It took a pandemic to get me to ride a bicycle to work. I live in London and studies show that the air quality along a busy road is actually cleaner than the air quality on my train ride to the office. I do my best to think about personal sustainability, yet I only started biking to work in March, when the term social distancing was already firmly in the lexicon.
People all over the world have made major changes to their daily lives in the past weeks and months, far more significant than my morning commute when I used to go into the office. So from a BNF perspective, we're going to explore what these changes mean for road transport as well as clean energy. On the show today are Colin mccarrickre and Logan Goldie Scott. Colin is head of Advanced Transport at BENF and Logan is head of Clean
Power Research. They're going to give us their views on how clean energy and transportation are changing right now and what we might be able to expect in the future. Be an F is currently writing a series of indicators reports on the impact of COVID Night Team on the industries we cover. These include indicators reports on clean power as well as global road traffic. These reports are available at b NF dot com and on the Bloomberg terminal
at b NF Go. And please remember that BNF does not provide investment or strategy advice, and we have a full disclaimer that can be found at the end of the show. Hi Colin, Hi Logan, thank you for joining today. Hi Dina, good to be here. Hey Danny, great to speak. So that was Colin's voice first and Logan's voice second for those who are wondering now, one of the things that is really great about recording remote podcasts is that we actually have the ability to bring in guests from
different parts of the world. We have this lovely studio in London that I haven't stepped put in about three weeks. But now we're joined today by Logan, who is located in the San Francisco Bay area, which is where I'm originally from. I guess we've got a little bit of a swap going on here, and I am curious, from a city that has a lot of mobility, when's the
last time you were in a taxi? So San Francisco ended up actually moving relatively early, so we've had shelter in place since March sixteenth, and then I was actually in an uber on March fifteenth, So that was my final social interaction that wasn't via camera and virus screen and the final time I was in the uber. So it's been a couple of weeks. Callin, when's the last
time you were in a taxi? For me, it's further back actually, So we were out in San Francisco actually for the San Francisco Summit and the theme is the future of mobility, so we were all there at the beginning of February for that, and that's the last time I think I was in an uber. Once I'm back in London. I'm a big advocate of cycling everywhere, so despite being someone who spends their time deeply immersed in auto market, I prefer two wheels over four whenever I can.
So it was that same week before I kind of moved into my house full time. But I must say the last couple of days at work, I started renting bikes and I've become a bit of a cyclist and I think that will stick with me for a while. So then that leads to another important point and something that we are tracking now here at b an Epso Collin, we're looking at transport and we're looking at traffic and congestion.
What are we seeing right now and what sort of developed over the last couple of weeks Because we are tracking this on a weekly basis around the world, are we not? We are? And what you're seeing is predictable in some sense. Everybody's been told to stay in their house, and for the most part, everybody is staying in their house. Traffic is plummeted, use of public transit has plummeted. It's
not all on the same timeline. Some of them are sort of a week or two staggered, or in the case of say China versus the US or Europe, it's more like a month or two. But you see sort of the same wave. And when you look at the data really closely, you see that ramps down very steeply. People really stop moving around when these shelter and place rules or these lockdowns come in. And then we're starting to see that move again. In China, we're starting to
see much more people moving around. It's still not back to pre COVID levels, but that ice is starting a thought and people are moving around pretty much in all forms more than they were at the height of this. So it kind of looks like about a ten week wave that peaks around week five or six and then starts to come down. Hopefully that's the pattern we see in other countries as well, but of course that's hard
to predict right now. So is this individual transport or we also seeing a pretty massive slowdown in logistics, So logistics is a bit less affected, it looks like, and
I think this lines up with everybody's personal experience. Right There're still ordering parcels on Amazon, and grocery trucks are still moving things around, so some of that has been a bit more resilient than personal mobility, because some of it is critical and we need to get more goods delivered or at least the same amount of goods delivered in quite a few cases. But even that is down
in some place as well. You think about how much stuff is moved around, for say the construction industry or just commodities being moved by road and rail and things like that, so that is down as well, but probably it looks like a little bit less dramatically than on
the passenger side. And then what is the actual impact this is having on emissions, and then as second but related note, air quality, because I've seen some pictures of the Himalayas visible from India for the first time in several decades, or even pictures of Los Angeles in the valley and having these beautiful blue skies and the ability to see hills nearby. Is air pollution down by a ton or are we just seeing short term kick and
air quality? I mean it's noticeably down. If you look at pretty much any measure of air quality, whether it's Knox emissions or particulates, they're pretty much all way way down overall CEO two emissions of course too, as you'd expect. And so yeah, you are seeing urban air quality dramatically change. I mean, I'm here in central London and looking out from my window, not only is the sky a different
shade of blue, but you can see stars. That's certainly not something you would have seen at any point previously in the ten years that I've lived here. The open question is how much of that stays versus how much of that just returns to normal, And I think there are some big unknowns in that right now, but certainly we are in a very strange and unique window in which urban air quality is dramatically better than it's been
in living memory. I think, so I am enjoying nice air quality, I must say, and I've already been somebody who's been pretty fascinated enthusiastic about electric vehicles. Now the question is do you think other parts of the world
will be equally as enthralled by electric vehicles? And will they when we come out of this fair the same as better than or worse than internal combustion engines, because with the backdrop of all of this is also an extraordinarily low oil price, and the low barrel price also makes internal combustion engines much cheaper to operate. Yeah, there's a lot of moving pieces in that question of do they fare better or worse Because there's a lot of
moving pieces in what's driving ev adoption. I think in the long term, so we go out five to ten years, I don't think much has changed. Look, the battery technology is going to continue to get better. There's still rising pressure around CEO two emissions. There's this pressure around urban air quality. I don't think any of that's going away.
But in the short term there are really big questions so you're probably heading for the first year and your drop in auto sales certainly since the financial crisis and a few thousand eight and nine. The thing about the financial crisis is that it hit different countries at a more staggered timeframe, right So the US gets hit hard in two thousand eight nine auto sales plummeted into thousand nine. Europe it's a much more delayed hit. Asia doesn't get it as bad. All these sorts of things where it
was a bit more staggered. We're pretty unique right now and that this is hitting everywhere quite at once, but pretty close. And cars are large pieces of discretionary spending from consumers. So in a time of big economic uncertainty, let alone a time where everyone's walked in their houses, people don't go out and buy a lot of cars predictably. So this is gonna be very tough year for automakers for sure. The question then, is do evs hold up
better or worse than internal combustion engine vehicles. If it wasn't for this all of this, you would have been heading for a record year for EV sales. Europe, especially sales in the first two months were doubling over last year because of this driver around CEO two regulations. China cut subsidies last year and sales fell in the second half, but it was probably gonna rise again this year, so we were heading for this real record. I think that's
off now, at least in unit sales. But I think you can probably make an argument that on a percentage basis, that percentage adoption EV share of new car sales will be either flat or rising a little bit. If you look at most sort of conventional auto analysts, they will say that EV sales are gonna get hit harder by this than internal combustion engine vehicles, and that's because on average they're more expensive, and generally, in economic downturns, more
expensive things get hit harder. Luxury cars go, but cheaper cars hold up a little better. Those are valid arguments generally.
The arguments against that are that one, there are a lot of evs out there with long backlogs of pre orders that people have put a deposit on that some of the automakers are still ticking through those, so Tesla Model Why for example, or the Model Free in China, so I think a lot of those are still going to get shipped, and even you know in Europe a lot of automakers last year we're deliberately pushing orders into because they could then count them towards their fleet wide
CEO to target, which they faced fines if they missed this year. But there was no fines in place last year because the targets didn't apply until this year. So I think there's a bit of a backlog there that might help. The other thing is that these are still, in large part early adopters who may be a little bit less sensitive, and then there's this question of policy support. So I've mentioned that they're already the European fleet CEO
two targets. One of the things we've seen so far, even in March in Europe, where for about half of March most of the big European economies were under lockdown. March EV sales in the u K up a hundred and thirty three percent, overall internal combustion engine vehicle sales down. Germany EV sales up percent. In March, overall internal combustion engine vehicle sales down. For France, UM passenger vehicles sales down, sales up twelve So it looks like at least in
Q one they're holding up a little better. The next three months are going to be really brutal for all parts of the auto market in North America Europe, but in China they're going to start to recover. And I think what you'll see is still a pretty strong push in China. And this is a bit uncomfortable, But my bad is that evs hold up slightly better and at the adoption rate, the percentage of new sales is flat to a little bit up maybe this year over last year,
but down in absolute terms. Well, you can add this to your predictions that you make, for which we did a podcast earlier where we went into those we did. Yeah, we can talk the beginning of one and see whether or not you were on or off on this new prediction joining us a little bit later in the year. So in that you know, given that there will be some reduced demand since one of the many things that Logan has done for us here at b n F is look very closely at the energy storage market, so
he knows the battery space pretty intimately well. And one of the potential views on our side is that if you have a reduction in electric vehicle sales, given they are the largest consumers, right now with the myan batteries, that this may depress prices for batteries and maybe therefore also battery metals. Do we think that that will end up being something that will be felt short term, medium term, long term come to pass, so the longer term to
reject you for battery prices, it's fairly clear. We've observed this incredible reduction in battery prices nearly over the last decade, and we expect that to continue and battery prices to fall from sort of close to a hundred fifty dollars a kill it was, how today to nearly sixty dollars by so that longer term tige actually remains relatively unaffected by the near term issues. As Colin mentioned around electric vehicles, there are so many different overlapping factors that will impact
the battery price. We've looked at VC investment in Q one and battery technology companies, lithium iron companies. It looked very similar to VC investment that we saw in previous quarters.
Clearly there's a lag there in this may drop off over the coming months, but many of these investments were from strategic investors large automakers where the emission targets aren't going away, where desire for competitive attractive vehicles is not going away, and that needs the highest qualities actually, so longer term, we don't see this as a sort of particular disruption. The very immediate impact is that the uncertain demand has a really significant ripple effect across the supply chain.
It's essentially a bullwhip effects. By the time that you actually get to the raw materials, the lithium, the nickel, the cobalt, that uncertainty is magnified hugely, and there were ready issues from raw matail processes and miners desperate for greater certainty from automakers. They were already complaining about that because the investment time frames didn't line up, like a minor wanted many more years of certainty than an automaker
was willing to give them. This collapse in certainty around demand is hugely problematic and will make aligning those timings on getting a mind, getting a processing fertility, and a battery manufacturing plant all online at the right times much much harder. Now that you just do not have this
visibility on demand. We have seen lithium and nickel production capacity around ten percent has also been impacted by quarantine measures, which is this sort of additional layer of disruption and then delays surrounding COVID nineteen also means that we don't expect a coboard production in the Democratic Republic of Congo to increase as we had in our early predictions. Instead this year we think that will be flat. So Logan, let's throw on the other hat that you know quite
a bit about right now, the clean energy space. Our colleagues over in the Bloomberg Economics team got an interview with the head of logistics at Longisolar, who was saying that these have been challenging times for them from a production standpoint due to some of the logistics concerns. Are we seeing supply chain issues and logistics as a challenge for what we would consider maybe some of the bigger
clean energy markets, let's say wind and solar. Do you think that these supply chain issues are going to have a massive impact or is it going to be something further on the demand side. So let's stop with supply then we consider move on to demand for solar, for energy storage and for the domestic market for wind China and China supply chain is sort of hugely important, and
it did face severe disruptions throughout Q one. China is almost completely resumed production now, so these factories are coming back online and lamping up acted their maximum capacity. So you have a few weeks of backlog, but production is coming back. Outside of China, some factories are also still operating in Europe and the US, but many have shut down due to sort of national or local shutdown orders. Well, actually, the other big thing is just related difficulties maintaining the
safety of the workforce. So supply chain was severely disrupted. There were a couple of things in China that that offset that. Many companies had started stockpiling ahead of Chinese New Year, and so you had greater inventory, so you knew that many of these factories were going to be either shut down or operating at a lower rate. This
extended it, but there was some preparation built in. The demand story is much more uncertain, and for US that is a much bigger concern in terms of understanding sort of broader decarbonization targets over the next couple of years. On the demand side, Does it have to do with a lack of government attention because they're distracted in rightfully by these health concerns, or does it have to do with consumer demand, I mean, explain why demand is so
uncertain in the medium to longer term. So success more broadly is held by continuity and economies of scale. So if you have those two things, success is likely to come your way. At the moment that disruption, supply chain caused ripples in terms of the timing of getting projects install of time, and so even though there's only a few weeks disruption in the US, for instance, the schedule for cranes to get win projects up and running, that's a very well managed schedule if there are any hiccups,
and that has a ripple effect across the board. So you do have the supply chain impacting demand. Companies are rushing to get projects built by end of year or by certain deadlines in order to get that government support. We expect some leniency in many markets, so that should ease things, but clearly that's something that's just been a concern. The other piece is immediate government at engine is clearly elsewhere.
We've seen around half of total wind and solar capacity that was due to be auctioned in has now been postponed. Governments are not planning on running the auctions as they were, but because clearly there are other priorities and companies don't know how to bid into those auctions. And so we saw that and File decide not to bid into an auction in Europe recently because of the broader uncertainty impacting their business. They didn't know where the appropriate place in
the bid was. And so you do see supply chain issues impacting the timing, and that's this renumeration for these projects. You see near term policy being pushed back, and there's also this issue around longer term targets. Many observers that I followed have said, now is not the time to be talking about clean energy, to be talking about climate girls. This is a distant future and we really need to focus on the sort of COVID nineteen sort of pandemic
right now. For me, that's a very misguided view. I think in any time where you're thinking about a long term massive stimulus package or any type of nationwide support, you want to be aligning that near to need with a longer term aim. As well. The fact that in some countries there is uncertainty around whether the government will continue to push your head with their previous targets around decoganization. I think that threatens many of these sort of companies
long term goals as well. I think green stimulus is something that is chatted about quite a bit in circles that we're in, But I would like to know are we actually seeing any tangible moves into this in any country in the world or is this just something that maybe people in our industry like to talk about. The one thing I can point to that we are seeing is out of China and is an indication that ev
charging infrastructure might be part of that stimulus. The government has indicated that charging infrastructure might be one of the focus areas. Southern Grid, one of the power grid operators, has indicated that they're going to invest about three point six billion dollars in charging infrastructure. That just came at the end of last week. So that looks like one And we know governments do like shovel ready infrastructure projects. Right.
You go back to the last financial crisis two thousand eight nine in the US, things like the whole grid modernization effort. The smart grid was a big part of the American Recovery and Reinvestment Act was pushing money into some of these infrastructure ready projects where you could go and spend money and get things moving right away. Now, I do think there's sort of a hierarchy of needs and in the places that are still in the very
much the acute phase of this. This is all about managing the pandemic, managing the health crisis and the humanitarian crisis on that side of it. But then again, looking to China as an example, is sort of starting to come out of this and thinking where to go with how you push the recovery. I think it probably depends a lot on the politics of who's in power at the time, so you will have that reflected in the
stimulus packages that come out. So I don't think, for example, in Europe, you will see a big relaxation of the push on the green deal or just sort of generally around the green economy that Europe is trying to push and these twenty thirty targets that are in place, that would be very hard I think to justify, given all the things that have gone into getting it to where it is. In the U S, it's a bit more uncertain.
I don't see much of a push coming on the clean transport side as a result of stimulus and recovery efforts. In the US. I think that is in line with also the Trump administration's recent rollback of fuel economy standards, which of course are going to get tied up in court, but that's consistent with what they've said there. This is
not a higher priority. So I think a lot of this ends up reflecting the politics and the priorities of the groups that are in power in those countries today, and that means there's going to be a very big patchwork of types of stimulus measures and focus of those stimulus measures between countries. I'd agree completely. In the US, clean power and dcomganization is much more contentious than it is in most parts of EU and many other markets. There was nothing relating to clean power in the first
stimulus package that was passed here in the US. If anything is to make it into any upcoming stimulus package, which is still potentially a trillion dollar plus package, it will be a big fight from Democrats to get anything related to clean power in there. It's a much more contentious issue in Europe because of the EU Green Deal.
It does look like they're sort of that longer term alignment and a broader desire, even if the details haven't been worked out to do something that does align with that. And then we have smaller instances like China is clearly the big one, but in Korea they passed a similar package that included some relief for Korean solo installers. The Korean government is very keen for solo to continue to continue to be deployed in the country. They bumped up
the subsidy in order to encourage further adoption. And then those are all things at the national level, and that's of course where stimulus really comes in, because the government has the power to print money and spend money in a different way. But one of the interesting policy responses I'm waiting to see is what we talked about earlier
on this this part about the city level. The medical data supports the idea that the mortality of the coronavirus of COVID nineteen is worse in places that have worse air quality. We know the places that have worse air quality lead to more respiratory problems. We know people with more background respiratory problems have a higher mortality rate. When it comes to this, I think there's a real chance that that makes some people in cities angry that their
governments have not done more to tackle this faster. I would put myself in that category. I imagine you might as well, Dana, And I think there's a possibility that at the city level that accelerates some action towards electrifying buses, towards electrifying taxis just towards getting on with it some of the stuff we've been talking about for quite a while that has already started and is happening at scale, but could certainly happen faster, and we've seen templates for
how it can happen faster. There's no trillions attached to that with a T or probably even with a B billions going out on at and there isn't the ability to borrow huge sums of money and get the gears the economy turning again. But there is this element of legitimacy of government and the priorities that they have and what citizens really want them to do. And I think there might be some interesting things that emerge from that at the municipal level as well as the national level.
So there are some out there who think maybe we have reached peak carbon emissions and that we might actually be on the decline after this. But what I'm hearing for both of your industries is that that actually might still be lagging out there in the future. Now I'm asking you guys to make tough predictions right here on
the spot. But my question to both you Logan and Colin is, at least for the spaces that you cover so clean energy on Logan and advanced transportation for Colin, do you think we've hit peak emissions and will be on the decline at least on in a decade all sense, when we get out of this. One thing we started tentatively saying a year and a half ago is that it actually looks like sales of new internal combustion engine
vehicles might have already peaked. Now, that was really uncomfortable at the time because that was and we were saying, look, might have been a high water mark for that. So far, that is holding up, and that will continue to hold up after this. So, look, you're gonna have internal combustion engine vehicle sales. Overall vehicle sales globally are going to be lower this year than they were in seventeen. They're
going to be lower the year after. They're probably gonna be lower in two, it's gonna take a while for this to fully bounce back. By the time you get to that point, we're anticipating evs are really starting to get cost competitive and their policy pressure is starting to ratch it up. So then they're getting into the sort of five to ten of new vehicle sales. Then it's really hard to see internal combustion engine vehicles ever returning
to those levels of thousand seventeen. So I think in sales of new internal combustion engine cars in the passenger vehicle segment have already peaked in the past. When I've made that in presentations, I've put a question mark at the end of the title slide. I'm taking the question mark out. I think they've peaked. That doesn't mean transport emissions overall have peaked, unfortunately. So we know aviation is still high and rise of course this year, notwithstanding. You
know shipping is high and rising this year. Notwithstanding. I don't think those are going to be on a good trajectory anytime soon. I think also trucking means that emissions from transport are going to keep rising. Now, when you look at overall emissions, you need to figure Okay, look maybe some segments of transport are still flat, or some are down slightly, or some are rising. Is that enough to be offset by what's going on in the power sector.
So I think we're not quite there yet, but I think road transport emissions are going to peak within the next ten years. Passenger vehicles is going to peak before that. Right now, the fleet of internal combustion engine vehicles is still growing. But each year where we don't see them grow again, you're you're sort of not locking in a bunch of further oil consumption that from those vehicles that would stay on the road for ten to fifteen years.
So what's happening right now is really significant. So you know, annual New Energy Outlook exercise, in the outlook, you ended up with clean energy making up. Just a visit of half tital generation was a more bullish view in terms of renewable energy adoption than what you saw from many of the oil majors from the i E. Now, even in that be nephew, there was a huge gap between that and a two degrees scenario and that in a
one point five degree scenario. And so the message was even with this significant acceleration in installations for wind and solar. There's still much more needs to be done. Now is not at the time to take the foot of the pedal. This clearly complicates that for wind and solo we were expecting record years in as of Q one, our outlook for global wind installations for this year is twelve than
what we were saying Q for last year. The outlook from US at the midpoint for solo is eight percent lower than what we were saying in QUE four last year. So this certainly hurts things in that near term. If installations are down, it makes what was already a sort
of gantuan task even harder. It doesn't mean that the PACER change cannot accelerate, because greater awareness around emissions, around the benefits the economic benefits of decarbonization, and around the economics wind and solar is in many parts of the world a cheaper way of producing electricity than emitting alternatives, even before you account for any of the nonpower sector related costs. So longer term, still more needs to be done.
COVID nineteen sort of doesn't change that. This does end up being a stumble now. What what I think is particularly interesting around this is how it could impact the type of clean engine installations in place as well. Colin mentioned at the very beginning that many cards it would be counted as a discretionary spending. Now, utility to get wind and solar doesn't tend to fall into that bucket,
but distributed solar and distributed storage very much does. In terms of where the biggest impact on clean power has been of the back of COVID, the biggest impact act has been in distributed solo and distributed steorage. We reviewed what a number of market participants had said over Q one, so these are typically solo installers in the US. These market artistants seem to agree that sales were down compared
to what they'd expected. In January and February, average number of permits was down across California, Texas, New York, Florida, Nevada. So across clean power, this is a stumble. It makes an already hard task harder. Distributed clean power gets hit the hardest. So I think we'll have to continue to come back to this in the next five and ten years. So let's let's keep this podcast and these interviews going.
But I think one thing that is very clear today that peeling back the onion around what is something that's impacting industry right now and what will in the near term, and then what will in the longer term. Is something that we're watching very closely and kind of monitoring as
we look at how this is all evolving. So I want to know, since we started this podcast today with you know, an impact to how you're moving around or as the case, maybe not moving around since we're all recording from our homes right now, I want to know what has been the biggest change to the way that you work. For me, if that's quite an easy one, it's that I spend half the day taking care of a one and a half year old at home. I
love it. I'm having a great time. I know that's not the conventional answer from people who've been stuck at home with their kids um and certainly balancing work is tough. One of the most difficult things I think is contact switching. Right. You sort of go from being intensely focused trying to say something professional and trying to get a piece of work done or edit something and publish something, to quickly dealing with somebody who's about to jump off a table.
And so that's a huge challenge. But I think there's a lot of great things about it. I'm getting to spend more time with my one and a half year old son than I would for all this sudden happened so silver Lines. So the biggest change for my perspective is making sure that I'm speaking to the team frequently. There's so many moving parts at the moment. Everyone is juggling a huge workload and personal commitments, and so it's making sure that everyone in the team is communicating, is happy,
and is not overworked. It's really hard to balance your time if you're not leaving the house, so making sure that we retain some balance as well. So, Logan, that's a really good point. And I would say the biggest thing that has changed from my perspective since we have all started working from home has been that time has become incredibly fluid and that there's no start time, there's no stop time. There is parenting and working, and that is very evident by the fact that we are recording
on what is a public holiday. So I would like to say thank you, Logan, thank you calling so much for carving time out of your busy schedules to be here on the podcast. Thanks Dana, it's always a pleasure and yet very interesting times ahead. Everybody, stay safe and take care. Thanks Dania, Thanks Colin. Bloombergin e F is a service provided by Bloomberg Finance LP and its affiliates.
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