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IX. Alternative Fuel Vehicles

Whereas emissions-technology approaches focus on reducing tailpipe emissions from conventional ICE (internal combustion engine) vehicles (via improved emissions equipment, reformulated gasoline, prewarmed catalytic converters, etc.), the alternative fuel vehicles strategy emphasizes a more radical step, the replacement of gasoline by other fuels. Major options discussed in the literature include ethanol, methanol, compressed natural gas, hydrogen fuel cells, electricity, and gasoline (or diesel)-electricity hybrids. In this paper, I concentrate on the last two of these options. Ethanol, methanol and compressed natural gas reduce some types of automobile emissions but increase others, so they do not offer an acceptable solution to the air quality problem. Vehicles using these fuels do have some potential role, e.g. delivery fleets using compressed natural gas, but a modest one. The hydrogen fuel cell solution is a very long-term approach; there are difficult technical problems, especially with regard to safety, and there are no plans for an infastructure supply network. It is probably not a feasible choice for meeting near-term ZEV mandates, although Daimler-Chrysler have announced plans to have a full fuel cell Necar-4 vehicle in limited production by 2004 (ISATA Magazine, June 1999). However, although the concept car runs on liquid hydrogen, the production vehicle will probably be powered by methanol. Nevertheless, given the tendency for technological and cost containment timetables to slip, we are safer with limiting the discussion to the EV (electric vehicle) and hybrid options.

Alternative fuel vehicles stand or fall from a marketing perspective on four legs: power, range, price and convenience (especially trunk and passenger room). Progress in electric vehicles has stalled because of all four problems: too little power, very limited range, too expensive, and insufficient space. The hybrids offer better prospects. The two hybrids that reached the U.S. market in the year 2000, the Toyota Prius and the Honda Insight, have both solved the range problem, with a range far greater than the typical ICE vehicle. The power (especially the torque) of both the Prius and the Insight is less than inspiring, although the Insight gets to 60 mph at a respectable 10.6 seconds on a full charge. R & D specialists are working hard on the power problem via more efficient SPUs (Surge Power Units), aerodynamic improvements, and weight reduction via lightweight materials, etc. A small SPU instead of a battery stack can help to cope with the space problem. The hope is that the economies of scale of mass production could dramatically bring down the price.11 These prospects led the Wall Street Journal to predict the death of the ICE within 20-30 years.

It became clear that slow progress with battery technology development would undermine the market penetration of EVs when the California Air Resources Board (CARB) abandoned its 1998 ZEV mandate (a 2 percent share of total automobile sales in California from the leading seven automobile manufacturers) in 1996, although the more ambitious 2003 mandate (a 10 percent share) required 54,000 ZEVs to be sold (4 percent of the Big Seven's sales, after allowing for 6 percent SULEVs [super-ultra-low-emission] vehicles to be substituted for ZEVs). Achieving this goal would be highly problematic, and this might explain the 22,000 annual 2003 ZEV requirement voted on by CARB in September 2000. Even this is very ambitious, given that the number of electric cars on the road in California is not much more than 10 percent of the new 2003 target, and that the current world production of the Honda Insight (a car that does not even qualify for the ZEV mandate) is only 8,000 (one-half destined for the U.S.). However, other offsets are still being discussed so the 2003 mandate may be achievable via a variety of contributions.

Tests on four prototype electric vehicles (a Chevrolet S-10, a Ford Ranger, GM's EV1 and a Toyota RAV4) suggested poor acceleration (except for the EV1), very limited range (39-89 miles), modest maximum speeds (69-80 mph), and poor reliability (multiple battery failures; Francfort and O'Hara, 1999). The problem was aggravated by Honda's decision in April 1999 to stop production of its EV Plus electric car, and to switch its R & D focus to fuel cell technologies that provide on-board electric power.12 In more than three years, only about 300 EV Pluses had been leased (at a lease rate of about $450 a month), most of them to businesses or government agencies mandated to use low-emission vehicles. However, Toyota plans to continue with its RAV4 electric version; it has leased about 500 so far, with plans for another 1,000 in the next few years. General Motors was planning a Phase II version of its EV1 car, a vehicle notable for its acceleration characteristics (0-60 mph in 8 seconds) and its record low drag coefficient of 0.19 Cd (because of fewer cooling orifices and a smooth underside13); yet leases have averaged only about one per day, and in January 2000, after spending $350 million, GM cancelled production, at least temporarily. In total, less than 3,000 battery electric cars and trucks have been sold or leased since 1996, most of them in California. The prospects are even bleaker with the announcement (in April 1999) by Edison International to close its Edison EV subsidiary that had installed 250 charging stations in California and Arizona.

In any event, EVs have several major defects. First, at the national level, they are pollution-shifting (i.e. to power stations) rather than pollution reducing. Second, the pollution that is generated comes from the more dangerous pollutants, particulate matter (PM), sulfur oxides and CO2 (not covered by the Clean Air Acts). Electric hybrids offer the best chance of achieving the CO2 reductions promised at the Kyoto Agreement, although 25-30 percent of cars sold would have to be of this type, and probably many of them with diesel-turbo rather than gasoline engines. Third, EVs create new environmental problems, a serious battery disposal problem and the potential for more pollution from existing gas-powered vehicles, driven under more congested conditions because of the stimulus of lower EV operating costs to higher VMT. Fourth, there are safety problems related to accidents involving lead-acid battery stacks (whether safer batteries will eventually be available remains an open question. Fifth, the cost barrier (ranging from $5,000 to $21,000 a vehicle) is difficult to overcome, even if narrowed by learning curve effects and subsidies (e.g. cheap recharging units, off-peak electricity rates, leasing as a mechanism for reducing consumer resale risk, free maintenance, extended warranties, and free rental cars for weekend trips).

From all these facts, it appears as if the technology-forcing 1998 ZEV mandate pointed R & D in the wrong direction.14 Although the ZEV mandate was a performance standard (zero emissions), it was a de facto technological standard because only electric vehicle technology could achieve zero emissions. Obviously, a technological standard is much more restrictive than a performance standard because it limits R & D options. When the technology has not been developed, its costs are uncertain and its limitations are unknown. The rationale for technology-forcing standards in favor of a new, unknown technology is that i. however costly they turn out to be, these costs will eventually fall to acceptable levels; and ii. they resort to "stretch goals" to motivate and to stimulate creativity (Leone, 1999). Of course, stretch goals do not always work, e.g. ubiquitous nuclear power, cost-effective supersonic aircraft, and now perhaps all-electric vehicles. Perhaps it is possible to make the indirect argument that the ZEV mandate got the automobile manufacturers' attention, and that the EV failures (or, at best, mixed success) further pushed them towards the hybrid route, but Leone raises the key question: "Would tailpipe emissions fees have done the job better and faster?" (Leone, 1999, p. 293). Also, the timing does not support this interpretation. Automobile manufacturers are very secretive, and we may never know, but superficially the evidence suggests that hybrid vehicle research was underway before the original ZEV mandate was adopted.

A relevant issue is the role of the Partnership for a New Generation of Vehicles (PNGV) that was launched as a public-private partnership in 1993 between the U.S. Government and the Big Three automakers. Its results have been mixed. By choosing diesel-electric hybrids (to be introduced in 2004), the partnership did not result in the adoption of best-practice technology (primarily because diesel fuel is so dangerous to health, and partly because this approach will be insufficient to achieve the 80 mpg fuel economy target). The funds available were too small relative to the Big Three R & D budgets to have much of an impact. Perhaps it would have been better to use the available funds to stimulate innovation by small firms. Probably, the best result from the initiative was to stimulate research by the Japanese and the Europeans into hybrid vehicle and fuel cell technology, and this in turn induced the U.S. manufacturers to pursue these initiatives more aggressively, via a "boomerang effect" (Sperling, 2001).

Recently, CARB has reconfirmed the ZEV 2003 mandate. The details have still not been finalized, but it looks as if automakers selling more than 35,000 cars per annum in California will have to make two percent of 2003 production as fully ZEV vehicles after receiving credits for early compliance and producing enough SULEV vehicles (such as the special versions of the Sentra CA and the Honda Accord) to meet the 10 percent of qualifying vehicles requirement. The proposal includes other highlights. For example, a potential subsidy of up to $3,000 per year for three years may be available from the State, but would be limited by a $18 million cap on the progran that would mean subsidizing only 2,000 vehicles. Even the ZEV vehicles that have been produced, such as the General Motors EV1 (the production of which is currently suspended) and the electric version of the Toytota RAV4 will not meet 2003 Federal safety standards, and would need redesigning to minimize the critical trade-off between performance and weight. The automakers are complaining yet again that this technology-forcing mandate will not work. It looks as if they have an out. Toyota makes the unbelievable claim that the net cost of an electric RAV4 is $180,000 (primarily because the engine and undercarriage modifications are, in effect, hand-built); if this were even a close approximation, they could save substantial money by paying the proposed $5,000 penalty for each mandated ZEV vehicle not produced. If the company receives the maximum partial ZEV credits, and meets one-half the ZEV targets, it would save $70 million in the first year.

If the 2003 ZEV mandate is unachievable because of both technological infeasibilty and evasion, a strong argument could be made for a more cost-effective strategy to improving air quality, opening up a wider array of vehicles (including hybrids) to partial ZEV credit. The case is reinforced by the fact that electric vehicles are far from non-polluting when measured in product life-cycle term. Another problem, hopefully being remedied, is that CARB has been too conservative in allowing low-emission vehicle offsets to the ZEV mandate (although special versions of the Nissan Sentra and the Honda Accord have been certified as SULEVs and qualify for partial ZEV credit). However, a major step forward is CARB's agreement to allow SULEVs and hybrids to count towards its mandates. The ZEV mandates are still under review, but it looks as if battery EVs will only need to account for two percent of the vehicles, and this could include neighborhood EVs and other credits. There are three types of "pure" electric vehicles: neighborhood vehicles, not much more than glorified golf carts with low speeds and a short range; city vehicles (such as Ford's small Think City car due out in 2002) that could be driven at freeway speeds, but have a short range and are intended for commuting and short trips; and the regular electric cars (such as the EV1 and the RAV4).

Conservatism and face-saving has diverted attention from the big picture, a dramatic reduction in overall automobile emissions if significant market penetration by gasoline-electric hybrids and SULEVs (even ULEVs) could be achieved (in part, market penetration is a function of costs, and persisting with a strong preference for an all-electric range drives up costs).

The Toyota Prius and its competitor, the Honda Insight, are technological marvels; they are less likely to be marketing marvels15 (their impressive fuel economy may not compensate for inadequate power and higher price16). The Prius is a very imperfect solution because its SPU is a standard battery; this "is likely to prove the Achilles heel of the Prius in terms of performance, reliability and the cost of frequent replacement" (Ellis, 1999, p. 25). To illustrate this, consider the results of a test drive by Autoweek magazine: to commemorate the centennial of the first car to climb Mount Washington in New Hampshire, they attempted the 7.6 mile climb with a Toyota Prius; two miles up the mountain, the battery failed (Katz and Payne, 2000).17 Also, a recent driving test of the Prius found on-road fuel economy much worse than advertised. In addition, under adverse driving conditions (winter in the Northeast) the Prius switched jerkily between the gasoline engine and the electric motor, compared with a much more seamless performance by the Honda Insight. Obviously, technological advances remain a work in progress.

To explain the advantages and limitations of the Prius (and the Honda Insight), a brief digression into the automotive technology of hybrids is needed. There are two main technological options: a "parallel" hybrid and a "series" hybrid. A parallel hybrid combines a conventional engine/mechanical gearbox and a battery-driven electric motor that operate independently. A series hybrid uses only electric traction, but power is generated by a fuel (either gasoline or diesel) and a SPU; the SPU provides most of the hybrid's improved efficiency (some of it coming from "regenerative braking" when the vehicle is slowed down by the electric motor acting as a generator) and recharging takes place on-board. There is no need for external recharging, either overnight in the garage or at recharging stations. Because of its battery constraint, the Prius has to use the gasoline engine to accelerate faster than 7 mph, so it is not a true series hybrid that would be a ZEV when the engine is off. Nevertheless, it has double the economy of its nearest conventional competitor, with equivalent benefits in terms of reduced emissions, including CO2 emissions (Burke and Miller, 1997).

Despite their limitations, the Toyota Prius and the Honda Insight move the assessment of hybrids as a major automotive force from the questionable to the highly probable. The Insight beat Toyota to the punch being introduced in January 2000 while the Prius's debut was delayed until July. It is classified as a ULEV (ultra-low-emissions vehicle), with a highway fuel economy of 70 mpg and a range of up to 740 miles (in terms of market penetration, its current drawbacks are its two seats -customers who need five seats would have to opt for the slower Prius -- and its 5-speed manual transmission, a temporary problem because an automatic version is marketed in Japan and should reach the U.S. this year). Ford and Daimler-Chrysler are promising to mass-produce fuel-cell vehicles by 2004, not quite soon enough for the ZEV target year of 2003. Ford's current prototype, the P2000, is a stretched Contour achieving 100 hp with an acceleration of 0-60 mph in 12 seconds, and has a fuel economy of 63 mpg; on the downside, it runs on compressed hydrogen that uses up all its trunk space, its fuel system accounts for one-third of its weight, and its range is limited to 100 miles. Daimler-Chrysler's Necar-4, based on the Mercedes A-class is a four-passenger vehicle of 75 hp, has a top speed of 90 mph, a range of 280 miles, and reaches 35 mph in 6.5 seconds; more notably, its fuel cell occupies a 6-inch space under the car floor. However, it weighs 3,800 lbs.18 and uses liquid hydrogen stored in the trunk space (an unresolved safety problem). General Motors is developing an aluminum-intensive, 90 hp diesel-electric hybrid with a fuel economy >80 mpg and double the range of the original EV1. General Motors also has plans to develop a full-size truck hybrid (probably a version of the Suburban), a concept that might have considerable market appeal, given current consumer tastes and the recent spike in gasoline prices.

Further technological advances are still needed to make hybrids fully competitive. Attempting to meet SPU needs with chemical batteries is the obvious weak link (weight, power, reliability, service life, efficiency, battery disposal, etc.). Technological progress in gas turbines and fuel cells are likely to make series hybrids superior to parallel hybrids. Two promising SPU technologies are ultra-capacitators (actually an old technology, currently with inadequate power except for small vehicles) and kinetic energy storage systems (KESS). The current best bet is the Powerbeam KESS (a powerful 120 kW SPU) which is expensive but could last the life of the vehicle. It could result in a "hybrid-hybrid" which works as a series hybrid in the city and as a parallel hybrid on the highway (on average, about 60 percent of VMT would be fueled electrically). It avoids the cold-start problem because the engine does not have to be fired up to start the car, but only later when the catalytic converter will have been heated electrically. Despite the environmental benefits of using compressed hydrogen as a fuel (one-third of the CO2 emissions of ICE vehicles), because of the lack of hydrogen infrastructure and storage and safety issues, the first commercially applicable fuel-cell vehicles are likely to use methanol to process the hydrogen indirectly19. Nevertheless, "(g)iven that fuel-cell systems now cost 10 times more than traditional engines, that no fuel infrastructure exists for hydrogen and methanol and that the systems are still too big and heavy, they are by no means assured of public acceptance" (Nauss, 1999, p. W6). Fuel cells are most likely to function as long-range batteries rather than as alternatives to engines. Although technological problems remain, they are not overwhelming enough to slow down these developments, provided that legislative insistence on a minimum battery-own range ("a blind alley", according to Mark Bursa, Editor of ISATA Magazine) can be overcome. The "end game" powertrain is likely to be an electrically recharged fuel cell of 40kW with a range in excess of 300 miles, complemented by a SPU of 100 kW and 1-2kWh of usable capacity, driving a traction motor/generator of around 100kW.

Pending these technological solutions, the major issue is: What could, and should, be done to expand the market for hybrids? Much depends on the automobile manufacturers, not only in terms of their technological progress to relieve the limited power problem but also in their ability to address the pricing issue, if necessary by aggressive cross-subsidization of vehicles. From the perspective of government action, there are three lines of attack. The first is tighter emission standards. This is unlikely to work as a hybrid promoter, because ultra-clean (although not ZEV) standards can be met by with technical improvements and catalytic converter treatment in conventional ICEs. Second, higher gasoline prices via increased taxation is a potential instrument. In the United Kingdom case, Evans (1998) argued that the government was pursuing a policy of instrumental redundancy by using land use controls in addition to higher gasoline taxes to address the automobile pollution issue. However, there are major difficulties with this approach: i. political acceptability; ii. the adverse repercussions of higher gasoline costs not only on consumers but on the economy as a whole; and iii. questions about the long-run price elasticity of demand for gasoline (obviously higher than the short-run elasticity, perhaps high enough to quench the thirst for SUVs and trucks, but may be too low to shift tastes in favor of hybrids). Third, the same arguments apply to a carbon tax, although this would have the wider goal of reducing CO2 emissions. The fourth policy instrument is tougher CAFE standards, but applied to all vehicles including SUVs and trucks. Again, there is a political acceptability issue, but it could do the trick. If tough enough, higher standards could make a wide introduction of hybrids the only means of achieving the targets.20 This could accelerate the rate of R & D and encourage the automobile manufacturers to implement aggressive pricing strategies to market the hybrids.

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