Challenges and Policy Issues for Plug In Hybrid Vehicles (Case study of US)

Transcription

1 Energy Policy Term Paper Challenges and Policy Issues for Plug In Hybrid Vehicles (Case study of US) Abhishek Rohatgi Energy Economics and Policy Prof. Thomas F. Rutherford Spring, 2011 ETH Zurich

2 Page 1 TABLE OF CONTENTS 1. Introduction Alternative Fuel Vehicles Plug In Hybrid Vehicles Present scenario and problems Cost Analysis of Plug In Hybrid Vehicles (Case Study of US) Policy Measures Conclusion References...16

3 Page 2 1. Introduction The world is facing a serious energy crisis and climate degradation. According to IEA report on Key World Energy Statistics(2010), currently the amount of Total Primary Energy Use(TPES) is 12, Mtoe out of which Mtoe accounts for the Total Final Consumption (TFC). Out of this final consumption, transport sector accounts for Mtoe which is approximately 27% of the Total Final Consumption, Industrial sector accounts for Mtoe, which is 27.8% of TFC, and the rest like residential is Mtoe and that is approximately 36% of TFC. From the above statistics, one can say that if we have to reduce our energy use, we should concentrate on all the three sectors. One can t neglect any of them. This paper focuses on the transport sector. Figure 1.1 shows the growth of energy use in different modes of transport from Fig. 1.1 World transport energy use by mode (Source: IEA 2009 report - Transport, Energy and CO2 Moving Towards Sustainability)

4 Page 3 It is clear that the the energy use in transport sector is increasing at an alarming rate and keeping in mind of the increasing demand fueled by the countries like China and India, the problem has become much more complex. From fig 1.1, we can infer that the road passenger and road freight together accounts for around 60-70% of the energy use in the transportation sector. If we go further down in the transport sector and see the different fuels used and energy use per capita, as shown in fig 1.2, we can see unsurprisingly that the developed countries accounts for the most of the energy use and that gasoline and diesel are the most commonly used fuels all over the world which signifies that the GHG emissions associated with the transport sector is worth to be studied. Fig Transport sector energy use per capita and type of fuel used 2006 (Source: IEA 2009 report - Transport, Energy and CO2 Moving Towards Sustainability)

5 Page 4 Figure 1.3 shows that cars and SUVs account for most of the LDV (Light duty vehicle) all over the world. There are exceptions like India and China which is an important point in this regard, but since most of the energy use in transport is by the developed Fig 1.3 Passenger Light duty vehicles (Source: IEA 2009 report- Transport, Energy and CO2 Moving Towards Sustainability) countries, we can say that the cars and SUVs are major source of demand in the transport sector. In fact, petroleum accounts for 97% of the energy use all over the world in cars, trucks, SUVs, airplanes etc (Joseph Romm [1]). Figure 1.2 and 1.3 also reinforce this fact. Hence, if we are serious about the energy crisis and GHG emissions, we must pay attention to the transport sector, especially the cars and SUVs.

6 Page 5 2. ALTERNATIVE FUEL VEHICLES Based on our analysis of transport sector in the introduction part, we can say that the Alternative Fuel Vehicles is one of the solutions to the problem. Alternative Fuel vehicles are the vehicles which use fuel other than petroleum based like methanol, hydrogen, etc.[2]. Hybrids and Plug in hybrids also come in the category of AFV even though they don't satisfy the goal of non petroleum based fuels. They are much more efficient than conventional gasoline based vehicles which explains their inclusion in the list of AFV. Lets analyze first the Hydrogen based vehicles. Hydrogen is being thought of an excellent source of energy for future primarily because of its abundance. We can produce hydrogen from fuel cells and use it for driving the vehicle but the things don't stop here. As with any other technology which has been successfully brought to the market, we have to look on the economic aspects of using hydrogen as a fuel. The biggest problem with hydrogen is that it is very expensive. At present, it costs 100 times more than traditional vehicle based on gasoline (Wald [3]). The other problem with using hydrogen is the lack of infrastructure for a hydrogen based economy. For successful deployment of hydrogen, we should have infrastructure like fuel refilling stations and servicing stations for such vehicles which require huge investment, but who will invest before there are sufficient cars in the market to make a profit from such a investment. This comes to the classic chicken and egg problem. Some of the people even say that using hydrogen can have more carbon footprint than using traditional vehicles as hydrogen is produced form electricity and if that electricity is not clean, then using hydrogen vehicles does not make sense (JRC et al. [4]). Moving on to other options, we come to methanol based vehicles. This has got some bright future since it can be mixed with gasoline and then used in traditional vehicles. The vehicles which use these mixed fuels are called as flex fuel vehicles. For example E85 class of vehicles are the flex vehicles which can run on a mixture of 85% alcohol based fuel and 15% gasoline [5]. To be more precise some of these vehicles can run on any mixture of alcohol (ethanol/methanol) and gasoline. The owner has the flexibility to decide upon the mixture based on his/her preferences. But with these vehicles also, there is a problem of fuel refilling. Currently there are lot of E85 vehicles running on US roads but still there are very few E85 stations built. Coming to hybrids, we can say that these are the vehicles which have raised the bar of competition for the other alternative fuel vehicles. These are the vehicles which use only gasoline but they have much more higher efficiency than traditional vehicles. The reason for higher efficiency is that they use both an electric motor and IC engine for propulsion. Electric motor is used so that the IC engine operates only in those situations where it has high efficiency. Besides this, the motor can also work as a generator and hence can extract energy by the process of regenerative braking when brakes are applied to stop the vehicle. This braking process store the kinetic energy which is otherwise lost as heat in conventional vehicles. These vehicles are safe, emit less GHG and are more efficient

7 Page 6 which makes them a perfect choice for the policy makers to focus on. A further advanced version of hybrid vehicles (which is more closer to 'all electric' vehicles), is PHEV which stand for plug in hybrid vehicles. The main difference between PHEV and hybrid vehicles is that we can plug in a PHEV and charge its battery directly from a plug. Like hybrid vehicles, these vehicles have got no fuel refilling problems, have high efficiency, better mileage and lots of other possible economic advantages. The owner of such vehicle can charge it during night and run it during day time thereby deriving income from the fact that electricity is cheaper in night than day. In addition, it can earn money by acting as a flexible load and generation. A more precise term for this is ancillary services. This can help in the development of smart grid as flexible load is one of the major requirement of smart grid. So, in near term, hybrids and PHEV have got a clear edge from other AFV and hence the governments should concentrate on the policy issues of both of them. In the further sections, we will try to find out possible policy measures for a successful integration of these vehicles in a clean economy.

8 Page 7 3. PLUG IN HYBRID VEHICLES CURRENT SCENARIO AND PROBLEMS As stated before, PHEV are a combination of 'all gasoline' and 'all electric' vehicles. These are better than hybrid vehicles since they have the possibility of charging their batteries just by plugging in a wire in any normal electric socket. According to IEEE [6], a vehicle can classify for being a PHEV if it satisfy the following points : 1. a battery storage of 4kWh or more 2. a means of recharging the battery system from an external source of electricity 3. in 'all electric' mode, it should be able to drive at least 10 miles and consume no gasoline. Chevrolet Volt is the first mass produced plug-in hybrid available in the US. Other vehicles which will come soon in the market are the Toyota Prius plug in hybrid, Ford Escape plug in hybrid, Volvo v70 plug in hybrid and a lot more. Almost every auto manufacturer is in the process of bringing PHEV in the market. Fig. 3.1 Comparison between a PHEV and a regular gasoline (source:

9 Page 8 Figure 3.1 shows a comparison of Chevrolet Volt and Chevrolet Aveo. Both of them have been regarded as compact size cars on the website fueleconomy.org. The comparison clearly shows the superiority of PHEV over a regular vehicle. Volt has a energy impact of only 0.4 barrels and 9.3 barrels annually when used in electricity only and premium gas only mode. Aveo, on the other hand, has a score of 12.3 barrels. The new MPG of Volt is also much better than Aveo. For the GHG emission comparison of PHEV and regular gasoline, see fig 3.2. Fig 3.2. GHG emission comparison of PHEV and conventional vehicle (Source: [6] ) In figure 3.2 we see that PHEV emit a lot less GHG than regular gasoline based vehicle. GHG emission of PHEV depends on the source of the electricity which is used to charge the battery. For example, if we charge the battery from electricity which was produced using coal, then GHG emission will be much more as compared to a situation where the vehicle is charged form electricity produced from all renewable. An interesting point is that in figure 3.2 is that even in the worst scenario of entire coal based electricity, PHEV emit less GHG than regular gasoline. In the case of all renewable electricity, GHG emissions are reduced to 150gCO2/mile which is one third of 450gCO2/mile, which is a very significant reduction. From the analysis done in the previous paragraphs, PHEV seems to be the answer to the problem of energy security and GHG emissions. But at present, it is not possible for PHEV to stay in the market without a supporting policy. Some of the problems for PHEV are explained below: 1. PHEV have high first costs. The price of Chevrolet Volt is $41,000 whereas for a regular vehicle, it is in the range of $20,000-$24,000. [7] 2. The Achilles heel of PHEV is the storage capacity problem. While there have been

10 Page 9 significant improvements in the battery technology but it still needs a lot more research to be able to be reliable and cheap enough for the success of PHEV in the auto market. 3. Infrastructure for charging is not available at the moment. There is a possibility of a new Vehicle to Grid service (commonly known as V2G) which can open a new market of ancillary services for PHEV and help in the development of smart grid. In the rest of the paper, we will develop a simple cost calculation for PHEV and then propose a few policy measures for the integration of these clean vehicles in the economy.

11 Page Cost Analysis of Plug In Hybrid Vehicles (Case Study of US) In this section, we will estimate the cost of PHEV (in US) in future(2030) and then we will look what are the possible economic benefits of using PHEV and the propose some policy measures to support the development of PHEV so that they can be integrated in the transport system which will help in making a transition to a clean and green economy. Currently, the US government provides some sort of cost benefits to the buyers of PHEV so as to encourage them to buy hybrid vehicles which are otherwise quite expensive for a average buyer. Some of the main acts which help in the promotion of PHEV are: 1. The tax credit between $2500 to $7500 to consumers based on the battery storage capacity under the American Recovery and Reinvestment Act 0f $400 million for electric drive vehicles projects under the same act as $2 billion in domestic manufacturers in the Energy Independence and Security Act of The cost benefit calculations are described in the following section. 4.1 The Cost Benefits Calculations for PHEV: The cost calculations tries to bring out the main points for a policy aiming at PHEV. We try to estimate the cost benefits that can be derived in future by using PHEV without considering tax benefits that are available currently under the various policies of the US government. All the cost data for these calculations have been taken from [7] and [8]. The cost of a vehicle can be written as follows: C total = C component +C operation C total is the total cost C component is the cost of components of the vehicle Coperation is the operating costs of a vehicle These costs can be further divided as follows: C component = C conventional + C non-conventional C conventional is the cost of components a conventional vehicle C non-conventional are the additional component costs which comes in the picture due to additional technological requirements of PHEV C operation = C maintainence + C fuel C maintainence is the maintainence cost of the vehicle C fuel is the cost of fuel over the lifetime of the vehicle Further, we can write down the conventional costs and non conventional costs as shown below where the new symbols are self explanatory. C conventional = C engine +C transmission +C glider C non-conventional =C motor/inverter +C storage +C charger

12 Page 11 We have the following data for the various costs [8]: C engine = $14.5/kW + $531 C transmission costs = $12.5/kW C motor/inverter =$8/kW C storage =$200/kWh C charger = $ C component of a traditional vehicle. Assume the power of the engine to be 133kW. This is the power of the Ford Fusion. Ford Fusion occupies first place in the 2011 US news rankings in the mid size segment. The cost of the Ford Fusion in 2011 is $21,615. This is the Ccomponent for the Ford Fusion We can calculate the individual components costs also as shown below. In fact it is quite important to calculate the individual component costs since we will be using the same value of C glider while calculating the PHEV cost. C engine = $14.5*133+$531=$ C transmission = $12.5*133= $ So the C glider = $21,615-$ $1662.5=$17, C component of a PHEV Chevrolet Volt is a mid size car and has 111kW engine and a 55kW motor and a lithium ion battery of 16.4 kwh storage capacity. The reason for choosing Volt is that it is the first mass produced plug-in hybrid available in the US. C engine =$14.5*111+$531=$ C transmission =$12.5*166=$2075 C glider =$17,493 (as calculated above) C motor/inverter =$8*55=$440 C storage =$200*16.4=$3280 C charger =$660 C component =C conventional +C non-conventional C conventional =$ $2075+$17,493=$21,708.5 C non-conventional = $440+$3280+$660=$4380 So, C component = $21,708.5+$4380=$ Coperation of a traditional vehicle According to [8], average maintainence cost of a traditional vehicle is $6,800 So, C maintainence =$6,800 An average vehicle will consume 4440 gallons of gasoline during its life time and taking

13 Page 12 the cost of oil as $4.5 [8], we can write down the fuel cost as: C fuel =$4.5*4440=$19,980 Hence, C operation =C maintainence +C fuel =$6,800+$19,980=$ C operation of a PHEV According to [8] average maintainence cost of a PHEV is $5,000 So, C maintainence =$5,000 An average PHEV will consume about 1100 gallons of gasoline during its life time and hence the cost of fuel is C fuel =$4.5*1100=$4950 Hence, C operation =C maintainence +C fuel =$5,000+$4,950=$9950 In case of PHEV, we have not included the battery costs as we assume that by 2030, the batteries will be developed enough so that they will continue for the life time of the vehicle Total Costs For Traditional vehicle, C total =C component +C operation =$21,615+$26,780=$48,395 For PHEV, C total =C component +C operation =$ $9950=$36,038 Hence from this very simple model, we can say that an average PHEV will offer a cost benefit of around $12,000 when compared to a traditional vehicle. Note that we have not included any possible benefits from the Vehicle to Grid (V2G) technology in this simple model. The following diagram shows the current and the future prices of the traditional and PHEV. Current Prices of Vehicles Prices in Price Price Traditional Vehicle PHEV Type of vehicle 0 Traditional Vehicle PHEV Type of vehicle Fig. 4.1 Current prices and future prices of a PHEV and a traditional vehicle

14 Page POLICY MEASURES From the cost analysis of PHEV, it is quiet clear that the governments should promote policies which can help in bringing the hybrid vehicles to the market. The cost analysis is done for 2030 and there we have assumed that by 2030, the PHEV would have become sufficiently competitive that they can survive in the market without any government help. But for now they certainly need some strong policy from the side of the government so that they can survive in the current market situation. Without any policy measures for PHEV, it is not possible for any auto manufacturer to invest in R&D for these vehicles and the future of these vehicles depend on both the technology development and the policy measures for promoting them. We will analyze the policy aspect from the following perspectives: 1. Direct Cost Measures 2. Market Measures It is important to understand that at the end all the suggested policy measures will reduce costs, the division of the policy measures in the above mentioned categories is based on the aspect which they will directly influence. For example, the direct cost measures will be aiming at reducing the cost directly like through tax credits and the market measures will be related to modifying/creating a market for the PHEV like an ancillary service market. 1. Direct Cost Measures Direct cost policy measures are already available in US. The following paragraph is taken from the IRS website (Energy Provisions of the American Recovery and Reinvestment Act of 2009): Plug-in Electric Drive Vehicle Credit (Section 1141): The new law modifies the credit for qualified plug-in electric drive vehicles purchased after Dec. 31, To qualify, vehicles must be newly purchased, have four or more wheels, have a gross vehicle weight rating of less than 14,000 pounds, and draw propulsion using a battery with at least four kilowatt hours that can be recharged from an external source of electricity. The minimum amount of the credit for qualified plug-in electric drive vehicles is $2,500 and the credit tops out at $7,500, depending on the battery capacity. The full amount of the credit will be reduced with respect to a manufacturer's vehicles after the manufacturer has sold at least 200,000 vehicles. However, it is possible to include some more specific provisions in these laws. The following points elucidate those provisions: 1. The tax credit should include incentives based on location. For example, in some areas, the density of car is very high as compared to others. As a consequence of this high density, the pollution level is also high and most probably, the population density will also be high. So if there is a provision in the law which provides more tax credit to consumers of highly populated/polluted areas, then the results will be more effective. 2. There should be comparatively more tax credit to consumers with low income. At present, the price of PHEV is very high. For example, even after the maximum possible reduction of $7,500, Chevrolet Volt costs around $33,000 which is still higher compared to regular gasoline cars [7]. If the government provides a factor in the tax credit which varies according to the income level of the consumer (more for

15 Page 14 low income and vice versa), there is a possibility to make the PHEV popular in medium and low consumer segment which constitutes a major part of the economy. 2. Market Measures: The introduction of PHEV opens an excellent opportunity to provide ancillary services to the future smart grid. For a smart grid to function properly, the load and generation should be flexible so that, for example, in the case of low load and high generation, the system operator should be able to either increase the load or decrease the generation or both. This is required so as to maintain constant frequency which is a prerequisite for a healthy power system. This problem of variable frequency comes in the picture because with the introduction of more and more renewable energy in the generation portfolio of the distribution system operators, the supply is becoming more variable as the renewable energy sources are intermittent in nature. For example, wind does not blow always and hence it is required to do a forecasting of the wind speed and then accordingly decide the schedule of generation. But even after forecasting, there is a possibility of variations in the schedule since no forecasting model is perfect. Hence, the possibility of frequency variations will increase (frequency depends directly on the available power in the grid, if the power supplied is less than demand, it will decrease and if it is more, it will increase). In such scenario, PHEV will play a very important role as they can act as generators by connecting(discharging) their battery to the grid and they can also act as load by charging their battery from the grid and hence can help in maintaining a healthy smart grid. This service of 'helping' the grid to be stable is better known as ancillary services and hence, if the policy measures aim at promoting a market for ancillary services, it will a positive development for PHEV. The best thing about PHEV is that they can come to the grid in zero time. To provide power, one needs to just plug in the battery and it is there. Similarly for acting as a load. If there are lot of PHEV in the economy, it is very probable that they will be available to provide the ancillary services. However, there also exist an other side of the coin. These vehicles have limited connection capacities. So the policy should include the building of Infrastructure parks (Charging/discharging parks) so that the system operator can make an educated guess of the available capacity to support the grid. These 'parks' will also help in removing the uncertainty of the mobility factor associated with PHEV. One can do a statistical analysis and then provide a model to estimate the number of vehicles which can possibly be connected to the grid when required. There should also be a contract between consumer and system operator to decide on the schedule of the availability of PHEV. The consumer will always want to charge the car in night as the prices of electricity is low at night. However, if we make it cost attractive for consumer to charge the vehicle at other time also, it will be a win win situation for both the system operator and consumer. Again the tool to make it attractive is policy measure for pricing of the feed in tariff of the PHEV electricity. Hence, it is possible to make a competitive ancillary service market for PHEV and develop the Vehicle to Grid(V2G) services, which will shape the future of the smart grid. An electrified car fleet which charges and discharges whenever required is an indispensable tool for developing a new power system scenario.

16 Page Conclusion PHEV are an excellent technological advancement. They are better than other alternative fuel vehicles in terms of market possibilities. They are safe, efficient, have low operating costs and in long term, have the potential to be a cost effective solution to the problem of energy crisis and GHG emissions. The governments can increase the energy security by an effective policy for PHEV. At the initial stages, it is not easy for any technology to compete with the existing technologies. The policy measures must be there to make it sure that the new technologies can survive in the market and eventually help in making a better future for us. In this paper, the cost calculations have been done based on a very simplistic but sufficiently reasonable assumptions and they are a clear indicator of the fact that PHEV will be cost effective in future and hence it is the responsibility of the current policy maker to be visionary and formulate policies for the PHEV. These vehicles also emit a lot less GHG emission as discussed before and have the potential to be a major player in the field of CO 2 reduction technologies. Existing policies can be modified to be more socially beneficial like giving tax credits to those who need it. High income people will, anyway, buy a hybrid if they are climate conscious. Middle income and low income people need more support to buy the vehicles and it is also possible to provide more tax credits to people living in highly polluted areas which will improve the effectiveness of the policy toward its real aim of GHG reduction. There also exists parallel markets along with the development of PHEV. PHEV can help in the functioning of smart grid technologies by acting as ancillary services provider. An entirely new market of ancillary services can be developed by providing policy support to PHEV which will also create lot of jobs for the people. There exists a lot of research areas in the formulation of policy measures for PHEV. It is time that researchers and policy makers should work together to mitigate the dangerous consequences of GHG emissions and energy crisis.

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