California LCFS and the Long Road to ZEV TRB Environment & Energy Conference June 8, 2010

Transcription

1 California LCFS and the Long Road to ZEV TRB Environment & Energy Conference June 8,

2 What is our national objective? EPA Wedge Analysis Stabilize and reduce GHG emissions Reduce consumption of petroleum..... enhance energy security Provide the greatest good at the lowestsocietalcost Expand national wealth & prosperity of the U.S. First 14 years: 1.4% Second 30 years: 5.2% 1

3 CARB has approved the Low Carbon Fuel Standard (LCFS) for implementation in California Regulation of Mobile Source Emissions The mission to reduce urban smog has morphed into the control of all energy consumption CAA Sec. 209(a) CA authority to regulate light duty vehicle criteria emissions PGM based catalytic converter introduced LEV I NOx limits reduced 50% Vehicles and fuels regulated as a system LEV II NOx limits reduced 75% Near harmonization with Federal Tier 2 regulations ZEV 10% sales mandate overturned Mandate met with credits oat PZEV opzev ong ofuel Cell GHG AB 1493 AB 32 SB 375 Cap & Trade Low Carbon Fuel Standard Renewable Portfolio Standard LEV III NOx and NMOG reductions to near zero = 45% GHG reduction 2

4 The gap between EPA s lab certification tests and real world MPG/CO2 performance is widening. CAFE Certification: 2 Cycle Real World Label: 5 Cycle Test cycles created in 1975 Prime emphasis is city driving (55/45) 38 mph average speed No A/C, radio, lights, heat Updated in 2006 under pressure from Congress Prime emphasis is highway driving (43/57) Accessories are recognized Both EPA and NHTSA are interested in developing programs that employ test procedures that are more representative of real world driving conditions... This is an important issue, and the agencies intend to address it in the context of a future rulemaking to address standards for model year 2017 and thereafter. 3

5 Ethanol blends reduce energy density and fuel economy not comprehended on 2 cycle tests. Renewable Fuels Energy Density per Gallon Lower Heating Value per Gallon 135, , , ,000 95, % Gasoline Not comprehended in 5 cycle label methodology 3.4% 5.8% ULSD 0.4% 1.4% 85, % 75,000 CAFE Indolene RFG E10 E15 E85 CAFE B5 B20 4

6 2 cycle lab certification test cycles are being exploited, increasing off cycle emissions. Lab Certification vs. Off Cycle Emissions Gap Increase in Off Cycle CO2 Emissions 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% + 24% Gas Fleet Indolene 1.6X Cycle Beating Effect +28% Gas Fleet E10 +46% No. 1 HEV E mpg 5.5 mpg 22.4 mpg 4. Off cycle Technology Credits Further, any credits for these off cycle technologies must be based on real world GHG reductions not captured on the current 2 cycle tests and verifiable test methods, and represent average U.S. driving conditions. Proposed rule page 162 5

7 CA LCFS exists within a national renewable fuels program regulating different outcomes. RFS: Forces Renewable Gallons LCFS: Forces Life Cycle CO2 Reduction National E10 Oil replacement policy pre dating CO2 Energy security monopsony Important linkage to job creation and U.S. balance of trade improvement Life cycle CO2 reduced 10% on an energy equivalent basis Each fuel pool regulated individually Back end loaded: CAGR = (1.49%) 6

8 RFS2 measures ethanol equivalent gallons renewable diesel s high energy density fundamentally shifts compliance economics. RFS2 Standard RFS2 Ethanol Equivalent Billion Gallons 30.5B real gallons = 36B ethanol equivalent gallons EPA Expected RFS2 Compliance Cellulosic Billions of Gallons National E15 in 2022 R Diesel National E10 Ethanol Fischer Tropsch BTL diesel is expected to account for 70% of the cellulosic fuel requirement by National B10. 7

9 EPA will allow midlevel blends making E85 a dead fuel and sweeping away promised CO2 credits with it. E85 Energy Equivalent Pump Price/gal. Over (Under) E10 EIA AEO 2010 $0.40 $0.30 < 1% stations have E85 pumps GM, Ford, Chrysler commit to > 50% FFVs $0.20 $0.10 Parity $ $0.10 $0.20 Source: EIA Annual Energy Forecast Reference Case E15 midlevel blends allowed: E85 price no longer needs to attract customers to comply with RFS2 Significant US and CA FFV credits vaporize without E85 fuel $ billions of FFV vehicle hardware wasted 8

10 Under LCFS, fuels are no longer fungible commodities. LCFS Compliance With Alternative Fuel Pathways 2010 CA grid Electricity WTW gco2e/mj Gasoline pool Diesel pool MW Corn Ethanol E100 Washington State Gasoline Blendstock Brazilian E15 (Sugarcane) 10% Grid Energy LDV (2020 CA Grid) E15 Cellulosic Ethanol (CA farmed trees) 9

11 Under LCFS, the price of Brazilian ethanol can sell at prices far above MW corn ethanol... CA cellulosic 3X higher than sugarcane ethanol. LCFS Carbon Intensity of Ethanol and EPA 2022 Delivered Costs/gal. Midwestern Corn iluc $1.72/gal Brazilian Sugarcane $1.49/gal Cellulosic CA Farmed Trees $1.72/gal Capital Invested: Shell $1.6B DOE $1.6B gco 2 e/mj 10

12 California s long march toward vehicle electrification continues. Battery EV InanattempttoleapfrogToyota,GMhasdevotedsignificant resources to the Chevy Volt. While the Volt holds promise, it is currently projected to be much more expensive than its gasoline fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable. White House Auto Task Force GM Viability Determination AT PZEV $8 15B... and counting Fuel Cell EV... because these cars won't leave the showroom unless consumers buy them, the Recovery Act includes a new tax credit of $7,500 to encourage Americans to plug one in at home. President Obama Grid Connected PHEV Battery EV 11

13 LCFS is strongly linked to CARB s ZEV sales mandate Light Duty EER CARB PHEV 2 Cycle FE Test compared to 2006 average car. Charge Depleting PHEV 5 cycle gco2e/mj 2010 CA Grid 3.0 EER Charge Sustaining 5 cycle Not indexed to improving fleet average under Pavley and EPA rules. WSPA* study showed 5 cycle fuel economy is appropriate real world measure not 2 cycle lab. CARB 2020 LD Fleet Market Share Assumptions ZEV Technologies Low High PHEV 4% 20% BEV FCEV 1% 3.7% *Western States Petroleum Association 12

14 Vehicle depreciation is not comprehended in federal or state CO2 rulemaking. Residual Value Performance at Mileage 1/2009 3/2010 Vehicle Retail Price 5 Cycle MPG Miles 68k Miles Residual Percent 100k Miles Prius $25, % 29% Camry L4 $21, % 31% Corolla $16, % 32% Based on Manheim Auction results. Vehicle sales tax and maintenance costs are not captured in this analysis. 13

15 Prius depreciates at a faster rate than Camry, sharply eroding the economics of fuel savings. Consumers Who Selected Prius Over Camry L4 $3,000 $2,000 Fuel Savings 1,231 Gallons Saved $1,000 $ $(1,000) $(2,000) Residual Value Performance Residual Tax: ($1.72) Gallon Saved $(3,000) 14,000 28,000 42,000 55,000 68,000 Miles Total Manheim Action results from Jan 2009 to March % discount factor represents new car bank rate. 14

16 Compared to the Corolla, Prius deprecation destroys all fuel expense savings. Consumers Who Selected Prius Over Corolla $3,000 $2,000 $1,000 $ Fuel Savings 939 Gallons Saved $(1,000) $(2,000) $(3,000) $(4,000) Residual Value Performance Residual Tax: ($5.37) Gallon Saved $(5,000) $(6,000) 14,000 28,000 42,000 55,000 68,000 Miles Total Manheim auction results from Jan 2009 to March % discount factor represents new car bank rate. 15

17 The EV range and cost relationship with ICE has changed little in 100 years /3 range 4X cost Detroit Electric $2, miles EV range A mileage radius farther than you will ever care to travel in a day. Model T $ miles ICE vehicle range /4 range 3X cost EPA 2 CycleTest Nissan Leaf $33, miles We expect the battery to have a lifespan of about 5 years. Like any battery, time and age will lead to a corresponding decrease in range. Nissan Versa $12, miles 16

18 To expand American prosperity, policies must achieve the greatest good at the lowest societal cost. Summary 1. Antiquated 2 cycle test procedures lead to massive off cycle CO2 emissions Widening gap between promise and delivery on fleet emissions in the real world. Policy makers will be accountable in barrels and tonnes. 2. LCFS exists within a national RFS2 framework Fundamentally different objectives. Fuels no longer fungible in CA competition for low CO2 fuels in CA will test the prices consumers can bear at the pump. CA likely to lead nation on E15 blends with falling energy density per gallon for CA consumers. Not revealed in label fuel economy reporting. 3. Once E15 is allowed, E85 will become a dead fuel $ billions of FFV hardware wasted. Future FFV credits available under CO2 rules will evaporate. 4. Inferior residual value performance is a hidden tax on consumers Battery is source of inferior HEV performance in secondary market. Hidden tax can eliminate all fuel expense savings derived from the technology. In all likelihood, PHEVs and BEVs will experience heavy depreciation in a nation where the average vehicle is 9.4 years old. martecgroup.com 17