One of the common ‘boasts’ available to Australian electric vehicle owners over the past year has been the fact that fuel prices have risen significantly, while the cost of electricity that used to charge their vehicle has been markedly cheaper – and constant.
Within that context, the current experience of EV owners in the UK and information provided at this week’s AFR Energy and Climate Summit by the Australian electricity industry sound a warning about how future steep rise in electricity prices may dampen the rate of EV adoption in the near term.
“The Australian Government’s recent EV policies appear to be replicating what was done in Europe and the UK some years ago and so we can get a bit of an idea about future growth in EVs in Australia by watching what is happening in these international economies”, said ACAPMA CEO Mark McKenzie.
“That said, the higher population density in the UK means that the UK trends are likely to be more relevant to EV demand growth in our largest capital cities and will be less relevant in our small capital cities and regional/rural areas,” added Mark.
Despite the high capital premium of an electric vehicle over an equivalent petrol vehicle, – which currently averages $20k to $25k – EVs provide their owners with lower overall maintenance and energy costs over the life of the vehicle. This has been a major selling point in most economies and has been a point of recent discussion in Australia in the face of rapidly rising oil and fuel costs.
It appears, however, that the current energy challenges in Europe and the UK are narrowing the gap between conventional fuel costs and electricity costs for motorists – particularly when it comes to the cost of fast charging of EVs.
The Royal Automobile Club (RAC) of the UK recently reported that the costs of using public EV chargers in the UK had increased markedly in recent months. The RAC reported that the costs of using public EV Charging Points on a ‘pay as you go’ basis had climbed from an average of 19 pence per kWh in May 2022 to more than 63 pence per kWh just 4 months later. When these increases are combined with smaller increases in home-based charging, the average cost of EV charging had increased by around 42%.
“The RAC analysis revealed that an EV owner charging exclusively via rapid or ultra-rapid public charge points – typically because they may live in an apartment block with no home charging – is now paying around 18 pence per kilometre, which is close to the costs of running petrol (19 pence per litre) and diesel (21 pence per litre) cars”, said Mark.
While it should be remembered that the recent spike in electricity costs in the UK is solely due to higher gas and energy costs created by the Russia-Ukraine crisis and an under-cooked transition to renewable electricity generation, the experience is nonetheless instructive on how rising electricity prices may influence EV demand in the future.
The other major Motoring Group in the UK, the AA, undertook a survey of motorists about their EV buying intentions in the face of the recent electricity hike. Their survey of 12,500 drivers revealed that the surging electricity prices were discouraging drivers from purchasing an EV in the near term.
Just over 63% of respondents to the AA Survey said that higher electricity prices were a contributing factor in them sticking with conventionally fuelled vehicles – and 10% said it was the ‘primary reason’ they were not switching to EVs just yet.
Further, the AA survey of motorist intentions are being reflected in a recent reduction in the rate of growth of EV registrations in the UK. UK automotive industry figures revealed that EV registrations for the 2022 year to date were 50% higher than the same period in 2021 which, while good, represented a fall from the 102% increase over the same period in 2021 that was experienced during the first quarter of 2022.
“On any objective reading, the UK experience reveals that surging electricity prices is impacting the rate of EV adoption in that country at the moment”, said Mark
“Our industry is going to have to be mindful of this impact as we plan the roll-out of fast and ultra-fast EV chargers across the nation’s service station network”, added Mark
The warning signs of a potential similar trend in Australia are already here with the leaders of Australia’s telling the AFR Climate and Energy Summit this week that electricity charges were going to increase by 35% in 2023 due to rising costs. These leaders suggested that this increase was not likely to be a short term phenomena as Australia strives for ‘Net Zero’ emissions in 20500, with the capital cost of replacement renewable energy infrastructure increasing by several orders of magnitude in the face of rising cash rates and international supply chain challenges.
“The above is not to say that EVs are not on their way but it does raise questions about how quickly EVs will become the norm for Australian motorists, with the rate of growth likely to be impacted by the future volatility of electricity prices relative to fuel prices”, concluded Mark