Navigant Research Blog

Military Could Lead in Commercializing Clean Transportation

John Gartner — March 27, 2012

The Department of Energy (DOE) loan program aimed at commercializing clean transportation technologies has been taking hits from all sides recently.  Loan recipients such as Fisker Automotive and Ener1, who have either had problems meeting deadlines or gone into bankruptcy, have become targets of opponents of subsidies for clean transportation.

Most recently, companies that have either been denied DOE loans (such as Carbon Motors) or have given up pursuing loans (Chrysler and Bright Automotive) have complained that the complexity and shifting milestones of the loan process did not give them a chance to be successful.  The fundamental flaws in the loan process are outlined in Earth2Tech’s Katie Fehrenbacher’s must read article.

I’ve also heard complaints about the political nature of DOE loans from industry sources who allege that campaign contributions and prior business relationships have influenced who gets a loan and who is left out.

A more basic question needs to be raised: should companies such as Tesla and Fisker that have been targeting very pricey vehicles that don’t scale to mass markets be eligible for DOE loans at all? It’s a long road from making a few luxury cars to the mass commercialization of EVs, so it’s not surprising that there have been some abandoned vehicles along the way.

DOE officials seem to have swallowed the applicants’ assumptions for the size of the markets and how quickly vehicles based on new technologies can be sold in volume.  Fisker, for example, planned on selling 15,000 Karmas, at nearly $100K a pop, per year.  That’s not realistic, especially when you consider that competitor Tesla Motors has sold less than 3,000 vehicles during its entire existence, and is considered a success.

Instead of supply-side funding, the federal government would get a much better return on its greenbacks if the demand side were addressed, starting with the government itself.  Rather than guessing what consumers will want in an EV, the military and other government fleets can specify exactly what they need, and select the most qualified companies to build them.  The government would no longer be preemptively picking winners and losers; instead, the joint forces of the DOE and the Department of Defense can work with the private sector to create vehicles and technologies that can become more easily commercialized.  (Ever heard of the jeep?)

The military is the very definition of the early adopter market that can afford to pay a premium for cutting edge technology before it goes mainstream.  And even if the price per vehicle is high, the government would still own a fleet of advanced vehicles that serves its purpose, which would be much more preferable to taxpayers than a stack of IOUs from defunct or struggling companies.

For example, the military’s research branch (TARDEC) has been working on the Advanced Vehicle and Power Initiative, a plan that would electrify its non-tactical vehicle fleet during the course of the next 20 years.  These vehicle-to-grid (V2G)-ready cars and trucks would give power back to the grid, and would enable the nation’s military bases to use much higher percentages of renewable power.  This plan for electrifying the fleet of nearly 200,000 would cost less ($4.6 billion) than the DOE has spent on transportation loans and research in development during the past three years, would reduce oil imports, and make the bases less vulnerable to attacks since they would be producing their own power and have energy storage at the ready.

The Obama administration appears to be realizing the greater return on investment of advancing clean transportation and clean tech in general through the military as outlined in the President’s recent state of the union address and budget proposals.  At the recent ARPA-E conference in Maryland, former president Bill Clinton, Deputy Secretary of Defense, Ashton Carter and ARPA-E Director, Arun Majumdar all called for greater collaboration between DOD and DOE to enable technologies that reduce fossil fuel consumption to become commercially viable.  As the nation’s largest single consumer of energy, the DOD can also provide critical input into the basic research that also needs continual funding.

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