What  is  electro  mobility?

Electro mobility has the potential to significantly alter the transport sector. Replacing gasoline and diesel with electricity generated from renewable sources would mark a significant step towards a green economy. Major upsides are that it concentrates pollution at the site of electricity generation outside of cities as well as reducing noise and it is much more energy-efficient than burning fossil fuels (International Energy Agency, 2011a). While electricity was a potential power source during the introduction of cars in the late 19^th century, it has largely disappeared after the internal combustion engine (ICE) became the predominant technology (Unruh, 2000). Since then, the ICE has locked-in and shaped the behaviour as well as infrastructure towards its needs (petrol station etc.), whereas the necessary charging infrastructure for electro mobility is missing. This increases the challenge because it requires an overhaul of the infrastructure. However, in comparison to other industrialised countries, this ICE lock-in is weaker in China because the Chinese car industry had been shut down during the Cultural Revolution when cars were considered luxury goods.⁵⁴

China has coined the term ‘New Energy Vehicles’ (People's Republic of China, 2011, State Council of the People's Republic of China, 2012a) when addressing electro mobility, which is the more common wording internationally.⁵⁵ New energy describes the electricity generation sources. The Chinese wording includes nuclear and large hydro (which are criticised technologies by many environmentalists) as well as renewable energy sources to power a growing electric fleet (Hannon et al., 2011).

4.1.1. Technology  development  and  the  Chinese  status  quo  

The transition to electro mobility depends to a high degree on the available technology stressing innovation. However, engineers still need to solve major challenges: high battery cost resulting in higher prices than traditional vehicles, limited driving range because of battery capacity restraints, lack of charging stations and the need to ramp up production to generate economies of scale (International Energy Agency, 2011a). The following discusses engine, battery and charging infrastructure in more detail and elaborates China’s current situation.

54 For an historical overview of the Chinese automotive industry Gallagher (2006: 31-45), Kubach (2011: 26-35).

55 The following uses the internationally predominant wording electro mobility and electric vehicles rather than the specific Chinese wording.

• Industry has developed various electrified power trains: Pure battery electric vehicles (BEVs) run only on electricity, meaning that they cannot move if not charged. Hybrid electric vehicles (HEVs) combine electricity and traditional ICEs – they can assume various forms, such as plug-in HEVs that are charged through a cable in addition to refilling the tank of the ICE or range extenders that include a small ICE to charge the batteries. An alternative power source applied in fuel cell electric vehicles (FCVs) is hydrogen. While only few BEVs and FCVs are available in the marketplace, HEVs have gained a significant share of several regional markets, for example approximately 3% in the United States in 2009 (International Energy Agency, 2011a).⁵⁶

Chinese carmakers are capable of producing all types of vehicles. However, they lack knowledge on many issues concerning ICE technology limiting their international competitiveness. For this reason, the government concentrates on electro mobility with a more level international playing field in an attempt to ramp up the industry. The definition of NEV of the National Development and Reform Commission includes

“HEVs, BEVs (including solar-panel-powered vehicles), FCVs, hydrogen internal-combustion engine vehicles, and other vehicles with new fuels” (cited by Gong et al., 2012: 211). Chinese manufacturers have presented several HEV and BEV models and joint ventures with international car manufacturers have increased the available models (Earley et al., 2011, Liu and Kokko, 2013). Nonetheless, industry insiders suggest that with regard to “energy efficiency, control accuracy and reliability for motors technology in China still lags behind the international advanced level, and further improvements are in need for product development and manufacturing process” (Ou and Zhang, 2012: 2046). Hence, the Chinese car industry is improving but has not yet caught up with international leaders.

• Batteries are the fuel tanks of electric vehicles. A key task for engineers is to improve their capacity while at the same time reducing their price. This is crucial because they explain the high price differentials compared to ICEs and their limited capacity reduces the potential driving range which deters consumers (SupplierBusiness, 2011).

While prices are expected to fall with growing production capacities, more research is needed to increase their capacity and reduce their weight. Currently, lithium-ion technology is predominant but most likely new chemical substances will bring the breakthrough to higher energy density (SupplierBusiness, 2011). However, developing

56 The most famous to date remains the Toyota Prius developed in Japan in the late 1990s.

Governing the Transition to a Green Economy 143 better batteries is only part of the solution as battery management systems determine

the life time and power of a battery.

China is the world leader in battery production for consumer electronics but not a major innovator in the field (SupplierBusiness, 2011): While it produces over half of all lithium-ion batteries for consumer goods, it holds only 1% of all patent registrations (PRTM Management Consultants, 2011).⁵⁷ This could hamper innovation because of licensing fees (Earley et al., 2011). However, China has cheap access to the required rare earths for lithium-ion batteries giving it a cost advantage.

• Charging electric vehicles takes longer than refilling ICE and needs to take place more often because of limited battery capacities. For electro mobility to gain market shares, charging needs to be easy for consumers (Reichert et al., 2011). Hence, the infrastructure needs to adapt and various models are discussed: First, charging at home through charging cables, which requires new power outlets; second, super-fast charging facilities comparable to existing gas stations that make use of induction technology, which can in the long-run damage the batteries; third, battery swap in which empty batteries are exchanged for charged ones. This is fast but requires standardized batteries, which limits design options for manufacturers.

China has not yet settled on a model leaving analysts to argue that the charging problem hinders the large-scale adoption of electro mobility (McKinsey & Company, 2012b). However, this is a common international problem. A peculiar Chinese challenge is that people in large cities often live in apartment buildings. This means that they lack access to power outlets over night. However, the two major energy utilities, ‘State Grid Corporation of China’ and ‘China Southern Power Grid’ have announced investment plans to begin building the necessary infrastructure until 2015 (Liu, 2012). The major oil companies also start moving into this field by adding electric charging to their gas stations (Li and Ouyang, 2011).

A major advantage of China in the international electro mobility competition is that it is close to a global monopolistic owner of lithium and rare earths required for the batteries and other parts (Kubach, 2011). 30% of rare earths deposits exist in China and it currently produces 95% of worldwide supplies; China is the third biggest world market supplier of lithium (following Chile and Australia) (Earley et al., 2011). Hence, a Chinese analyst states that

“China's competitive edge in batteries, electric motors, lithium and rare-earth resources can help the nation to become a leader in the electric-vehicle industry” (Li, 2011). It has put in

57 Japan holds 50%, the United States 25%, and Europe and South Korea about 20% of the patents.

place strict export restrictions which has led to price hikes abroad (Stewart et al., 2012).

While this does not improve the perception of China abroad, which could hinder the technological cooperation, it gives it a cost advantage (PRTM Management Consultants, 2011, Valentine-Urbschat and Bernhart, 2009). Furthermore, it might stall international R&D of new battery technologies that could diffuse to China.

4.1.2. Greenhouse  gas  emissions  intensity  of  an  electrified  transport  sector   The environmental impact of electro mobility depends on the electricity generation (Earley et al., 2011, Huo et al., 2012b): GHG emission reductions take place when generation emits less than burning gasoline; GHG emissions increase when the GHG intensity of generation is higher than of ICEs. Hence, the energy mix determines the environmental impact. While China advances renewable sources of electricity generation, it generates almost 80% of its electricity by burning coal for which reason it is responsible for almost half of worldwide coal demand (International Energy Agency, 2012b). In the United States, the second largest coal user, burning coal generates approximately 45% of electricity. Hence, the Chinese energy mix is very GHG emissions-intensive because of the high share of coal burning. This does not bode well for achieving GHG emission reductions through electro mobility.

In a full life-cycle comparison of ICE vehicles and BEVs taking into account the current Chinese energy mix, “the GHG emission changes range from a 23% reduction to a 36%

increase over the use of ICE vehicles” (Earley et al., 2011: 22) depending on the regional grid.⁵⁸ These findings are supported by Huo et al. (2012b) who conclude that in a wheel-to-wheel comparison electro mobility will reduce GHG emissions by 12% by 2050 compared to the business as usual scenario.⁵⁹ However, fuel consumption improvements are more effective as they would reduce GHG emissions by 34% during the same time frame. According to Huo et al. (2010), GHG emissions could rise potentially by 7% in an electro mobility scenario – the breakeven point between ICE and electric vehicles emissions is when coal power plants produce 87% of electricity.⁶⁰ Hence, the differing energy mixes of the Chinese regional power grids are an important variable for the GHG emissions from each power train. From an environmental point of view, only the regions with a low level of electricity generated

58 Six regional energy grids that are not closely linked serve China. Depending on the grid, between 65% and 98% of generated electricity stem from burning coal (Huo et al., 2010).

59 This study assumes that electric vehicles will assume 60% of the market.

60 The scenario does not include GHG emissions arising from the creation of the charging infrastructure. The breakeven point also depends on the efficiency of the power plants and which other technologies are included in the energy mix. Currently, in the Northwest, Central and South regions clean energy sources are furthest developed. Hence, they are better suited for electro mobility from an environmental point of view.

Governing the Transition to a Green Economy 145 through coal burning should pursue electrified transport. Other parts of the country should

change their energy mix first.