Top down forecasting
To explore this possibility, the strategic energy consultancy E4tech has compared the bottom up forecasting approach with a top down method that may better reflect the impending changes. For the conventional forecast, E4tech analysed the increase in Chinese consumption of food types such as meat, milk, fruit and vegetables as incomes rose over the two decades to 2011, and applied this rate to other developing economies over the next ten years. On these assumptions, the required global refrigerated truck grows almost five-fold from around 2 million today to 9.6 million in 2025.70
To develop a top down forecast, E4tech assumed that consumers in developing countries will aspire to lifestyles that imply the same level of cold chain service as found in the UK, and then used the growth rates of two products that have already been widely taken up in developing countries to test the rates at which this might be achieved. The products – mobile data in the Asia Pacific region, and air conditioners in China – are simply examples of goods and services that became affordable as incomes rose, and are thought to be reasonable analogues for what could happen to demand for cold chain services.
Figure 5: Potential growth rates of the Chinese refrigerated vehicle fleet to reach levels found in developed countries. Source: E4tech
In 1990, for example, less than 1% of China's urban households owned an air conditioner, but by 2003 the number had soared to 63%, and by 2010 there were about 110 air conditioning units per 100 households.71 Mobile data usage has grown even faster, from negligible in 2011 to 1,000 petabytes per month in 2014.72
This data was used to develop two scenarios: 'aspirational demand', which assumes that cold chain capacity in developing countries reaches the same level per capita as in the UK; and 'feasible demand', which approximates what people in developing countries with rising incomes might be able to afford. This approach suggests that by 2025, aspirational demand in the developing world would require a global refrigerated truck fleet of 17.9 million, almost double the bottom up forecast, while feasible demand implies 15.6 million, more than 60% higher than the conventional approach. We stress that neither number is a forecast, but together they suggest the conventional forecast may be deeply conservative and that there is substantial headroom for further growth beyond it.
The impact on individual countries would be dramatic. In China, for example, which has around 66,000 refrigerated trucks today, the conventional approach produces a 9 fold increase to 593,000 by 2025, whereas E4tech's feasible demand suggests a 28 fold rise to more than 1.8 million. In India, with a current fleet of just 9,000, the bottom up forecast suggests 246,000 in ten years' time, while feasible demand projects almost 1.5 million. For the rest of the developing world, the numbers are: current, 422,000; conventional, 2.5 million; and feasible, 6.7 million.
Figure 6: World refrigerated vehicle fleet by region at various growth rate assumptions. *NB In addition to 9,000 refrigerated trucks, India has 27,000 milk tankers, which are insulated but not refrigerated, and so excluded from this analysis. Source: E4tech
70 2014 REPORT OF THE REFRIGERATION, AIR CONDITIONING AND HEAT PUMPS TECHNICAL OPTIONS COMMITTEE, UNEP, February 2015, http://ozone.unep.org/Assessment_Panels/TEAP/Reports/RTOC/RTOC-Assessment-Report-2014.pdf
71 Future air conditioning energy consumption in developing countries and what can be done about it: the potential of efficiency in the residential sector – 2007, Michael A. McNeil and Virginie E. Letschert, Lawrence Berkeley National Laboratory, http://www.eceee.org/library/conference_proceedings/eceee_Summer_Studies/2007/Panel_6/6.306/paper
72 E4tech study, unpublished