Navigant Research Blog

Natural Gas Vehicle Faceoff: Honda vs Detroit

— April 26, 2012

Ever since the introduction of the Tesla Roadster in 2008, compressed natural gas (CNG) has taken a back seat as an alternative fuel in the U.S. retail automotive market.  Despite heavily financed advocacy campaigns, the technology has suffered from a lack of model availability, infrastructure, and public interest. Recent announcements from both domestic and foreign automakers , though, may be placing the alternative fuel back in the spotlight alongside electricity.

General Motors, Chrylser, and Ford all announced in early March that by the end of 2012, CNG versions of the OEMs’ pickup trucks will be available for the U.S. retail market directly from their dealers.  The “Big Three” used to sell CNG vehicles retail in the 90’s and early 2000’s, but cheap gas and a lack of infrastructure made the more expensive CNG models less desirable.  Thus the CNG models have been relegated to the conversion aftermarket with other eco-friendly alternative fueled vehicles such as biodiesel and EVs.   Ford was the first of the Big Three back into the CNG market, offering packages preparing engines for CNG conversions in 2009.

One auto-manufacturer, Honda, has consistently maintained a CNG light duty vehicle on the U.S.  market: the Civic GX.  The GX has been a perpetual winner of the “Green Car of the Year” award, but is only available in four states.  Though sales of the Civic GX in the U.S.  have not been spectacular (2009 sales numbered less than 2,000), Honda announced in late 2011 it was expanding its sales territory to 38 states while simultaneously installing CNG refueling stations at its dealerships – essentially creating its market.

The trend certainly has much to do with the rising price of gasoline and the more consistent price of CNG (see below), as well as the slowly growing infrastructure (there are now 449 publicly accessible stations).  Though the increased interest from OEMs is encouraging, the trend has not yet translated to  actual sales.  This is in large part because conventional internal combustion engines are becoming more efficient, hybrid mpg ratings are topping 50 miles, and plug-in electric vehicles (PEVs) are finally starting to hit the market.  All these competing technologies also rely on an infrastructure that is quickly becoming, or already, easily accessible.  This fact is troubling for Honda, because it means that a) the GX faces stiff competition, and b) it doesn’t have the public infrastructure to make “range anxiety” irrelevant. For GM, Chrysler, and Ford, however, the issues of competition and range anxiety are less concerning.


The big three have taken a markedly different approach.  The first difference being that, instead of competing in a market saturated with small Japanese hybrids, plug-ins, and European clean diesels; Detroit is sticking to markets it knows well, offering a fuel efficient “enabler” to a vehicle segment desired by fleet purchasers and prominently regarded as gas guzzling.  Second, and most important: many of the CNG pickup trucks are dual Fuel, which means they will have tanks for both gasoline and CNG, and can switch between the fuels with ease.  Ford and GM models will boast a range of more than 600 miles on combined tanks.  Dodge’s model has a much smaller gasoline tank, and therefore combined range is placed around 360 miles.  The dual fuel system will therefore give drivers the opportunity to both reduce mileage costs and be “greener” without the concerns of range anxiety.

Dual fuel CNG technology is not necessarily “new” to the world, as Fiat first introduced the systems in 2008 to South American markets.  The system, however, has never been directly available from U.S.  dealerships.  In the battle for the CNG vehicle market share, Detroit’s prospects look good.


The Trafik is Terrible, Let’s Go Electric

— March 15, 2012

Concerning transportation, post-Soviet Moscow has not been known for progressive policies.  Ever since the fall of the Communist Party, Moscow authorities have been content to let the free market govern the city’s transportation infrastructure.  As a result, the city has become infamous for its congestion and is believed to have the longest (in terms of duration) traffic jams in the world.

Russians have been moving to the city and buying cars in droves, increasing the number of cars per thousand residents from 60 to 350 from 1991 to 2009.  To manage the increase, authorities sought to build Russia out of congestion rather than to invest in public transportation.  (Which is unfortunate, considering that Moscow has one of the world’s legendary subway systems.)  The result: wide avenues lined with cars at standstill.  The problem has grown ever more troublesome as both government officials and wealthy oligarchs posing as government officials have subverted traffic law by mounting phony police sirens on their vehicles.   In early February debate roiled again as a cyclist nearly drowned in the Moscow River in attempt to avoid such a traffic jam.

In lock step with past policies, the latest discussion among Moscow’s authorities is whether or not to allow senior officials to travel across the city by helicopter to alleviate some of the congestion.  Another suggestion made by Mikhail Prohkorov, who ran quixotic (and unsuccessful) for the Russian presidency in this month’s elections, was that the president’s residence should be moved out of the Kremlin.  Despite any real attempts to move Moscow’s traffic jams along, several of Russia’s business guru’s are moving ahead with their own plans to make Moscow, if not less congested, more environmentally friendly by introducing plans for electrified transportation.

The first development started a little more than a year ago, with the announcement by Prokhorov that his Onexim Group and Russian truck maker Yarovit were going to introduce Russia’s first domestic hybrids.  True to the promise, Yo-Mobile announced late last week an innovative line of CNG hybrids will go into production in St. Petersburg and should be hitting Russian dealers by late 2012.  The second development began with lesser known Maxim Osorin, owner of Revolta, who recently secured an investment of 1.5 billion rubles ($49M US) from Florida-based Enerfund to build an electric vehicle charging network of 2,000 AC stations and 100 DC fast charge stations throughout Moscow and several other Russian cities.  Moscow United Electric Grid Company also announced the start of MOESK EV which will place 28 charging stations this year, and potentially several hundred over the course of the project, throughout Moscow.  If you’re going to sit in traffic you might as well do it in an EV.

The push for electric comes on the heels of the Mitsubishi iMiEV’s (it is currently the only EV model available in Russia) introduction to Moscow streets last August.  Before the end of 2011 only 41 were sold; however, it is hoped that with an increase in publicly available charging stations, sales will grow and more EV models will become available.

The developments are a few years behind what western European brethren have put into place, but the flurry of activity in the past months alone has been if nothing else, encouraging.  Though these efforts can hardly be argued to have any effect whatsoever on ameliorating the traffic woes of Moscow, they are shifting the discussion towards actual efficiency and environmental gains for Moscow’ streets and air quality.  An example being, in mid-February Moscow City Hall announced it will finally invest in public transportation through 2,000 eco-buses, and a number of high speed trams.  These plans mark a divergence from Moscow’s reticent approach to traffic mitigation, and the trend may present a future that includes both tolerable and efficient commutes for Moscow’s highways.


How Deregulated Electricity Markets Spark EV Infrastructure Development

— February 23, 2012

Texas is big in land mass, hats, and, well, most things.  The state has no corporate or income tax and is one of the more conservative states.  Europe, on the other hand, is made up of small nations with high population densities, characteristically high tax rates, and a reputation for liberalism.  Despite these big differences, however, the state and the continent share a deregulated approach to governing electricity markets.

In many European countries, residential electricity consumers have the ability to choose their power utility.  This competitive retail market has created an environment in which each individual consumer can choose to have electricity at a higher price from a cleaner source or cheaper, dirtier power.  Deregulated electricity markets first started in the United Kingdom, under Margaret Thatcher, and spread to other EU members in the early 90s.

Stateside, most electricity markets are controlled by geographic near-monopolies.  Specific utilities supply entire communities through a regulated relationship with that community’s governing entity, usually in the form of a public utilities commission.  In the 1990’s many states considered deregulation schemes, but momentum in that direction has since waned.  Texas, however, continued to progress towards deregulation, and today is one of 10 states to offer both an open market for retail competition and no rate cap.  Seven other states offer either open market retail competition or no rate cap, but not both.  The remaining 33 are more strictly regulated.

Deregulation has not always succeeded in developing competition or decreasing consumer costs (see California).  In some cases unwary consumers have been caught on the harsh receiving end of dramatic price increases.  However, deregulation may have found a new advocate in electric vehicle infrastructure development.

For the last few years, the growing interest in electrified transportation has spurred European utilities to get into the business of developing and servicing EV infrastructure.  Most major European utilities have begun developing and deploying their own EV supply equipment in major European municipalities through private membership programs for EV owners.  The memberships usually include, for a monthly fee, unlimited charging at home and access to a network of intelligent chargers that can signal members when specific charge points are available for use.

Norway, for example, a country with a population slightly smaller than Colorado’s 5 million, has over 900 installed EV charging stations while Colorado has at most 30.  Granted, the disparity can’t be blamed only on regulation: Norwegians pay twice what Coloradoans pay for gasoline.

Yet in Texas, where utilities do not have geographic monopolies, European models of EV infrastructure membership services are emerging from both investor-owned and municipal utilities.  NRG recently launched its eVgo network operating in Dallas/Ft. Worth and Houston, and Austin Energy offers membership services through its Plug-In EVerywhere network.

Perhaps the success of electricity market deregulation is largely dependent on timing.  Perhaps the correct timing is now, as smart grid technologies are evolving to better assist electricity consumers communicate with providers, and society is becoming more dependent upon utilities to not only provide power for homes and buildings but power for transportation as well.  State legislators should take note of these success stories.


EV Industry Makes Room for the Big Guys

— January 27, 2012

Electric and hybrid vehicles are often derided for their petite size, hefty purchase prices, and lack of range.  Recent improvements have made these cars more appealing to individual consumers, but like their size, their deployment globally has so far been relatively small.  Recent reports show that more than 17,000 plug-in vehicles were sold in the United States in 2011, mostly first year models of the Nissan Leaf and the GM Volt ().

Though lower than the ambitious targets set by Nissan and GM, sales of both the Leaf and Volt outpaced the first year sales of the popular hybrid vehicles Toyota Prius and Honda Insight when they were launched more than a decade ago.  Furthermore, nearly every major auto-manufacturer in the world has declared it has some type of plug-in model in the works.  Despite these indicators though, Pike Research estimates that the U.S. market share for plug-in vehicles will not breach the 1% mark before 2017.

Countering the subcompact image of EVs, though, is a growing number of medium to heavy duty electric and hybrid vehicles that stand to make a significant impact in electrified transportation.  While these vehicles also tend to carry high initial purchase prices, models are being developed and deployed for almost every transportation related purpose, from garbage trucks to school buses.  The cost reductions are greater, and range concerns fewer, for fleet managers deploying these vehicles than for individuals buying new passenger plug in models.

Plug-in vehicles can significantly reduce costs tied to vehicle maintenance and transportation fuel, an appealing element for fleet managers who have few conventional alternatives for cutting operating costs.  Fleet vehicles often run predictable routes and distances, so that the limited ranges of electric vehicles do not pose the same concerns for fleet managers as they do for individual consumers.

The Electric Drive Transportation Association (EDTA) reports fleet managers are willing to pay 10-14% more for electric vehicles based on operating costs reductions, and 73% of government fleet managers are willing to consider deployment of these vehicles in their own fleets.  In accordance with these findings, Pike Research estimates that by 2017 sales of plug in and hybrid medium/heavy duty vehicles will gain increasing market shares in major world markets, from 6% in the United States to 22% in the United Kingdom.  All which indicates that while sleek sports cars and subcompacts may get most of the publicity, the transition to electrified transportation will likely be exemplified by boxy delivery trucks as well.


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