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CMS Guide to Electric Vehicles

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CMS Guide to Electric Vehicles
Introduction
Interest in electric vehicles (“EVs”) has waxed and waned over the years but they are no longer a rarity just for enthusiasts. Public and media interest in EVs and global take up of registered EVs has surged over the last ten years, increasing exponentially since 2010. The rapid increase was examined by the International Energy Association (“IEA”) it its recent report, Global EV Outlook 2017 Two million and counting1, citing a new record of registrations of EVs in 2016, with over 750,000 sales worldwide. The IAE goes on to cite Norway as the world leader in EV deployment with a 29% market share, followed by the Netherlands with a 6.4% market share, Sweden with a 3.4% market share, and finally, China, France and the United Kingdom lagging behind with market shares close to 1.5%. Those figures can be deceptive, as China had the largest EV market, accounting for more than 40% of the electric cars sold in the world and more than double the amount sold in the United States.
What is driving the current surge of interest? A number of factors, including a range of government initiatives:
  • the UK2and French3 governments separately announced in July 2017 that the sale of new conventional petrol and diesel vehicles will be banned by 2040;
  • more ambitiously, all cars sold in India are to be powered by electricity by 2030, according to an announcement made by the energy minister in April 20174;
  • large cities (Paris, London, Mexico City, Stuttgart, Tokyo are imposing measures to encourage take up of EVs, as reported by Bloomberg in May 20175 - such measures include banning or restricting polluting vehicles, or to imposing charges for such vehicles entering specified city zones.

In May 2017, the Financial Times (“FT”) reported on a UBS analysis that forecast cost parity between EVs and conventional gas and diesel vehicles as early as 2018 in Europe, by 2023 in China and 2015 in the United States6. In September 2017, the FT reported on Bloomberg research that predicted “tumbling battery prices” would make EVs cheaper to buy than conventional vehicles in most countries by 2025-29, leading to EVs making up more than half of new car sales worldwide by 20407.
Deployment of EVs could address a number of concerns, but mass uptake and market saturation will bring with it its own set of challenges. What charging infrastructure will exist? Will demand on networks increase as more EVs need to be charged? Or will demand decrease as large businesses and domestic consumers forge their own charging solutions, whether that means an increase in embedded generation or investment in energy storage?
To enable large scale EV deployment, clarity will be required in terms of government policies, regulation, applicable laws, and the interactions between EVs and electricity networks. Solutions cannot come forward as long as different interest groups continue to work in silos. Government departments will have to work closely and collaboratively with each other and with the automotive and energy industries to ensure that future developments, regulation and legislation will be fit for purpose.
Why EVs?
The increase in deployment of EVs creates a wealth of opportunities for developers, investors, automotive manufacturers, electricity generators, supply chains, network operators, energy suppliers, consumers, infrastructure owners and developers, and other electricity and automotive sector participants.
EVs could be the key to developing solutions that have the potential to address a range of concerns and issues:
Types of EVs – technologies and terminology
Electric vehicles that use electric motors powered by on-board batteries are sometimes called Battery Electric Vehicles (“BEVs”) to distinguish them from hybrid engine vehicles, which combine a normal petrol or diesel engine with an electric motor. Conventional hybrids (such as the Toyota Prius) balance combustion and electric propulsion fairly evenly, whereas “Plug-in Hybrids” (“PHEVs”) have a larger battery and fall back on a smaller combustion engine less frequently.
Batteries have been a significant obstacle in the wider deployment of EVs to date and represent a large proportion of their cost. Battery characteristics including energy density, longevity and charge time impact greatly on the range and performance of EVs. Manufacturers have made significant improvements in these areas, but there is still a long way to go to achieve value parity with vehicles with combustion engines, especially for heavier vehicles.
The table below sets out the types of batteries currently used in EVs.



Battery typeDescription and useAdvantagesDisadvantages
Lead-acid batteriesCommonly used in forklifts and golf carts. Rarely used in modern EVs.
  • Cheap to produce
  • Toxic
  • Volatile
  • Short lifespan
  • Low energy density
Nickel metal hydride [NiMH]Uses hydrogen ions to store energy around nickel and e.g. titanium. Currently used primarily in hybrids but rarely in BEVs.
  • Safer than Li-ion – fewer volatile materials
  • Faster rate of self-discharge when not in use than Li-ion
  • Semi-toxic – requires special handling to recycle.
  • Recharging early can diminish capacity.
Lithium ion batteries [Li-ion]Uses liquid electrolyte. Currently considered to have the most potential for mass-market EVs
  • Higher energy density than NiMH
  • Versatile – greater scope for varying discharge currents, voltages, charge times etc.
  • High cost – especially the most advanced units
  • Degrades with age at faster rate than NiMH
  • Technology may have reached an energy density barrier

Despite the various problems with current battery technologies, automakers have largely eschewed hydrogen fuel cells. Compared to batteries, fuel cells would have the benefits of being smaller, lighter and instantly rechargeable; but they are currently much further from economic viability than batteries. Instead, new battery types are currently in development, with both “solid state” and “lithium air” batteries promising further gains in the crucial variable of energy density.
Electric motors are more efficient than combustion engine propulsion – this, coupled with the transition to a lower-carbon electricity generation mix, is how EVs will contribute to the reduction of global air pollution. The table below sets out the types of motors currently used in EVs:
.
Motor type Advantages Disadvantages
Alternating-Current (“AC”) Motor
  • Greater efficiency and more reliable continuous power (this makes a difference uphill)
  • Can run at higher RPMs without overheating (and therefore able to move heavier vehicles)
  • Better suited to regenerative braking systems (which use braking power to re-charge the battery)
More expensive than DC motors.
Since battery output is DC, the EV must also house a DC/AC converter to power the motor from the battery.
Direct-Current (“DC”) Motor More affordable,
Greater power
Tendency to overheat.

Regulatory considerations – European legislative framework/policy
A key driver for the transition to electric vehicles is regulatory targets on carbon emissions. The Paris Agreement, which came into force in November 2016, brings a large number of nations together in the pursuit of containing climate change. Parties to the treaty are required to declare their best efforts in the form of “nationally determined contributions” (“NDCs”).
The EU’s NDC requires it to reduce greenhouse gas emissions to a level 40% below 1990 levels by 2030, and the EU has further committed to achieve an 80% reduction by 2050. The EU has put a range of transport-related measures in place to achieve this goal, including the following:
  • The 2009 Renewable Energy Directive requires member states to ensure that at least 10% of transport energy consumption is derived from renewable sources by 2020.
  • The 2014 Alternative Fuels Infrastructure Directive requires member states to put in place national policy frameworks for the development of the market for non-fossil fuels in the transport sector, including the provision of adequate EV charging infrastructure in developed areas.
  • The European Commission’s 2011 Single European Transport Area white paper sets a target of a 60% reduction in transport greenhouse gas emissions by 2050 (by 1990 levels).
  • The 2009 Emission Performance Standards Regulation requires car manufacturers to achieve a certain average emissions level across the new vehicles they sell and to make available to consumers information about the emission performance of their vehicles.

Financial incentives for the purchase of new EVs, along with a range of tax and access benefits for ownership, are present across the larger European economies. Norway and the Netherlands are international leaders in EV incentives, with special measures including nationwide toll exemptions in Norway and an urban charging point development regime led by resident applications in Amsterdam.
Regulatory considerations – global legislative framework/policy
The Paris Agreement’s NDC mechanism, giving individual countries discretion over their own targets, was designed to prevent undue burden on less economically developed nations. The NDCs of other major polluting nations are not closely aligned: China has committed to a 60% reduction in CO2 emissions from 2005 levels by 2030, whereas India’s target is 33%; Russia is aiming for a 25% reduction in greenhouse gas emissions from 1990 levels by 2030; the US has formally notified the UN of its intention to withdraw from the Paris Agreement, but the target it had previously set was a 26% reduction in greenhouse gas emissions from 2005 levels by 2025. China, India, Japan and the US (unlike the EU) also included specific transport emissions measures in their NDCs, including fuel efficiency improvements and alternative fuel promotion.
Few nations have stricter vehicle emissions standards than the EU, but the US and Canada are currently phasing in the world’s most stringent standards. The standards in China and India are less demanding, though plans are in place in both jurisdictions to catch up to the EU.
China has achieved remarkable EV sales growth through such promotional measures as sizeable purchase subsidies, large-scale charging infrastructure funding and restrictions on registrations of combustion-engine vehicles. However, the market is already showing signs of over-reliance on subsidies, with a precipitous fall in sales linked to subsidy reductions in early 2017.
Other legal issues
Cohesive regulatory frameworks for electric vehicles are not well-established. To prepare for the universal electrification of roads, there is likely to be national legislation on a broad range of issues, including vehicle licensing and taxation, vehicle and charging standards and the smart management of grid demand.
About the guide
The CMS Energy group is passionate about developments that impact the industry. We strive to constantly be on top of R&D, engage in constructive dialogue and help our clients manage the challenges and opportunities brought by change. This e-guide is our approach to help our clients, whether they are battery or vehicle manufacturers, EV infrastructure providers, network or supply businesses, get acquainted with EV developments across the world to help with their investment and growth decisions. We are starting with a chapter on developments in the UK and will continuously update it with chapters from other jurisdictions across Europe, Asia, the Middle East and Latin America.
References
  • https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf (accessed 15 September 2017)
  • https://www.gov.uk/government/news/plan-for-roadside-no2-concentrations-published
  • http://www.gouvernement.fr/en/climate-plan
  • http://www.independent.co.uk/news/world/asia/india-electric-cars-2030-fossil-fuel-air-pollution-piyush-goyal-climate-change-a7711381.html
  • https://www.bloomberg.com/news/articles/2017-05-17/paris-london-lead-urban-charge-for-cleaner-cars-as-trump-balks
  • https://www.ft.com/content/6e475f18-3c85-11e7-ac89-b01cc67cfeec
  • https://www.ft.com/content/fbbc05b0-9c75-11e7-8cd4-932067fbf946

United Kingdom
The UK shows significant potential in EV development. It is the second largest automotive manufacturing hub in Europe, with a comparatively large consumer base for road vehicles and a wealth of innovation from its world-class universities.
What EVs have been deployed in your jurisdiction to date?
Electric vehicles currently represent a small proportion of the vehicles licensed in the UK:
“Ultra-low emission vehicles”
(Electric, hybrid & hydrogen)1
Total vehicles2
Cars108,00031,212,000
Vans6,0003,870,000
HGVs & buses679660,000
All vehicles119,00038,971,000

However, market share is increasing. In 2016, the UK was one of only six countries worldwide in which sales of electric passenger light-duty vehicles exceeded 1% of sales of all such vehicles.3 August 2017 was the first month in which pure electric cars represented over 2% of total UK new car registrations (with hybrids contributing a further 3%).4
Is there any specific legislation for/regulation of EVs in your jurisdiction?
The UK Government announced its Air Quality Plan in July 2017, including a commitment to ban the sale of new petrol and diesel cars and vans by 2040. The plan also included £255 million in additional funding for local councils to produce and implement nitrate pollution reduction plans, funded through changes in tax treatment for new diesel vehicles. Vehicle manufacturers have been subject to tougher “real world” emissions testing requirements since 1 September 2017. The government has also had a Motor Fuel Greenhouse Gas Emissions Reporting regime in place since 2013, requiring large-scale suppliers of road transport fuel to report to the Department for Transport on the quantity and types of fuel it supplies and the greenhouse gas intensity of each type.
A key upcoming piece of legislation is the Automated and Electric Vehicles Bill, which had its first reading in the House of Commons on 18 October 2017. The Bill introduces powers for the government to issue regulations for the improvement of the country’s charging infrastructure by e.g. ensuring interoperability between all public EV charging points, forcing large fuel retailers to provide rapid charge points and requiring that all new public charging points be smart enabled.
What measures promote EVs in your jurisdiction?
The government is investing in EV promotion and infrastructure. The Department for Transport and Department for Business, Energy & Industrial Strategy have set up a dedicated Office for Low Emission Vehicles (“OLEV”), which has been given a £900 million investment mandate to keep the UK at the forefront of ultra-low emission vehicle technology. The government also has a range of further investment programmes in place, including a £246 million investment in its “Faraday Challenge” to boost expertise in battery technology; a £20 million investment in “vehicle to grid” infrastructure (as part of the government’s July 2017 Smart Systems and Flexibility Plan); and a recent award of £40 million shared among four UK cities with innovative EV infrastructure proposals (as part of the government’s “Go Ultra Low” scheme). The government’s Clean Growth Strategy on 12 October 2017 reaffirmed all these investments, while committing a further £80 million to investment in charging infrastructure, and a “further strategy on the pathway to zero emission transport” is expected in March 2018.
Investments are also coming from industry sources. Ofgem, the UK National Regulatory Authority, administers a £500 million Low Carbon Networks Fund sponsored by distribution network operators. Projects proposed by DNOs in relation to electric vehicles have included experimentation with charging point tariffs and extensive smart metering to determine how best to reinforce distribution networks.
The current incentives to own a low emission vehicle in the UK include:
  • EV purchase grants – the government will pay up to £4,500 towards the cost of purchasing a low emission vehicle (based on factors including CO2 emissions and distance which can be travelled with zero emissions). Taxi drivers can obtain a grant of up to £7,500 for the purchase of plug-in vehicles.
  • Charging point grants – OLEV will contribute £500 towards the cost of installing a home charging point (the Energy Saving Trust offers a further £500); local authorities can apply to OLEV for funding for up to 75% of the cost of installing an on-street charging point in areas lacking off-street parking.
  • Various tax benefits – for example, road tax is graded by CO2 emissions.
  • HGV licensing break – the weight threshold at which an HGV licence is required is higher for electric vans than for vans with combustion engines.
  • London Ultra Low Emission Zone – ultra-low emission vehicles already qualify for a 100% discount on the London congestion charge; this exemption will increase in significance in 2019 when Sadiq Khan’s pledged additional fee for certain petrol and diesel vehicles is introduced. All newly licensed taxis are to be zero-emission capable from 2018.

Who are the main entities (e.g. developers, government, System Operator) and what are their roles in the deployment of EVs in your jurisdiction?
In addition to government, stakeholders in the UK EV market include:
  • Ofgem – the regulator will have a huge role in reviewing existing licence conditions for transmission, distribution, generation and supply to ensure the removal of any existing barriers to development of EVs and their supporting infrastructure. Ofgem will have a key role in engaging with all stakeholders.
  • Vehicle and battery manufacturers – Nissan is already manufacturing its Leaf model, and the batteries for it, in Sunderland; BMW has announced that it will be making electric Minis in Oxford; and Jaguar Land Rover has pledged to electrify its entire range from 2020.
  • Network owners and operators – National Grid, as transmission system owner and operator, will have to work closely with distribution network operators to ensure that investment in developing and reinforcing the networks is deployed in the most efficient way. This is a particularly challenging task as EVs will not be predictable in terms of the points at which they call on the networks.
  • Electricity market participants – electricity generators, suppliers and distributors will have to work together with the network owners to ensure that vehicular demand for electricity is managed; they may also have a part to play in the ownership, operation and marketability of charging infrastructure.
  • Charging station developers – existing developers of new charging infrastructure, including POD point, EV Charging Solutions and Rolec, are likely to face increasing competition and a need to ensure a consistent level of compatibility and interoperability.
  • NGOs and industry bodies including Energy UK and the Energy Saving Trust.

What are the main challenges to further deployment of EVs in your jurisdiction? How have EV developers sought to overcome these challenges to date?
From a UK consumer perspective, obstacles to EV ownership include:
  • Price – EVs remain more expensive than combustion-driven vehicles.
  • Freedom of travel – while a large proportion of the car-owning population is able to charge their cars at home every night, the shortage of nationwide charging infrastructure is a major issue for prospective EV-purchasers. The ratio of public charging points to registered electric vehicles is currently 1:2,900 in the UK as compared with 1:350 in Norway. The Automated and Electric Vehicles Bill may go some way towards addressing this issue – although the introduction of vehicle-to-grid discharging measures could cause consumers concern if it leads to their being unable to control their vehicles’ charge levels.

One of the most significant challenges will be encouraging the various stakeholders listed in section 4 above to cooperate to take ownership of the necessary infrastructure and manage electricity demand. There are a number of plausible models for this, from bespoke power purchase arrangements to taking consumers entirely “off grid”.
Current regulation is also a challenge – e.g. weight-based vehicle licensing requirements discourage purchase of electric vans. Ofgem has often been overtaken by the pace of change, and there will need to be a level of flexibility and pragmatism in bringing forward changes to the licensing regime and to industry codes to open the doors to new participants in the energy sector.
Despite significant advances in battery technology in recent years, this component remains a significant limiting factor for vehicle manufacturers, especially in relation to heavy goods vehicles. Further, while it might be assumed that developments in autonomous and connected vehicles will naturally accompany the transition to EVs, they in fact present their own difficulties. Self-driving vehicles process a very large quantity of data, and consume a lot of power in the process; fully electrifying these vehicles will require further developments in battery technology to be economically viable.
The National Infrastructure Commission, in its October 2017 draft National Infrastructure Assessment, observes an additional issue for government. The transition to EVs will require a new model for taxing road use (to fund road maintenance), since fuel duty will become inapplicable and EVs benefit from vehicle excise duty exemptions.
These challenges present a broad range of opportunities for businesses across the electricity market. While the transition from petrol/diesel to electric vehicles will inevitably have a significant impact on electricity demand, National Grid has published reassurance that the media is prone to overstate this. National Grid anticipates that increase in peak power demand is most likely to be between 6GW and 18GW by 2050, with the exact increase depending heavily on electricity market development as well as consumer behaviour. System stress can be minimised by the effective roll-out of smart charging infrastructure and the complementary development of smart energy networks to smooth out the impact of the additional demand. Grid strain could be avoided entirely if charging point owners and EV drivers invest in their own generation and storage facilities.
References
  • https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/644457/veh0101.ods
  • https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/644467/veh0130.ods
  • https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf
  • https://www.smmt.co.uk/vehicle-data/evs-and-afvs-registrations/

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