Strategic Issues Facing Transportation, Volume 5: Preparing State Transportation Agencies for an Uncertain Energy Future (2014)

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28 The central aim of this study is to consider how changes in transportation fuels and vehicle technologies might affect state departments of transportation in the coming decades. As a basis for developing plausible transportation energy use futures, the research team reviewed the current status and future prospects for both conventional and alternative fuels and vehicle technologies, including gasoline and diesel, natu- ral gas, biofuels, electricity, and hydrogen. While much of the effort focused on fuels and vehicle technologies in the con- text of the light-duty fleet—including passenger cars, pickup trucks, vans, and sport utility vehicles—the analysis also con- sidered medium- and heavy-duty vehicle applications. This chapter summarizes the examination of relevant fuels and vehicle technologies. Detailed discussions of the prospects and challenges for conventional fuels, natural gas, biofuels, electricity, and hydrogen within the light-duty fleet appear in Appendices A, B, C, D, and E, respectively, while Appendix F examines the potential utility of various alternative fuels and vehicle technologies for different medium- and heavy-duty vehicle applications, such as garbage trucks, transit buses, and long-haul freight trucks. This chapter begins by reviewing each of the fueling alterna- tives for light-duty vehicles in turn and discusses issues such as fuel production, distribution, refueling infrastructure, rel- evant vehicle technologies, cost and performance issues, and key challenges or barriers likely to influence future adoption. The chapter then offers a side-by-side comparison of the major strengths and limitations or challenges for the various fuels and vehicle technologies for light-duty applications. Finally, the chapter closes with a brief overview of the potential for alterna- tive fuels and advanced vehicle technologies for medium- and heavy-duty uses. 3.1 Conventional Fuels Petroleum-based fuels—gasoline and diesel—power nearly all vehicles on the road today, and many experts anticipate that petroleum will remain dominant for decades to come [see, for example, projections in the Energy Information Administra- tion’s (EIA) most recent Annual Energy Outlook (EIA 2013b)]. To begin with, recent advances in extraction technologies have led to upward revisions in global reserve estimates [Interna- tional Energy Agency (IEA) 2012], which may help to moder- ate the growth in oil prices. At the same time, more-stringent federal fuel economy standards through 2025 will enable vehi- cles to travel many more miles per gallon, effectively reducing per-mile energy costs for gasoline and diesel. Yet the global demand for oil continues to rise, leading to concerns about future prices and price volatility, and continued reliance on gasoline and diesel is also problematic with respect to green- house gas emissions and local air quality. Such issues have stimulated increased investment into a range of alternative fuels and vehicle technologies that, if successful, could begin to compete with and ultimately displace petroleum fuels. 3.1.1 Petroleum Production, Distribution, and Refueling The distribution and refueling networks for petroleum- based fuels are well established and mature. As an illustration, the American Petroleum Institute (API) reports that there are more than 150,000 gasoline and diesel stations across the country (API 2013). Estimated global oil reserves, as noted pre- viously, have increased due to improved extraction technolo- gies. Recent analysis from the IEA (2012) estimated that global proven reserves of oil, defined as the amount of petroleum that could be produced at current prices with existing technol- ogy, totaled about 1.7 trillion barrels in 2011. This provides a reserves-to-production ratio (the period that petroleum could be produced at current rates) of around 55 years. IEA also estimated that global technically recoverable reserves, or the amount of oil that could be produced with current technol- ogy irrespective of price, stood at around 5.9 trillion barrels in 2011, an amount that could support current rates of produc- tion for almost 200 years. C H A P T E R 3 Emerging Fuels and Vehicle Technologies

29 The United States has been a major beneficiary of the improved fossil-fuel extraction technologies. With the ability to develop significant tight oil and shale gas reserves, U.S. oil and gas production have increased significantly in the past few years, and forecasts suggest that the United States could be a net fossil-fuel exporter by 2030 (IEA 2012). U.S. consumers, how- ever, are still subject to global oil prices and shocks despite increasing domestic production (CBO 2012). The proven and technically recoverable reserve estimates from IEA (2012) include enhanced oil production from exist- ing wells, oil production from harder-to-reach locations such as ultra-deepwater and Arctic wells, oil from currently pro- ducing unconventional sources such as oil sands and light tight oil, and oil from undeveloped oil shale; the estimates do not, in contrast, include synthetic petroleum from coal- to-liquid and gas-to-liquid technologies, which could further bolster supplies. Many of these sources, however, are expected to be more expensive to exploit than current wells, and some pose major environmental concerns. Absent carbon capture and sequestration (CCS), for example, coal-to-liquid technol- ogy would produce far more GHG emissions than gasoline (Mashayekh et al. 2012). Given uncertainties about future demand and costs, EIA’s most recent oil cost projections for 2040 range from $71 to $228 per barrel for imported crude (EIA 2013b). Any significant shift away from petroleum, then, is unlikely to be caused by running out of oil. Rather, it would more likely be due to some combination of escalating oil prices and the emergence of cost-competitive alternative fuels, perhaps sup- ported by environmental regulations that favor less carbon- intensive fuels and technologies. 3.1.2 Conventional Vehicle Technologies Conventional vehicles reliant on internal combustion engines (ICEs)—including spark ignition for gasoline and compression ignition for diesel—are technologically mature. Still, there are notable opportunities for additional gains in efficiency, includ- ing improved aerodynamics, lightweight materials, advanced direct injection engines and transmission improvements, and widespread application of hybrid-electric drivetrains to capture and recycle power through regenerative braking (Kobayashi, Plotkin, and Ribeiro 2009; NRC 2013b). From the late 1980s to the early 2000s, federal CAFE stan- dards remained rather stagnant, and oil prices were relatively low. As a result, auto manufacturers found it more profitable to apply efficiency gains to increased vehicle size and power versus improved fuel economy (Knittel 2011). In just the past few years, however, the Obama administration has issued a series of far more stringent CAFE standards and harmonized GHG emissions standards for future years, resulting in a required average fuel economy of 35.5 miles per gallon (mpg) by 2016 and an average of 54.5 mpg by 2025 [U.S. Environ- mental Protection Agency (EPA) and U.S. National Highway Traffic Safety Administration (NHTSA) 2012]. To meet these more aggressive targets, auto manufacturers will likely need to apply many of the advanced technologies just mentioned. 3.1.3 Conventional Vehicle Cost and Performance As the long-standing incumbent technology, conventional petroleum-fueled vehicles provide the benchmark against which the cost and performance of competing fuels and vehi- cle technologies are judged. Conventional vehicles are gener- ally viewed as providing acceptable size, range, and power and reasonably affordable vehicle and fuel costs (except, perhaps, during oil price spikes). On the other hand, their emissions of greenhouse gases and local air pollutants—including non- methane volatile organic compounds (VOCs), carbon mon- oxide (CO), nitrogen oxides (NOx), particulate matter (PM), and sulfur oxides (SOx)—are viewed as problematic. Looking forward, the recent revisions to CAFE standards, by inducing the adoption of more advanced vehicle technolo- gies, are likely to increase the average cost of new vehicles. The incremental increase, however, is expected to be more than off- set from fuel-cost savings over the life of the vehicle (EPA and NHTSA 2012). The higher fuel economy standards should also result in significant reductions in greenhouse gases and air pollutants. On the whole, even with the modest increase in vehicle prices, more-stringent CAFE standards are likely to make it more difficult for alternative fuels and vehicle tech- no logies to compete effectively with petroleum. Still, some of the competing alternatives, such as natural gas and electric- ity, already offer the potential for significant fuel-cost savings, and it is also possible that increases in the price of oil could outpace vehicle fuel economy gains. The continued domi- nance of petroleum is thus not a certainty. 3.1.4 Future Market Prospects for Conventional Vehicles Absent the emergence of cost-competitive alternatives, petroleum-fueled vehicles—though almost certainly with much higher fuel economy than what is offered by most mod- els today—are likely to remain dominant in the market for the foreseeable future. However, should a cost-competitive alternative emerge—especially one that offers some combi- nation of reduced fuel costs and substantial environmental benefits—it is also plausible that petroleum could be largely displaced as a transportation fuel by the middle of the cen- tury. Key factors likely to influence petroleum’s market share through 2050 include the future trajectory of oil prices, prog- ress and potential breakthroughs in competing fuel and vehicle

30 technologies, and future regulations relating to climate and local air quality. 3.2 Natural Gas Two other fossil-based fuels considered for transportation applications are natural gas (NG) and liquid petroleum gas (LPG, also referred to as propane or autogas). Interest in nat- ural gas and LPG as transportation fuels—especially in the context of vehicle fleets that could share centrally installed refueling infrastructure—gained momentum in the United States in the 1990s and early 2000s but then entered a brief period of decline. The recent advent of horizontal drilling and hydraulic fracturing (or fracking), however, has greatly expanded domestic reserves of economically recoverable nat- ural gas and triggered sharp reductions in prices, stimulating renewed interest in natural gas as a transportation fuel. With a cheap and abundant domestic supply, natural gas offers the prospects of reduced energy costs for travel and greater energy independence. Additionally, natural gas appears to offer moderate GHG emission reduction benefits [Argonne National Laboratory (ANL) 2012], although the climate miti- gation advantages could be undermined by even modest leak- age of methane in the natural gas supply chain (Alvarez et al. 2012). To store natural gas in a vehicle, it can either be com- pressed (CNG) or chilled and liquefied (LNG). Light- and medium-duty vehicles generally rely on CNG, whereas heavy- duty vehicles can use natural gas in either form (Yacobucci 2005). Converting natural gas into methanol to power flex-fuel vehicles has also received attention. Research at the Massachu- setts Institute of Technology (MIT 2011) indicates that the energy equivalent of a gallon of gasoline in methanol can be produced for about $2.00 when natural gas costs $8 per million British thermal units, and the current price is well below that figure. Here, though, the focus is on CNG. 3.2.1 Natural Gas Production, Distribution, and Refueling Natural gas has many uses—as a feedstock for electric power generation, as a fuel for many industrial processes, as a raw input for some products, as a source of power and heat for commercial and residential applications, and as a transporta- tion fuel. As such, the pipeline distribution network for natu- ral gas in the United States is already quite extensive. With the success of fracking, U.S. reserves and production have been on the rise in recent years (IEA 2012). Between 2000 and 2010, according to EIA (2012), proven natural gas reserves in the United States rose by 71%. While concerns over the environ- mental effects of fracking remain, the United States should have access to an abundant and low-cost supply of natural gas if these concerns can be satisfactorily resolved. From the fuel-supply side, then, the main limitations for natural gas lie less with available supply and long-range dis- tribution, but rather stem from a lack of refueling stations. As of September 2013, there were just over 1,250 natural-gas stations across the country (EERE 2012b), and more than half of these were dedicated to fleet vehicles and were not publicly accessible. Expanding the network of refueling stations would require considerable investment. The National Petroleum Council (NPC) estimated that a dedicated CNG station costs about $1.5 million, while a modular CNG station connected to an existing gasoline station costs around $400,000 (NPC 2012). The cost of a home refueling appliance for natural gas is around $3,500, with another $1,000 to $2,000 for installation [Western Governors Association (WGA) 2008]. 3.2.2 CNG Vehicle Technology As of 2011, there were approximately 234 million light- duty vehicles in the U.S. fleet. Of these, about 66,000 relied on CNG, and most of these were fleet vehicles (EERE 2012b). The modest market penetration to date is mirrored by a pau- city of available models. First offered by original equipment manufacturers (OEMs) in the early 1990s, the number of light-duty CNG offerings peaked at 18 OEM models in 2002 and then entered a period of decline. In the latter part of the first decade of the 2000s, Honda, with its Civic GX, was the only auto manufacturer still offering a light-duty CNG. Spurred by the lower prices and increased supply of natural gas enabled by fracking, however, interest in CNG vehicles on the part of OEMs is once again on the rise. As of 2012, Chevrolet, Ford, GMC, Honda, and the Vehicle Production Group all offer light-duty CNG vehicles, and Ford also offers a bi-fueled truck capable of running on natural gas (EERE 2012b). CNG engines typically rely on spark ignition and are in many ways quite similar to a gasoline ICE. Configuring a vehicle for CNG thus requires only modest changes to the fuel lines and electronic control system. The most significant difference is the fuel tank, which must hold highly pressurized gas (Yacobucci 2008). Given the relatively minor differences, it is fairly straight- forward to convert a gasoline-fueled vehicle to run on natu- ral gas, and a number of conversion kits for both new and used vehicles are available on the market [Natural Gas Vehicle America (NGVA) 2011]. 3.2.3 CNG Vehicle Cost and Performance The current cost difference between a CNG vehicle and an otherwise similar conventionally fueled vehicle is signifi- cant, on the order of at least several thousand dollars. For example, the suggested retail price for Honda’s base-model 2013 Civic sedan starts at $18,165, while the Civic natural gas model from 2012 begins at $26,305 (Honda 2013). The

31 concerns associated with fracking, the potential for methane leakage in the natural gas supply chain, low availability of publicly accessible refueling infrastructure, cost and avail- ability of light-duty CNG models, performance and range of CNG vehicles, and perceived safety concerns (WGA 2008) associated with natural gas. CNG as a transportation fuel will also need to compete with other potential uses for natu- ral gas, such as power generation, industrial processes, and home heating. 3.3 Biofuels The displacement of petroleum with liquid fuels produced from biomass, commonly referred to as biofuels, promises several potential advantages. Estimates indicate that domesti- cally produced biofuels could further the objective of energy security by meeting roughly a third of U.S. transportation fuel needs (Parker et al. 2011). Also, depending on their feed- stocks and production methods, biofuels could help reduce greenhouse gas emissions from the transportation sector. Biofuels can be classified by their technological and eco- nomic maturity. Widely used first-generation biofuels include ethanol from the fermentation of corn, sugar cane, and other sugary or starchy food crops along with biodiesel derived from oil seeds such as soy and canola through a chemical process known as transesterification. (Waste fats and recycled cooking oil can also be used to produce biodiesel, but these feedstocks are more limited in quantity.) Unlike other alternative fuels such as natural gas and hydrogen, ethanol and biodiesel are not commonly used in their pure form but rather are blended with petroleum-based gasoline or diesel. Ethanol is routinely blended with gasoline in mixes of up to 10% ethanol (E10) in the United States, and can be used in blends of up to 85% (E85) in specially modified flex-fuel vehicles (FFVs). Biodiesel is typically blended in mixes of up to 20% (BD20). There are a variety of potential feedstocks and produc- tion pathways, most still in the earlier stages of research and development, for advanced second-generation biofuels (NRC 2009, NPC 2012, NRC 2013b). One option is to produce cellu- losic ethanol or butanol through biochemical processes using wood, grasses, or crop wastes (e.g., corn stover) as feedstocks. Alternatively, thermochemical processes—such as gasification followed by Fischer-Tropsch catalytic processing, gasification to produce methanol followed by the conversion of methanol to gasoline, or pyrolysis followed by hydroprocessing—can be used with biomass feedstocks to create drop-in gasoline and diesel replacements (often referred to as green gasoline and green or renewable diesel) that work well with existing vehicles and distribution infrastructure without the need for blending. Algae, which offers the advantage of requiring less land and water to produce, is also being explored as a potential feedstock for biofuels. cost of converting a conventional vehicle to run on natural gas is even higher, falling in the range of $12,000 to $18,000 per estimates from NGVA (2011). The high cost of CNG vehicles stems in part from low production volume, but also from the expense associated with high-pressure fuel tanks. Once purchased, though, CNG vehicles offer the poten- tial for significant fuel-cost savings. On an energy-equivalent basis, CNG vehicles offer roughly the same fuel economy as a gasoline-fueled ICE, yet CNG is currently much less expen- sive. As of July 2013, for example, the average U.S. retail price for gasoline was $3.65 per gallon, while the average retail price for CNG was $2.14 per gallon of gasoline equivalent (EERE 2013c). Looking forward, the most recent reference-case pro- jections from EIA (2013b) anticipate that the cost of CNG will increase slightly faster than the cost of gasoline through 2040, but not by enough to offset the differential cost advantage of CNG. Thus natural gas should remain relatively attractive as a transportation fuel. Additional benefits of CNG include a modest reduction in per-mile emissions of greenhouse gases and some local air pollutants. Compared to gasoline vehicles of comparable fuel efficiency, for example, CNG vehicles appear to offer about a 14% reduction in well-to-wheel carbon dioxide emissions (ANL 2012). A major unresolved concern, however, is that natural gas vehicles or upstream distribution infrastructure could leak methane, itself a greenhouse gas. Methane has a 34-times greater climate-warming impact than carbon diox- ide, so even modest levels of leakage in the natural gas supply chain could undermine the life-cycle GHG benefits of CNG in comparison to petroleum (Alvarez et al. 2012). Another limitation for natural gas as a transportation fuel, beyond the obvious issue of vehicle cost, is that CNG engines tend to generate less power for the same size engine in comparison to a gasoline ICE. This has the effect of limiting acceleration and hill-climbing power. Additionally, the energy density of CNG is less than that of gasoline, resulting in relatively lim- ited driving range (200 miles or less) for many CNG vehicles (Yacobucci 2008). 3.2.4 Future Market Prospects for CNG If natural gas retains its current cost advantage in rela- tion to petroleum and the premium cost of CNG vehicles can be reduced, the future for natural gas as a transportation fuel could be promising. Renewed effort on the part of auto manufacturers to offer CNG models would seem to reflect this possibility. On the other hand, there are significant chal- lenges that would need to be overcome in order for natural gas to gain significant market share as a transportation fuel. Some of the critical issues likely to influence the market suc- cess for compressed natural gas are unresolved environmental

32 In terms of refueling, all stations can dispense ethanol in blends up to E10 or E15, but separate storage and dispensers are needed for E85. The usage of E85 is currently concentrated in the Midwest, where the majority of American corn is pro- duced. The availability of E85 fueling stations in the United States remains limited to date, with about 2,300 stations that are predominately concentrated in the Midwest (EERE 2013d). For E85 to be used in much greater volume, the availability of E85 stations will need to be greatly expanded. 3.3.2 Biofuel Vehicle Technologies Ethanol can be efficiently combusted in older conventional vehicles at blends of up to E10 and, for newer vehicles, up to E15. FFVs sold in the United States, in contrast, are able to use blends that range from 100% gasoline to 85% ethanol (EERE 2013a); blends above E85 are not used because higher ethanol concentrations can make it difficult for vehicles to start in cold weather. FFVs include a sensor that automati- cally detects the amount of ethanol in the fuel, and the vehicle computer then modifies the fuel injection and spark timing as needed. The incremental vehicle cost is modest, and auto- makers often offer FFVs at the same prices as comparable conventional vehicles. U.S. sales of FFVs to date have been impressive, though this may reflect the concerted marketing efforts of auto manufac- turers motivated by the opportunity to gain credits under the CAFE mandate rather than a response to strong consumer demand for the ability to fuel with E85. Between 1998 and 2009, the number of FFVs in the United States increased from a very small number to nearly 10 million (EIA 2013b). How- ever, available estimates indicate that only about 860,000 of these are fueled primarily with E85 (EIA 2013a). 3.3.3 Biofuel Vehicle Cost and Performance In comparison to other alternative fuels, an important advantage of biofuels is that the additional vehicle costs are either minimal or non-existent. The additional production cost for an FFV is on the order of $100 in most cases (Corts 2010), while drop-in gasoline or diesel can be combusted in conventional vehicles without modification. Looking for- ward, both FFVs and conventional vehicles will be equipped with advanced technologies to meet more-stringent CAFE standards, so vehicle costs could rise by a few thousand dol- lars. Yet this would also translate to reduced fuel costs based on greater fuel economy. Though the premium cost for FFVs is negligible, current biofuels are generally more expensive than their petroleum- based counterparts on a gallon of gasoline equivalent (gge) basis. In October of 2010, for example, the national average price of gasoline was $2.78 per gallon, while E85 sold for $3.45 The remainder of this section briefly highlights recent developments and future prospects for liquid biofuels; more detailed discussion is available in Appendix C. 3.3.1 Biofuel Production, Distribution, and Refueling Ethanol has benefited from a long history of federal sub- sidies. Additionally, the more recent federal renewable fuel standard (RFS2), along with similar regulations in some states, mandates increasing production and sale of several types of biofuels. As a result of these federal and state incentives and mandates, the production and consumption of biofuels in this country have accelerated rapidly in recent decades. Between 2000 and 2012, annual consumption of ethanol in the United States rose from about 1.7 billion gallons to about 12.9 bil- lion gallons (EIA 2013c), with the vast majority vended as E10 rather than E85. As of 2011, ethanol supplied about 10% by volume of total demand for gasoline in the United States (NRC 2013b). Most ethanol consumed in the United States is currently derived from corn, a rather inefficient feedstock that yields only modest greenhouse gas reduction benefits at best (Mullins, Griffin, and Mathews 2010; ANL 2012). A possible near-term alternative to corn-based ethanol is cellulosic ethanol, which is made from breaking down the woody fibers in trees, grasses, and crop wastes. Several tech- nical challenges have slowed the ability to produce cellulosic ethanol at commercial scales. If these can be overcome, how- ever, the technology promises cheaper biofuels with more substantial reductions in life-cycle GHG emissions in com- parison to corn-based ethanol. Over the longer term, the production of drop-in gasoline and diesel replacements via thermochemical processes could offer the environmental ben- efits of cellulosic ethanol without the need for blending, dedi- cated pipelines, or specialized vehicle technology (NPC 2012, NRC 2013b). Researchers are also examining the use of algae as a feedstock for biofuel production over the longer term that would require less land and water to produce (Williams et al. 2009, Parker et al. 2011). Once refined, biofuels must be transported to local distri- bution centers. As a general rule, liquid fuels can be trans- ported most efficiently by pipelines. Ethanol distribution by pipeline, however, poses some challenges with respect to the absorption of water and other impurities, which can then damage engines and degrade performance. For this reason, the vast majority of ethanol is transported instead by rail, truck, or barge. Moving biodiesel via pipeline is also problem- atic because it can stick to pipeline walls and then contami- nate other fuels that flow through the pipeline subsequently (NPC 2012). In contrast, drop-in green gasoline and diesel, if successful, could rely on the same transport pipelines as their petroleum-based counterparts.

33 displace in the range of 20% to 30% of petroleum-based fuels [see, for example, Perlack et al. 2005, West et al. 2009, U.S. Department of Energy (DOE) 2011]. Critical factors that will influence the penetration of bio- fuels include available land and effects on food prices; invest- ments in blending and storage capacity, transport capacity, and refueling infrastructure for first-generation biofuels; the pace of technical progress in the development of cellulosic ethanol and drop-in gasoline and diesel products; fuel price volatility; and technical progress on other competing alterna- tive fuels and vehicle technologies. 3.4 Electricity Electric vehicles (EVs), as defined in this report, can be partially or fully powered by batteries charged from an off- board source of electricity (e.g., grid power). Two possible EV configurations are now beginning to enter the marketplace: battery electric vehicles (BEVs), such as the Nissan Leaf and Tesla Model S, which only operate on electricity; and plug- in hybrid-electric vehicles (PHEVs), such as the Chevy Volt, the Toyota Prius plug-in model, the Ford C-Max Energi and Fusion Energi, and the Honda plug-in Accord, which accom- modate a more limited range in all-electric mode but also include a gas tank and an internal combustion engine to power the vehicle or recharge the batteries. EVs face several steep obstacles, such as higher vehicle prices and, for BEVs especially, relatively limited driving range and long recharging times. Yet they also promise many compel- ling benefits, including greater energy independence based on domestically produced electricity and much lower energy costs for travel. Depending on how and where the electric power is generated, a significant shift from petroleum to EVs could also provide for considerable reductions in greenhouse gas emis- sions and much-improved urban air quality. 3.4.1 Electricity Production, Distribution, and Refueling Annual electric power production in the United States climbed steadily over the past century and through the begin- ning of this century, peaking at just over 4,000 terawatt hours in 2007 and then declining modestly over the past several years. As of 2012, the most significant source of electric power production, accounting for 38.5% of the nation’s total, is coal combustion, though the share of coal-fired power has been declining in recent decades. Other major sources of power are natural gas with 29.2%, nuclear with 19.7%, and large hydro- electric facilities with 7.0%. Other renewable energy sources, such as wind, solar, and geothermal, have been expanding rap- idly but still account for just 4.8% of power on the U.S. grid (EIA 2013c). per gge (EERE 2010). In January of 2012, the average cost of gasoline had risen to $3.76 per gallon, while E85 was selling for $4.96 per gge (EERE 2012a). Biodiesel also tends to be more expensive than conventional diesel, although the margin is much smaller than for E85 and gasoline. In January of 2012, the national average price of diesel was $3.86, while BD20 sold for $4.02 per gallon of diesel equivalent (EERE 2012a). An important performance-related challenge for ethanol is that it contains about a third less energy on a per-gallon basis than gasoline, and this has the effect of reducing the range between refueling stops for an FFV operating on E85 rather than gasoline. Lower range, higher fuel costs, and lim- ited availability of E85 stations have all contributed to tepid demand for E85 to date. In comparison to gasoline, biofuels may offer potentially significant benefits for reducing greenhouse gas emissions, though the effects depend on the feedstock and production process. For corn-based ethanol, the GHG reductions are modest at best, and the fuel may even perform more poorly than gasoline once direct and indirect land use effects are taken into account. With cellulosic ethanol, in contrast, life- cycle GHG reductions could be reduced by 50% or more in comparison to gasoline, though again there are uncertainties relating to land use effects (Delucchi 2006, Farrell et al. 2006, Searchinger et al. 2008, Williams et al. 2009, ANL 2012). For drop-in gasoline, it may actually be possible to achieve nega- tive life-cycle GHG emissions through the use of carbon cap- ture and sequestration during the production process (NRC 2013b). With respect to local air pollutants, corn-based ethanol may perform worse than gasoline for volatile organic compounds, nitrogen oxides, and fine particulate matter (ANL 2012). Future reductions in air pollutants from biofuels could be achieved, however, as biofuel feedstocks and production processes are improved and rely on electricity with fewer emissions. 3.3.4 Future Market Prospects for Biofuels Over the near term at least, despite its relatively higher cost in relation to gasoline, ethanol should continue to gain market share based on the mandates embedded in RFS2 and similar state regulations. In its most recent Annual Energy Outlook, for example, EIA (2013b) projects that the consumption of E85 will increase from around 117 million gallons in 2012 to about 2 billion gallons in the 2040 reference case. Over the longer term, however, the production of biofuels may face practi- cal limitations based on the amount of arable land available for planting and harvesting feedstocks. Already there are concerns that the diversion of corn for fuel production is adversely affecting food prices, creating valid equity concerns for poorer nations around the world. Given such constraints, many studies have suggested that biofuels could ultimately

34 One convenient advantage of EVs is that they can be charged at home, using either an existing 120-volt outlet (referred to as Level 1 charging) or an electric vehicle charging appliance on a 240-volt circuit (described as Level 2 charging). The main challenge, however, is that recharging the battery pack is slow. With Level 1 charging, it can take 16 hours or more to fully charge the battery pack for a typical BEV; even with Level 2, it can take several hours. While this may be acceptable for charg- ing a vehicle at home or at work, it is not a viable option for recharging during the middle of a long-distance trip or while running a quick errand (EERE 2011). Further compounding this challenge, most current BEV models only accommodate a relatively limited range, on the order of 100 miles or less, between recharging. The potential need to recharge away from home has led to considerable public and private interest and investment in publicly accessible fast-charging stations for EVs, where “fast” is defined (per EERE 2011) as 30 minutes or fewer. While the need to wait 30 minutes for a battery charge is still likely to deter many prospective EV owners, it is still preferable to a recharge time of several hours. Level 3 charging, which pro- vides an electric load (the product of voltage and amperage) of 14.4 kilowatt (kW) or higher, is currently the main option available for fast recharging. Level 3 stations, which can cost in excess of $50,000 (NPC 2012), typically require commer- cial or industrial electrical service and may not, based on the load and the capacity of the battery pack to be charged, actu- ally achieve the 30-minute goal (EERE 2011). The concept of swapping a fully charged battery for a depleted battery, a pro- cess that can be executed in under two minutes, has also been explored. Battery swapping was developed by a firm that sub- sequently declared bankruptcy; more recently, Tesla Motors announced a plan to provide battery-swapping services for its EV customers (Tesla 2013). Owing to considerable public subsidization to date, including stimulus funding from the American Recovery and Reinvest- ment Act, the network of publicly accessible charging stations in the United States has grown rapidly. As of September 2013, there were a little more than 19,000 charging stations in the United States (EERE 2013b). About 1,500 of these are located in California, some of which are residual from earlier efforts to support the state’s zero emissions vehicle (ZEV) mandate in the 1990s and early 2000s. 3.4.2 Electric Vehicle Technology Following failed efforts to develop and successfully market EVs in the 1990s, the underlying technology has progressed significantly. Several BEV and PHEV models, such as the Tesla Roadster and Model S, the Nissan Leaf, the Chevy Volt, the Toyota Prius plug-in, and the Ford C-Max Energi, have already been released, and many more are anticipated in the For a variety of environmental reasons—climate change, air quality, water quality, land degradation, and others—there is considerable interest in shifting away from coal to cleaner sources of power generation, a process that is already underway. For newly installed capacity, a number of alternatives, such as natural gas and several forms of renewable energy, can com- pete favorably with coal in terms of levelized cost—the cost of producing power accounting for initial capital costs, feedstock costs, expected operational capacity, and operating costs (EIA 2013b). The main reason for coal’s continuing cost advantages, setting aside the fact that power producers are not charged for many of the harmful emissions associated with coal, is that there is a large base of existing coal-power production capacity for which the capital investments have already been made. Looking forward, there are significant opportunities for shifting to greater reliance on less-polluting power sources on the grid, including nuclear, solar, wind, small-scale hydro and wave, geothermal, and biomass. Natural gas is already much cleaner than coal, but carbon capture and sequestra- tion is receiving significant attention as a possible means for capturing the greenhouse gas emissions associated with both of these fossil-fuel options [National Energy Technology Laboratory (NETL) 2013]. All of these possibilities, however, still face one or more hurdles that will need to be overcome in order to accommodate broader adoption (NRC 2010a, Crane et al. 2011). These include limitations in the available resource base (for current geothermal technology or for new conventional hydropower projects), competition for resources with other possible applications (for biomass), intermittency and the related challenges of balancing supply and demand (for wind and solar), safety and security concerns leading to greater public acceptance challenges (for nuclear), and uncer- tainties regarding the technical and economic feasibility of CCS (for coal and natural gas). Still, the general trajectory is toward greater use of cleaner or renewable power, with the main open questions relating to the timing and specific mix of technologies deployed. Electricity is distributed across the nation via the electrical grid, which includes long-range transmission lines from power plants to major load centers (e.g., cities) along with local dis- tribution facilities from utilities to industrial, commercial, and residential clients. While existing long-range transition capac- ity is not viewed as imposing significant constraints on the adoption of EVs, new transmission capacity could be needed to accommodate an increase in renewable energy on the grid given that the necessary resources—such as wind on the Great Plains—are often located far from population centers (Kintner-Meyer, Schneider, and Platt 2007). In contrast, many local distribution networks will require upgrades—particularly for local transformers serving residential households—to accommodate demand patterns imposed by EV charging (May and Johnson 2011).

35 the next several decades (Plotkin and Singh 2009, Michalek et al. 2011). While EVs currently cost much more than conventional vehicles, they also offer outstanding performance in terms of the energy cost of travel. Additionally, because BEVs are mechanically simpler than conventional vehicles, routine maintenance costs may be lower as well. Precise estimates of the fuel-cost benefits of EVs are contingent on the rela- tive price of electricity and gasoline along with the respective fuel economy of EVs and gasoline-fueled vehicles. Currently, though, the per-mile cost of electricity for driving an EV is only about a quarter to a third of the per-mile cost of gasoline for an average conventional vehicle [see, e.g., cost curves from Idaho National Laboratories (INL), undated]. Additionally, the cost of electric power is expected to increase much less than the cost of petroleum over the coming decades (EIA 2013b). As noted by Michalek et al. (2011), however, the cost of gasoline would need to increase to well above $4 per gallon on a sustained basis for the fuel-cost savings of EVs to pay back the vehicle cost premium at current battery prices. Turning to other performance characteristics, both BEVs and PHEVs offer impressive power and torque. As noted pre- viously, however, BEVs face important limitations in driving range, an issue that is compounded by the relative paucity of public charging stations and the long time required to recharge the battery pack. PHEVs, with their ability to run on gasoline when the battery pack becomes depleted, are not affected by this issue. For GHG emissions, the benefits of EVs depend on the means of electric power production (for PHEVs, another important factor is the amount of miles powered by electric- ity versus petroleum). In some regions of the country that depend heavily on coal combustion, GHG emissions for an EV can be worse than for a conventional vehicle fueled by gasoline. For the U.S. grid mix as a whole, however, EVs do produce notably fewer well-to-wheels GHG emissions than a typical ICE vehicle, and the advantage is even more pro- nounced in states like California that derive a greater than average share of the power from renewables and lower- carbon sources (ANL 2012). Note, however, that battery pro- duction is quite carbon-intensive, partially offsetting some of the GHG reduction benefits of EVs (Michalek et al. 2011, Mashayekh et al. 2012). If all electric power could be pro- duced renewably, then the full fuel-cycle emissions for BEVs could be driven close to zero. As with greenhouse gases, the implications of EVs for local air pollutants likewise depend on the means of power produc- tion. With the current mix of power on the grid, EVs perform better for many air pollutants but much worse for particulate matter and sulfur oxides. All of the well-to-wheels emissions for BEVs, and for PHEVs in all-electric mode, however, occur at the power production facility; driving a vehicle in electric near term. Current models still face limitations, including a significant premium cost along with relatively constrained driving range in all-electric mode. Most BEV models that have already been released or are planned for the near future, for example, are limited to around 100 miles between charges. The high cost associated with BEVs and PHEVs stems in large part from the expense of batteries. Relatively recent bat- tery cost estimates range from $500 to $800 per kilowatt hour (kWh) (NPC 2012, NRC 2013b), though costs continue to decline. For a PHEV with a 16-kWh battery pack, this translates into a premium of $8,000 to $13,000. To compete effectively with conventional vehicle technologies in future years, signifi- cant further reductions in battery cost will almost certainly be needed. Other areas for improvement include safety and abuse tolerance, usable energy storage, peak power, and cycle and calendar life. These attributes vary with different potential battery chemistries; to date, lithium-ion batteries appear to offer the best combination of attributes for BEV and PHEV applications, though improved chemistries could emerge. For PHEVs, the integration of electric power with the inter- nal combustion engine involves additional technical consid- erations. These include power blending strategies as well as battery charging and discharging modes. One important design choice is how to employ the power generated by the ICE. In the Chevy Volt, power from the ICE is used to charge the battery pack, which in turn powers the drivetrain. The other alterna- tive, essentially an extension of the approach employed in most conventional hybrids, is to blend output from the battery and ICE in powering the drivetrain. The Toyota Prius plug-in pro- vides an example of this latter strategy. 3.4.3 Electric Vehicle Cost and Performance The high cost of EVs, stemming in turn from the high cost of batteries, stands as a major impediment to broader adoption. To offer a few illustrations, the Prius plug-in has a premium of almost $8,000 over the standard third- generation Prius hybrid-electric vehicle (HEV) (Toyota 2013a, b), the Chevy Volt has a premium of almost $17,000 over the Chevy Cruze (GM, undated a, b), and the Nissan Leaf has a premium of almost $15,000 over the Nissan Versa (Nissan, undated a, b). To help offset the added cost associated with EVs, the federal government currently offers tax cred- its of up to $7,500, depending on the battery capacity of the model purchased, and some states offer additional subsidies. Given mounting pressure to trim federal and state budgets, however, it is unclear whether the public sector will be able to keep offering such financial support over the longer term. Absent public subsidies, reductions in the cost premium for EVs, largely a reflection of battery costs, will be important for broader adoption of EVs. Many analysts expect, though, that EVs will continue to require at least a moderate premium for

36 as steam reformation of natural gas or the gasification of coal or biomass, and electrolysis, in which electricity is used to split water molecules into separate streams of hydrogen and oxygen. Looking out even further, clean hydrogen could be generated via thermochemical water splitting with high-temperature heat from nuclear or concentrated solar power, via biologi- cal or photoelectrical water splitting, or via biomass pyrolysis, although these technologies face greater economic challenges (Ogden et al. 2011, NPC 2012). Currently, the methods of pro- ducing hydrogen involving lower greenhouse gas emissions also tend to be more costly (NRC 2013b). Both natural gas reformation and electrolysis can be imple- mented in large central plants or in smaller installations at a refueling site. Large central plants allow for greater economies of scale in the production of hydrogen, while smaller instal- lations obviate the need for transport. For centrally produced hydrogen, options for transporting the fuel to distribution centers or refueling stations include gaseous hydrogen tube trailers, liquid hydrogen tank trailers, and gaseous hydrogen pipelines. Transporting via truck trailers is likely to be the least expensive option in the early stages of adoption, while a pipe- line distribution network would be far more cost-efficient for handling higher volumes of hydrogen. Pipelines for hydro- gen, however, must rely on alloy steel to avoid embrittlement, along with special seals given the small size of hydrogen mole- cules, and the estimated costs range from $1 million to $1.5 mil- lion per mile in urban settings. One study concluded that transporting hydrogen via pipeline would only become cost- effective once FCVs had achieved a 25% market share among the light-duty fleet (Washington State DOT 2009). As with electric and natural gas vehicles, home refueling with hydrogen is a realistic possibility at some point. Options might include a tri-generation appliance that uses natural gas to produce some combination of heat, electric power, and hydrogen fuel, or a home electrolysis device. Over the foresee- able future, however, such technology is likely to be priced out of the reach of most households, necessitating the consider- ation of publicly accessible hydrogen refueling infrastructure to enable a large-scale shift to hydrogen as a transportation fuel (Ogden et al. 2011). Providing such infrastructure will require a major investment. One recent study (NPC 2012) esti- mated that the cost of building a hydrogen refueling station falls in the range of $1 million to $7 million, depending on size and configuration. Nicholas and Ogden (2006) have cal- culated that the number of refueling stations required to sup- port large-scale adoption of FCVs falls in the range of 4,500 to 11,000; at present there are fewer than 80 hydrogen stations across the country (Fuel Cells 2000, 2012). The question of hydrogen refueling infrastructure is often described as a “chicken-and-egg” problem. Without a signifi- cant number of FCV owners, fuel providers will be reluctant to invest much in hydrogen refueling infrastructure; at the mode produces no emissions. Even with the current grid mix, then, EVs could lead to improved air quality in many urban areas, positively affecting human health. 3.4.4 Future Market Prospects for Electric Vehicles Assuming that battery costs can be reduced and certain performance characteristics improved, then the market potential for EVs within the light-duty fleet is unconstrained. Important factors that are likely to influence the overall com- mercial success of EVs, the relative market shares for BEVs versus PHEVs, and the social benefits afforded by EVs include vehicle and battery costs, battery life cycle and replacement needs, battery performance and range limitations, availability of publicly accessible fast recharging stations, impacts on the power grid, shifts to more renewable electric power sources, the price of conventional fuels, and the pace of progress for competing alternative fuels and vehicle technologies. 3.5 Hydrogen While hydrogen has been used for various commercial applications for over a century, serious interest in hydrogen as a transportation fuel began with the first hydrogen fuel-cell bus demonstration by Ballard Power Systems in 1993 [Office of Fossil Energy (OFE) 2000]. Hydrogen can alternatively be combusted in an ICE, either in pure form or mixed with natural gas, but fuel cells provide for more efficient use of the embodied energy in hydrogen. A number of automakers have now developed demonstration hydrogen fuel-cell vehicles (HFCVs, or FCVs), and early commercialization is expected around 2015 (NRC 2013b). Because there are several methods for producing hydro- gen that rely on domestically abundant resources, hydrogen promises important energy-security benefits. It is also likely that FCVs would reduce the energy cost of driving in rela- tion to conventional ICE vehicles. Finally, depending on the hydrogen feedstocks, FCVs could support major reductions in greenhouse gas emissions and local air pollutants (NRC 2013b). 3.5.1 Hydrogen Production, Distribution, and Refueling While a significant quantity of hydrogen is already produced in the United States each year, most of this is already used for other applications. To support a major shift to hydrogen as a transportation fuel, the current volume of U.S. hydrogen production would need to be expanded by nearly an order of magnitude (Joseck 2012). Near-term options for producing hydrogen include electrochemical conversion processes, such

37 technology of choice for at least the near term. Estimates for the cost of mass-produced compression tanks based on current technology fall in the range of $12 to $19 per kWh. This translates to about $2,800 for a tank able to hold enough hydrogen to provide a compact FCV with a range of 300 miles (NRC 2013a). 3.5.3 Hydrogen Vehicle Cost and Performance Most FCVs to date have only been produced as demonstra- tion vehicles, making it difficult to estimate their costs. It is safe to assume, however, that the premium cost for an FCV will be significant in the near term but then decline over time with increased production volume. Ogden et al. (2011), for example, provide a series of future FCV cost estimates based on a rapid market adoption scenario as follows: 5,000 FCVs sold by 2014 at a cost of $140,000 per vehicle, over 50,000 sold by 2015 at a cost of $75,000, over 300,000 sold by 2017 at a cost of $50,000, and two million sold by 2020 at a cost of $30,000. In this same projection, the cost premium for an FCV ultimately declines and levels out in the 2025 time frame at about $3,600 more than the cost of a conventional vehicle. While FCVs may demand a price premium, they are also expected to provide at least moderate fuel-cost savings. The energy content in a gallon of gasoline is about the same as the energy in a kilogram of hydrogen, yet the fuel economy of an FCV, in miles per kilogram, is about twice the fuel economy for a conventional vehicle, and about 35% to 65% higher than for an HEV vehicle. More-stringent CAFE standards will result in greater fuel economy for conventional vehicles, but FCVs are expected to achieve much higher fuel economy in future years as well. An NRC (2013b) study, for example, has esti- mated that the average on-road fuel economy for a mid-sized passenger FCV in 2050 could fall in the range of about 140 to 170 miles per gallon of gasoline equivalent. Given the pro- portionally higher fuel economy for FCVs, hydrogen priced in the range of $4 per kilogram—an estimate provided in the NRC study for the 2050 time frame assuming a high level of adoption of FCVs—should be able to compete with gasoline priced at $2 to $3 per gallon. Gasoline prices are already above this level, and many (for example, see EIA 2013b) anticipate that gasoline will become more expensive in future decades. Accordingly, FCVs should compare favorably with conven- tional vehicles in terms of per-mile fuel costs, and they could allow for significant savings. Beyond the question of fuel-cell durability mentioned earlier, current demonstration FCVs do not appear to suf- fer any particular performance challenges. Speed and power are acceptable, and vehicle range—at least with compressed hydrogen storage at 10,000 psi—appears to rival that of con- ventional vehicles. Refueling time is likewise not an issue. same time, however, prospective customers will be less willing to purchase FCVs unless the network of refueling stations is sufficiently developed. Many thus envision that some form of public support will be necessary to jump-start a network of hydrogen fueling stations. Mobile refuelers have also been explored as an option for serving early FCV adopters until more extensive refueling infrastructure becomes available [California Energy Commission (CEC) 2004]. 3.5.2 Hydrogen Vehicle Technology The fuel cell in an FCV is used to convert hydrogen into electricity, producing only water as a by-product. The elec- tricity then powers an electric motor, which in turn propels the vehicle. Key vehicle components include the hydrogen storage tank, the fuel-cell stack, the electric motor, the power controller, and batteries for hybrid operation and cold-start support. Among these, hydrogen storage and the fuel cell present the greatest research and development challenges. Fuel-cell technology has advanced considerably in recent years, providing acceptable size, weight, driving performance, and tolerance for low-temperature operations. There are, though, some remaining challenges—most notably with respect to durability and cost. Current proton exchange membrane (PEM) fuel-cell systems have a lifetime of about 2,500 hours in on-road tests, well short of the 5,000-hour life viewed as a target for commercialization. PEM fuel-cell durability is continuing to increase, however, and laboratory tests have demonstrated lifetimes of more than 7,000 hours (NRC 2013a). The cost of fuel-cell technology, often measured in dollars per kilowatt, is currently quite high, owing in part to low production volumes. The U.S. DOE, however, has esti- mated that if current fuel-cell configurations were produced at greater scale—on the order of 500,000 units per year— the cost would fall to about $49 per kW (NRC 2013a). This would translate to about $4,000 for an 80-kW system, which is roughly twice the cost of a comparable internal combustion engine. The target set by DOE is $30 per kW, which automakers hope to achieve via improved materials, reduced use of plati- num, and increased power density (Ogden et al. 2011). At $30 per kW, fuel cells would still be more expensive than ICEs, but the differential would be more modest. Determining the most cost-effective way to store enough hydrogen on an FCV to accommodate a 300-mile range is another target for further research and development. The main options include high-pressure cylinder tanks with hydro- gen stored at either 5,000 or 10,000 pounds per square inch (psi), super-cooled liquid hydrogen tanks, or the use of metal hydrides or other materials to absorb hydrogen under pres- sure. Absent breakthroughs in the latter two technologies, most automakers have opted for compressed hydrogen in their demonstration vehicles, which is expected to be the

38 significant numbers by 2020 and together account for virtu- ally all light-duty vehicle sales by 2040. The ultimate success and attendant benefits of a shift to hydrogen fuel are likely to hinge on such issues as hydrogen costs and feedstocks, fuel- cell cost and durability, onboard hydrogen storage cost, avail- ability of refueling infrastructure, and technical progress for competing fuels and vehicle technologies. 3.6 Summary of Prospects for Light-Duty Vehicles Drawing on the previous discussion as well as the infor- mation presented in Appendices A, B, C, D, and E, now is offered a qualitative summary of future prospects, challenges, and potential market share for conventional and alterna- tive fuels and vehicle technologies in the light-duty fleet in future decades. Table 3.1 illustrates vehicle cost, per-mile fuel cost, and the well-to-wheels emissions of GHGs in the 2050 time frame versus a typical gasoline-fueled ICE in today’s fleet. Each cell in the table has a series of symbols that con- sists of two downward arrows followed by a dot followed by two upward arrows. These are intended to reflect the range between a significant decrease with the left-most downward arrow and a significant increase with the right-most upward arrow, with the dot in the center representing the baseline for a current conventionally fueled light-duty vehicle. This setup enables comparison of the potential attributes of future fuels and vehicle technologies to the current fleet of petroleum- fueled light-duty vehicles, as well as to each other, to highlight their prospective strengths and limitations. Symbols shown in black within each cell designate the range of outcomes judged to be reasonably likely based on the evidence reviewed by the research team, while symbols in light gray are viewed as less plausible. So, for example, the Vehicle Cost column of the first row in the table shows that the future price of a conventional ICE or HEV appears likely to be the same or moderately more, in real terms, than the cost of a conventional vehicle today, due to the inclusion of Turning to environmental performance considerations, the potential for reducing GHG emissions depends on the feed- stocks and processes for producing hydrogen. With either natu- ral gas reformation or electrolysis using the current mix of grid power, FCVs could yield GHG reductions on the order of 15% to 25% in comparison to a typical gasoline-fueled ICE (ANL 2012). Looking at the longer term, greater reliance on renewable feedstocks, such as wind or solar power, or the use of carbon capture and sequestration with fossil feedstocks, could support far greater GHG reductions (Ogden et al. 2011, NRC 2013b). Likewise, the implications of a shift to FCVs for local air pollutants depend on how the hydrogen is produced. In par- ticular, emissions of fine particulate matter appear to be sen- sitive to the method of hydrogen production (Sun, Ogden, and Delucchi 2010; ANL 2012). Several production pathways, in fact, could lead to greater well-to-wheels particulate mat- ter emissions in comparison to gasoline-fueled vehicles. The increase would be most significant if the hydrogen is pro- duced via electrolysis using the current U.S. grid mix (Ogden et al. 2011) given the degree to which it relies on coal combus- tion, although increased substitution of natural gas or other generation for coal would lessen this effect. Additionally, many power plants are located away from dense settlements, mitigating the human health impacts to some extent. 3.5.4 Future Market Prospects for Hydrogen Hydrogen as a transportation fuel offers great promise but also faces steep challenges. Unsurprisingly then, projections for future market share vary considerably. In its base-case projec- tions from the most recent Annual Energy Outlook, for exam- ple, EIA (2013b) anticipates that cumulative FCV sales will only reach 70,000 by 2040. Greene et al. (2008), in contrast, explore three scenarios in which FCV sales in 2025 range from 500,000 at the low end to 2.5 million at the high end. With a similar degree of optimism, the California Air Resources Board (CARB 2009) has laid out an aspirational vision in which both BEVs and FCVs begin to enter the market in Fuel and Vehicle Technology Vehicle Cost Per-Mile Fuel Cost GHG Emissions Petroleum and ICE or HEV Natural gas and CNG vehicle Cellulosic E85 and FFV or drop-in biofuels and ICE Electricity and BEV or PHEV Hydrogen and FCV Source: Assessments based on data and analyses presented in Appendices A, B, C, D, and E. Table 3.1. Future vehicle cost, fuel cost, and well-to-wheels emissions prospects.

39 3.7 Medium- and Heavy-Duty Vehicle Applications In its examination of alternative fuels and advanced vehicle technologies, the research team focused principally on light- duty vehicles, which account for the majority of all fuel use in the transportation sector. Additionally, though, the team explored potential applications of efficiency improvements and alternative fuels for medium- and heavy-duty vehicles (MHDVs). The results of this analysis, presented in greater detail in Appendix F, are summarized here. 3.7.1 Fuels and Vehicle Technologies Motivated by concerns over energy security, climate change, and economic efficiency, there have been several ini- tiatives and studies in the United States aimed at reducing advanced vehicle technologies to meet more-stringent federal fuel economy standards. Based on the entries in this table, conventional vehicles and FFVs appear likely to entail the lowest vehicle premi- ums, while natural gas and electricity promise the greatest fuel-cost savings. Biofuels, electricity, and hydrogen offer the greatest potential reductions in GHG emissions. Table 3.2 summarizes the major obstacles and uncertain- ties likely to affect future market share and environmental benefits for each of the alternative fuels and vehicle tech- nologies in competition with conventional petroleum-fueled vehicles. Challenges are organized into two columns: the first deals with fuel production and distribution, while the second focuses on supporting vehicle technologies. Factors likely to influence adoption rates are shown in standard text, while issues relating to the environmental benefits of adoption are italicized. Table 3.2. Factors influencing market potential and environmental benefits. Technology Production, Distribution, and Refueling Vehicle Cost and Performance Natural gas CNG or LNG Environmental concerns with fracking Climate concerns from possible leakage of methane in the supply chain (which could more than offset GHG benefits of natural gas versus petroleum) Lack of refueling stations Competition with other potential uses of natural gas High costs for onboard CNG or LNG storage, leading to higher vehicle costs Perceived safety concerns for CNG Limited vehicle range for CNG Cellulosic E85 or drop- in biofuels FFV or ICE Insufficient feedstocks to fully displace petroleum and potential competition with food crops Uncertain ability of industry to meet RFS2 targets for advanced low-carbon biofuels such as cellulosic ethanol or, eventually, drop-in biofuels Limited distribution network, blending and storage capacity, and refueling stations for E85 Reduced vehicle range with E85 given lower energy content per volume for ethanol versus gasoline Electricity BEV or PHEV High cost of increasing the share of renewable electricity on the grid Cost of upgrading local transformers to support at-home charging Cost of upgrading residential electrical systems and installing home recharging equipment Limited availability of fast recharging stations (most critical for BEVs) Unresolved battery performance concerns related to safety, longevity, and ability to handle fast recharging Very high battery costs, leading to very high vehicle costs Limited all-electric driving range and long required recharging time (most critical for BEVs) Hydrogen FCV High cost of renewable hydrogen in comparison to hydrogen produced from fossil fuels Lack of hydrogen distribution network and refueling stations Insufficient durability of fuel cells High cost of onboard hydrogen storage and very high cost of fuel cells, leading to very high cost of vehicles Source: Assessments based on data and analyses presented in Appendices A, B, C, D, and E.

40 mass of a vehicle as specified by the manufacturer, including the weight of the vehicle itself along with fuel, cargo, passengers, and the like. Classes 3 through 6, ranging from 10,000 pounds to 26,000 pounds GVW, are typically considered “medium duty,” while Classes 7 and 8, ranging from 26,000 to 80,000 pounds GVW, are designated as “heavy duty.” Class 8 can be further divided into Classes 8a, straight trucks, and 8b, combination (tractor-trailer) trucks. Because of their weight, number, and travel patterns, Class 8b vehicles account for about 60% of all fuel use among MHDVs (NRC 2010b). Another approach for classifying MHDVs that can be useful for certain analyses is by sector of use—for example, within the goods movement sector or the agricultural sector [Economics and Statistics Administra- tion (ESA) 2004]. Alternatively, MHDVs may be classified according to appli- cation, which combines features of weight-based and sector- based classes. The previously referenced NRC study (2010b) classified MHDVs into seven general application categories: tractor-trailers, straight box trucks, straight bucket trucks, refuse trucks, transit buses, motor coaches, and pickup trucks and small vans. For evaluating the potential benefits and suit- ability of advanced vehicle technologies and alternative fuels within the MHDV fleet, this proves to be a helpful classifica- tion system, one that incorporates a range of relevant applica- tion characteristics: • Fleet use. MHDVs are often operated in fleets. Examples of fleets are utility bucket trucks for line maintenance and emergency response, school buses, trash collection trucks, and cement trucks. Fleets, whether private or public, can benefit from shared vehicle maintenance and refueling stations. This can be quite helpful from the perspective of introducing alternative fuels because the fleet can be sup- ported with minimal investment in refueling infrastructure. To convert a fleet of municipal service vehicles to natural gas, for example, it may be sufficient to install a single natu- ral gas dispenser at a central fleet facility. • Daily range. Operating range describes the distance from the central facility within which an MHDV must oper- ate on a daily basis. Because some alternative fuels and technologies—most notably CNG and battery electric— offer more limited range than conventional fuels, quan- tifying the typical operating range provides insight into the potential applicability of such fuels and technologies for various MHDV classes and applications. • Annual mileage. MHDVs are used heavily and, as a result, tend to travel more miles per year than passenger vehicles. Typical mileage by class ranges from 20,000 miles per year for local utility vehicles to over 200,000 miles per year for tractor-trailers used in long-haul applications (NRC 2010b). In comparison to passenger cars, then, this ampli- fies the relative benefit of alternative fuels and vehicle tech- nologies that reduce fuel consumption for MHDVs. With fuel consumption and improving the performance of MHDVs. The 21st Century Truck Partnership, for example, is a coopera- tive research and development partnership among the DOE, the DOT, the U.S. Department of Defense (DoD), the EPA, and 15 industry partners. Its goal is to increase the ability of trucks to move freight while reducing emissions and fuel consumption (NRC 2012). The NRC set up its own committee to assess fuel economy technologies for MHDVs (NRC 2010b). The EPA also has several programs, including the Clean Diesel Campaign and the SmartWay freight program (EPA 2012, SmartTruck 2009), that focus on advanced engine and vehicle technologies and the promotion of alternative fuels to reduce petroleum consump- tion and improve environmental performance. In addition to voluntary and collaborative public–private partnerships, the United States is poised for the first time to regulate fuel economy improvements in MHDV fleets. The federal government has mandated CAFE standards for light- duty vehicles since the late 1970s, but MHDVs were not pre- viously subjected to analogous regulations. In May of 2009, though, President Barack Obama directed the NHTSA and the EPA to develop the Heavy-Duty National Program, which would specify fuel economy standards for combination trac- tors, heavy-duty pickup trucks and vans, and vocational vehi- cles (buses, refuse trucks, utility trucks, etc.). The proposed rulemaking for this program was issued in November 2010, and the rule was finalized in September of 2011. Under the new standards, which are set to take effect in 2014 and esca- late through 2018, combination tractors will be required to achieve a 20% reduction in fuel use and greenhouse gas emis- sions, heavy-duty pickup trucks and vans will be required to achieve a 15% reduction, and vocational vehicles will be required to achieve a 10% reduction (EPA and NHTSA 2011). Most MHDVs currently rely on diesel engines, in part for their power and fuel economy but also for their greater lon- gevity, but an increasing number rely on gasoline. Many of the technical strategies for reducing petroleum use and emissions within the MHDV fleet have therefore focused on efficiency improvements for conventional diesel and gasoline power trains and vehicle configurations. Promising options in this vein include lighter-weight materials, improved aerodynam- ics and rolling resistance, gasoline direct injection, homoge- neous charge compression ignition, and hybrid-electric and hybrid-hydraulic systems (NRC 2010b). Alternative fuels are receiving increased attention for MHDVs as well. Depending on the specific application, potentially promising options include natural gas, biofuels, and hydrogen, with electricity offering some potential in niche markets. 3.7.2 Promising Applications A common system for classifying MHDVs is by gross vehicle weight (GVW), a term describing the maximum operating

41 tors in evaluating alternative fuels and vehicle technolo- gies. Alternative fuels often involve trade-offs in which certain cost components increase but others are reduced. For example, hybrid drivetrains and natural gas vehicles increase the purchase price of the vehicle significantly, adversely affecting both capital and financing costs. How- ever, a hybrid drivetrain reduces fuel consumption, and natural gas vehicles can benefit from a lower-cost fuel. When purchasing new vehicles, MHDV owners typically assume that the vehicle will be sold for a certain resale value at the end of its term of service. Given the small installed base of support for both natural gas and hybrid vehicles, the ability of the purchaser to sell the vehicle could be com- promised; diesel MHDVs operated using untraditional fuels such as biodiesel may likewise fetch less on the salvage market. By implication, given the importance of resale in most MHDV life-cycle-cost computations, the develop- ment of alternative fuels that substitute or may be blended with existing diesel is important. Drawing on several sources of information, including from the ESA (2004), NRC (2010b), and ORNL (2012), Table 3.3 summarizes relevant class, usage, and fueling information for the various MHDV applications defined by the NRC (2010b). Accounting for such characteristics, Table 3.4 summarizes the potential utility of various vehicle efficiency technologies and alternative fuels—taking into consideration their relative strengths and limitations, as well as information about where more miles traveled each year, fuel-cost savings can accrue more rapidly to offset increased capital costs associated with the vehicle purchase or conversion. Even with the poten- tial for savings in fuel costs, though, there is still a delicate balance among capital and operating costs associated with MHDVs because newer technologies may increase system complexity and result in increased maintenance costs. • Duty cycle. The term “duty cycle” refers to the pattern of use of a vehicle over a fixed time period. Duty cycles are as varied as the applications of MHDVs. For example, the duty cycle for a long-haul tractor-trailer may be as simple as driving 6 hours at an average speed of 60 mph. A waste- collection truck, in contrast, might drive to a neighbor- hood at moderate speed, and then creep along as workers gather trash in that neighborhood. The duty cycle for an application influences such factors as how often a vehicle has the opportunity to refuel, whether the vehicle would reap much benefit from aerodynamic improvements, whether the use of hybrid technology to capture power through regenerative braking would be valuable, and whether the vehicle would benefit from stored electric or hydraulic power, for example, to lift a trash receptacle or lift workers in buckets. The duty cycle can also have a strong effect on the emissions profile for internal combus- tion engines (NRC 2010b). • Ownership characteristics and life-cycle cost. Finally, life-cycle ownership costs, including capital, financing, fuel, maintenance, and resale, are extremely important fac- Application Classes Fleet Typical Duty Cycle Typical Fuel Typical Refueling Location Tractor-trailer 7, 8 Local, regional, and national Extended periods at high speed Diesel Truck stop, own facility Straight truck, box 3–8 Local and regional Urban delivery, moderate average speed Diesel Own facility Straight truck, bucket 3–8 Local and regional Urban and rural use, significant auxiliary load Diesel Own facility Refuse truck 7, 8 Local Urban use with frequent stops and creeping at low speed Diesel Own facility Transit bus 7, 8 Local and regional Urban use with frequent stops at low speed Diesel but increasingly natural gas Own facility Motor coach 8 National Extended periods at high speed Diesel Truck stop Pickup trucks and small vans 2b Local Varied uses Gasoline or diesel Gas station Source: Developed by authors based on material from ESA (2004), NRC (2010b), and ORNL (2012). Table 3.3. Summary characteristics for common MHDV applications.

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