On March 20^th, a group led by major natural gas drilling companies Chevron, CONSOL Energy, EQT Corporation, and Shell announced that they have negotiated a set of voluntary environmental standards for shale gas hydraulic fracturing.  The new coalition includes five environmental groups and two foundations that have environmental interests.  The new Center for Sustainable Shale Development (CSSD) certification will include 15 performance standards for fracking operations.

This effort is encouraging because, until now, the arguments about fracking have been largely based solely on two voices: the drillers claiming that the technology is absolutely safe and the environmentalists claiming it is irreparably flawed.  While the truth is grayer than these positions, the bottom line has been that America’s thirst for energy has trumped any environmental concerns, until politicians get an earful from constituents and ban fracking altogether.  The CSSD standards have been compared to the LEED certification for certifying construction of environmental buildings and are likely to help relieve some of the tension surrounding fracking.

Mostly Marcellus

The CSSD standards are a good first step, but I see a few flaws that are likely to undermine some of their effectiveness.  For the most part, these new standards cover groundwater, the water used for fracking, the flaring of natural gas, and the type of diesel fuel that can be used at drilling sites.  The standards do not seem to make any effort to address the air pollution associated with drilling or the land use.  Most of the time, the air pollution surrounding fracking operations is substantially worse than other areas.  What’s more, the CSSD standards ignore the pollution impact of all the motors running on a drilling site.

Drill motors are almost always considered non-road diesel engines by the U.S. Environmental Protection Agency, and therefore, have different requirements than the diesel trucks that are used on the road.  Natural gas-fueled motors for drilling operations are starting to come into play, but these remain few and far between and the CSSD standards are unlikely to push that front.

Another challenge with the CSSD standards is one of geography: these standards (so far) only apply to the Appalachian area and the Marcellus shale gas region.  Whether they’ll be accepted by drillers in Wyoming and western states remains an open question, though it should be noted that Chevron and Shell both drill in those areas as well.  This geographic limit is likely driven by the number and location of environmental partners in the CSSD, but it gives the impression of more political posturing.

Still, the fact that drillers and environmentalists came together to put together some standards that appear to help reduce the impact of fracking is huge.  So, the billion dollar question is: will voluntary CSSD standards be enough to quell the fracking concerns and stave off additional legislative regulations?  Don’t bet on it.  The Sierra Club has already blasted the voluntary nature of the standards, and the Environmental Defense Fund has come out saying that these should complement, not replace, regulations.  Ultimately the success of these new standards will rest in the court of public opinion, and the public, right now, shows little inclination to limit the natural gas bonanza.

The electric two-wheel vehicle (E2WV) market in China has grown explosively in the past several years.  A lot of this growth has come from the supply side, as the number of E2WV producers has reached anywhere from 2,700 to 3,000 companies  While many of these manufacturers are building E2WVs from raw materials, numerous companies are manufacturing vehicles from completely knocked down (CKD) kits.  A manufacturer builds the frame and components from raw materials and then these pieces are sent as a CKD kit to another factory, which assembles and rebrands the E2WV.  (CKD kits are often sent across national borders by Chinese and other Asia Pacific and Western Hemisphere manufacturers, as well.)  Other manufacturers are assembling E2WVs from components and frames sourced from a variety of suppliers.

E2WV growth in China is also being driven by relaxed regulations.  In China, e-bicycles are defined as having pedals, a speed limit of 20 kph (12.4 mph), and a weight limit of 40 kg (88.2 lbs).  Not subject to licensing rules, they’re significantly lower priced than scooters or motorcycles.  The majority of the e-bicycles sold in China are scooter-style, meaning that they have step-through frames similar to traditional scooters, with almost useless pedals.  Many of these scooter-style e-bicycles skirt the 40 kg weight limit.  Additionally, the speed limits are met through speed limiters placed on vehicles capable of much higher speeds, and it is an open secret that many retailers will either disable these limiters or show customers how to do so.  Enforcement of the rules has been lax at best – a situation that has begun to change as the number of E2WVs has grown.

The first stab by the government of China at cracking down on this industry in 2009 was met, not unexpectedly, without enthusiasm from both consumers and manufacturers.  The new enforcement rules, which would have required e-bicycles to be licensed, were dropped before they went in effect.  But in 2011, a crackdown on lead-acid battery producers resulted in the closure of a number of battery manufacturers that supply the E2WV market (approximately a quarter of all lead produced in China goes to E2WV batteries).  The result was a shortage of batteries throughout the first half of 2012, limiting the growth of the E2WV market.  What’s more, the government now requires E2WV manufacturers to obtain licenses, leading to consolidation in the market during 2011 and 2012.  Cities and provinces have also tried cracking down on enforcement of e-bicycle rules, with limited success; some have decreed outright bans.

Additional regulation is inevitable.  As I pointed out in Pike Research’s report, Electric Motorcycles and Scooters, the details of the new rules remain unclear, but one of two results is likely: e-scooters will be reclassified as e-bicycles because of a change in the definition (higher weight limits or speeds, etc.) or e-scooters will get a boost as e-bicycle manufacturers are forced to change their definition to meet market demand.  Of course, the third option is that the government, faced with a backlash from consumers and manufacturers, will back down again – though this seems less likely than it was in 2009.

Annual Electric Scooter Sales, China: 2012-2018

(Source: Pike Research)

Small plug-in electric vehicles (PEVs) are typically said to be designed for use within cities where commutes are shorter and pollution is high.  These vehicles are targeted at large urban areas, and our analysis of PEV sales by Metropolitan Statistical Areas confirms that big cities are indeed seeing the highest sales.  This urban focus, however, raises the question: How many more cars can cities absorb?  I have broached the subject of peak cars in the past, and I stand by my assertion that the United States hasn’t yet hit that magic number, beyond which car sales will fall steadily over time.  Even more intriguing is a related question: Will PEVs actually cause traffic congestion and bring the point of peak cars sooner?

Texas A&M’s Transportation Institute released its annual study on traffic in the United States in early February.  The headlines are unsurprising: traffic is bad and getting worse.  Another recently released U.S. study, authored by Chris McCahill and Norman Garrick and published in Urban Design International, shows that once all these cars arrive at their destinations, cities that provide ample parking may not, in fact, be places where people want to be.  The amount of space required for parking cars (regardless of drivetrain) makes destinations less desirable.

More Lanes, More Traffic

As cities grow, one thing becomes clear: this is an interesting conundrum for city and transportation planners who don’t want cars but want the people that cars bring.  Often public transit is pointed to as a key solution and it does serve the purpose.  However, as I pointed out in my peak cars post, in the United States transit passenger trips and the number of vehicles sold actually correlate surprisingly well (they both grow at similar rates).  Similarly a 2011 study from the American Economic Association demonstrates that, regardless of the increase in public transit and in the number of lanes of roadways, traffic tends to always clog the available roads.

In sum, traffic is getting worse (and perhaps more concerning is that it’s becoming less predictable), resulting pollution is significant, building more roads doesn’t reduce traffic, and when all that traffic arrives at its destination, if drivers can easily find a place to park, that likely means they don’t want to spend much time there.  To find the solution to this challenge, a number of different strategies for congestion mitigation have been attempted, including congestion pricing, banning vehicles from roads on specific days, increased public transit, and carsharing.

Since congestion mitigation is almost always centered on the environmental impact of traffic, it makes sense that PEVs would be excluded from mitigation schemes.  PEVs greatly reduce or eliminate the environmental cost of traffic.  Of course, the fly in the ointment is that many of the other indirect costs of driving a vehicle remain ‑ particularly time lost to traffic congestion and increased parking space requirements.  While this won’t matter for the next decade because of the low number of PEVs on the roads, as the market matures expect to see PEVs increasingly getting lumped together with traditional vehicles.  This distinction matters because city and transportation planners talk in terms of decades in future plans … much to the bicycle industry’s glee, no doubt.

It’s no secret that the United States automotive market is on the upswing.  Chrysler, GM, Honda, Hyundai, Toyota, and VW are all boasting new strong, if not record-breaking, sales from 2012.  This was evident at the North American International Auto Show.

I have been going to the auto show in Detroit since about the mid-1990’s, and in 2009, the show, along with much of the Detroit auto industry, was faltering.  Automakers had pulled out of the show.  GM and Chrysler were on the brink of bankruptcy.  And those that did show up didn’t have extra cash lying around to throw into giant displays and theatrics.  Well, 2013 is clearly a different economic feel.

While the show in the last few years has had almost an apologetic quality to it, 2013 had a decidedly different feel.  This year the truck displays were as brash and bold as they have ever been (Ford even lowered a pickup truck, called the Atlas Concept, from the ceiling).  Chrysler’s Ram 1500 won truck of the year, and Jeep showed off a new high performance Grand Cherokee SRT.

Still, fuel economy was a key message of almost every launch.  Start-stop is a feature called out on the Ram 1500.  The Grand Cherokee has a new V6 diesel engine with towing capacity of 7,400 lbs and listed fuel economy of 30 mpg on the highway.  The Ford Atlas Concept showed features such as wheel shutters that closed when the vehicle is at speed, to lower drag.

EVs Shift Gears

Performance vehicles are also back in a big way.  Of course, there has been a lot of digital ink spilled on the new Corvette.  Audi also displayed the new 2014 RS 7, which will hit 62 mph in under 4 seconds, thanks to a 560 hp V8.  Again, fuel economy was another key message, as the RS 7’s cylinder shut-off feature improves fuel economy by 10%.

So, where were the electrics?  Well, they weren’t forgotten, but there was a decided shift in tone.  This year, plug-in hybrids (PHEVs) were the format of choice.  VW showed a new midsize SUV concept, the CrossBlue, with 15 miles of electric driving and 35 mpg from the turbo diesel engine.  And Cadillac unveiled the production version of the ELR, which uses the Volt plug-in drivetrain.

The big battery electric at the show was an updated version of the Tesla Model X.  Clearly, this vehicle is getting closer to production, but still has a ways to go.  Tesla is planning to use the 60 kilowatt-hour (kWh) and 85 kWh battery packs to achieve 200-plus miles of range, along with the 17 in touch screen from the Model S.  Prices weren’t given but I expect the 60 kWh option to land somewhere in the $75,000 neighborhood.  Telsa also again promised a vehicle close to the BMW 3 series in size and price vehicle within the next 3 to 4 years.

Nissan’s venerable LEAF was there too, but it felt like old news.  With a 3-year-old design, Nissan seems to be struggling to keep the reduced-price LEAF relevant.  The big excitement at Nissan was reserved for the new Versa Note, a subcompact internal-combustion vehicle.

Of course, Bob Lutz’s VIA Motors again straddled the two worlds, by showing a brash, no apologies, 800 hp PHEV pickup concept with 35 miles of electric range and PHEV cargo vans.

Other small things pointed to the comeback of the internal combustion engine (ICE) over the electrics this year.  Small SUVs (really small) were numerous, with Honda and Lincoln revealing new “compact utility vehicles” (CUVs).  The test drive circuit in the basement of Cobo Center, which has featured a test track for driving BEVs, PHEVs, and HEVs in the past, this year included a regular gas-powered Fiat 500 sport, despite the BEV 500 being upstairs on the show floor.  The test track was half to a third the size of past years (perhaps due to remodeling going on in Cobo), and had significant roof leaks, which gave the whole thing the unfortunate feeling of being trapped in a dungeon with the green cars.

Perhaps the most telling sign of the times (and the most perplexing) came to us again from Bob Lutz.  While converting ICE vehicles to electric may be so 2009, VL Automotive (a design firm) is now converting PHEV Fisker Karmas to V8 powered ICE vehicles under the name Destino.  Electric drives may be here to stay, but clearly big gas power isn’t going away.