Energy efficient electric vehicles are a new technology with the promise to transform the way energy is used by today's internal combustion engine (ICE) vehicles. For net energy importing countries, such as the Philippines, electric vehicles can dramatically reduce the country's dependence on imported energy resources, which in turn will reduce short term price volatility and improve long term energy security. This technology has also created the opportunity to transition into an environment, where vehicles no longer generate harmful air and noise pollution and can be powered by indigenous renewable energy resources such as solar, hydropower or geothermal.
In April 2011, ADB successfully introduced, as a pilot project in the City of Mandaluyong , Philippines, a basic form of locally made electric vehicles, 20 electric tricycles (e-Trikes) with lithium ion batteries. The project will build on lessons from the pilot and scale-up for the entire Philippines and transform the sector, enabling eventual replacement of the current inefficient ICE tricycles. The proposed project will also generate local employment by establishing new associated electric vehicle support industries in the Philippines.
|Project Rationale and Linkage to Country/Regional Strategy
Energy importing countries around the world are taking policy measures to improve energy security, largely due to global concern over heightened competition for depleting energy resources, price volatility and growing demand. Many countries are planning to introduce electric vehicles as a strategy to tackle energy security, for example, in Israel, the government has committed to go 100% electric by 2020 and created generous policy incentives for it. President Obama has also set the target of putting one million electric cars on the road by 2015 and his government have provided up to $7,500 rebate per vehicle. UK, Australia, Ireland, Japan, Singapore and many other countries have pro-active policies promoting electric vehicles. According to the International Energy Agency's Technology Roadmap , the current announced policies of the 17 countries will require seven million electric vehicles by 2020.
Accounting for the total energy consumed from well to wheel , electric vehicles can reduce energy consumption by up to 50% and greenhouse gas emissions by up to 60% compared to internal combustion engine (ICE) vehicles. Electric vehicles will also reduce greenhouse gases and other harmful emissions because: (i) electric vehicles use no electricity while stranded in traffic jams (no air conditioning), (ii) electric motors have higher efficiencies than internal combustion engines, and (iii) transmission and distribution of electricity is more efficient and cost effective than transportation of liquid fuels to the end user.
In 2010, the Philippines spent approximately $8.78 billion on imported oil, 39% more than in 2009, mainly because of higher volume and rising prices. Preliminary modeling suggests that if Philippines targets only about 7% electric vehicle penetration by 2015 and 15% by 2030, the country can reduce fuel import by about 6% in 2015, 13% in 2020 and more than 40% by 2030. This will be accompanied by greenhouse gas reduction and other economic benefits. The Government is working on an electric vehicle policy , which among others, will exempt importation of all electric and vehicle from taxes for 9 years. In addition there will be other incentives to set up electric vehicle businesses in the Philippines.
Apart from introducing electric tricycles (e-Trikes) with lithium ion batteries, because of its scale, the project will also transform the tricycle industry of the Philippines from a nascent industry with less than six suppliers capable of locally manufacturing functioning electric tricycles to a mature industry with production capacity of more than 3,000 units a month.
The Philippine tricycles are unique because they run on imported gasoline, operate across the country, and although most of them may fail basic international safety standards, they remain the main form of transport in many cities. The proposed transformation will permanently change the market dynamics by increasing energy conversion efficiency and switch from imported fuel, reduce environmental impact (noise and air pollution, greenhouse gas emissions), increase driver income (reduced cost of maintenance and cost of fuel) and create new employment in manufacturing (local assembly with some imported parts). The passengers will benefit from better service (improved comfort and safety standards) with the same fare, as e-Trikes will not increase operation cost. In the longer term, however, with lower operation cost and with growing competition, prices are likely to be lower.
Transformation will introduce lithium ion battery technology for electric vehicles and improve (in some cases establish) safety and efficiency standards. Transformation will change the way risks are being allocated in the industry: through battery leasing mechanism with minimum 3-year or more warrantee on batteries, tricycle drivers, suppliers and retailers will not be exposed to the risk of a faulty battery as they are unable to manage technology risks. One of the main lessons from the 20-units Mandaluyong pilot is that battery manufacturers are best placed to manage the risk of poor performing batteries.
From the environmental perspective, this project will also reduce the risk of re-introduction of lead into the transport sector: because of unleaded fuels, the transport sector is currently free from lead pollution however, the possibility of using lead acid batteries and its improper disposal poses the risk of reintroducing lead in the environment, especially in rivers and ground waters. With the Peoples Republic of China's targeted crackdown on heavy metal pollution by the lead acid battery industry, the Philippines may see large volumes of import of substandard tricycles with poor quality lead acid batteries. This may add to existing concerns on illegal smelting of lead acid batteries in the Philippines.
The Government of the Philippines has decided to capitalize on this early-adopters opportunity to attract large reputable battery manufacturers in the country and establish local manufacturing capability for e-Trikes. As the first developing country taking this initiative to develop locally designed and produced e-Trikes retailing for about $6,000, it will also create a potential export market to the other ASEAN countries.
Without the government leading, the transformation cannot happen because reputable global electric car (and battery) manufacturers are focused on bringing in the early adopter's family car (Nissan Leaf, Chevy Volt and Toyota Prius) with prices ranging from $40,000 to $50,000 mainly for markets in Europe, United States, and Australia, where the governments are providing subsidies for electric vehicles. With policy support from governments around the world, electric vehicles have made significant leaps forward and are driving societal changes. Multi-donor concessional trust funds like the Clean Technology Fund (CTF) are also supporting these changes which have resources amounting to more than $4 billion pledged by major donors such as Australia, France, Germany, Japan, Spain, Sweden, United Kingdom, and United States. In December 2009, the Trust Fund Committee for the CTF endorsed the Philippine Country Investment Plan with the goal of reducing emissions levels by about 3 million tons of CO2e/year. CTF funds will be used to buy down the cost of this transformation.
The proposed project will be the foundation for implementing the Government's Fueling Sustainable Transport Program and the Alternative Fuel Vehicles Incentives Act of 2011. The promotion of new technology and energy efficient transportation solutions is part of the core lending strategy of the Assessment Strategy and Roadmap for the Philippine energy sector, and the program is in the Country Operations Business Plan (COBP, 2010-2012).