Navigant Research Blog

Japan Doubles Down on Fuel Cell Vehicles

— July 13, 2014

Two recent announcements out of Japan have dramatically cut the price that Japanese drivers will pay for a fuel cell car.  Toyota unveiled its completed design for the fuel cell vehicle (FCV) it will put on the market in 2015.  More importantly, the company revealed the price would be around ¥7 million, or $70,000.  This is a big drop from the $100,000 price tag floated, alarmingly, a few years ago.

A day earlier, Japan’s prime minister Shinzo Abe called for subsidies of FCVs beginning next year.  A part of the government’s economic growth strategy, these incentives reflect the hydrogen energy roadmap adopted by Japan’s trade ministry.

As described in my Fuel Cell Vehicles report, I’ve long said that the two impediments to fuel cell cars taking hold in the market are cost and infrastructure.  Automakers like Honda and Daimler have already shown that the technology works, resolving early issues such as cold-start capability.  FCVs will also deliver on the key performance characteristics that make them intriguing, as compared to battery electric vehicles: range and refueling.  The Toyota FCV will have a 420-mile range and refuel in 3 minutes.

The Post-Fukushima Strategy

For longtime fuel cell technology followers, I am stating the obvious.  The potential benefits of fuel cells in transportation have been well-understood for years.  Honda, General Motors (GM), Daimler, Hyundai, and Toyota have all shown they can make cars that meet those performance targets.  Nevertheless, in the U.S. media, the perception persists that fuel cells were made obsolete by the successful introduction of plug-in electric vehicles (PEVs).  In Navigant Research’s recent white paper, The Fuel Cell and Hydrogen Industries: 10 Trends to Watch, I noted that the U.S. media would continue to tie these two technologies together – and would misunderstand the rationale for pursuing them both.  Sure enough, this article asserts that the Japanese government’s goal is to crush Tesla.

Not quite.  The Japanese government’s plan is to promote technologies and fuels that will help ensure the country never has another experience like the Fukushima disaster in 2011.  The Japanese government also wants to grow the economy by supporting domestic industries.

The Market Will Decide

To take a phrase from President Obama, Japan has taken an “all of the above” approach in pursuing these two goals.  Nissan and Toyota have done well in the PEV market.  But fuel cells offer an alternative for consumers who may find that a plug-in car doesn’t meet their driving needs.

Japan has also made a huge commitment to fuel cells that provide residential power.  The country’s residential fuel cell program has supported the deployment of over 42,000 combined heat and power (CHP) fuel cells in Japan.  Manufactured by Toshiba, Panasonic, and Eneos Celltech, these residential units are sold through gas companies like Tokyo Gas.  After Fukushima, when the plant’s backup diesel generators were rendered useless and employees scavenged car batteries to power monitoring equipment, the Japanese government set a requirement that the fuel cells be capable of starting up when the power is off.  While these fuel cells employ a different technology from automotive fuel cells, the CHP program demonstrates both Japan’s commitment to pursuing whatever technology the country believes will support its energy resiliency (utilizing domestic expertise) and its willingness to support that technology in its early market introduction.

Japan has already committed to building 100 hydrogen fueling stations in key metro areas.  The country’s energy companies are partnering in that effort.  Note that the Japanese government is also supporting the automaker deployment of 12,000 charging stations in Japan.  Again, it’s not an either/or prospect for Japan.  The announcement on the FCV subsidies will put the cars at a price point where they might have a chance in the market.  If the infrastructure is in place to make fueling reasonably convenient, then it will be up to consumers to decide whether FCVs will succeed in the market or not.  Success will be measured over many years, not in 18 months.

 

DC Fast Charging Gains Momentum

— June 17, 2014

While still in some ways the forgotten child of the charging family, direct current (DC) fast charging is starting to take on some momentum.  At the Electric Drive Transportation Association Annual Meeting in May, BMW and Nissan joined ABB and Fuji Electric on a panel to discuss their experiences in the United States with fast charging and what they see as the main barrier to further development of the market.

The panel addressed three technical questions that continue to hang over the DC charging market.  The first question was whether the industry would ever resolve the dueling standards issue and officially adopt either the CHAdeMO standard prevalent in Japan or the SAE’s combo standard being adopted by European automakers and deployed in the United States.  The clear answer from the panel was that both are here to stay.  As a proponent of the CHAdeMO standard, Nissan has a head start over the combo charger supporters, having deployed over 100 CHAdeMO stations in the United States at Nissan dealerships in addition to its widespread deployments in Japan.  Navigant Research’s view is that, over time, the combo charger will start to edge out CHAdeMO – simply because more automakers will adopt it.  But a few markets, most notably Japan, will stick with the CHAdeMO standard, having made significant investments in deploying it.

Fast Is Better

The second question was on whether battery degradation is a concern.  The consensus was that it is not.  Cliff Fietzek, manager of Connected E-Mobility at BMW and David Peterson, EV Regional Manager at Nissan North America, asserted that no one is more concerned about protecting the battery than they are, and they are comfortable with the use of DC charging for their electric vehicles (EVs).

The final technical question is still open for debate: whether fast charging is more optimal at 50 kW or 20 kW to 25 kW.  ABB is offering both 20 kW and 50 kW units, while Fuji has focused exclusively on the 25 kW size.  Larry Butkovich, general manager of EV Systems at Fuji Electric Corporation of America, made the case for the 25 kW charger, available on the ChargePoint network in California for over a year.  According to Butkovich, the average driver stops for 20 to 30 minutes and gets around a half a charge, with an average output of 18 kW.  The typical fee paid is $6 to $8.  Butkovich noted that usage dropped once the fees were instituted but quickly bounced back, and the company thinks a business case can be made for fast charging.

Distance versus Speed

The case for lower-power fast charging centers on the time it takes to bring a battery to 80% state of charge (SOC).  BMW’s Fietzek noted that a 50 kW unit will get a 20 kWh battery to 80% SOC in 20 minutes, while a 25 kW charger takes 35 minutes.  Fuji’s experience suggests that a driver will be satisfied with a 20- to 30-minute charge that doesn’t quite reach 80% SOC.

Given that the panelists cited cost as one of the biggest barriers to this market, downsizing to a less expensive 20 kW or 25 kW fast charger will make sense in applications where the charger is not expected to enable long-distance trips.  The lower-power units are also less likely to trigger costly demand charges, which are another major barrier to securing more fast charging locations.  These units are poised to capture more market share in the United States ‑ especially for operators not involved in deployments supported by the Department of Energy or the big automakers.

 

Brickyard City Hosts Carsharing Experiment

— June 10, 2014

Indianapolis, Indiana, is set to become the site of one of the biggest electric vehicle (EV) carsharing programs in the United States.  The Bolloré Group kicked off the “BlueIndy” carshare program, the company’s first in the United States, in May.  The Bolloré Group is large French conglomerate that, among other things, produces electrical components for capacitors and lithium polymer batteries.

Indianapolis is an odd choice for an EV carshare service location compared to a city like Paris, where Bolloré’s Autolib one-way EV service has been a huge success since its launch in December 2011.  Autolib was one of the first carshare programs to combine EV technology with the one-way carshare model, which allows users to drop cars off at any of the service’s designated parking spots.  The Autolib program has expanded beyond Paris and now has around 140,000 users across France.  According to Hervé Muller, the president of BlueIndy and vice president of Bolloré subsidiary IER, the cars in the Paris Autolib program are used an average of 7 times per day and the program is set to become profitable just 3 years after its launch. The company is now targeting the United States.

Charge Here

So why Indianapolis?   The city has limited public transportation, and its downtown, although quite suitable for hosting the Super Bowl, lacks the concentration of residential living that successful carsharing cities like Paris, Boston, and San Francisco have.  What it does have, though, is a mayor who made the carshare program one of his major priorities and an electric utility that stepped in to pay for charging equipment.

Setting up a public charging network fulfilled a key goal for Indianapolis Mayor Greg Ballard.  Indeed, this program demonstrates a creative way for a city to rapidly establish a charging network.  Bolloré will let other EV drivers use the stations, thus adding an additional revenue stream.

Bolloré has committed to bringing 500 Bluecar EVs and 1,000 public charging stations to Indianapolis. This represents a $35 million commitment from the company.  Indianapolis Power & Light (IPL) has also partnered to support the charging deployment, although there is some question about whether IPL can secure a rate hike to pay for it.  In my conversation with him, Muller said Bolloré expects the BlueIndy service could take up to 6 years to reach profitability and noted that the company is taking a long-term view of developing its U.S. carshare business.

Students and Tourists

It will be instructive to track how this service is used.  Typically, public transportation can be a key ingredient for successful carsharing services, because it allows city residents to get around easily, with the carshare filling in the transit gaps.  In Indianapolis, BlueIndy may essentially take the place of a widespread public transit network.  This is an advantage of the one-way model, with cars being easily used for short trips across town, for example.

The Bolloré Group is also looking to draw membership from the city’s large student population, travelers using the Indianapolis airport, and local businesses that could use the carshare program in place of fleet vehicles.  It’s an ambitious plan. Bolloré has yet to deliver its first U.S.-approved EVs and the program could take several years to reach viability. But if it works, the Indy experiment could serve as a model for other similar U.S. cities.

 

The Coming Crack-Up on U.S. Highway Funding

— May 6, 2014

The White House has submitted its transportation funding proposal to Congress, where it immediately fell victim to the legislative rigor mortis that’s overtaken the 113th Congress.  The current lack of congressional activity is partly thanks to the November elections.  But it also reflects two broader trends in Congress that spell serious problems for the future of U.S. infrastructure.

First is the loss of bipartisan agreement on the importance of transportation funding.  Transportation used to be one of the few areas on which Republicans and Democrats could be counted on to pass legislation, even when they disagreed about broad policy objectives.  This is no longer true.  While transportation funding is not as contentious as some issues, there is less consensus on its importance than in previous eras.  That means that policy disagreements are more likely to prevent action from being taken.

Broke by Fall

The second, and related issue, is the divide over tax policy.  Although support for tax reform is strong, proposals put forward by the House Ways & Means Committee chair and the White House have not made much progress.  One ongoing area of disagreement is whether to use new revenue from eliminating tax breaks to fund other priorities, such as transportation, or whether any tax reform must be “revenue neutral.”

This divide will make it very difficult to address the problem of dwindling gas tax revenue.  The transportation funding problem is better described as a revenue problem.  As we’ve noted before, the U.S. Highway Trust Fund – which comes from gas tax revenue – has been steadily dropping, creating a major gap between U.S. infrastructure needs and available funding.  This issue has been abundantly clear to Congress and the White House for years, yet there’s no solution in sight because of an unwillingness to make difficult decisions about new revenue schemes.

The problem may come to a head this summer.  According to the White House and the Congressional Budget Office, the Highway Trust Fund will run out of money in August.

Pothole Puzzle

This creates problems for states looking to start major construction projects in the warmer spring and summer months.  A new report by advocacy group Transportation for America projects that gas tax revenue in fiscal year 2015 will not be able to fund any new projects.  And this problem will only worsen as the U.S. passenger car fleet becomes increasingly fuel efficient under stringent Corporate Average Fuel Economy (CAFE) regulations out to 2025 and urban areas continue to push alternatives to individual car ownership.

Congress could raise the gas tax, but this is extremely politically unpalatable.  New revenue could come from increased use of tolls.  Indeed, the White House has proposed allowing states to implement tolls on interstate highways for the first time.  It could come from greater use of privately operated, tolled highways – though early results on that have been mixed, with the highways garnering little revenue.  It could come from mileage-based taxing schemes, but these face hurdles due to privacy concerns.

Each of these options would continue to move the United States away from a long-term, national vision for the country’s transportation future and toward a patchwork of ad hoc solutions that rely more on city and state initiatives.  While localities do well as laboratories for innovations in transportation, the United States will not be well-served in an increasingly competitive global economy if it is not able to support a robust national transportation infrastructure.

 

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