The global electric vehicles (EV) market is evolving fast. Policy, regulations, jurisdictional phaseouts of internal combustion engines, original equipment manufacturer (OEM) new product road maps, infrastructure investments and customer acceptance are all converging to support adoption. We’re quickly moving beyond the early adopters, and the opportunity now is to fully commercialize the market for mass adoption.
Canada, which has identified electric vehicles as a key contributor to achieving our transportation sector greenhouse gas emissions reduction target of 12 megatonnes of carbon dioxide by 2030, can play a significant role in this evolving EV market. But success will require an ecosystem of participants to collaborate with one another. What does the EV transition in Canada look like, and how can all players come together to maximize the opportunities?
Canada is aiming for a greenhouse gas emissions reduction of 12 megatonnes from the transportation sector by 2030
Transitioning our vehicle fleet
Canada had more than 25 million registered light-duty vehicles in 2019. At 168,000 vehicles, EVs currently represent a small portion of the market.
This will need to change quickly. Of the 12-megatonne target, Canada is aiming for seven megatonnes of emissions reductions from light-duty vehicles by 2030. This will require the retirement and replacement of 1.8 million internal combustion engines or 7% of the vehicle fleet.
To move the transition forward, Canada has announced new vehicle sales goals targeting a 10% share for EVs by 2025, 40% by 2030 and 100% by 2040. This equates to about 3% of the vehicle fleet in 2025, 11% by 2030 and 60% by 2040. While this is aggressive, it’s reasonable under the right conditions and given the announcements by major OEMs to shift their entire vehicle offerings to EVs. Extending the forecast to 2050 would take the EV fleet in Canada to 100% of total registered vehicles by 2050.
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Canada's 2025 target for EVs' share of new vehicle sales
The path forward for Canada
The path to achieving this transition will require a number of factors to come together:
- Total cost of ownership
- Fuel costs
- Transforming the electricity system
- Charging infrastructure
Total cost of ownership
Total cost of ownership (TCO) is a critical consideration. Currently, the TCO of an EV ranges from 15-30% higher than for an internal combustion engine. This means the EV value proposition continues to appeal more to those concerned about their environmental footprint and social reputation, early adopters of emerging technologies and people who can access government incentives to offset the extra cost.
We estimate EVs will reach TCO parity for the first three years of ownership by 2025 in Canada. After that, we forecast a TCO advantage for EVs that will lead to a sharp uptick in sales and adoption.
Fuel costs
Carbon taxes will have significant implications for fuel costs and may be the tipping point for the timing of TCO parity. As Canada’s carbon price rises to the planned CA$170/tonne by 2030, the cost impacts will reach an estimated 48 cents per litre for gasoline. There will also be a decline in battery costs, which could help increase the EV fleet by more than three million vehicles by 2030.
Transforming the electricity system
The electricity system is another critical factor in EV adoption for light-duty vehicles. Nationally, Canada is forecast to have an abundance of electricity generation until 2050, with a significant portion coming from low-emission sources.
The challenge for the electricity system is the ability to manage the impacts of peak demand from charging and two-way flow as vehicle batteries become part of the broader intelligent energy ecosystem. To estimate the demand impacts, we analyzed daily residential grid data from the University of Waterloo. Based on the patterns observed for Kitchener-Waterloo, Ontario, we estimate an additional 38.7 megawatts of electricity will be necessary for EV charging at peak times in that region. This amounts to about a 25% increase in peak demand if all anticipated vehicles in 2030 were to charge at the same time.
New commercial and technical solutions will be necessary to manage these impacts, such as:
price signals and customer contracts and offers;
intelligent grid solutions to manage energy consumption remotely or according to programmed rules; and
technical upgrades to grid capacity where appropriate.
Charging infrastructure
Charging infrastructure is potentially the most critical component of the EV transition. Key considerations for how the charging landscape will need to evolve include:
Charging location: In a recent analysis of vehicle charging requirements in the US market, our PwC US colleagues estimated up to 80% of charging will occur at home, mostly due to cost and convenience.
Time to charge: After the number of charging points, the time to charge is an important factor. Our research indicates that for charging at work, Level 2 chargers will be acceptable. But for all highway and top-up charging, a network consisting of faster Level 3 and Level 4 chargers will be necessary.
Given these trends, how many stations will be necessary to address the on-the-go charging market in Canada and alleviate range anxiety, and how does this compare to the current network of service stations?
Canada currently has a total network of about 12,369 service stations, of which 7,078 are in urban areas and 5,291 are in rural communities. Based on the expected pattern of 80% of charging occurring at home, we estimate a total network requirement of 7,060 charging stations (1,769 urban and 5,291 rural). The majority of these will be necessary for long-distance travel, which will shift the network to serve mostly rural and major-travel corridors.
Collaboration across the value chain
Achieving mass adoption of EVs will require collaboration across the value chain, with key roles for players including:
- OEMs: Mass adoption will depend on OEMs developing and producing vehicles spanning a wider spectrum of models across all price points and product types in line with customer expectations.
- Governments: Incentives, as envisioned in Canada’s current plans to address climate change, will be critical to encouraging investment in infrastructure as well as customer vehicle purchases in the near term.
- Utilities: Canadian utility companies need to invest in grid infrastructure to support smart management of intermittent assets, peaks in electricity demand and two-way energy flow. Regulators of these utilities will need to recognize the value and necessity of the investments required.
- Service stations: Operators will need to develop strategies to change their business models depending on location, incentives and customer demand.
- Miners: Making the most of Canada’s abundance of minerals used in EV batteries will require large investments in our mining sector.
Canada’s strengths in these areas point to significant advantages for our country to develop the EV market in line with its emission reduction targets. Making the most of the opportunity will require the players involved to evaluate business models, partnerships and service offerings and explore new opportunities to create value through strong EV ecosystem integration. Communication and education across stakeholder groups will also be critical to building confidence and supporting market growth and investment.
It’s an exciting time as critical elements of the EV value chain take shape in Canada. To explore what this means for your strategy and the opportunities for your organization to play a key role in this evolving market, please contact us.
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