To meet federal, state, and local mandates for alternative drive vehicle adoption and fossil fuel reductions, local fleet managers must find replacements for traditional gasoline-powered vehicles that are both economically and environmentally beneficial.  At the Green Transportation Conference hosted by TransEnergy Solutions recently, it was clear that finding the optimum alternative drive vehicle replacement for any given fleet is not easy.

Advanced technologies for alternative drive vehicles come with a price premium, alternative fuel infrastructure requirements, and the need for driver training programs on how best to operate and refuel the replacement vehicle.  The fuel cost savings of the replacement vehicles have to pay back the aggregated costs of those items in as few as 3 years to make the alternative drive vehicles appealing to fleet buyers.

Adding to the difficulty is the fact that there are many alternative fuels and drive technologies for fleets to choose from.  Technologies featured at the conference included regular hybrids, hydraulic hybrids, compressed natural gas (CNG), liquefied natural gas (LNG), liquefied propane gas (LPG), plug-in electric vehicles (PEVs), and fuel-cell vehicles (FCVs).

Find Your Niche

Choosing the wrong technology for the wrong application can turn potential savings into costs.  For instance, purchasing a light duty hybrid to replace a low-mileage light duty fleet vehicle would not likely pay back the cost of the advanced technology, as hybrid technologies accrue the greatest savings per city-mile driven; the more the vehicle is driven on city roads with stop and go traffic, the quicker it pays back its premium.  Equally economically inefficient is purchasing an LNG-powered medium duty truck for inner-city applications, as the evaporative nature of LNG reduces the fuel economy of the technology considerably when the vehicle is idling.

In other words, each alternative drive technology is best suited for a particular market niche.  LPG is particularly suited for smaller fleets with medium duty vehicles and for school bus fleets, since the infrastructure costs are low.  LNG is best suited for long distance heavy duty trucks whose idling time is minimal.  Hydraulic hybrids produce the best returns for fleet vehicles used for stop and go driving, like shuttle buses, refuse trucks, and mail delivery.  The hydraulic hybrid system works like a spring, compressing hydraulic fluid when braking and releasing when accelerating, capturing 70% to 80% of the accumulated energy.  The hydraulic system provides fuel savings and faster acceleration than diesel or CNG-powered vehicles.

The alternative drive vehicle industry still has a long way to go to convince fleet managers of the benefits of transitioning from gasoline and diesel power.  Though lower greenhouse gas (GHG) emissions are great benefits of alternative drive adoption, educating fleet managers on the options that will give them the greatest financial return is the best way to achieve market growth for all alternative drive technologies.

I’d like to say I was surprised to hear that $850 million bust Better Place has entered bankruptcy, but the company’s audacious vision for electric cars was a longshot from the start.  Founder Shai Agassi started in 2007 by raising hundreds of millions and quickly staffed up a global operation as the company attempted to prove that being able to swap out a car’s battery pack in minutes was a requirement for EVs to succeed.  This message ran contrary to the rest of the industry’s strategy to convince motorists that EVs could be sufficiently charged for local travel through a combination of overnight home charging, public charging, and the occasional fast charge.

But as I wrote 3 years ago, the risky strategy of positioning battery swapping as a panacea (while denigrating fast charging) was not a good one for consumers, and was only suited to specific applications.  For taxis or fleets, where maximizing time on the road is crucial, the extra cost of building a network of battery swapping stations could make sense.  Better Place could not even gain traction in its home turf of Israel, a small country where employers purchase many of the vehicles.

Better Place could only have succeeded if multiple auto manufacturers had designed cars for battery swapping, and once it was clear that only Renault would be a partner, the implosion clock started ticking.

Beyond Battery Swapping

As owners of the Nissan LEAF, Tesla Model S, and other battery electric cars have realized, public charging, supplemented with occasional fast charging, is sufficient for most local driving needs.  With Better Place gone, consumers will no longer receive mixed messages about what is required to keep EVs on the road.

Over the last few years I’ve spent hours chatting with many very bright and committed people at Better Place who were underutilized and mismanaged.  Better Place failed to go beyond being an incredible marketing engine and leverage its other assets that could have increased its prospects.  The company’s software and communications system, which recognizes electric vehicle driving patterns and monitors performance, could have been licensed to other EV charging companies.  Despite the nearly billion dollars Better Place raised, the company made very little effort to develop an energy storage solution for its reserve battery packs, which could have generated revenue from utilities or grid operators.  While neither of these options was a guaranteed success, they could have diversified the revenue stream during the years that the company was hemorrhaging cash.

We haven’t heard the last of battery swapping though.  If the cost of infrastructure can be kept to a minimum, a battery swapping taxi or delivery fleet could make financial sense.  That is what Slovakia’s GreenWay Project is doing, and I was encouraged by what I saw when I visited it in April.  For less than $100,000 (or 20% of the cost of a Better Place location), the company has an operational swap station for replacing a delivery van’s battery pack in under 10 minutes.  For battery swapping to survive, a targeted rather than a bold vision is called for.

Last month Specialized announced that it is launching its new electric bike, the Turbo, in the United States.  This is significant for two reasons: first, it’s from Specialized, known for fast and high-tech traditional bikes; second, it’s designed specifically to engage with Specialized’s traditional bicycle customer base – a target not typically pursued by e-bike manufacturers.

The Turbo e-bike is a pedal-assist (pedelec) model with a 250-watt rear hub motor, a 342 watt-hour lithium nickel manganese cobalt oxide (LiNiMnCoO2) battery, and SRAM drivetrain components.  The e-bike has a top assisted speed of almost 28 mph and includes brake energy regeneration capabilities.  The LiNiMnCoO2 battery is integrated into the downtube, so the bike resembles a traditional model.  The battery can be charged either on the bike or while removed and has a 300-cycle or 2-year expected lifespan (which means it retains 75% of its original capacity at that point).  It also includes a wireless user interface and integrated front and rear lights.  The cost is $5,900.

The key words chosen to promote the Turbo on Specialized’s website are “fast, integrated, clean, sexy, and strong” – in that order.

There has been a lot of press regarding this bike and its significance in the U.S. e-bike market.  No doubt the price positions this bike at the top end of the market, where volumes are low and competition is stiff: Currie’s e-Flow, Stromer, and Prodeco’s Titanio 29er to name a few.

So is the Turbo a game-changer in the U.S. e-bike market, or just another high priced toy for a particular niche?

I’d say it’s probably analogous to Tesla’s Model S: definitely successful, but within a niche.  The Specialized Turbo won’t likely achieve blockbuster sales, and Specialized still has a lot of work to educate its dealers on how to sell the e-bike.  But it seems poised to show other manufacturers, particularly cycling giants like Trek, Giant, and Cannondale, that the U.S. market is ready for dramatic new products, it’s a growth market, and they are at risk of falling even farther behind.

With U.S. oil imports hitting a 17-year low, the mainstream media has awoken to the fact that, as I pointed out in a Fortune.com article 3 years ago, peak oil is not happening anytime soon.  Charles Mann’s excellent cover story in this month’s Atlantic, “What If We Never Run Out of Oil?” focuses on an obscure though potentially vast source of energy: methane hydrates, or crystalline natural gas trapped below the seabed.  If early exploration ventures by Japan and other countries succeed, this gas “could free not just Japan but much of the world from the dependence on Middle Eastern oil that has bedeviled politicians since Churchill’s day.”

An Associated Press story last week reached a similar conclusion about “unconventionals” in general: companies are opening huge deposits of shale gas, “tight oil,” and other hard to reach petroleum sources that will essentially flip the energy world upside down, as the United States regains its status among the world’s largest exporters of petroleum.

Both of these stories, though, share a common misconception, captured in the AP article’s headline: “New Technology Propels Old Energy Boom.”

In fact, the technologies underlying today’s petro-boom are not new at all; they are innovative applications and refinements of technology that has existed for decades.  The boom’s core technology is hydraulic fracturing, or fracking.  And drillers have been fracking wells for nearly 60 years.  More than 1 million wells have been developed using fracking since the 1940s, according to EnergyFromShale.org, an industry-supported website.

The early use of fracking to get at reserves previously thought of as unrecoverable, emerged in the early 2000s after exploration companies began examining geologic formations using x-ray computed tomography, or CT scanners.  The CT scanner was invented in 1967.

Tinker Imaginatively

What’s happening today is not a new-technology revolution; it’s an evolution of new applications for existing technology.  We are doing things that we’ve been doing for decades more efficiently, more effectively, and in much wider applications.

That may sound like a fine distinction, but it’s an important one: Silicon Valley has for years invested in sexy new technologies, from smartphones to social media to exotic solar power materials.  The cleantech industry itself has not benefited from a fascination with the new, the exotic, and the high-tech.  The technology for embedding sensors in a drill head so that technicians on the surface can map a formation as they drill is not all that sexy, and it didn’t come from a VC-funded startup in a Mountain View garage.  It came from drilling engineers in the field figuring out, incrementally, how to do things better, cheaper, and smarter.  Often, as in the case of the 21st century oil and gas boom, imaginative tinkering can be more fruitful than reinvention or laboratory R&D.

Leaving aside, for the purposes of this blog, the question of how we can move toward a carbon-free energy system in a world suddenly awash in hydrocarbons, the next phase of technology will almost certainly focus on how to better store, transport, and distribute the seemingly limitless supplies of natural gas now becoming available.  The difficulty and expense of liquefying and transporting natural gas have been a drag on the wider use of the relatively clean fuel for many years, particularly in the transportation sector.  In 2012, GE Oil and Gas introduced its Micro LNG plant to power remote industrial locations and fuel long haul trucks and locomotives, and last month the company debuted its LNG In A Box system for small-scale retail fueling stations.  The Norwegian gas producer and distributor Gasnor in 2009 launched the world’s first specialized, small-scale LNG carrier, the Coral Methane, designed to deliver fuel to remote ports along Norway’s coastline.

These are not “new technologies,” and they’re not being developed and funded as such.  But they’re exciting innovations.  And they are helping to power an energy transformation that will shape the world’s economy and its geopolitics through the rest of this century.