I Did Not Fully Understand the Complexity, and the Truth is Mind blowing

I Did Not Fully Understand…

For seventeen years I have studied the change of transport systems to renewable fuels and argued that the change will be much more complex and demanding of resources than most people have realized.

I have been one of the few in the world to investigate what I took to be the complete picture of the transformation, but little did I know that there are further layers of complexity that I have not been aware of until recently. When I got to know about the next layer, I was blown away!

A Historic Shift of Unimagined Complexity

The world needs to break the dependence on oil and other fossil fuels. I have previously written some articles about the complexity of this shift and I have written five books that have been published since 2009 in English. In the past month, however, I have become aware of a layer of complexity that I have not known about before.

This is what I used to say:

Countries, especially in Europe and North America, are in the early phases of a change to renewable energy and electromobility. Production of electricity from renewable sources is increasing and now the sales of electric cars is starting to take off.

In 2021 five percent of all cars sold on the planet were electric. In total, less than two percent of all cars are electric and the share of electric transport vehicles remains close to zero. Several truck manufacturers launched their first electric models in the past two years.

Now, the EU Commission have decided to ban the sales of new petrol and diesel cars from 2035. Countries will have to dramatically speed up the conversion to electric vehicles.

Europe will have to go from the present situation of very small numbers of electric cars to close to 100 percent over the course of 25 years. At the same time the share of electric trucks and buses is expected to increase from close to zero to a large share in the same space of time.

To fuel a large share of the world’s cars and trucks with electricity, very large investment in power infrastructure will be necessary. According to Elon Musk, many countries will need to double their power production to have enough electricity to fuel battery production and charge growing vehicle fleets.

To charge all cars, trucks, and buses, Germany will need more than 150 TWh of electricity every year, but the capacity needed may almost double in the coldest weeks of cold winters. Currently, annual power production in Germany stands at 600 TWh of electricity.

In addition to the electricity needed to charge vehicles, similar amounts of power are likely to be needed to fuel battery production. A large number of battery plants will be needed, each of which needs as much electricity as a city the size of Stockholm, with more than one million inhabitants.

I have also argued that to drive the change to electromobility countries will have to invest heavily in the transformation of vehicle fleets, battery production, the expansion of power production, digitization and expansion of electricity grids, and the business and competence development that will be necessary for the transformation.

Millions of individuals across society will need to become involved in the transformation and countries will have to invest hundreds of billions of dollars to make it a reality. (In December of 2020 the Chairman of Toyota, Akio Toyoda, went public saying that the transformation to electromobility in Japan will require investment of between 135 and 358 billion dollars in infrastructure.)

I have indicated that the change from producing petrol and diesel vehicles to making electric ones will be very demanding for automotive suppliers. Mechanical engineering companies, as suppliers, will experience declining demand for their products and new suppliers of electric motors, and their components, will have to grow.

This will involve a need to rapidly dismantle the supplier structure for petrol and diesel engines and build new supply chains and expand the production of all the components needed in electric vehicles.

The production of electric engines requires fewer man-hours, perhaps only one-third of the man-hours needed to build combustion engines.

What I Did Not Realise

Over the past month, I have had the opportunity to learn about the challenges of strengthening the European semiconductor industry. Many have heard about the shortage of semiconductors that in the past year has forced automotive companies to now and then temporarily, stop production. Soon new production plants for chips will come online and the shortage is likely to disappear.

What will not disappear, but instead continue to become more pronounced, is the need for increasingly advanced semiconductors in the automotive industry, and in other industries as well.

The production of electric cars is highly dependent on semiconductors and the share of the value of a car that is made up of semiconductors is expected to increase from the present level of 17 percent to a future level of 50 percent.

In the cars, buses, and trucks of tomorrow, there will be more chips, and these chips will be more advanced. Over the next ten years the demand for semiconductor designers in the automotive industry will increase dramatically and the demand for such designers overall may almost grow exponentially.

Up until now I have had the impression that the engines of electric vehicles will be less complex than those of petrol and diesel engines, but this seems to only be true to a certain extent, and perhaps not at all if the statement is closely scrutinised.

It is true that there are fewer moving parts in electric vehicles, and it is true that the manufacturing cost of each car, the value that is added in the assembly plant and at suppliers in the form of mechanical engineering companies will go down dramatically.

What few have realized is that the complexity of vehicle production will be transferred from an area of relatively low complexity (mechanical production) to an area of extremely high complexity.

This area of increasing importance is semiconductor design and production. In this area, there is a sub-area called power electronics, where a very large investment will be needed to develop increasingly advanced semiconductors and the manufacturing technologies needed to produce them.

Moore’s Law and the Challenges of Chip Development

Chips are all the time becoming smaller and for every year the information density on each chip increases. According to what is known as Moore’s Law, the number of transistors on a certain area doubles every two years.

At present semiconductor companies manage to fit 100,000 transistors on an area the diameter of a human hair, and then they stack layer upon layer of transistors on top of each other to make the chips that are used in smart phones, computers, but also in electric cars.

Production is nanoscale, meaning that manufacturing is done at the atomic and molecular level, and the production processes are the most advanced on the planet.

This truth is nothing less than mindboggling! Over the past years experts on electric vehicles have talked about the great advantages of the reduced complexity and cost of the production of electric vehicles, compared to petrol and diesel ones.

Few, however, have mentioned the increasing need for advanced semiconductors that will arise from this development and the need for Europe and The United States to invest heavily in this development. It would be a very bad idea to transform transport systems to electric if it would also mean that an increasing share of the chips will be made in Asia.

It is necessary that European and American petrol and diesel engines get changed to electric motors with European and American semiconductors, or that at least a significant share of the semiconductors used in the future, not only in cars, will be made in Europe and the US.

Unveiling the Picture, Step by Step

It is true, as I have argued since 2004, that the transformation to electric vehicles will be much more complex and demanding of resources than most people realize.

Now, it becomes clear that the advantage of the less complex production process is only part of the picture. Automotive companies will leave behind a production process of low complexity that is well established and understood, and they will instead have to embrace an infinitely more complex and resource-demanding process of semiconductor design and production.

I have written five books on the large-scale transformation to electric transport systems. Nobody I have interviewed in the automotive industry, among its suppliers, or people in the utilities or transport sector have mentioned this dramatic shift.

It is not until I started to work with semiconductors that people like the Director of Corporate Research at Ericsson, Björn Ekelund, and the managers of a number of start-up companies in the semiconductor industry have told me about the future need for complex semiconductors in the automotive industry. It leads me to believe that few people in the automotive industry are aware of this shift from low to high complexity!

Is this big and important news? Is it something that politicians and business leaders need to learn about and act on immediately?

It definitely is!

But we must not forget that what is most important is the big picture. Yes, the sales of electric cars are growing. Yes, semiconductors will play a much more important role in this transformation than you and I have up until now realised.

But there will also be a need for expansion and digitization of power grids, expansion of power production, and large-scale business and competence development in many areas.

Each aspect is daunting in itself, in terms of scale and complexity. The entire change is also much more complex than most people understand. As one of the experts that have tried to investigate this scale and complexity, I am willing to testify to this!

And the conclusion? Governments need to map the entire change and develop realistic strategies and plans for the process overall. Companies need to provide their competence and insights and we all need to listen and learn!

Governments also need to allocate resources to the various aspects of the change, not only to the support of battery production and subsidies of car sales and the expansion of charging infrastructure. The change will be systemic and it does not make sense to invest heavily in a few areas and let others be left behind.

Mats is the author of five internationally published books on sustainability, focusing on the large-scale change to electromobility, the circular economy, and energy efficiency. His latest book is “The Blind Guardians of Ignorance — Covid -19, Sustainability, and Our Vulnerable Future” from 2020 and the first one of these was “Global Energy Transformation,” published in 2009.