China has implemented a new incentive program for alternative fuel vehicles for 2013 to 2015 with generous subsidies for electric vehicles and fuel cells. Passenger car subsidies are pegged to the technology’s price premium and range. For battery electric vehicles (BEVs), the largest subsidy is for cars with ranges of over 155 miles– not exactly common – at 60,000 yuan ($9,800). A car with over 90-mile range receives around $8,100, and a BEV under 50 miles receives around $5,700. Fuel cell cars are eligible for up to 500,000 yuan ($81,670 dollars).
The scheme is intended to help China meet its own aggressive goals for clean vehicle production and adoption. Under China’s New Energy Vehicle (NEV) Industry Development Plan, which governs the years 2011 to 2020, China aims to have 500,000 BEVs and plug-in hybrid electric vehicles (PHEVs) on the road by 2015. By 2020, China projects having a production capacity of 2 million BEVs and PHEVs, with cumulative production and sales of 5 million vehicles – including hydrogen fuel cell vehicles. At present, China is far from reaching these aggressive goals: as of 2012, it had around 28,000 EVs on the road.
China wants to promote clean vehicles for economic, energy security, and environmental reasons. The economic rationale for promoting plug-in electric vehicles (PEVs) is clear, as a large, well-established PEV market will support China’s lithium battery industry and secure long-term demand for China’s lithium reserves.
The Coal Question
China is also coming to grips with the fact that its growing energy consumption is not sustainable, both because of the country’s limited domestic energy supplies and growing pollution problems. Coal provided a whopping 78% of China’s 4.2 trillion MWh of electricity consumed in 2010, according to China’s current Five-Year Plan, an increase of 44% from the previous 5 years. In 2010, hydroelectric was 17%, while natural gas and nuclear were each 2%. The country has minimal crude oil capacity; hence its interest in transportation options like batteries and fuel cells.
In its 12th Five-Year Plan, which covers 2011-2015, China made a dramatic shift away from simply driving economic growth toward creating a more efficient and sustainable economy. The plan aims to slow energy consumption growth, increase the use of non-fossil fuel energy and natural gas, and set limits for energy consumption per unit of GDP.
Increased use of natural gas and non-fossil fuel energy will, of course, also help China combat its growing pollution problem. Unfortunately widespread use of BEVs will work against China’s sustainability goals because of the country’s reliance on coal. This problem may be the rationale behind the new fuel cell vehicle subsidies. In Navigant Research’s report, Fuel Cell Vehicles, I noted that the twin pressures of growing demand for passenger cars – annual sales are already almost 20 million, and Navigant Research forecasts steady growth through 2020 – and urban air pollution present an opportunity for fuel cell vehicles in China. Even with new energy investments, coal will remain the primary source for electricity for the near future; this substantially reduces the emissions benefits of BEVs, and it is one reason why I forecast China as one of the top countries for fuel cell vehicles adoption from 2015 to 2030. The new subsidies suggest that China’s leaders also see fuel cell vehicles in the country’s future.
Tags: Alternative Fuel Vehicles, China, Climate Change, Coal, Electric Vehicles, Policy & Regulation, Smart Transportation Program
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