Updated: May 29, 2021
In September, German automaker Daimler made a stunning announcement: it’s halting the development of internal combustion engines and, instead, focusing its efforts on making electric vehicles (EVs) and batteries.
It was another signpost for the oil and gas (O&G) sector that disruption could be ahead. The world’s consumers, including Canadians, are starting to turn to EVs. And the wave of demand could be significant enough to push fundamental strategic changes at global car companies — and soon among energy players.
A new EY study, Canadian electric vehicle transition - the difference between evolution and revolution, outlines the possible impact of either rapid, moderate of slow adoption of EVs by 2030.
The rapid scenario contemplates EVs representing 30% of all vehicles on Canadian roads by 2030, coinciding with the International Energy Agency’s most aggressive forecast for EV adoption. Sales of new EVs in Canada are already growing quickly, with a 165% year-over-year increase in 2018 compared to 2017. Canada is also the 10th fastest adopter of EVs in the world, trailing only China, the United States, Japan and several European countries.
This scenario, while aggressive, could be reality if a number of scenarios play out. One scenario could be if several provincial governments with high-density populations impose new progressive policies (for example, procurement programs, fuel economy standards and zero-emission vehicle mandates that encourage EV uptake) — with that, we could see a rapid move to EVs over the next decade. The same applies if the prices are at par with gas-fuelled vehicles, which is expected by 2025.
This rapid adoption scenario could mean as many as 13.2 million EVs in Canada by 2030 — enough to displace about 252,000 barrels of oil per day in consumption. That’s a 13% reduction in current Canada Energy Regulator forecasts.
That’s a dramatic shift. So, how would O&G companies cope? They’d need to diversify their portfolios by expanding further into the power and utilities sector, increase their focus on petrochemical products and intensify their efforts to develop new revenue streams for existing products by gaining tidewater access to enter new markets through pipelines. One opportunity could be increasing the flow of natural gas to power generators to stabilize the electricity grid and manage growing demand during peak hours, or by retrofitting gas stations with charging points.
The clock is ticking for Canada’s energy players to determine how they’ll compete — and succeed — in any rapid, moderate or slow EV adoption scenario. Successful companies will be those that monitor the external reality, adapt and react quickly.
Authored by Lance Mortlock (Senior EY Strategy Partner & Haskayne School of Business Visiting Professor).