Future fuels and service stations – a perspective on the future

By Australasian Convenience and Petroleum Marketers Association CEO Mark McKenzie.

Australasian Convenience and Petroleum Marketers Association CEO Mark McKenzie.
Australasian Convenience and Petroleum Marketers Association CEO Mark McKenzie.

History tells us that predicting the timing of the market adoption of new technology – whether that be personal computers, mobile phones, rooftop solar, electric vehicles, or hydrogen power – is a black art. Each time a new technology appears on the horizon, the advocates (and investors) in the new technology make predictions that ultimately prove far too optimistic while the opponents (often the investors in the incumbent technology) are too pessimistic, suggesting that the timing for mass market adoption is likely off in the ‘never never’.

In the end, new technology is adopted when the community is convinced that the new technology will actually improve their lives – the timing to this realisation is often slower than the predictions of the optimists but faster than the predictions of the pessimists.

Al Gore, in his 2006 film An Inconvenient Truth repeated the often-cited quote that “The Stone Age did not end because the world run out of rocks – bronze tools became more affordable”. Similarly, the age of oil will not end because we run out of oil – it will end when we find better alternatives.

“This underlying principle, that new technology take-up comes when society is convinced that it makes their lives better, is perhaps the only truth when it comes to the timing of mass market adoption of new technology – and is particularly pertinent to the timing of mass market adoption of battery electric vehicles, or BEVs, and hydrogen vehicles”, says ACAPMA CEO Mark McKenzie.

“At present, these new technologies do not deliver alternatives that provide the same level of convenience and affordability as the incumbent internal combustion technology – but the technology is improving all the time and the convenience advantage of the current technology continues to narrow.”

It is worth noting that battery electric vehicles are actually not new – the technology has been around for many years. The first electric vehicle, for example, was manufactured by Jacob Loehner and Ferdinand Porsche – powered by four electric wheel hub motors – and exhibited at the 1901 Paris Motor Show.

But this technology never got off the starting blocks given the work of Henry Ford and others who pioneered the use of the internal combustion engine powered by oil-based fuels. The convenience and affordability of this technology relegated the Loehner/Porsche electric vehicle to the history books and Ferdinand Porsche went on to establish the Porsche marque as the internal combustion engine powered vehicles took hold across the globe in the post-World War II era.

More than eight decades later, in response to growing concern about urban air pollution, the State Government of California signalled that it was preparing to legislate for cleaner vehicles and General Motors developed a contemporary battery electric vehicle aptly named ‘EV1’.

This development captured the imagination of motoring enthusiasts around the world, but the high capital cost and limited range of these vehicles resulted in their demise in 1990. Conspiracy theorists have suggested that this development was killed off by the ‘oil industry’ but such claims were judged to be baseless. The demise of the EV1 project was ultimately (and objectively) attributed to the fact that these vehicles were an expensive alternative that did not provide the same consumer utility (i.e. usefulness) as existing internal combustion technology. That is, they did not improve the quality of life of the average motorist and therefore failed to gain market acceptance.

Fast forward another 20 years to 2006 and the maturity of the discussion around carbon emissions and climate change. During this time Australia started to experiment with BEVs with the state governments in Eastern Australia (i.e. NSW, Queensland and Victoria) seeking to incentivise the market adoption of BEVs via policy settings, capital grants and direct procurement of these vehicles in their own government fleets.

But once again, these vehicles were plagued with the same challenges when compared with modern internal combustion vehicles. Governments changed, exposing the fact that the policies that had been advanced created an artificial demand that was not sustainable without ongoing government intervention.

And so we arrive at 2021 – a post- Covid-19 world – where a growing focus on climate change has encouraged governments around the world to seek to promote the adoption of BEVs. This era marks the fourth serious attempt to promote market adoption of BEVs since the first vehicle was introduced to the market more than a century earlier.

Much has changed in that time. BEV technology has improved markedly, as has on-board battery storage technology, and many of the world’s automotive manufacturers have developed electronic drive chains that are eminently reliable and affordable.

That said, the principal challenges of market adoption – that is, the high capital cost of an EV relative to a conventionally powered car and the limited driving range between recharging (with limited accessibility of charging stations) – remain as pertinent now as they were in the time of the EV1 more than 30 years ago.

“ACAPMA, together with the Australian Institute of Petroleum and the automotive industry is engaged in a range of national and state government forums discussing the future outlook for BEVs and Hydrogen vehicles in Australia”, said Mark.

“These forums range from the Queensland Government’s Ministerial Fuels Council, the Australian Renewable Energy Agency’s Future Fuel initiative and consultation on the Federal Governments Future Fuels Strategy – a strategy that is set to be finalised by the end of this year.”

ACAPMA’s advocacy contribution to these forums is premised on five core principals, namely:

  1. Australian fuel enterprises have the capacity to diversify their business to accommodate a likely mix of vehicle technologies over the medium term. The majority of fuel enterprises in Australia are readily able to adapt their business model to accommodate a likely mixed technology fleet in the medium term (i.e. next 20 to 30 years). Indeed, many of the largest enterprises in the industry (or their global parent) are already making significant investments in this area.
  2. Adoption of EV technology will predominantly occur in the light vehicle market only over the foreseeable future. The near-term transition to alternative vehicle technologies (i.e. next 10 years) will primarily relate to light vehicles (i.e. passenger cars) in the first instance, with heavy vehicles more likely to transition to hydrogen power rather than BEV technologies.
  3. The majority of EV recharging will occur in the home, with service stations operating in the fast charge section of the market. The suggestion that time-conscious motorists will somehow spend 45 minutes in the convenience part of a service station while their vehicle is recharged is considered implausible – and is not supported by empirical research conducted around the world which reveals that the majority of the vehicle recharging task will be completed using low AC chargers in the home. The service station industry is, however, best placed to provide a safe and supervised environment for DC fast charging to supplement home charging.
  4. All Australian governments must exercise extreme care to avoid the creation of competitive distortion in the EV charging market. Current government approaches to capital grants for EV fast charging have resulted in a disproportionately high flow of taxpayer grants to just two vehicle recharging companies. Such an approach must not continue given the substantial risk of creating adverse competition consequences in the medium to long term.
  5. The transition to alternative fuels in the road transport sector should be supported by ‘light touch’ government actions that redress barriers to market adoption. Mandates of arbitrary targets for fleet conversion are not supported by ACAPMA as the ultimate adoption of new technology will only occur when the majority of Australians are convinced these new technologies provide a mobility solution that is superior to the current. Such approaches have proven ineffective and economically destructive in the past as the created artificial demand that was not sustained when governments changed office – resulting in early adopters being left with stranded investments. Areas of policy focus should include:
  6. An examination of the fit-for-purpose nature of the current national electricity grid to support DC fast charging (i.e. 50kW or higher charging rates);
  7. The nature of the current barriers to connection of fast charge infrastructure to the national grid; and,
  8. The economic efficiency of current electricity tariffs.

The last principle is an important one for our industry. With an estimated $30B invested in the national refuelling network, fuel enterprises cannot put investment ahead of demand – nor can they lag too far behind it.

“Government policy needs to be both measured and meaningful in catalysing market demand that is sustained over time – as opposed to advancing yet another set of ‘flash in the pan’ policies that satisfy short term political need but risk destruction of industry capital”, said Mark.

“ACAPMA will continue to provide an industry perspective on these Australian Government forums to ensure that the specific needs of Australian fuel enterprises are given fair consideration in the development of government policies relating to EV’s and hydrogen vehicles.”

ACAPMA will be establishing a regular member forum to promote a cohesive industry discussion on the challenges of accommodating alternative fuelled vehicles. An invitation to participate in this forum will be issued early in 2022.

Published with permission from ACAPMA.

Source: https://acapmag.com.au/2021/10/future-fuels-and-service-stations-a-perspective-on-the-future/

Similar Articles

Instagram

Most Popular

Subscribe to our newsletter

To be updated with all the latest news, offers and special announcements.