Norway is often held up as a poster child for EV adoption. The Government has recently announced it will be pushing for all new car sales in the country to be EV by 2025, and the current adoption figures suggest that this could happen much earlier than that. As the chart below shows (credit: CleanTechnica), a startling 91.5% of all cars registered in Norway for September were electric in some way, and 77.5% are pure battery electric vehicles without any form of fossil fuel propulsion.
This got me thinking: why is Australia so far behind? I’ve done some quick brainstorming and analysis to work out the fundamental differences between the Norwegian and Australian markets.This is a complex issue and this analysis will not be comprehensive or as academic as some would like. But it does provide some directional insight.
I wanted to be objective and focussed on structural dimensions (some of which are difficult to change in the short-medium term) which will form a context and te lens through which policymakers will need to consider this issue. I haven’t considered factors related to politics, government intervention, incentives etc. That’s a whole other kettle of fish.
My thesis is that there are four main structural factors that drive EV adoption:
- Running costs
- Range requirements
To my old consulting managers that would kill me for having 4 factors rather than 3 or 5…I’m sorry, not sorry.
Let’s look at these in turn and compare Norway and Australia, and try and form a view on whether EV adoption is more or less advantaged in each country.
Affordability of EV vehicles
As above, the price of the Model 3 in both countries is largely comparable, and the disposable income available per capita to purchase a vehicle is the same as well.
But what about the available alternatives to an EV? As a proxy to compare the average prices of vehicles purchased, I used a cool World Bank index which shows vehicle prices across the world in 2017 (I know this is imperfect because the range and type of vehicles purchased will be different…but like I said, this is directional).
Norway is one of the most expensive places to buy cars worldwide, while Australia is below the world average and one of the cheapest OECD advanced economies. So maybe if you’re Norwegian, and everything around you is expensive but Teslas seem like a good deal by world standards, that’s a good incentive to go EV?
I am concluding that EVs are just as affordable in Norway as they are in Australia. But maybe there is a slight advantage to adoption in Norway because all the other cars are more expensive.
The key advantage of an EV is that you no longer need to fuel your car up with the golden stuff, but clearly, you do need to plug in to charge, and in most cases pay for the electricity you consume. The relative price of fuel and electricity in any market is a key determinant of EV uptake.
This is where I had my ‘aha’ moment with this piece of analysis. I knew that fuel would be a bit more expensive in Norway but I didn’t realise quite how significant the difference would be. In Norway, a litre of fuel costs on average $2.06 compared to $1.14 in Australia, around 45% cheaper. This difference is likely due to the significant fuel taxes that most European countries add to the wholesale cost of fuel.
On the other hand, electricity is really cheap in Norway at around 9.7c per kWh. In Australia, the price is on average an eye-watering 22.6c per kWh, more than 130% more expensive! Norway has an abundance of cheap hydroelectricity while Australia’s grid is still heavily coal reliant, and coal-fired power is getting more and more expensive (not to mention the distribution distances are very large for the NEM).
Clearly, from a running cost perspective, EVs just make a lot more sense in Norway.
Range anxiety is often cited as the key reason why consumers are hesitant to go electric. I wanted to see what the difference was in the average range a commuter and a longer distance driver would need in the two countries.
Obviously, this is quite challenging to do, but the two metrics I wanted to measure were the average commute time for inhabitants across the country, and the distance between the two largest economic centres.
In Norway, the average commute time is 27 minutes, while in Australia it was 122% longer at a whole hour. This surprised me but given Sydney / Melbourne traffic, it is quite believable. This would mean that the average EV would need to be charged half as often in Norway compared to Australia assuming you used it just for your daily commute.
Osla to Bergen (the second largest economic centre in Norway) is 464km. Sydney to Melbourne on the other hand is 878km. Without even going too much in-depth on this metric, it is common sense that Australia is a much larger and less sparsely populated country. As a result, an EVs range is going to be less useful than it would be in Norway.
The final structural driver could be considered the inherent suitability of the environment for electric vehicles. There are two things that drive efficiency for an EV: temperature (too cold or too hot decreases efficiency, around 20C is the goldilocks zone), and speed (as speeds get higher, the wind resistance starts really eating into battery range).
On the temperature front we find that actually on average, Australia is the perfect temperature – around 18C. In the chilly north, Norway averages a temperature of around 6C which is going to mean an efficiency loss of up to 15%.
Now I know in Norway it can get to -20C in the depths of the winter and in the very far north of the country but it isn’t like that all year around and in every part of the country. Similarly in Darwin it is 30C+ basically every day of the year while those in southern states get out their Canada Goose every winter (seriously…we aren’t made for the cold). This is a directional piece of analysis, remember? So averages are what I am using.
In terms of speeds, in Australia 100-110 on major highways is very normal, and there are very long stretches of highway that you are able to actually achieve those speeds. In Norway, it appears that there are rare roads that are faster than 80 km/h, but that really is the most you will be going most of the time.
As mentioned, EVs love speeds of 80 km/h, but above 100 km/h the range drops relatively quickly. A Tesla Model 3 for example will consume twice the energy at 120 km/h as it will at 80 km/h!
Therefore in terms of the environment, while Norway is colder which is worse for efficiency, Australians likely drive faster. This one then is inconclusive.
Where does this leave us?
In summary, Norway is on average a very attractive place for EVs to exist, if only because they just make a lot of economic sense. The lower range requirements also mean range anxiety is less likely to be an issue. However, the average temperature in Australia should drive better efficiency outcome.
There are clear reasons why EV adoption is so high in Norway. Australia’s strong drive toward renewable energy will hopefully drive down energy costs and remove that structural barrier – perhaps a paradigm shift is coming after all.