Navigant Research Blog

Should the U.S. Replace the Gas Tax as the Federal Funding Vehicle for Transportation?

— November 17, 2011

I asked this question in my last blog post, which examined a recent GAO report that all 50 U.S. states received more transportation funding from the federal government than they sent to it in gas taxes from 2005-2009. The GAO concluded that fuel taxes may no longer be a viable source for transportation funding since vehicles are becoming more efficient and are running on alternative fuels. I agree with this assessment, based on Pike Research’s own projections of plug-in vehicle uptake and on the proposed new mileage standards formally proposed yesterday by the Obama Administration. These new standards will raise fuel economy to 54.5 miles per gallon by 2025, requiring cars to increase fuel economy 5% every year.

The revenue gap is simply going to widen. This issue has been a key sticking point in Congressional negotiations over the next U.S. transportation authorization bill. The last one ran out in 2009, and Congress has spent the last two years unsuccessfully trying to pass a new one. While Congress these days hardly needs an excuse to drive itself into gridlock, this is an issue that requires rethinking the way the United States pays for infrastructure, and that is not something that will be easy to do.

The simplest solution is to raise the gas tax. My colleague Dave Hurst has already outlined the case for this – and the dim chances that it will happen. Suffice it to say, increasing gas taxes has never been an easy sell to the American public and is likely to be even less popular in the current economic climate. The unknown factor here is that pretty much all of the federal budget is considered fodder for deficit control measures right now, so that could change the dynamics somewhat. But a gas tax hike remains unlikely, so what about an idea that has been floated for a number of years – taxes based on vehicle miles travelled (VMT)?

This has the benefit of seeming more “fair,” with all drivers paying based on their actual road usage. I looked at this concept in researching a Pike report on the state of smart technologies in transportation. A VMT based tax hits many of the intelligent transportation touchpoints. It takes advantage of increasing vehicle connectivity, which is occurring for a variety of reasons such as improving safety or offering in-vehicle information. It allow real-time responsiveness, which in turns means the potential to create a variable tax structure that charges more during peak times. It also raises the issue of who pays, since some vehicles potentially would have to be retrofit with tracking devices and the system must be managed. And it raises privacy concerns among some in the public, similar to those we have seen with smart phones GPS tracking.

The Oregon DOT conducted a road user fee pilot project in 2006 and 2007. The agency found that the prototype tracking technology needed improvement; since the pilot ended, vehicle telematics has been progressing significantly, so technical issues are not likely to be the show stopper. More likely is then the potential political pushback, as drivers object to having their travel data collected or to the possibility that such a system would be designed to modify their behavior – for example, by discouraging rush hour driving. This concept has already run into trouble with the introduction of high occupancy toll (HOT) lanes, with some arguing it turns driving during peak hours into a “luxury” activity. This argument would certainly be used against a variable road user tax, making this concept politically challenging. Based on some of these early concerns, while states and the federal government will keep exploring VMT based taxes, they may have to look to other innovative ideas.

 

GridWise Global Forum: Smart Grid Leaders Highlight Progress, but More Work Needed

— November 17, 2011

Proponents of smart grid technology agreed that progress has been made to improve energy efficiency, but much more work is needed to reap the promised benefits. That was the upshot of the three-day GridWise Global Forum held recently in Washington, D.C.

There is “some outstanding technology being deployed,” said Bob Shapard, chairman of GridWise Alliance (the forum sponsor) and CEO of Texas utility Oncor Electric Delivery, noting that beyond smart meters, advanced switches and dynamic line measuring help improve a utility’s operational efficiency. Combined with smart meters, these technologies will help dramatically over the next 5 to 10 years, he added.

More Effort Needed

But clearly more effort is needed to advance the grid, as Claudio Zito, head of international business development for Enel Distribuzione – Italy’s largest power company – told the audience of some 200 people. His company was the first utility in the world to install smart meters, but noted that there remains “lots of work to do.”

Joe Kelliher, former FERC chairman and now executive vice president of regulatory affairs for NextEra Energy, perhaps summed it up best when he said what’s needed is both a muscular and an intelligent grid when describing the pathway ahead. But Kelliher, said there is still too much uncertainty keeping dollars on the sideline, and that if he were ‘king for a day,’ he would make quicker decisions to get things moving and remove the chaos.

Lousy at Communicating

One of the other themes that emerged was how poorly utilities communicate the benefits of the smart grid to consumers. Southern Company CEO Susan Story admitted, “We are doing a lousy job of communicating.” She said what utilities need to do is take the “so what” and turn it into a “this is what it means to you” message, showing people the benefits of a smart grid.

Story also pointed to a need for deeper understanding of customer segments. For instance, among Southern Company’s customers, 30% to 35% still pay their monthly bills by walking into the utility’s subsidiary offices, and 18% of Southern customers do not have bank accounts.

By contrast, San Diego Gas & Electric’s COO Michael Niggli described how his company has found success engaging customers during its smart meter rollout. SDG&E made a point of having seven touchpoints with customers to explain the deployment process and the benefits of the new technology; and he emphasized the importance of not over-selling the product.

Similar Challenges Globally

Industry leaders from outside the United States, expressed similar challenges in getting consumers engaged with smart grid technologies as utilities test and deploy equipment and services. Representatives from South Korea, Australia, and Japan described various levels of engagement. In particular, Hiroshi Watanabe, executive director of Japan’s New Energy and Industrial Technology Development Organization (NEDO), said consumer attitudes differ by country and region-by-region, so the challenge is, “How to cultivate those customer needs?”

Marathon of Sprints

Some of the effort needed to invigorate smart grids must be focused internally by utilities, according to two GridWise panelists. Jennifer Lin, senior director of product marketing for Cisco’s connected energy group, said everyone within the organization needs to align with the smart grid vision, likening the effort to a marathon and not a sprint. Sander van ’t Noordende, group chief executive for management consulting at Accenture, echoed this view, saying it’s a “marathon of sprints” for utilities trying to harness the smart grid concept.

Takeaways

The big takeaways for me: They early hype-phase for smart grids is over. The technology is available and being deployed (albeit slower than some would like). And now the months and years of heavy lifting are needed to deliver on the promised benefits. Time for the muscles and smarts to come together.

 

Rio de Janeiro’s System of Systems

— November 17, 2011

At the IBM Smarter Cities forum in Rio de Janeiro last week, I had the chance to go behind the scenes and take a first-hand look at Rio’s smart city project. My main impression is that the project represents one of the purest emerging examples of a smart city project that is simultaneously developing smart solutions on multiple fronts – natural disaster management, public safety, health, utilities, to mention a few – and is starting to achieve a true “system of systems” – nirvana in smart city terms. This level of integration and interoperability across city agencies – and the successes Rio has had so far – bodes well for the smart city opportunity not only in emerging markets but worldwide.

The City of Rio de Janeiro has accomplished this by deploying smart technologies ranging from broad, continental-scale weather tracking down to mobile device-enabled notification systems for potholes and burnt-out streetlights. The centerpiece, of course, is the Rio Operations Center, which features Latin America’s largest screen and dozens of stations that provide visualizations of real-time data feeds. Within the center, 35 city agencies work together to synergize their responses to city events. (One interesting detail is that the operators wear uniforms modeled after NASA that create a sense of camaraderie and homogeneity across the historically separate city agencies, which creates something of a spectacle.)

To provide an example of how this works: If heavy rains cause flooding in a specific portion of the city, the operations center coordinates teams that notify citizens ahead of time via text message, close down the streets, mobilize ambulances, and shut down electricity distribution systems in the neighborhood to prevent electrocution. These processes are all pre-determined via standard operating procedures (SOPs). On the city side, bringing all these agencies under one roof helps break the silos that perennially plague the smooth delivery of city services. And, on the citizen side, it certainly helps that Brazil’s mobile device and networks are exploding, providing the platform for vigorous smart city app development and citizen involvement.

But technology is only one part of the winning recipe for a smart city. One persistent barrier echoed many times at the event is that smart city projects often rely heavily on the vision and initiative of specific mayors and administrations, which typically face four-year election cycles. The timetables required for certain types of infrastructure – particularly those involving high-tech and high initial capital expenditures – don’t always fit neatly into mayoral terms. Indeed, Rio’s mayor, Eduardo Paes, who spoke at the event, described the challenges of making progress on the project despite his uncertain future as mayor. Selecting smart city technology measures that optimize in terms of high net-present value, ease of deployment within a tight timeframe, and high PR benefits for the mayoral office seem to be emerging as the most pragmatic smart city solutions that address this challenge.

What differentiates Rio from other smart cities is the added challenge of managing its favelas – shantytowns perched on steep hillsides throughout the city that have historically received little in the way of city services or regulation – and integrating them with Rio’s urban fabric. These areas are among the most vulnerable to disasters such as mudslides as well as important symbolic testing grounds for Rio’s ability to serve even its poorest citizens as scrutiny of the city mounts in the lead-up to the 2014 World Cup and 2016 Olympics. From the perspective of a smart city, the favelas also provide opportunities for infrastructural “leapfrogging,” installing smart systems that could catapult these portions of the city to levels found in the rest of the city using state-of-the-art technology.

All in all, though, the event provided a clear picture of the concrete progress that’s being made on the smart city front and, in particular, the unique opportunities afforded by cities in emerging markets.

 

Update: Wireless EV Charging

— November 16, 2011

I am in South Korea this week for the International Forum on Electric Vehicles (IFEV 2011), at the Korea Advanced Institute for Science and Technology. Tomorrow I’ll giving a presentation at the conference on wireless charging of electric vehicles, and as part of my talk I’ll provide a news update on recent developments in wireless EV charging. Here are some of the highlights:

Working with the government of the United Kingdom, the Mayor of London’s office, and Transport for London (TfL), Qualcomm this week said it will launch a wireless EV charging trial in London.  Starting in London’s “Tech City” district in early 2012, the pilot program will use Qualcomm’s inductive power transfer (IPT) technology and involve up to 50 electric vehicles (EVs).  Qualcomm says its IPT system “enables high-efficiency power transfer across a large air gap.”  Prime Minister David Cameron said in a statement, “This wireless charging technology is a giant leap forward for the electric car industry.”

According to the “rumors” section of Automobile Magazine’s website, Nissan is developing a wireless charging system for the Leaf.  As with many prototype wireless EV chargers, the system will consist of an inductice transmitting pad on the ground and a receiving unit on the undercarriage of the vehicle.

The “world’s biggest trial of electric vehicles” is taking place in Coventry and Birmingham, in England,, under the name “CABLED,” which stands for Coventry and Birmingham Low Emission Demonstrators (CABLED).  As part of the trial, the BBC reports,  a pair of Citroen C! EVs are using the wireless charging system from HaloIPT, a U.K. company based on technology first developed at the University of Auckland in New Zealand.  Auckland has become one of the world centers for wireless EV charging technology.

In the same report, the BBC notes that luxury carmaker Rolls Royce “has equipped its latest electric model, the 102EX Phantom Experimental Electric with a magnetic induction plate.”

Earlier this year, Toyota, the leading major automaker in terms of commercializing EVs, invested in WiTricity, the wireless charging technology developer spun out of MIT.  Toyota and WiTricity – which uses magnetic resonance coupling, rather than conventional inductive charging – have signed an agreement to develop wireless charging for future Toyota models.

While my 2010 report, Wireless Power, forecast that wireless EV charging for personal vehicles would not gain significant adoption until the end of this decade, it’s clear that the technology is advancing on multiple fronts.  I’ll have more to report from KAIST after this week’s conference.

 

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