The path forward - and the roadblocks to overcome

There are still questions that we need to find answers to – and businesses across Australia have a key role to play.

Australia’s New Vehicle Efficiency Standard comes into effect on 1 January 20251 and in some respects, marks the beginning of the next chapter of electric vehicles in Australia.

The standard will reduce emissions from new passenger vehicles by more than 60% by 2030, and roughly halve the emissions from new light commercial vehicles, too. It will also provide $95 billion in fuel cost savings, and reduce CO2 emissions by approximately 321 million tonnes by 2050. (Globally, the widespread use of EVs is projected to eliminate 2 Gt of CO2 by 2035. 2) “The New Vehicle Efficiency Standard will provide Australians with more fuel-efficient car options,” says Samantha Johnson, CEO of the Electric Vehicle Council.

“By 2050, motorists are projected to save about $95 billion in fuel costs, and greenhouse gas emissions are set to reduce by about 321 million tonnes.”

With the new standard being introduced, availability of EVs – which has been growing significantly over recent years – is expected to increase, while public charging stations have almost doubled in just 18 months.

Building that infrastructure is crucial, as is incentivising people and businesses to use EVs as opposed to the petrol or diesel alternative, if the desired environmental benefits are to be realised.

Where does the power to power EVs come from?

One of the big questions that needs to be answered to achieve the projected benefits of mass EV adoption surrounds energy: namely, the capacity of the grid – and production of the power.

Each year, an average EV travelling 12,000km per year will use 2000kWh of energy. Every house uses around 4000-8000kWh per year. With more than 20 million vehicles on the road3 – and a growing population4 – it’s a major challenge.

“By 2050, motorists are projected to save about $95 billion in fuel costs, and greenhouse gas emissions are set to reduce by about 321 million tonnes.”

“There’s going to need to be significant consideration with regards to stabilising the infrastructure for electricity in this country,” says Andy Doran, General Manager –Underwriting at Allianz.

“Every country will face that challenge, but it may not be as problematic elsewhere given the appetite for renewable energy elsewhere in the world.

“In Australia, we’re still attached to coal-fired power generation, which isn’t going to help realise the environmental benefits of using EVs. It’s going to take strong alignment between federal, state and local governments to resolve.”

Chris Jones, President of the Australian Electric Vehicle Association, says it’s important to remember vehicles are only as clean as the energy that supplies them.

“The good news is that our energy is becoming increasingly renewable, but the government does have a large role to play in making sure that future grid generation is coming from zero or low-emission sources.

“Businesses and households have some control over that, too, in that they can have solar on the roof, or choose to charge their car during the middle of the day when we know that the grid is dominated by renewables.”

A dual fuel future?

For those businesses that rely on large vehicles undertaking significant journeys, electric vehicles may not prove a solution. Although manufacturers – notably Toyota and Hyundai – have developed hydrogen models, they’re yet to make an impact here in Australia. However, they could play a major role for many businesses in the future.

Professor John Rose from the University of Sydney, says one of the missing key policy areas is around freight.

“At the moment, we don’t have battery technology to be able to move long-distance trucks. The larger the vehicle, the bigger the batteries you need, the heavier the vehicle, the less distance it can travel. The likelihood of seeing electric heavy articulated trucks going from Sydney to Melbourne or Brisbane to Melbourne anytime soon is near zero.

“If you look at the bus industry, they’re split 50/50 between hydrogen buses and electric vehicles.

“So the question then becomes, are we getting into a position where we’re going to be having two sets of infrastructure? We need to set up infrastructure around charging for electric vehicles, and infrastructure around hydrogen for some passenger vehicles, but also heavier vehicles.”

Given the government’s investment in the national charging network has also seen it announce plans for ‘hydrogen highways’, the government seems to believe this is a more than likely scenario. However, CSIRO’s Rapid Decarbonisation scenario assumes more than half (56%) of long-haul road transport is electrified by 2050, with the remainder using low or zero-emission hydrogen. 5

Can we access the data to make the transition successful?

Data is critical for many things in the world today, and it’s critical to the evolution of EVs.

Independent research into EV usage is relatively scarce, says Rose.

While manufacturers collect and harvest every last fragment of information from each EV, it’s closely guarded. This makes it challenging for other stakeholders to deeply understand certain aspects, which consequently has implications for many stakeholders – owners, businesses, repairers, manufacturers and insurers alike.

Rose says, “The companies that have all the data are the manufacturers, so they monitor every movement, but they never release it.

“We have very, very limited data on EV usage, which is going to pose a potential challenge as EVs evolve. We could see a scenario in the future where you pay as you drive on an individual level, for example, because the manufacturer understands the driver’s risk profile, when and where you travel, and everything about how you are and what you do behind the wheel.”

Do businesses have a moral obligation to switch to EVs?

The general public often takes cues from businesses. By seeing more EVs on the road, the concept is normalised, demand is increased and subsequently so is production.

And, while governments and authorities have a major part to play in achieving mass adoption, businesses have an opportunity to take the lead.

But do they also have an obligation – albeit a moral one –to help the EV transition build further momentum?

Quite possibly.

“In years gone by, a strong environmental, social and governance (ESG) policy and the achievement of ESG goals was a nice to have – today it’s a must-have.

“Businesses are now a lot more deliberate around how they build their businesses – good businesses make sure they’re doing the right thing, and act as a good corporate citizen, in terms of how they treat employees, treat stakeholders and treat customers.

“So, yes, I do think businesses have a moral obligation to start this transition, because the general public will see businesses moving that way and see that it’s probably a good thing to follow them, too.”

Generating revenue through EVs

Professor Rose says a number of trials are in progress that put power from EVs back into the grid – potentially turning every company into an energy company.

“A lot of the electric vehicles today enable you to take power from the electric vehicle and put it back into the grid – you can set it up so it draws power from the grid when it’s off-peak and cheap, and when it’s peak and more expensive, it can put energy back into the grid.

“For example, a winery in South Australia had a simple electric vehicle. Their electricity bill was $6000 a year, and by using their EV to put electricity back into the grid, they went from a $6000 spend to making a profit of $50 per week.”

The implications for transport companies, for example, could be significant.

“If you think about a bus company, where you might have buses sitting in a depot not doing anything for a significant period of time, they could actually be putting energy into the grid and providing income sources.

“In five years time, they may no longer be a bus company – they will be an energy company.”

1. Annual Climate Change Statement 2022 (dcceew.gov.au)

2. Outlook for emissions reductions – Global EV Outlook 2024 – Analysis - IEA

3. Motor Vehicle Census, Australia, 31 Jan 2021 | Australian Bureau of Statistics (abs.gov.au)

4. Population | Australian Bureau of Statistics (abs.gov.au)

5. https://www.csiro.au/-/media/Environment/Net-zero/Infographics/CSIRO_ TransitionsReport_ElectricitySector.pdf