U.S. Energy Secretary Stephen Chu announced a new EV charging initiative last month at the Washington Auto Show.  This was the Secretary’s last new program launch before he announced he would be leaving the DOE.  The DOE’s “Workplace Charging Challenge” is intended to encourage U.S. employers to install EV charging for their employees.  The goal is to increase the number of employers with workplace charging by tenfold within 5 years.  Program participants make a commitment to “develop a plan for workplace charging in at least one major company location” – 13 companies have signed up so far.

The focus on workplace charging highlights the general consensus that PEV drivers will charge up most often at home, but that the workplace is the second most likely place for charging.  This is somewhat in contrast to the heavy focus placed on public charging spots by the media, some EV charging companies, and indeed the DOE itself.  The DOE’s two biggest EV charging initiatives, the EV Project and ChargePoint America, together lead to over 4,000 charging units being placed into publicly accessible networks.  In his remarks, Secretary Chu noted that many potential PEV customers live in apartments or condos and would rely more on workplace charging since they would not have a dedicated garage unit.

Pull, Not Push 

The workplace charging market faces some of the same challenges that the public charging market does.  One question is: how much should the employer actually charge for the use of the units?  For now many workplace owners will do what the public station owners have done and not charge anything, viewing the charging units as a way to attract and retain employees.  Longer term, they may simply bill employees as they would for parking. This issue is less daunting for the workplace sector than for public charging simply because the workplace units will not be intended as a revenue generator; however, this lack of potential revenue is also why employers need to be encouraged to install EV charging stations, which will cost thousands of dollars. Another potential problem will come as the fleet of employee vehicles grows. Businesses will then have to manage the energy use and, in particular, the potential for incurring demand charges when electricity use spikes.

The DOE workplace charging initiative also reflects the new fiscal environment for the DOE (and indeed all government agencies).  The DOE is offering no specific financial incentives for workplace installation through this program, although employers can take advantage of federal tax breaks for installing EVSE that were reinstated for 2012 and 2013 with the fiscal cliff legislation passed at the end of 2012.  Compare this to the $130 million that the DOE provided in 2009 and 2010 for the EV Project and ChargePoint America programs, via the stimulus package.  Given the political focus on reigning in government deficits, we are not likely to see such an ambitious effort, with a matching price tag, in the second Obama Administration, but we will see smaller-scale funding grants – for example, through the Clean Cities program.  Overall, though, the U.S. EV charging market will be moving forward much more on its own now, with companies and technologies rising or falling based much more on the market pull and not government push.

Workplace EVSE Unit Sales, United States: 2013-2020

(Source: Pike Research)

Virginia Governor Bob McDonnell has proposed a new transportation infrastructure funding plan that is being described as bold.  “Bold” is a compliment in the policymaking world, since big problems are assumed to require bold solutions.  The transportation funding gap is indeed a big problem in Virginia, as it is throughout the United States.  At Pike, we have written before that fuel efficiency improvements and alternative fuel vehicles (AFVs) are reducing gas tax revenues, the primary mechanism in many states and at the federal level for infrastructure funding.   Since simply raising the gas tax still seems to be considered political poison, states are considering a variety of other options to address this problem, such as taxes based on vehicle miles traveled.

The Virginia proposal calls for eliminating the gas tax, which is currently $0.175 per gallon (it hasn’t been raised since 1987 and is one of the lowest in the country); increasing the sales tax instead to fund transportation; and increasing vehicle registration fees, including charging AFV drivers an additional $100 per year, with the revenue going to transit funding.

One problem with this plan is that it decouples transportation infrastructure funding from actual road use, instead making everyone pay for roads, whether they use them or not.  This is not inherently a terrible idea, as this is already the case for other types of taxpayer funded programs, like schools.  However, all taxes have perverse effects of some kind, and, as other critics of the plan have noted, higher gas taxes tend to result in behavior that helps the environment and reduces highway congestion.  Sales taxes are also regressive, meaning they hit poorer taxpayers proportionately harder, while gas taxes are progressive: you drive more, you pay more.  Shifting the tax to all retail spending takes away the benefits of the gas tax, and would encourage greater fuel consumption.

Alt Fuels Discouraged

The worst part of Governor McDonnell’s plan is to single out AFV owners by charging them a $100 fee.  It seems like an idea borrowed from other states that are trying to make up the funding deficit from falling gas tax collections, like Washington state, which recently passed an EV fee of $100.  This tariff is meant to rectify the fact that EV drivers are not helping pay for roads through the gas tax.  I cannot see any good reason for taking away the gas tax that drivers of conventional cars pay, and then adding a fee that punishes EVs and other alternative fuel cars.

Another component of the proposal that seems counterproductive: maintaining the diesel fuel tax.  Presumably that is meant to ensure that the state still collects revenue from truck drivers using Virginia roads.  But it will also make Virginia a terrible market for another type of fuel-efficient vehicle – diesel cars.  As I discussed in my Clean Diesel Vehicles report last year, the slightly higher price for diesel than for gas in the United States already discourages adoption of diesel cars.  If the $0.175 state tax on gasoline disappears while diesel still gets taxed, this difference almost entirely wipes out the fuel savings that diesel drivers get from better fuel economy.  While only 125,500 light duty diesel cars sold in the United States in 2012, demand is rising.  The top seller was Volkswagen (here I am referring to VW and Audi combined; if we say only VW, the right percentage is 72%), with 78% of the market.  VW is very bullish on diesel – and happens to have its American headquarters in northern Virginia.

In sum, the proposal lacks a broad framework on how to improve Virginia’s overall transportation system.  Yes, it provides a consistent funding source, but it will also encourage more driving and more oil consumption.  It would truly be bold to be honest with drivers that gas taxes are a sensible way to pay for roads, that $0.175 went a lot farther in 1986 than it does in 2012, and we need to pay for our infrastructure by raising taxes on old-fashioned, gas-powered vehicles.

GE Global Research recently demonstrated its new battery dominant fuel cell bus, which attempts to address a sticky problem for fuel cell buses: cost.  Fuel cell bus system costs have dropped, but the buses are still expensive (the costs aren’t just in the fuel cell system, but also the hydrogen storage tanks, the hybrid battery and the system controls).  The U.S. Departments of Energy and Transportation jointly set a target bus price of $1 million by 2016, which is still pretty steep.  The long term goal is $600,000, which would put the fuel cell bus in the range of today’s hybrid buses, which have captured significant market share in the United States and are making inroads in Europe.

In my report this year on the global electrified bus market, I forecast that sales of fuel cells buses will experience good growth, with a 55% CAGR from 2012 through 2018.  Nevertheless, they will remain a niche technology, accounting for well under 5 % of global transit bus sales.  Pure battery buses and plug-in hybrids will see higher sales rates, but this is driven almost entirely by the muscle China is putting into battery bus development and deployment.  Indeed, it should be noted that the costs of both batteries and fuel cells must come down to move these technologies beyond niche status in the bus market.  As I have discussed earlier, transit agencies in North America and Europe are already struggling to make do with less, with tax revenues down or austerity measures kicking in.

Which brings us back to GE’s fuel cell bus.  Its development was supported by the U.S. Federal Transit Administration’s fuel cell bus program, which has funded a range of development and demonstration projects to help this technology meet the cost target noted above as well as key performance targets.  GE has integrated the fuel cell with not one battery (as other fuel cell buses do) but two: a lithium ion battery for acceleration and launch assist and GE’s own Durathon battery for load leveling of the fuel cell.  Putting together three different power and energy storage devices seems complicated, but each can then be downsized, reducing its cost, and operated in its preferred mode – steady state in the case of the fuel cell and power in the case of the lithium battery.  GE is gung ho about its Durathon battery for a variety of energy storage applications.  What is less clear is how gung ho the company is to move this bus concept beyond a demonstration.  Their FTA funded project has been underway for 4 years, suggesting that there is no great urgency.  So, though we’re still a long way from commercial viability, the GE program provides an interesting approach to addressing the cost conundrum for both battery and fuel cell buses.

My first blog post when I joined Pike Research 2 years ago was about fuel cell forklifts.   Not the sexiest of topics, I know, but over the past 12 months there’s been a major uptick of interest in alternatives to conventional lead-acid batteries, which include not only fuel cells but also advanced batteries.  Lead-acid batteries are well entrenched in the forklift market and provide operators with zero emissions operations at low cost.  However, they have a number of drawbacks, the most notable of which is the length of time needed for recharging and cool down.  This process can take 16 hours and requires significant space set aside for the batteries to sit during this time.  Many forklift operators have been eagerly waiting for a viable alternative to appear for years.  From the technology provider perspective, fuel cell advocates have looked to this market as an early win for fuel cells, while advanced battery and fast charging companies see it as an opportunity to expand into new markets.  So, where are we on displacing the lead-acid battery as king of electric forklifts?

The good news is, shipments of fuel cell forklifts have grown over the past 2 years, nearly doubling since 2010, albeit from a very low baseline.  Fuel cells now capture around 1% of annual electric forklift sales in the United States.  That’s respectable for a new technology that’s still in its first few years of commercial availability.  Some of this growth, however, was funded by the 2009 American Recovery and Revinvestment Act, and it appears that demand has slowed in 2012.

Now, for the bad news. The fuel cell forklift business is still far too dependent on a single supplier, Plug Power.  I remain concerned, as I was 2 years ago, that this poses a risk to the application’s long-term success. We also have not yet seen success in forklifts lead to the same type of fuel cells transferring to similar applications, such as ground support equipment for aircraft.  That said, fuel cells have proven that they can provide a good return on investment (even at a cost of 2 to 3 times that of the batteries they replace) for very busy warehouse operations.  In its 3Q 2012 financial results, Plug Power reported  that its “new product platforms have a material cost that is now 60% of the product’s price” – a positive trend that must continue for fuel cells to be more competitive for forklifts and for other industrial applications.

As for lithium ion batteries, this technology faces some critical challenges in adapting to forklift vehicles, which have been designed and built around heavy lead-acid batteries.  Nevertheless, the promise of this alternative to offer longer runtime and cycle life, as well as opportunity charging, will continue to attract both battery and charging equipment players to this market.  Pike Research plans to explore the opportunities and challenges for advanced technologies in the materials handling market further in our Smart Transportation practice in 2013.  I welcome conversations with folks working on forklifts and their batteries as we explore this sector further.