Fuel for thought

F u e l f o r THOUGHT

Strange Times

Strange goings on, worrying times, and who knows where we'll be by the time you come to read this. If one thing is patently clear, it's the fact that energy sources and supply will be a critical issue for us all. Electrification will face challenges in the immediate future, with natural gas being a key fuel for generating electricity in the UK, although in time Britain can probably gear up to bring in more gas from the rather neglected North Sea reserves. At current prices, they have now become valuable enough to justify the significant capital expenditure to finance their extraction and distribution.

What does a doubling of both natural gas and crude oil prices mean for us, as motorists? The impact on petrol and diesel prices is softened, on account of the high fixed excise duty content of 58p a litre, so a doubling of the petroleum cost only adds around 50% to the pre-VAT price. But electricity prices have simply rocketed, and costs of free market wholesale electricity used for non-domestic charging will be hit hardest if the present situation persists. Premium price ultra-rapid charging could see the costs rising towards £1per kWh, whilst at the lower end 50p per kWh could become the going rate. Domestic charging, where low cost overnight tariffs may disappear, and the standard rates could easily climb to 30 to 35p per kWh is not out of question. So how does this affect costs on a per mile basis? Any increases from today's £1.60 to £1.65 per litre means petrol and diesel costs will be heading towards 20p a mile for 40mpg petrol cars and 15p a mile for 50mpg diesels. For electric vehicles, using 3 miles per kWh as a mileage yardstick, costs per mile could range from 10p a mile for domestic charging to around 25p to 30p a mile for premium rate on-road rapid charging. That's quite an eye-opener, and something of a blow to all electric vehicle owners, and particularly those who previously enjoyed home charging tariffs of around 5p per kWh. Free charging at work and some supermarkets and hotels is a huge perk, although the situation on pricing is changing daily, and free electricity may not last.

This present situation throws a challenge down to the government, in terms of avoiding a sudden slowdown in electric vehicle sales. Some might see that as a good thing, as on-road charging facilities are not keeping up with ownership growth. Waiting lists for new electric vehicles are also growing, due to component shortages, and some damping down of sales volumes might not be a bad thing, to allow supply to catch up with demand. We could also see the government grasping an opportunity to make a move on petrol and diesel taxation though, with maybe a few pence added to the 58p a litre excise duty that's been frozen for 11 years, if the treasury desperately needs to raise some extra tax revenue. Perhaps we need incentives for manufacturers to stop killing diesel variants, and offer more diesel hybrids – if for no other reason than to keep their factories busy? Moving too quickly to kill the fossil fuel car in advance of the 2030 deadline is unhelpful to the motor industry, and it also unbalances the market. Maybe some guarantees that diesel and petrol variants that meet current emissions limits will be legal to operate until 2035 or 2040 might be a helpful move?

Longer term though, thoughts will also be turning to raising tax revenue to replace that being lost as petrol and diesel cars disappear. The popular idea of road pricing is a complicated and costly way of doing the same thing as simply taxing fuel, be it petrol, diesel, electricity, or hydrogen, but without offering any incentives for achieving better fuel economy. Cars need to be taxed in line with their true ecological impact and their contribution to road maintenance costs, so they need to be taxed in line with weight, size, and energy usage. That's better handled by taxing the fuel/energy they use than any other system. Finally, consideration should be given to those on low incomes who simply cannot afford to buy electric vehicles at today's prices. It will be years before a meaningful used electric vehicle market exists, and it's pointless using taxation or incentives to push people towards buying them when they simply can't afford them, and/or have no access to domestic charging facilities. Victor Harman