On April 1st the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) announced a joint final rule establishing fuel economy standards for all light duty vehicles sold in the United States. Since the existing standards don’t apply to light trucks, I used vehicle sales forecasts from the Energy Information Administration’s “Annual Energy Outlook 2010” to estimate a current baseline fuel economy of 19.6 mpg. The new rules will be phased in over a five-year period beginning with the 2012 Model Year and are certain to drive rapid evolution in the auto industry. The following table summarizes the new fuel economy standards:
|Model Year||Passenger Cars
(1) Source: Wikipedia Corporate Average Fuel Economy
(2) Source: NHTSA CAFE-GHG Fact Sheet
In plain English, the new rules mandate a 26% improvement in passenger car efficiency and a 30% improvement in light truck efficiency by September of 2011, with long-term goals of 45% and 47% by September of 2015. Overall, the EPA expects to bring CO2 emissions for the new car fleet down to 250 grams per mile by the 2016 Model Year.
The US is not alone in its implementation of stringent fuel efficiency standards. In April 2009, the EU adopted new CO2 emission standards that establish a fleet wide target of 130 grams of CO2 per km that will be implemented on the following timetable:
|Calendar Year||Percent of Fleet||CO2 Emission Standard||MPG Gasoline||MPG Diesel|
While the EU CO2 standard appears to be more stringent than the US CAFE standards, the two are fairly comparable because the EU standard is subject to adjustment at 45.7% of the base rate for new passenger cars that weigh more than 1,372 kg, or about 3,000 pounds. In the case of a European car like a BMW 5-Series that weighs closer to 4,000 pounds, a fairly typical American value, the allowable CO2 emissions will be 150 grams per km, which works out to 240 grams per mile, a figure that’s almost identical to the US target.
While it may be fun to debate the long-term viability of plug-in vehicles, which I characterize as unconscionable waste masquerading as conservation and even the first great fraud of the new millennium, it’s clear that plug-ins will offer no help by 2012 and their contribution to meeting 2016 fuel efficiency standards will be insignificant. Therefore the heavy work will have to be done by conventional fuel efficiency technologies that are available and cost effective today.
In mid-February, I wrote an article titled Energy Efficiency in the Automotive Sector that included the following summary of HEV and automotive efficiency technologies I assembled from the www.fueleconomy.gov website.
|Hybrid Electric Technologies||Gain|
|Prius-class strong hybrids with idle elimination, electric-only launch, recuperative braking and acceleration boost.||40%|
|Insight-class mild hybrids with idle elimination, recuperative braking and acceleration boost.||20%|
|Direct Fuel Injection (with turbocharging or supercharging) delivers higher performance with lower fuel consumption.||11-13%|
|Integrated Starter/Generator Systems (e.g. stop-start systems) automatically turn the engine on/off when the vehicle is stopped to reduce fuel consumed during idling.||8%|
|Cylinder Deactivation saves fuel by deactivating cylinders when they are not needed.||7.5%|
|Turbochargers & Superchargers increase engine power, allowing manufacturers to downsize engines without sacrificing performance or to increase performance without lowering fuel economy.||7.5%|
|Variable Valve Timing & Lift improve engine efficiency by optimizing the flow of fuel & air into the engine for various engine speeds.||5%|
|Automated Manual Transmissions combine the efficiency of manual transmissions with the convenience of automatics (gears shift automatically).||7%|
|Continuously Variable Transmissions have an infinite number of “gears”, providing seamless acceleration and improved fuel economy.||6%|
In a presentation at last fall’s Frankfurt Motor Show, Dr. Wolfgang Bernhart of Roland Berger Strategy Consultants predicted that full or partial powertrain electrification would become a critical automotive efficiency technology by 2020 and forecast high scenario market penetration rates as follows:
If the Roland Berger forecast is accurate, stop-start engine systems will likely become a standard feature within 10 years; a conclusion mirrored in an October 2009 report from HSBC Global Research. The forecasts were a good deal easier to ignore a couple months ago than they are today.
Last month Lux Research published a new industry report titled “Emerging Technologies Power a $44 Billion Opportunity for Transportation and Grid” that forecast energy storage system sales growth of $890 million for stop-start vehicles by 2015. Of that total, Lux reported that roughly 10% would be spent on supercapacitor-based systems and the remaining 90% would be spent on advanced lead-acid batteries.
After the NHTSA announcement, I called the author who confirmed that his estimate of $890 million in stop-start battery purchases was based primarily on EU regulations, and the subsequent adoption of the new CAFE regulations would require a significant upward revision in his forecast. My guess is that by the time the dust settles, the forecast revenue gains for advanced lead-acid battery producers will be on the order of $2 billion by 2015, a number that handily eclipses Lux’s forecast of $1.2 billion in lithium ion battery sales growth during the same period.
The four publicly traded U.S. companies that stand to benefit most from the widespread implementation of stop-start technology as standard equipment in the U.S. and Europe are Johnson Controls (JCI) Exide Technologies (XIDE) Maxwell Technologies (MXWL) and Axion Power International (AXPW.OB). For more detailed information on the strengths and weaknesses of these companies in the stop-start space, my author’s archive at Seeking Alpha is a good starting point that provides a variety of detailed discussions, along with copious links to third-party source documents.
While there are times when I feel like a broken record for revisiting the same topics over and over again, the last twenty months have been a time of tremendous change in the energy storage sector and every relevant development has supported my premise that cool technologies will progress more slowly than the market expects and companies that manufacture objectively cheap products have a far greater economic potential over the next five years.
I continue to believe the baby steps of the cleantech revolution will be taken with cheap and reliable solutions like advanced lead-acid batteries. Something better, stronger and cheaper will undoubtedly emerge in the future. But until it does we need to go to work with the tools we have, solve our problems through old fashioned hard work and be ready to embrace new technologies when they prove to be something more than airbrushed centerfolds.
Disclosure: Author is a former director of Axion Power International (AXPW.OB) and has a substantial long position in its stock.
One thing that will have to change for CAFE standards to making stop-start de rigeur is for the EPA to start taking into account stop-start technology when calculating MPG:
It’s a fascinating report and I’ll need to do some digging around at the EPA, but apparently Mazda has decided to go stop-start across the fleet regardless:
What battery type is used by Mazda in their stop/start vehicles? If standard lead acid, what are the implications for Axion?
I don’t know who Mazda buys their batteries from, but with a $500 option price, I’m sure they’re using lead-acid.
I’ve heard that conventional lead-acid is not giving the automakers the performance they want because the application is so demanding.
That being said, it will be very hard to draw any lines between Axion and specific OEMs till somebody starts talking.