Electromobility will boost the economy

The development of electromobility is in line with the strategy of abandoning traditional fuels. It will also have a powerful and positive effect on the economy and society.

It is hard to believe today, but already a hundred years ago people predicted that the future of the automotive industry would be based on a simple electric motor. In reality, however, the internal combustion engine has dominated the industry for over a century. And while its rule is not over, the idea of electric engines, dating back to the very beginnings of the car industry, is now increasingly coming back to life. It has the chance to revolutionize not only the automotive industry, but also the entire economy (at the global and European level, and at the level of the national economies), the labor market, as well as the trade balance, and to permit a significant reduction of air pollution, especially in the cities.

An impulse for the economy

According to the macroeconomic model applied by Cambridge Econometrics, at the pan-European level the net economic impact of the transition to low-emission transport will amount to 0.1 per cent of annual GDP in 2030, compared with a scenario in which the structure of vehicle types remains the same as it is today. The authors of the report entitled “Charging Poland” predict that as a consequence Polish GDP will be boosted by 0.3 per cent in 2030 and by 1.1 per cent in 2050.

The popularization of electric and hybrid vehicles in the coming years will result in increased investments in automotive technologies. European manufacturers of electric and hybrid vehicles will increase their sales both on the local markets and abroad. Admittedly, these gains will not offset the loss of revenues from the sale of internal combustion engine cars (ICE) due to the fact that batteries for electric vehicles (EV) are largely imported. However, additional value will be created by various enterprises involved, for example, in the development of new infrastructure, such as charging stations. According to a report prepared by EY Poland and ING Bank Śląski “Which lane are we driving in” an increase in EV production will change supply chain, and will affect spare parts producers. Their revenues may decrease, also due to the fact that EV production is a simpler one.

The lower costs of vehicle operation could also have a positive economic impact. Households could shift the resulting savings to other categories of expenditures. Such expenses will have a higher added value for the national economy than money spent at the gas station. On the other hand, most cars in Poland are old cars (14 years old on average) imported from abroad. National or local government policy in France, the United Kingdom or Spain, aimed at getting rid of the most emission-intensive vehicles (e.g. by prohibiting them from entering into city centers) could temporarily increase the inflow of used ICE – with the highest emissions and highest maintenance costs – into Poland.

The automotive industry – regardless of the power source – is a very controversial subject due to the progressive automation of production. However, the authors of the report “Charging Poland” argue that electromobility will have a positive effect on employment levels. In Poland, it is supposed to contribute to the creation of up to 81 thousand new jobs by 2050 (56 thousand in services and trade, and the remainder in industry and in construction). Some 206 thousand additional jobs are supposed to be created across the European Union. Authors of the EY Poland and ING Bank Śląski report have a different prognosis. According to them EV’s production will decrease employment and will change car dealers’ networks.

What is needed is retraining “old” employees, so they could work in the newly created sectors, if the education system followed the market changes, and if a large part of the electric or hybrid vehicle production chain was located in Europe. For the time being, however, this cannot be clearly predicted.

Reduced dependence on oil

The impact of the growth of the electric vehicle market on the economy also results from other factors. Firstly, according to the analyses of Cambridge Econometrics, it will have a positive effect on the balance of trade, mainly due to the decrease in oil consumption (reaching up to 50 per cent in 2035, and as much as 90 per cent in 2050) and the associated dramatic reduction in the imports of the raw material from abroad. While Poland is self-sufficient in terms of electricity production, some 97 per cent of oil is imported at a cost of 2-4 per cent of the country’s GDP. The European Union as a whole imports 89 per cent of oil, most of which is consumed for transportation.

For every EUR10 spent by consumers at the gas pump, EUR5.3 go to the local authorities in the form of taxes, EUR1.5 go to the refineries and the distributors, and only EUR3.2 are the actual costs of imports. In 2030, European Union member states could save a total of EUR49 on the reduction of oil imports. In Poland, for every EUR10 paid at the gas station, some EUR2.5 constitute the actual cost of the raw material, which is mainly imported from Russia. On the one hand, reduced fuel consumption would at the same time lead to a decrease in budget revenues from the fuel sales taxes. In the case of Poland, this drop could reach the equivalent of about EUR2bn per year by 2030, and EUR6bn by 2050. On the other hand, the tax authorities will get new opportunities for obtaining revenues. They would be based, among others, on the increased sales of electricity or other charges related to the operation of the infrastructure for electric vehicles.

The impact of electromobility on the energy industry

The analysis presented in the “Charging Poland” report shows that in order to realize the positive scenarios of transition to a low-emissions economy through electromobility, Poland will need 127,000 charging stations within two years (there are currently several hundred publicly available charging stations) and almost a million stations over the next five years. This indicates that huge investments are needed, which will also have a strong effect on the electricity market and the enterprises operating on that market.

In general across Europe the share of demand generated by electric vehicles will amount to approx. 7.8 per cent of the total electricity demand in 2050. According to the Polish Ministry of Energy, one million EVs will create an additional energy demand of 2.3-3.3 TWh per year in Poland. This is not a huge spike in demand (in 2016, Poland generated a total of 161 TWh of electricity), but could certainly provide an additional source of revenues for the energy producers.

According to the report of the Polityka Insight think-tank entitled “Silent Revolution in the Energy Industry”, the development of electromobility could help the Polish energy industry. Although the Polish energy network is not adequately developed to take full advantage of the first phase of electromobility, the infrastructural shortcomings of the system provide a good excuse for modernization and expansion. Investments in the development of charging stations could become a part of the plans for the expansion and strengthening of the network, just like investments in smart grids and smart metering.

One million electric cars could create the possibility of a better balancing of the system, utilization of the available production capacity during the night time consumption drops, and the integration of renewable energy sources. The increased popularity of electric cars may lead to an increase in the differences in electricity demand during the different parts of the day.

Network modernization should proceed in two directions. On the one hand, it should aim to encourage owners of EVs to charge them at night (through smart meters and dynamic tariffs), and on the other hand – it should utilize the distributed renewable energy sources and energy storage to balance the newly created demand. The transformation of the electric energy system into a smart system could also lead to the creation of completely new services, also in the field of fin-tech, as well as new markets (IT innovations, smart metering equipment or the programming of smart grids).

The authors of any analysis regarding electromobility emphasize that the development of EVs will permit a significant reduction of pollution, especially in the cities. In the event that policies supporting electromobility are integrated with restrictions concerning the use of ICE (along with a total ban on the sale in 2030), emissions of harmful nitrogen oxides and PM10 particulate matter could fall by 80 per cent or could even be brought down to zero.

And that will also have economic consequences. Diseases caused by air pollution generate enormous costs through hospitalizations, sick leave, and medical procedures. They are the direct cause of nearly half a million deaths per year. In addition, they have a negative effect on biodiversity, crop yields and the destruction of buildings. And these are the most important reasons why a transition to a low-carbon economy is simply a necessity.

EVs will become more available

According to Bloomberg, electric vehicles accounted for only 0.1 per cent of the over 84 million cars sold in 2016 alone. Most of them were sold in just a handful of countries headed by Norway (where – according to the OECD report “Global EV Outlook 2017” – every third electric vehicle is registered), the Netherlands and Sweden. However, according to the estimates of the International Energy Agency (IEA), in two years there will be nearly 20 million electric vehicles on the roads across the world (including hybrids, scooters and electric buses). By 2025 the number will have reached 60 million, and by 2030 – 150 million. This is mainly due to the changing policies pursued by the states which want to transition to a low-carbon economy, as well as the technological progress along with the resulting drops (reaching more than 20 per cent each year) in the prices of batteries powering the electric vehicles. As a result, the purchase price of a zero-emission vehicle and an internal combustion vehicle will even out around 2030.

The high prices have been the main factor hampering the development of the electric vehicle market thus far. Other factors include the limited driving range of such vehicles, long charging time and the poor infrastructure. All that is changing, though. Back in 2010 there were only 20,000 charging stations in the world and five years later there were already 1.5 million such stations. Almost half of them were built in China. China, just like many other countries (Germany, France, the United Kingdom, Japan, or the United States), is investing heavily in the development of charging stations and incentives for consumers, and is changing the relevant regulations (e.g. those concerning parking and entry to city centers) in order to increase the share of electric vehicles and to reduce the share of internal combustion cars.

Poland has joined this group of nations with detailed plans for the development of electric mobility and a number of new regulations. These include, among others, the amendment to the act on bio components and liquid biofuels, providing for the introduction of an emission fee charged for each thousand liters of gasoline or diesel fuel sold.

According to the estimates presented by the “Charging Poland” report in 2025 there could be up to one million electric vehicles in Poland. By 2030 their number could reach 3 million, and by 2050 this number could increase up to 16.5 million vehicles (which is roughly the same as the total car stock in the country today).

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