - Technical Advances

Stage 3 - Sustainable industrial volumes - Consolidated Competitors - Operational Improvements - Continued Technical Advances

› The cost of the battery contributes as much as one-third of the cost of light-duty

electric vehicles. The share is higher in truck applications.

Charging Infrastructure: Getting Ready for

Plug-In Vehicles

Where vehicles spend their time

21 Source: SAE

Charging Infrastructure: Business Model

22

Investment in widespread public (shared) charging infrastructure is a risky

proposition. The appropriate strategy and business models are unknown.

Source: EC Roadmap; PRTM Analysis

PAYBACK PERIOD FOR A SINGLE PUBLIC CHARGER IN A ‘BUSINESS AS USUAL’ CASE

TEPCO Fast Charge Experiment

Source: TEPCO R&D Center Study 2008

Infrastructure Is Critical for EV Adoption, Even if it is Not Used Extensively

Electrification Overview: Vehicle Supply

Automakers worldwide are developing plug-in hybrid and electric vehicles.

By 2013, more than 30 models could be available to consumers.

EXPECTED PEV LAUNCHES BY MAJOR GLOBAL OEMs ANNOUNCED PRODUCTION CAPACITY OF GLOBAL OEMs

24

Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance

1

5

8

3 1

1

6

2

2010 2011 2012 2013

PHEV

EV

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2011 2012 2013

PHEV

EV

› Global automakers are rolling out a

substantial number of PEV option in the

coming years.

› Production volumes are expected to scale up

as supply chains become mature and

consumer demand becomes predictable.

Electrification Overview: Vehicle Demand

As the market for the current generation of PEVs enters its second full year

of sales, there have been some encouraging signs amid obvious challenges.

GM VOLT WAITLIST BY STATE—TOP 20 U.S. MARKETS U.S. SALES OF PEVs: 2011

25

› There are currently 23,698 GM Volt

customers on waitlists throughout the

United States.

› U.S. PEV sales were 17,813 in 2011. This total

exceeded the number of traditional hybrids

sold in 2000—HEVs first full sales year.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

CA

TX

FL

MI

NY IL

PA

OH

WA

VA

NJ

AZ

GA

NC

MD

MA IN

CO

MN

MO

0

2,000

4,000

6,000

8,000

10,000

12,000

Chevy Volt Nissan LEAF Smart ED Mitsubishi i

26

U.S. Hybrid and Plug-In Vehicle Sales

-

50

100

150

200

250

300

350

400

1999(2010 for

PEVs)

2000(2011 for

PEVs)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Tho

usa

nd

HEV

s

Mercedes S400

Mercedes ML450

Mazda Tribute

Honda CR-Z

Ford Lincoln MKZ

BMW X6

BMW ActiveHybrid 7

Sierra/Silverado

Lexus HS 250h

Mercury Milan

Ford Fusion

Dodge Durango

Chrysler Aspen

Cadillac Escalade

Chevy Malibu

GMC Yukon

Chevy Tahoe

Saturn Aura

Lexus LS600hL

Saturn Vue

Nissan Altima

Toyota Camry

Lexus GS 450h

Mercury Mariner

Toyota Highlander

Lexus RX400h

Honda Accord

Ford Escape

Honda Civic

Toyota Prius

Honda Insight

PEVs

The Electrification Coalition Revolutionizing Transportation and Achieving Energy Security

› Online

www.electrificationcoalition.org

› Download Reports

www.electrificationcoalition.org/electrification-roadmap.php

› Office Contact

1111 19th Street, NW

Suite 406

Washington, DC 20036

202.461.2360

http://www.electrificationcoalition.org/

http://www.electrificationcoalition.org/electrification-roadmap.php



28

Global Oil Market Dynamics—Reserves

GLOBAL OIL RESERVES BY SOURCE

Proved conventional oil reserves have generally declined in most developed

economies over the past several decades. OPEC reserves have grown.

› OPEC’s share of global

oil output (40 percent)

sharply lags its share of

reserves (80 percent).

› This might make sense

if OPEC resources were

highest cost, but in fact

the opposite is true.

› Geopolitical issues,

cartel politics, and

weak investment

regimes are key

challenges.

0%

20%

40%

60%

80%

100%

0

200

400

600

800

1,000

1,200

1,400

1,600

1980 1984 1988 1992 1996 2000 2004 2008

Bill

ion

Ba

rre

ls

OPEC Other non-OPEC

OECD OPEC Share of Reserves

OPEC Share of ProductionSource: BP, plc