trb environment energy conference - ncsu
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0©Copyright 2010 The Martec Group, Inc. All Rights Reserved©Copyright 2010 The Martec Group, Inc. All Rights Reserved
California LCFS and theLong Road to ZEV
TRB Environment & Energy Conference
June 8, 2010
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What is our national objective?
Stabilize and reduce GHG emissions
Reduce consumption of petroleum . .. . . enhance energy security
Provide the greatest good at thelowest societal cost . . .
. . . Expand national wealth & prosperity of the U.S.
EPA Wedge Analysis
First 14 years: ‐1.4%Second 30 years: ‐5.2%
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1994
LEV I• NOx limits reduced 50%
• Vehicles and fuels regulated as a system
CAA Sec. 209(a)• CA authority to regulate light duty vehicle criteria emissions
• PGM ‐based catalytic converter introduced
LEV II• NOx limits reduced 75%
• Near harmonization with Federal Tier 2 regulations
2004
ZEV• 10% sales mandate overturned
• Mandate met with credits oAT‐PZEVoPZEVoNG oFuel Cell
2005
GHG• AB 1493 • AB 32• SB 375• Cap & Trade• Low Carbon Fuel Standard
• Renewable Portfolio Standard
2009 2010
LEV III• NOx and NMOG reductions to near zero
• 2009‐2020 = 45% GHG reduction
1975
CARB has approved the Low Carbon Fuel Standard (LCFS) for implementation in 2011.
California Regulation of Mobile Source Emissions
The mission to reduce urban smog has morphed into the control of all energy consumption.
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CAFE Certification: 2 Cycle
• Test cycles created in 1975• Prime emphasis is city driving (55/45)• 38 mph average speed • No A/C, radio, lights, heat
Real World Label: 5‐Cycle
• Updated in 2006 under pressure from Congress
• Prime emphasis is highway driving (43/57)
• Accessories are recognized
Both EPA and NHTSA are interested in developing programs that employ test procedures that are morerepresentative of real world driving conditions . . . This is an important issue, and the agencies intend to address itin the context of a future rulemaking to address standards for model year 2017 and thereafter.
The gap between EPA’s lab certification tests and real world MPG/CO2performance is widening.
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Ethanol blends reduce energy density and fuel economy – not comprehendedon 2‐cycle tests.
75,000
85,000
95,000
105,000
115,000
125,000
135,000
Low
er H
eatin
g Va
lue
per G
allo
n
CAFEIndolene
RFG E10 E85 CAFE B5 B20
‐2.4%
‐27.8%
‐0.4% ‐1.4%Gasoline ULSD
Renewable Fuels Energy Density per Gallon
‐5.8%
E15
‐3.4%
Not comprehended in 5‐cycle label methodology
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2‐cycle lab certification test cycles are being exploited, increasing off‐cycle emissions.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%+46%
Gas FleetIndolene
Gas FleetE10
No. 1 HEVE10
+ 24%
1.6XCycle Beating
Effect
Incr
ease
in Off‐Cycle
CO
2 Em
issi
ons
Lab Certification vs. Off‐Cycle Emissions Gap
+28%
‐ 4.9 mpg ‐ 5.5 mpg ‐ 22.4 mpg
4. Off‐cycle Technology Credits Further, any credits for these off‐cycle technologies must be based on real‐world GHG reductions not captured on the current 2‐cycle tests and verifiable test methods, and represent average U.S. driving conditions. ‐ Proposed rule page 162
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CA LCFS exists within a national renewable fuels program regulatingdifferent outcomes.
• Life cycle CO2 reduced 10% on an energy equivalent basis
• Each fuel pool regulated individually• Back‐end loaded: 2014‐2020 CAGR = (1.49%)
RFS: Forces Renewable Gallons LCFS: Forces Life Cycle CO2 Reduction
• Oil replacement policy pre‐dating CO2• Energy security – monopsony• Important linkage to job creation and U.S. balance of trade improvement
National E10
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RFS2 measures ethanol‐equivalent gallons – renewable diesel’s high energydensity fundamentally shifts compliance economics.
RFS2 Standard
RFS2 Ethanol‐Equivalent Billion Gallons
Cellulosic Billions of Gallons
R‐Diesel
Ethanol
Fischer‐Tropsch BTL diesel is expected to account for 70% of the cellulosic fuel requirement by 2022. National B10.
30.5B real gallons = 36B ethanol‐equivalent gallons
EPA Expected RFS2 Compliance
National E15 in 2022
National E10
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‐$0.20
‐$0.10
$0.00
$0.10
$0.20
$0.30
$0.40
2006 2010 2014 2018 2022 2026 2030
EPA will allow midlevel blends making E85 a dead fuel and sweeping awaypromised CO2 credits with it.
Source: EIA Annual Energy Forecast Reference Case
E85 Energy Equivalent Pump Price/gal. Over (Under) E10 – EIA AEO 2010
Parity
E15 midlevel blends allowed: • E85 price no longer needs to attract customers to comply with RFS2
• Significant US and CA FFV credits vaporize without E85 fuel
• $ billions of FFV vehicle hardware wasted
• < 1% stations have E85 pumps• GM, Ford, Chrysler commit to > 50% FFVs
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85
87
89
91
93
95
97
99
2010 2012 2014 2016 2018 2020
LCFS Compliance With Alternative Fuel Pathways
Under LCFS, fuels are no longer fungible commodities.
WTW gCO2e/MJ
Gasoline pool
Diesel pool
MW Corn Ethanol E100
E15 CellulosicEthanol(CA farmed trees)
2010 CA grid Electricity 124.1
Brazilian E15 (Sugarcane)10% Grid Energy LDV(2020 CA Grid)
Washington State Gasoline Blendstock
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0 25 50 75 100
Midwestern Corn
Brazilian Sugarcane
Cellulosic ‐ CA Farmed Trees
Under LCFS, the price of Brazilian ethanol can sell at prices far above MWcorn ethanol . . . CA cellulosic 3X higher than sugarcane ethanol.
iLUC
gCO2e/MJ
LCFS Carbon Intensity of Ethanol and EPA 2022 Delivered Costs/gal.
$1.72/gal
$1.72/gal
$1.49/gal
Capital Invested:
Shell $1.6B
DOE $1.6B
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California’s long march toward vehicle electrification continues.
Battery EV
AT‐PZEV
“In an attempt to leapfrog Toyota, GM has devoted significantresources to the Chevy Volt. While the Volt holds promise, it iscurrently projected to be much more expensive than itsgasoline‐fueled peers and will likely need substantial reductionsin manufacturing cost in order to become commercially viable.”
White House Auto Task ForceGM Viability Determination
3.30.09
Battery EV
Fuel Cell EV
$8‐15B . . . and counting
Grid ConnectedPHEV
“. . . because these cars won't leave the showroom unlessconsumers buy them, the Recovery Act includes a new taxcredit of $7,500 to encourage Americans to plug one in athome.”
President Obama3.19.09
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0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
LCFS is strongly linked to CARB’s ZEV sales mandate.
Light Duty EER
CARB PHEV 2‐Cycle FE Test – compared to 2006 average car.
Charge Depleting PHEV5‐cycle
Charge Sustaining5‐cycle
124.1 gCO2e/MJ 2010 CA Grid3.0 EER
WSPA* study showed 5‐cycle fuel economy is appropriate real‐world measure ‐ not 2‐cycle lab.
CARB 2020 LD Fleet Market Share Assumptions – ZEV Technologies Low High
PHEV 4% 20%
BEV 1.3 6.7
FCEV 1% 3.7%
*Western States Petroleum Association
Not indexed to improving fleet average under Pavley and EPA rules .
41.37
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Vehicle depreciation is not comprehended in federal or state CO2 rulemaking.
VehicleRetail Price
5‐CycleMPG
Residual Percent
68k Miles 100k Miles
Prius $25,002 47 40% 29%
Camry L4 $21,291 25 41% 31%
Corolla $16,652 28 43% 32%
Miles
Based on Manheim Auction results. Vehicle sales tax and maintenance costs are not captured in this analysis.
Residual Value Performance at Mileage – 1/2009 – 3/2010
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Prius depreciates at a faster rate than Camry, sharply eroding the economicsof fuel savings.
$(3,000)
$(2,000)
$(1,000)
$‐
$1,000
$2,000
$3,000
Manheim Action results from Jan 2009 to March 2010. 8.5% discount factor represents new car bank rate.
14,000 28,000 42,000 55,000 68,000
Miles
Total
Residual Tax: ($1.72)GallonSaved
1,231 Gallons Saved
Residual Value Performance
Fuel Savings
Consumers Who Selected Prius Over Camry L4
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Compared to the Corolla, Prius deprecation destroys all fuel expense savings.
$(6,000)
$(5,000)
$(4,000)
$(3,000)
$(2,000)
$(1,000)
$‐
$1,000
$2,000
$3,000
14,000 28,000 42,000 55,000 68,000
Miles
Total
Residual Tax: ($5.37)GallonSaved
939 Gallons Saved
Residual Value Performance
Fuel Savings
Manheim auction results from Jan 2009 to March 2010. 8.5% discount factor represents new car bank rate.
Consumers Who Selected Prius Over Corolla
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The EV range and cost relationship with ICE has changed little in 100 years.
1913
Detroit Electric$2,60060 miles
Model T$650180 miles
“ A mileage radius farther than you will ever care to travel in a day.”
1/3 range4X cost
ICE vehicle rangeEV range
2010
Nissan Leaf$33,000
100 miles
Nissan Versa$12,000
400 miles
“We expect the battery to have a lifespan of about 5 years. Like any battery, time and age will lead to a corresponding decrease in range.”
1/4 range3X cost
EPA2‐CycleTest
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To expand American prosperity, policies must achieve the greatest good atthe lowest societal cost.
Summary
1. Antiquated 2‐cycle test procedures lead to massive off‐cycle CO2 emissions• Widening gap between promise and delivery on fleet emissions in the real‐world.• Policy makers will be accountable in barrels and tonnes.
2. LCFS exists within a national RFS2 framework• Fundamentally different objectives.• Fuels no longer fungible in CA – competition for low CO2 fuels in CA will test the prices
consumers can bear at the pump.• CA likely to lead nation on E15 blends with falling energy density per gallon for CA
consumers. Not revealed in label fuel economy reporting.
3. Once E15 is allowed, E85 will become a dead fuel• $ billions of FFV hardware wasted.• Future FFV credits available under CO2 rules will evaporate.
4. Inferior residual value performance is a hidden tax on consumers• Battery is source of inferior HEV performance in secondary market.• Hidden tax can eliminate all fuel expense savings derived from the technology.• In all likelihood, PHEVs and BEVs will experience heavy depreciation in a nation where
the average vehicle is 9.4 years old.
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