There are, according to latest counts, about 46,000 electric vehicles in New Zealand. To reach government emissions targets over the coming decade, well over a million more will be needed.
But how will that be possible, given the expense and issues like range anxiety, even with the government "clean car" incentives? A million more EVs seems an enormous ask.
The answer may lie in the battery. It makes up around 30-40 per cent of the overall cost of an EV, so alternative business models are cropping up which may help accelerate EV uptake in New Zealand.
Thierry Mortier, Partner at EY and Global Digital and their Innovation Lead for Energy & Resources, has told the Genesis Energy Climate Change Hub that new leasing models will come into play to eliminate cost and technology risk factors and allow the benefits of EVs to prevail.
EVs are initially more expensive than internal combustion engine cars (ICE), he says, but have lower maintenance costs. So leasing EVs becomes an option: "You can spread the total costs of procurement plus maintenance into the lease price and come to a more comparable price. In some cases that will be more beneficial than an ICE.
"It's a way of making EVs more competitive by evening out the lower running costs with the higher purchase price…this takes away some of the uncertainty around the reliability and the residual value of the battery. If you put the battery in the lease then people would feel more secure. They don't own the battery and, at the end of the lease, can return it – so have no risk of a bad battery in a vehicle which they then cannot sell."
Swappable batteries
EV uptake is pioneering more radical ownership options than leasing for consumers: "Battery leasing is different to models developed in the conventional vehicle market. You wouldn't lease the engine of your vehicle, for example, but the disaggregation of the battery from the car is definitely a model," Mortier says.
The principle is that a car owner does not own the battery of the EV; owners can then experiment with different models like 'battery as a service' (BaaS).
"It [the battery] can come in the car and it will stay there," he says, "but it's disaggregated in terms of financing and ownership or it can also come in the form of a swappable battery."
The latter is already happening in China – which has the most EVs of any country and is regarded as an ideal test bed for innovative ownership and operating models. Chinese EV company NIO launched its battery as a service offering in August 2020. Users get RMB 70,000 (aboutNZ$16,500) off the cost of the car as they don't buy the battery.
Instead, they take out a battery subscription starting from RMB 980 (NZ$230) per month for a 70 kWh unit. By December last year, NIO had already installed 700 battery swap stations in China – users visit to have their battery swapped in a quick operation which lasts only three minutes while they stay inside the vehicle.
NIO says their model offers lower owning and operating costs than for comparable cars - and solves issues such as battery degradation, battery upgrades, and potential lower resale value.
Creative solutions
Novel approaches to EV and batteries can also spark energy sector innovation. For example, when EV battery ownership belongs to someone other than the car owner, it raises the possibility of aggregating battery capacity to feed back into the national grid.
"In China, there is a pilot scheme of 6000 cars experimenting with the desegregated battery concept. They calculated that the total value of that flexibility, if the grid company could use it, was about $10,000-12,000, almost the price of a cheap car," Mortier says.
"They could almost give away the cars for free and use the batteries at their disposal to help the grid. Although that was a pilot, they extrapolated that if they were to roll this out then it could probably offset in the next five years about $1 billion of grid investment."
There is another scheme like this in Boulder, Colorado – where the city is trying out vehicles-to-building technology, taking electricity from EVs and feeding that into buildings.
According to a Forbes magazine article on the Boulder pilot, "it works for companies and consumers too. Boulder residents use on average 16 kilowatt-hours a day. A 2020 Nissan LEAF battery has 62 kilowatt-hours of storage, meaning that it could power a small business for four days."
Other kinds of business models to boost EV uptake are also emerging:
- Britain's Zoom EV has created an EV community where people share an EV owned by an individual or a business while getting discounts on charging, for example. Individual owners list their vehicle for other members of the community to hire. , generating additional revenue for the owner while allowing others to benefit from EVs.
- New Zealand's Zilch operates EV for hire schemes that Genesis Energy and other companies have adopted. London's Zipcar for Business provides access to over 3000 vehicles, booked through a phone app – both are alternative to traditional business car hire, ownership or fleet rentals.
Incentives can also help create people embrace EV ownership, for example by manipulating import taxes on cars to giving additional convenience benefits to people using EVs.
"In Norway, for example, there is free parking or electric car parking only or free ferries and so on. It's a combination of these convenience incentives plus subsidies, plus more macro-economic rules and regulations," says Mortier. He cites Belgium, where only EVs are eligible for tax deductions as a business expense in a bid to electrify all company cars by 2025.
"Suddenly you see a whole ecosystem of infrastructure coming in, and car companies coming and so on, because they know the market will be there."
Whatever the business models used to accelerate deployment, New Zealand represents a significant opportunity for EVs that can avoid some of the challenges faced by other nations, as Mortier says:"I think New Zealand may be a few years later than some other countries, but there are a lot of lessons learnt. New Zealand can probably do this right the first time now."
For more information, go to https://www.genesisenergy.co.nz/about/sustainability/climate-change-hub
