Hyperefficient EVs can help accelerate and realize the energy transition in the Netherlands

Blog post
September 30, 2022

Dr. Paul Nillesen | Partner, Strategy& Netherlands

Executive summary

To power the energy transition in the Netherlands, huge investments in energy infrastructure will be needed in the coming decades; DSOs and TSOs will need to invest more than €100bn between 2020 and 2050
Electrification of mobility is a key driver to reduce greenhouse gas emissions and thus strongly supported by policy makers; as a result, the adoption of EVs in the Netherlands is accelerating and the total number of EVs is expected to reach 5.8 million in 2040
To power this growing fleet of EVs, an increasing number of EV charging points will be needed (up to 3.7 million in 2040), and electricity consumption will grow accordingly
Significant investments in electricity infrastructure are needed to facilitate this increased power and accommodate higher peak loads; furthermore, >15TWh of additional electricity is needed to power the growing number of EVs in the year 2040

In a study conducted by PwC Strategy& in collaboration with Stedin for Lightyear we estimate that a 20 percent penetration of hyperefficient EVs could reduce electricity infrastructure investments by €2.2 bn over the 2022-2040 period, through three levers:

Less reinforcement required of DSO grids due to lower energy demand, equivalent to cumulative CAPEX savings of €500 mln
Fewer and less powerful EV chargers needed, equivalent to cumulative CAPEX savings of €600 mln
Lower energy consumption by EVs, translating to lower investments in electricity generation assets (equivalent to ~€1 bn) and lower CO₂ emissions (1.1 mton)

Thus, hyperefficient EVs can provide a very sizable contribution to solving the investment challenge in the Dutch energy infrastructure, as well as help lower the CO₂ emissions of the mobility sector.

Introduction

The Netherlands has the ambition to be completely climate neutral by 2050, meaning that greenhouse gas (GHG) emissions need to be reduced by 2.5 percent annually on average. Electrification is a key lever for decarbonisation and the resulting growth in renewable generation and electricity demand is putting significant pressure on the transmission and distribution infrastructure. Collectively, the Dutch network operators are projected to invest more than €100 bn in the period to 2050, as found by a study conducted by PwC for Netbeheer Nederland.

Electrification of cars is a key lever to reduce traffic- and transport-related emissions, responsible for 20 percent of Dutch GHG emissions in 2021¹⁾. From 2030 onwards, all newly sold passenger vehicles in the Netherlands will need to be fully electric⁴⁾. As a result of dropping EV prices and policy incentives, the number of EVs is expected grow to 5.8 million vehicles in the next two decades.

This strong growth in EVs drives an increasing, and more unpredictable, demand for electricity. By 2040, we project that EVs alone will be responsible for 10 percent of the total Dutch electricity consumption (~17 TWh). More renewable energy will need to be generated and transmitted through already congested electricity grids. In addition, the growing EV fleet requires the installation of ~3 million new charging points, varying from private home chargers to fast chargers along the highway²⁾. Apart from requiring substantial financial investments, the execution challenge (“maakbaarheid”) for these investments is significant.

Therefore, it is crucial to look at options that minimize investments in renewable generation capacity, grid reinforcements and charging points.

Impact of hyperefficient EV technology on investment agenda

Where EV manufacturers have in the past focused on improving range, several OEMs are developing hyperefficient EVs³⁾ that optimize both range and efficiency. Such cars demonstrate a lower energy consumption through a combination of technologies, such as optimization of the drivetrain, aerodynamics, battery pack or chassis. On top, several hyperefficient EVs (e.g., Lightyear, Aptera) utilize in-roof solar panels. Lightyear, as an example, has proven to be ~50 percent more efficient than the average EV in the current market. For car owners, this translates in a range up to 700km, resulting in fewer charging moments.

What could be the potential impact of hyperefficient EVs on the investment challenge that electricity infrastructure providers face?

To investigate this, PwC Strategy&, Stedin and Lightyear analysed the impact of this technology on electricity generation, charging infrastructure and distribution grids. Our base case assumes an EV adoption as provided in the mid-scenario as provided by Elaad. In our study, we assume a scenario in which one-fifth of all passenger cars on the Dutch road (~35 percent of the EV fleet) utilize hyperefficient technology in 2040. Our high-level assessment shows a positive impact on required investments (i.e., CAPEX savings) along three levers:

1. Charging points
Hyperefficient EVs require less charging, lowering the average utilization and resulting in fewer charging stations. For the installation of charging points both the charging point operators (CPOs, material and installation cost) and the DSO (connection cost) are involved. We estimate potential CAPEX savings for charging points to be ~€600 mln, of which €505 mln for CPOs and €94 mln for DSOs (cumulatively over 2022-2040).

2. Grid reinforcements
For grid operators (DSOs), hyperefficient EVs means a lower demand and lower peak loads, due to less frequent and shorter charging sessions. This results in a lower need for grid reinforcement. The impact on the distribution grid and investments were estimated using a “digital twin” model of the Stedin network, extrapolated to the rest of the Netherlands. Based on these simulations, the DSOs could save an additional ~€500 mln in grid reinforcements over the 2022-2040 period.

3. Electricity generation and CO₂ emissions
Lastly, less energy is required to power the hyperefficient EVs. A high-level estimation indicates that 1.9 TWh can be saved in 2040, a ~10 percent reduction of the base case. If EVs are completely powered by renewable energy sources, this results in an additional ~€1 billion CAPEX savings in generation capacity.

The total CAPEX abatement of these three levers adds up to € 2.2 billion over the period 2022-2040, equal to almost 2 percent of the total investment agenda of the Dutch network operators up to 2050.

As electricity generation will not fully come from renewable sources in the coming years, hyperefficient EVs can also help to reduce CO₂ emissions. We estimate the reduced energy consumption will result in 1.1 mton cumulative CO₂ savings over 2022-2040, equivalent to the absorption capacity of 9.8 mln trees.

Conclusion

The investment agenda for the Dutch electricity infrastructure in the next decades is massive, resulting in increasing issues related to execution (delays) and financing (balance sheet constraints). Any option that can mitigate, minimize or avoid investments should be considered. These include thinking in terms of software instead of hardware - i.e., using data and information on the grid better – but also incentivizing people to contribute to flexibility and introducing more price incentives.

Importantly, it will also involve developing new technologies or introducing new innovations to lower average demand and increase energy efficiency. As demonstrated in this study, hyperefficient EVs can provide a very sizable contribution to solving the investment challenge, as well as help lower the CO₂ emissions of the mobility sector.

Although this study does not draw any conclusions about the potential of hyperefficient technology for other countries, it shows the potential societal benefits of hyperefficient EVs could be significant.

^{1) Source: CBS; Climate agreement 2019; Design policy program Energy and Climate 2022; IPCC

2) Source: Elaad; TNO; APPM; CBS; PBL; Strategy& analysis

3) The term “hyperefficient EVs” is referring to EVs with an efficiency below 100 Wh/km

4) Source: https://english.rvo.nl/information/electric-transport}

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Dr. Paul Nillesen

Partner, Strategy& Netherlands

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