Electric vehicles to seriously impact fossil fuel demand

A new report forecasts that fossil fuels may lose 10 per cent of market share to solar panels and electric vehicles within a single decade.

The report from the Imperial College London and think-tank Carbon Tracker Initiative suggests that energy companies are seriously underestimating the impact of electric vehicles and solar panels. Such technology could be so disruptive that, by 2020, the global demand for coal and oil could peak and start to decline.

The report, called ‘Expect the unexpected: The disruptive power of low-carbon technology’, warns that fossil fuels may lose 10 per cent of market share to solar panels and electric vehicles within a single decade. In the past, a similar 10 per cent loss of power market share caused the collapse of the US coal mining industry.

Similarly, Europe's five major utilities lost more than €100 billion in value from 2008 to 2013 because they were unprepared for an 8 per cent growth in renewable power, of which solar panels played a big part.

According to the report, growth in electric vehicles alone could lead to two million barrels of oil per day (mbd) being displaced by 2025 - the same volume that caused a major oil price collapse in 2014-15. The report finds 16mbd of oil demand displaced by 2040 and 25mbd by 2050.

This contrasts with expectations of big energy companies - in which oil demand continues to grow -  and could have implications for the way they conduct their business.

“Electric vehicles and solar power are game-changers that the fossil fuel industry consistently underestimates. Further innovation could make our scenarios look conservative in five years’ time, in which case the demand misread by companies will have been amplified even more,” said Luke Sussams, senior researcher at Carbon Tracker.

The report explores how plausible advances in solar panels and electric vehicles could affect future fossil fuel demand alongside efforts to reach international climate targets. It models a range of scenarios using the latest data and market projections for future cost reductions in these technologies, with varying levels of global climate policy effort and energy demand.

Emerging technology, such as printable solar panels, could mean the scenarios used in the study in fact still underestimate growth in the renewables sector.