Hart Energy Consulting Future Prospects and Potential Impacts The Electrification of Transportation...
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Hart Energy Consulting
Future Prospects and Potential Impacts
The Electrification of Transportation in the US:
Hart Energy Consulting
Structure of the Presentation
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
2. Technical & Economic Feasibility of Vehicle Electrification
3. The Current HEV Market Landscape4. Future Potential of Vehicle
Electrification in the US5. Key Takeaways
Hart Energy Consulting
Growth of US vehicle stock has slowed in recently years, but there are still nearly 250 million light-duty vehicles out on the road today.
Sources: NHWA, DOT, R.L. Polk, HEC estimates
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300Car & light-duty vehicles in operation (millions, bars, right scale)Cars & light-duty vehicles per 1000 people (line, left scale)
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
Hart Energy Consulting
The industrial sector and utilities have cut back on oil consumption, but the transportation sector has not => its share of of total US oil consumption continues to grow.
Source: EIA
50%
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16,000Oil Consumption by US TransportationSector (000 bpd, right scale)Share of Total US Oil Consumption (line,left scale)
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
Hart Energy Consulting
Oil and gasoline prices reached historical highs in 2008, and still remain relatively high ($75/barrel) despite a sharp economic slowdown.
Sources: API, EIA
Source: EIA
$0
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$4.00Saudi Arabian Light Crude, USD/barrel (left scale)
Avg. Gasoline Price in US, USD/gallon (right scale)
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
Hart Energy Consulting
In the 1970s, OEMs improved fuel economy by reducing weight and horsepower, but since the early 1980s fuel economy (acc. to EPA method) has remained stagnant.
Source: HEC, based on EPA data
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Avg. Fuel Economy Avg. Vehicle Weight Avg. Horsepower
1975 = 100 1983 = 100
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
Hart Energy Consulting
Thanks to cheap gasoline, consumers found it affordable to purchase bigger vehicles like pickups and SUVs—but high oil prices and the recession have changed that.
Source: Ward’s Auto
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mill
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Cars CUVs SUVs Vans Pickups
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
Hart Energy Consulting
US CO2 emissions—especially those of the transportation sector—must come down if global CO2 emissions targets are to be met.
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
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32CO2 Concentration - Siple Dome (ppm, left scale)CO2 Concentration - Law Dome (ppm, left scale)CO2 Concentration - Mauna Loa (ppm, left scale)Global CO2 Emissions (million tons, right scale)
Sources: Oak Ridge National Laboratory, IEA
Hart Energy Consulting
Corporate Average Fuel Economy (CAFE) standards changed little in the 1980s and 1990s, but that was before age of high oil prices and global warming. CAFE wll increase through 2016 and beyond.
Sources: NHTSA, EPA
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CAFE Std., CarsCAFE Std., Light TrucksFleetwide Avg., CarsFleetwide Avg. Light Trucks
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
Hart Energy Consulting
To meet the IPCC’s CO2 emission reductions, fuel economy in the US might need to increase by over 50% => ICE engine improvements alone are unlikely to be enough.
Source: IEA
4.6
6.67.6
9.2
7.7 7.1
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1990 2007 BaselineCase, 2020
BaselineCase, 2030
450ppm-by-2050 Case,
2020
450ppm-by-2050 Case,
2030
C02
Em
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s (b
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(2
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7=
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Industry BuildingsOther Veh. Fleet CO2 Intensity
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
Hart Energy Consulting
Vehicle electrification can help meet fuel economy and CO2 emissions goals, but in the short term they are not cost competitive.
2. Technical & Economic Feasibility of Vehicle Electrification
Technology% CO2
ReductionCost
Cost per 1% CO2
ReductionReducing Mechanical Friction of
Components3.0% 50$ 17$
Electric Steering 5.0% 120$ 24$
Low Rolling Resistance Tires 3.0% 150$ 50$
Light Weighting 10.0% 750$ 75$ Variable valve lift and timing 4.9% 410$ 84$
Cylinder deactivation 3.9% 415$ 106$ Gasoline direct injection 7.5% 825$ 110$
Turbocharging 6.9% 800$ 116$ Mild Hybrid 12.0% 1,400$ 117$
Start-stop system 3.9% 470$ 121$ Moderate Hybrid 18.0% 2,200$ 122$
HCCI 12.2% 1,800$ 148$ Full Hybrid 35.0% 6,000$ 171$
Source: HEC, based on Deutsche Bank, BCG, Edmunds, Anderman (2007) data
Hart Energy Consulting
Because of the high cost of hybrids today, their payback period is relatively long => their ability to gain market share has been limited.
Source: HEC, based on Edmunds, EPA, EIA data
Make & ModelModel Year
Trim Engine PricePrice
Premium
EPA Combined
MPG
Payback at $3.30/g (i.e.
2008 avg. US price (years)
Payback at $2.61/g (i.e.
2009 avg. US price (years)
Honda Civic 2010 EX 1.8L $20,255 29Honda Insight 2010 EX 1.3L $21,300 41Toyota Corolla 2010 XLE 1.8L $17,750 29Toyota Prius 2010 I 1.8L $22,800 50Toyota Camry 2010 SE 2.5L $23,165 26Toyota Camry Hybrid 2010 Base 2.4L $26,450 34Ford Escape 2010 XLT (FWD) 2.5L $24,045 23Ford Escape Hybrid 2010 Base 2.5L $29,860 32Ford Fusion 2010 SE 2.5L $21,225 25Ford Fusion Hybrid 2010 Base 2.5L $27,950 39Chevrolet Malibu 2010 LT1 2.4L $22,715 26Chevrolet Malibu Hybrid 2009 Base 2.4L $25,555 29
15.0
22.8
3.3
11.1
11.6
15.2
9.2
12.0
$3,285
$5,815
$1,045
$5,050
2.6
8.8
$6,725
$2,840
11.8
18.0
2. Technical & Economic Feasibility of Vehicle Electrification
Hart Energy Consulting
The main reason for the high cost of hybrids is the high cost of their batteries. New chemistries can lower cost and improve performance.
Source: Saft
2. Technical & Economic Feasibility of Vehicle Electrification
Hart Energy Consulting
As new battery technologies mature, more cost reductions can be expected: this has been the case with LCO batteries for laptops and cell phones.
Source: Brodd (2005)
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$3,200
$3,600Specific Energy, Wh/kg (left scale)
Cost, USD/kWh (right scale)
2. Technical & Economic Feasibility of Vehicle Electrification
Hart Energy Consulting
Hybrids still comprise a small part of the light-duty vehicle market—but their share is growing.Consumers associate hybrids with fuel economy, so they have favored strong HEVs over mild and moderate HEVs.
Source: HEC, based on Ward’s Auto data
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Strong HybridsModerate HybridsMild Hybrids
3. The Current HEV Market Landscape
Hart Energy Consulting
Sales of the Prius have shown a strong correlation to their payback period => it is not enough for a HEV to be “green,” it has to offer good value.
Source: HEC, based on Ward’s Auto, Edmunds, Automotive News, EIA data
Note: Payback calculation is based on 12K mi/year of usage, and include the EPCAT and “Cash for Clunkers” incentives
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25,000Prius Sales (bars, rightscale)Payback period (years),line, left scale
Correlation: -.84
3. The Current HEV Market Landscape
Hart Energy Consulting
MONTANA
WYOMING
IDAHO
WASHINGTON
OREGON
NEVADA
UTAH
CALIFORNIA
ARIZONA
NORTH DAKOTA
SOUTH DAKOTA
NEBRASKA
COLORADO
NEW MEXICO
TEXAS
OKLAHOMA
KANSAS
ARKANSAS
LOUISIANA
MISSOURI
IOWA
MINNESOTA
WISCONSIN
ILLINOISINDIANA
KENTUCKY
TENNESSEE
MISS
ALABAMAGEORGIA
FLORIDA
SOUTHCAROLINA
NORTH CAROLINA
VIRGINIA
WV
OHIO
MICHIGANNEW YORK
PENN
MARYLAND
DELAWARE
NEWJERSEY
CONNRI
MASS
MAINE
VT
NH
ALASKA
HAWAII
MONTANA
WYOMING
IDAHO
WASHINGTON
OREGON
NEVADA
UTAH
CALIFORNIA
ARIZONA
NORTH DAKOTA
SOUTH DAKOTA
NEBRASKA
COLORADO
NEW MEXICO
TEXAS
OKLAHOMA
KANSAS
ARKANSAS
LOUISIANA
MISSOURI
IOWA
MINNESOTA
WISCONSIN
ILLINOISINDIANA
KENTUCKY
TENNESSEE
MISS
ALABAMAGEORGIA
FLORIDA
SOUTHCAROLINA
NORTH CAROLINA
VIRGINIA
WV
OHIO
MICHIGANNEW YORK
PENN
MARYLAND
DELAWARE
NEWJERSEY
CONNRI
MASS
MAINE
VT
NH
ALASKA
HAWAII
Governments—federal, state, local—are providing incentives for buyers and manufacturers of HEVs, PHEVs and EVs.
3. The Current HEV Market Landscape
Hart Energy Consulting
• Dual-mode mild HEVs(Silverado, Yukon, Malibu) have been failures
• Volt series PHEV could be a winner
• IMA system (moderate HEV) is low-cost but has, for the most part, yielded disappointing sales
• CR-Z launch means more of the same—for the next few years, at least• Has been a cautious mover on Li-Ion
technology
• Tie-up between PEVE & Sanyo now gives it a potentially reliable battery supplier
• Prius PHEV & EV on the horizon
• Suddenly, Ghosn is betting big on EVs
• Lack of proprietary HEV technology is a significant liability
• Gradually weaning itself off reliance on Toyota’s HSD system: new Fusion HEV beats Camry HEV on fuel economy
• Taking a more cautious approach on PHEVs & EVs: small volumes of Transit Connect EV due out late this year
• Moving aggressively, but lack of large-scale manufacturing experience is a big concern
• Dual-mode mild HEVs(Silverado, Yukon, Malibu) have been failures
• Volt series PHEV could be a winner
• IMA system (moderate HEV) is low-cost but has, for the most part, yielded disappointing sales
• CR-Z launch means more of the same—for the next few years, at least• Has been a cautious mover on Li-Ion
technology
• Tie-up between PEVE & Sanyo now gives it a potentially reliable battery supplier
• Prius PHEV & EV on the horizon
• Suddenly, Ghosn is betting big on EVs
• Lack of proprietary HEV technology is a significant liability
• Gradually weaning itself off reliance on Toyota’s HSD system: new Fusion HEV beats Camry HEV on fuel economy
• Taking a more cautious approach on PHEVs & EVs: small volumes of Transit Connect EV due out late this year
• Dual-mode mild HEVs(Silverado, Yukon, Malibu) have been failures
• Volt series PHEV could be a winner
• IMA system (moderate HEV) is low-cost but has, for the most part, yielded disappointing sales
• CR-Z launch means more of the same—for the next few years, at least• Has been a cautious mover on Li-Ion
technology
• Tie-up between PEVE & Sanyo now gives it a potentially reliable battery supplier
• Prius PHEV & EV on the horizon
• Suddenly, Ghosn is betting big on EVs
• Lack of proprietary HEV technology is a significant liability
• Gradually weaning itself off reliance on Toyota’s HSD system: new Fusion HEV beats Camry HEV on fuel economy
• Taking a more cautious approach on PHEVs & EVs: small volumes of Transit Connect EV due out late this year
• Moving aggressively, but lack of large-scale manufacturing experience is a big concern
OEMs are approaching vehicle electrification in many different ways.
3. The Current HEV Market Landscape
Hart Energy Consulting
Sizing up the potential of electrification is complex: payback period is influenced by many relevant variables.
Source: IEA
Customer Choice
OEM Choice
Market Segmentation
Desired Vehicle
Attributes
Driver Behavior (i.e. VMT, degradation
factor)
Gov’tChoice
Price of Gasoline v. Price of Electricity
Gasoline & Carbon Taxes
Cost Premium of HEVs, PHEVs &
BEVs
Fuel Economy & Emissions
Regulations
Cost/Benefit of Electric
Powertrains v. ICE
Improvements
Battery Suppliers’
Production Capacity
Grants/Loans to Suppliers &
OEMs
Vehicle Mileage Taxes, Congestion
Pricing
Clean Vehicle
Incentives
Payback Period of Electric Vehicles
Customer Choice
OEM Choice
Market Segmentation
Desired Vehicle
Attributes
Driver Behavior (i.e. VMT, degradation
factor)
Gov’tChoice
Price of Gasoline v. Price of Electricity
Gasoline & Carbon Taxes
Cost Premium of HEVs, PHEVs &
BEVs
Fuel Economy & Emissions
Regulations
Cost/Benefit of Electric
Powertrains v. ICE
Improvements
Battery Suppliers’
Production Capacity
Grants/Loans to Suppliers &
OEMs
Vehicle Mileage Taxes, Congestion
Pricing
Clean Vehicle
Incentives
Payback Period of Electric Vehicles
4. Future Potential of Vehicle Electrification in the US
Hart Energy Consulting
•
4. Future Potential of Vehicle Electrification in the US
Base Case (i.e. 2009 WRFS)
"Green Renaissance" Scenario
"Realpolitik" Scenario
RationaleTest impact of "green" government policies on
electrification
Test impact of resource nationalism and trade
barriers on electrification
Fuel pricesGrow moderately and
gradually
Gov't introduces $4/gallon floor in 2011,
and raises it to $5 in 2020
High
CAFE StandardsRise to 35.5 mpg by
2020; grow moderately thereafter
Rise to 42.5mpg by 2020; grow moderately
thereafter
Rise to 35.5 mpg by 2016; grow moderately
thereafterGovernment
incentives for PHEVs & EVs
Are short-lived Last until 2020 None
Battery costs Decline moderately Decline quickly Very little decline
OEM and battery manufacturer
capacityRises moderately
Rises moderately to 2020, and grows quickly
thereafterRises slowly
Parameters
Due to complexity and uncertainty, it is best to analyse a variety of possible scenarios.
Hart Energy Consulting
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Gasoline Strong Hybrid PHEV-20 PHEV-40 EV
In the Base Case, penetration of vehicle electrification in the light-duty vehicle market grows moderately.
4. Future Potential of Vehicle Electrification in the US
Source: HEC
Hart Energy Consulting
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Gasoline Strong Hybrid PHEV-20 PHEV-40 EV
In “Green Renaissance,” the gasoline price floor, vehicle incentives and battery cost reductions combine to spur high levels of penetration after 2020.
4. Future Potential of Vehicle Electrification in the US
Source: HEC
Hart Energy Consulting
•
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Gasoline Strong Hybrid PHEV-20 PHEV-40 EV
In “Realpolitik,” vehicle electrification penetration is modest. Total light-duty vehicle sales also stagnate.
4. Future Potential of Vehicle Electrification in the US
Source: HEC
Hart Energy Consulting
•
60,000
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90,000
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110,000
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2008
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2016
2017
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2020
2021
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2023
2024
2025
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2027
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2030
-11%
-9%
-7%
-5%
-3%
-1%
1%
3%
Green Renaissance (mn gallons, left scale)Baseline (mn gallons, left scale)Change v. Baseline
In “Green Renaissance,” aggressive fuel economy standards and vehicle electrification combine to lower liquid fuels consumption by about 9% compared to the Base Case.
4. Future Potential of Vehicle Electrification in the US
Source: HEC
Hart Energy Consulting
60,000
70,000
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90,000
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110,000
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-11%
-9%
-7%
-5%
-3%
-1%
1%
3%
Realpolitik (mn gallons, left scale)Baseline (mn gallons, left scale)Change v. Baseline (%, right scale)
In “Realpolitik,” liquid fuels consumption also declines relative to the Base Case—mostly because lower new vehicle sales lead to fewer total light-duty vehicles in operation.
4. Future Potential of Vehicle Electrification in the US
Source: HEC
Hart Energy Consulting
5. Key Takeaways
Vehicle electrification in the US today suffers from high battery costs and relatively low fuel prices, but:
Government policies will be necessary to help make HEVs, PHEVs and EVs more affordable until economies of scale push battery costs down further.
Future fuel economy and criteria pollutant emission regulations will make future ICEs more costly.
Vehicle electrification has significant upside—but only after 2020.
Vehicle electrification also depends on the continuation of open trade: resource nationalism and trade barriers could limit OEMs’ and battery producers’ ability to capitalize on global economies of scale.
Hart Energy Consulting
The transportation sector—and light-duty vehicles in particular— are also a significant source of CO2 emissions in the US.
1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations
Source: EPA
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2008
Mill
ion
Met
ric
To
ns
of
CO
2 E
qu
iv.
Medium- and heavy-duty vehicle GHG emissionsLight-duty vehicle GHG emissionsAll other US GHG emissions from fossil fuel combustion