IGA News

The Future of Fuel

The Future of Fuel

29 September 2017

What options are available to keep us on the move without causing further damage to our planet? Similar questions have plagued our brightest minds for generations. Time is running out and the heat is on for decision makers in the motor industry and government to start a fuel revolution.

Great strides have been made in the last decade to reduce the amount of harmful greenhouse gases our vehicles expel into Earth’s atmosphere. The traditional internal combustion engine has been vastly improved and refined over recent years – to the point where the next great leap takes us away from established thinking and into the unknown. What will the future of fuel look like?

Electricity

With trailblazing companies like newcomer Tesla, and established mainstream car manufacturers like Nissan pioneering, innovating and pushing boundaries, the humble electric car is fast becoming a more attractive and viable prospect. What started as an outlier is increasingly looking like the most practical alternative to petrol and diesel fuelled vehicles.

The uptake of electric cars is set to soar over the next decades and supposedly will overtake fossil fuelled cars in the UK by 2027. The fact that France recently, and the UK even more recently, announced they would stop selling petrol cars by 2040 is surely going to increase uptake. The Netherlands have pledged to do the same by 2025 and Norway registered 50% of new car sales as electric or hybrid – which highlight the steps countries are already taking. Along with the Paris Climate Deal, struck in 2015, where 194 countries made a firm commitment to the environment, such declarations help bring the issue of emissions into the spotlight. Electric car uptake might be a crucial factor in meeting the deal’s target of limiting global temperature rise to 2 degrees.

Accompanying these countrywide announcements, car manufacturers from Audi to Volvo all have electric cars either in production or scheduled for release in the near future. In Volvo’s case, announcing plans to only produce electric or hybrid vehicles from 2019.

The infamous emissions scandal in 2015 highlighted the issue of emissions in a way that it hadn’t been before. Cars were programmed to recognise when they were under test conditions and adjusted their emissions outputs accordingly. The vehicles displayed false results and this seemed a step too far for customers – helping to raise awareness about car emissions.

There are challenges to a potential mass uptake of electric vehicles. The recharging infrastructure, while improving, is negligible compared to existing refuelling stations. The lack of places to charge electric cars is often cited as a main reason for customers not choosing one, along with how long they take to charge. Although often subsidised by the government, the expensive technology is sometimes a deal breaker for customers too, but this is improving. Tesla has recently launched their Model 3 saloon car, their first mid-range car, instead of their previous cars – exclusively luxury sports cars. Plus, battery technology is progressing rapidly and battery prices continue to tumble.

Another often quoted reason for people opting for petrol over electric is a phenomenon called ‘range anxiety’. This is an anxiety about the range of your electric car and whether it’s got enough charge left for your journey home. While an understandable concern, ranges are improving. Only a few years ago, electric car companies were boasting ranges of 80 miles, now some exceed 300 on a charge. An electric car recently drove 670 miles on one charge, setting a new record. This is the exception currently (the car was driven no faster than 25mph), but ranges will increase as the technology develops further.

Better engines

That’s not to say that our love affair with petrol and oil will simply switch off. The world has spent over 100 years growing an economy on oil; it will take decades to dismantle and wean the world from fossil fuel reliance.

Modern engines are more powerful, although smaller than they traditionally have been. Most commonly, a newer engine features a turbocharger – not necessarily a way to boost performance – but as a way to improve efficiency. They work by utilising the force exerted by the exhaust gasses pushed out of the engine to compress the air fed into the cylinder for more efficient combustion and less fuel being burnt.

The size of engines today has changed drastically. Less popular are big V8 engines, customers instead turn to smaller engines as we all grow more conscious of our environmental impact. Manufacturers used to build large engines for more power. Engine design has changed and become smarter. Manufacturers can get the same, if not more power, from a much smaller engine than before (saving weight in the vehicle too).

Modern engines are more efficient than their ancestors. This primarily takes the shape of less waste in the fuel burning process to get the most out of the engine, as well as technology designed so the engine only uses the fuel it needs, when it needs it. Mazda have recently announced a radical new engine design, a compression ignition petrol engine designed to be 30% more efficient than current engines by eliminating the need for spark plugs.

The problems often thrown at modern engines are that they’re actually less powerful, which simply isn’t true. As well as this, modern vehicles tend to have more compact engine bays, which could make them more difficult to work on. This could make them more expensive to take to the garage or discourage people from working on their own vehicles.

What does this mean for insurance?

Underwriting considerations will change, as each new type of fuel, the equipment and infrastructure required for it will come with its own risks. Our thinking needs to alter from traditional methods to adapt to these changes. For instance, the number of home charging stations could dramatically increase in the next few years. Insurance companies need to work out the best way to incorporate this into the underwriting mix, along with whether this would be part of home or car policies.

Battery technology is also something insurance companies need to be aware of. At present, electric car batteries tend to come with a warranty. In the case of the Nissan Leaf, it’s covered for five years or 60,000 miles. After that time, customers could buy a new battery (and costs will have fallen in that time) or sell their cars on. Insurers need further clarification on who owns the battery and how complex repairs could be.

How electric cars could affect claims is something that needs careful consideration. The technology is still in its infancy (compared to conventional cars) and the world will need to adjust. Claims teams across the globe have similar worries about electric vehicles. The number of electric vehicles on the roads is still quite low and the lack of local, experienced garages to make repairs is a prevailing risk posed by an electric car claim. Linked to this are potentially higher claims costs because transporting the car further to the limited number of places it can be worked on drive up costs. An example of how electric car claims possess new challenges for claims, Renault electric car owners lease the car’s battery, and don’t own it. When it comes to making a claim, the owner must either buy the rest of the battery from Renault, or pay for it to be taken back to France and fixed.

Predicting the future

The future is notoriously difficult to predict, which is why hybrid vehicles, hydrogen and other alternative fuel sources haven’t been mentioned. Instead, we chose to focus on the most prevalent themes at the time of writing. There seems to be a growing consensus that electric cars will be the future of fuel, but combustion engines aren’t going anywhere immediately. Instead, there will be a shift and electric cars will replace them one day.