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Future Prospects and Potential Impacts

The Electrification of Transportation in the US:. Future Prospects and Potential Impacts. Structure of the Presentation. The Impact of Oil Prices, CO 2 Emissions & Fuel Economy Regulations Technical & Economic Feasibility of Vehicle Electrification The Current HEV Market Landscape

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Future Prospects and Potential Impacts

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  1. The Electrification of Transportation in the US: Future Prospects and Potential Impacts

  2. Structure of the Presentation • The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations • Technical & Economic Feasibility of Vehicle Electrification • The Current HEV Market Landscape • Future Potential of Vehicle Electrification in the US • Key Takeaways

  3. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Growth of US vehicle stock has slowed in recently years, but there are still nearly 250 million light-duty vehicles out on the road today. Sources: NHWA, DOT, R.L. Polk, HEC estimates

  4. The industrial sector and utilities have cut back on oil consumption, but the transportation sector has not => its share of of total US oil consumption continues to grow. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Source: EIA

  5. Oil and gasoline prices reached historical highs in 2008, and still remain relatively high ($75/barrel) despite a sharp economic slowdown. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Source: EIA Sources: API, EIA

  6. In the 1970s, OEMs improved fuel economy by reducing weight and horsepower, but since the early 1980s fuel economy (acc. to EPA method) has remained stagnant. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Source: HEC, based on EPA data

  7. Thanks to cheap gasoline, consumers found it affordable to purchase bigger vehicles like pickups and SUVs—but high oil prices and the recession have changed that. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Source: Ward’s Auto

  8. US CO2 emissions—especially those of the transportation sector—must come down if global CO2 emissions targets are to be met. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Sources: Oak Ridge National Laboratory, IEA

  9. Corporate Average Fuel Economy (CAFE) standards changed little in the 1980s and 1990s, but that was before age of high oil prices and global warming. CAFE wll increase through 2016 and beyond. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Sources: NHTSA, EPA

  10. To meet the IPCC’s CO2 emission reductions, fuel economy in the US might need to increase by over 50% => ICE engine improvements alone are unlikely to be enough. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Source: IEA

  11. Vehicle electrification can help meet fuel economy and CO2 emissions goals, but in the short term they are not cost competitive. 2. Technical & Economic Feasibility of Vehicle Electrification Source: HEC, based on Deutsche Bank, BCG, Edmunds, Anderman (2007) data

  12. Because of the high cost of hybrids today, their payback period is relatively long => their ability to gain market share has been limited. 2. Technical & Economic Feasibility of Vehicle Electrification Source: HEC, based on Edmunds, EPA, EIA data

  13. The main reason for the high cost of hybrids is the high cost of their batteries. New chemistries can lower cost and improve performance. 2. Technical & Economic Feasibility of Vehicle Electrification Source: Saft

  14. As new battery technologies mature, more cost reductions can be expected: this has been the case with LCO batteries for laptops and cell phones. 2. Technical & Economic Feasibility of Vehicle Electrification Source: Brodd (2005)

  15. Hybrids still comprise a small part of the light-duty vehicle market—but their share is growing.Consumers associate hybrids with fuel economy, so they have favored strong HEVs over mild and moderate HEVs. 3. The Current HEV Market Landscape Source: HEC, based on Ward’s Auto data

  16. Sales of the Prius have shown a strong correlation to their payback period => it is not enough for a HEV to be “green,” it has to offer good value. 3. The Current HEV Market Landscape Note: Payback calculation is based on 12K mi/year of usage, and include the EPCAT and “Cash for Clunkers” incentives Source: HEC, based on Ward’s Auto, Edmunds, Automotive News, EIA data

  17. Governments—federal, state, local—are providing incentives for buyers and manufacturers of HEVs, PHEVs and EVs. 3. The Current HEV Market Landscape

  18. OEMs are approaching vehicle electrification in many different ways. 3. The Current HEV Market Landscape

  19. Sizing up the potential of electrification is complex: payback period is influenced by many relevant variables. 4. Future Potential of Vehicle Electrification in the US Source: IEA

  20. Due to complexity and uncertainty, it is best to analyse a variety of possible scenarios. 4. Future Potential of Vehicle Electrification in the US

  21. In the Base Case, penetration of vehicle electrification in the light-duty vehicle market grows moderately. 4. Future Potential of Vehicle Electrification in the US Source: HEC

  22. In “Green Renaissance,” the gasoline price floor, vehicle incentives and battery cost reductions combine to spur high levels of penetration after 2020. 4. Future Potential of Vehicle Electrification in the US Source: HEC

  23. In “Realpolitik,” vehicle electrification penetration is modest. Total light-duty vehicle sales also stagnate. 4. Future Potential of Vehicle Electrification in the US Source: HEC

  24. In “Green Renaissance,” aggressive fuel economy standards and vehicle electrification combine to lower liquid fuels consumption by about 9% compared to the Base Case. 4. Future Potential of Vehicle Electrification in the US Source: HEC

  25. In “Realpolitik,” liquid fuels consumption also declines relative to the Base Case—mostly because lower new vehicle sales lead to fewer total light-duty vehicles in operation. 4. Future Potential of Vehicle Electrification in the US Source: HEC

  26. Vehicle electrification in the US today suffers from high battery costs and relatively low fuel prices, but:Government policies will be necessary to help make HEVs, PHEVs and EVs more affordable until economies of scale push battery costs down further. Future fuel economy and criteria pollutant emission regulations will make future ICEs more costly.Vehicle electrification has significant upside—but only after 2020.Vehicle electrification also depends on the continuation of open trade: resource nationalism and trade barriers could limit OEMs’ and battery producers’ ability to capitalize on global economies of scale. 5. Key Takeaways

  27. Thank you!!Raphael Hudsonrhudson@hartenergy.com

  28. The transportation sector—and light-duty vehicles in particular— are also a significant source of CO2 emissions in the US. 1. The Impact of Oil Prices, CO2 Emissions & Fuel Economy Regulations Source: EPA

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