Navigant Research Blog

Despite Volkswagen Scandal, GM Remains Committed to Diesel

— November 17, 2015

In the wake of the ongoing revelations about Volkswagen (VW) deliberately manipulating powertrain control software in order to pass emissions tests in Europe and the United States, it would have been unsurprising if General Motors (GM) and other automakers immediately cancelled all future diesel engine plans. Instead, GM remains fully committed to a broad portfolio of fuel efficiency technologies that include diesel engines in a variety of vehicles.

In June 2015, Dan Nicholson, GM vice president of global powertrain development, announced that “GM wants to be considered the leader in North American passenger car diesels.” The same month, Nicholson also spoke to the media and to analysts at a Chevrolet technology forum where the second-generation Cruze was revealed. In North America, the new Cruze will be offered with two four-cylinder powertrain options, a 1.4-liter turbocharged gasoline engine, and a 1.6-liter diesel.

Diesel on Schedule

Barely 2 months later, the automobile leader that Nicholson wanted to dethrone began imploding from self-inflicted wounds and proceeded to take an entire class of fuel-savings technology down with it. Despite the acknowledged illegal actions of VW and unconfirmed reports that other manufacturers may have cheated in a similar fashion, Mark Reuss, GM executive vice president for global product development, is staying the course.

Reuss told a group of North American Car and Truck of the Year jurors in early November that the next-generation Cruze diesel remains on schedule for production in 2016. That announcement came as GM revealed that the diesel-powered 2016 Chevrolet Colorado and GMC Canyon had officially been certified by the U.S. Environmental Protection Agency (EPA) as the most fuel efficient pickups in the United States with an estimated 22 mpg city, 25 mpg combined, and 31 mpg on the highway.

The certification of the new trucks was due right around the time that the VW scandal went public and was held up for several weeks as the EPA decided that these should be among the first vehicles to undergo additional road testing in order to validate the results of the usual lab tests.

Unlike VW’s four-cylinder diesel engines, the GM trucks and the Cruze utilize a urea-injection system to control emissions of nitrogen oxides (NOx). During development prior to the launch of the Cruze diesel in 2013, Chevrolet did test the same lean NOx trap technology used by VW, but found it inadequate to meet EPA and California Air Resources Board standards.

During a weeklong evaluation earlier this year, a 2015 Cruze diesel returned 39 mpg in combined driving with the older 2.0-liter engine that was then in use. The 2017 Cruze diesel will be powered by a new 1.6-liter engine that debuted earlier this year in several Opel models in Europe. In the Cruze, the new engine is expected to easily beat the 33 mpg combined rating of the old model.

Navigant Research’s Automotive Fuel Efficiency Technologies report projects that diesels will only account for about 3% of North American light duty vehicles sales in 2025, but GM wants a big piece of that market as the company takes advantage of every technology in its portfolio. GM is already aggressively slimming the mass of its new vehicles and adding automatic stop-start as a standard feature on many models. In the next year, the company is set to launch new conventional and plug-in hybrid electric systems, the 200-mile Bolt electric vehicle, and by 2020 plans to launch fuel cell electric vehicles. No stone—including diesel—will be left unturned by GM.


Battery Makers Preparing for Post-Lithium Ion Era

— November 6, 2015

Lithium ion (Li-ion) batteries, we hardly knew ye.

Today’s mass-marketed light duty plug-in electric vehicles (PEVs) uniformly rely on batteries with Li-ion chemistries, but advancing the technology will hit an upper limit of performance by the end of the decade. Battery makers that spoke at the late October eCarTec conference in Munich stated that the energy density can be doubled while cutting the cell cost of PEV batteries in half by 2020, but that beyond that, battery makers will need to shift to other technologies.

Energy storage and automotive power electronics company Robert Bosch and automaker Renault both presented similar timelines for the beginning of the phaseout of Li-ion batteries. Li-ion cell prices will come down thanks to efficiencies in volume manufacturing at plants run by companies such as Tesla and LG Chem and reductions in the amounts of precious metals used. According to Navigant Research’s report Advanced Energy Storage for Automotive ApplicationsLi-ion pack prices (which include the battery management systems, cooling systems, electronic controls, and wiring) will continue to decline by 5%-6% annually through the remainder of the decade.

Once manufacturing and raw material costs have been optimized, other technologies such as lithium-air, lithium sulfur, and solid-state batteries will begin to take over as the technologies that will offer increased performance in PEVs, said Dr. Holger Fink, senior vice president of Engineering at Robert Bosch Battery Systems GmbH. Fink said that solid state battery technology is the most likely of the alternative battery technologies to be commercialized in the short term, with lithium sulfur unlikely to be commercially viable until closer to 2030.

Bosch is developing solid state battery technology based on the intellectual property it acquired when the company purchased startup battery company SEEO in September 2015. Fink said the solid-state batteries that Bosch are developing feature lithium metal anodes that have increased storage capacity and replaces a flammable liquid electrolyte with a safer dry polymer. One challenge for solid state batteries is the high minimal operating temperature of at least 80°C, which Fink said the company is focusing on in its research.

According to Navigant Research, and as seen in the chart below, by 2020, the global market for Li-ion batteries in automotive applications will reach $25 billion.

 Total Light Duty Consumer Vehicle Li-ion Battery Revenue by Powertrain Type, World Markets: 2015-2024

John Li-Ion Blog Chart(Source: Navigant Research)

Masato Origuchi, chief battery engineer for EV/HEV at Renault and another speaker at eCarTec, echoed Fink’s comments about the 5-year timeframe for Li-ion battery performance gains peaking. He said that improvements in energy density in Li-ion batteries will be able to provide 200 miles of driving range in battery electric vehicles (BEVs) such as the Nissan LEAF (a Renault-Nissan Alliance partner) by 2020. Origuchi said that further improvements in energy density via other technologies could extend the range of a BEV to 600 km (372 miles) or more.

Disruptive innovations in energy storage and many other automotive technologies often takes years longer than initially expected to gain market share over the incumbents due to higher prices and the cautious nature of automakers. As a result, the market share for Li-ion batteries can be expected to erode slowly, even after better performing technologies are first commercialized.


What Does El Niño Mean for the Energy Industry?

— November 6, 2015

One of the strongest El Niño climate patterns in the past 50 years is active and causing irregular weather patterns globally. El Niño is characterized by above-average ocean temperatures in the eastern and central equatorial Pacific Ocean. The weather pattern began to develop in March 2015 and is expected to peak between December 2015 and April 2016, when the equatorial Pacific Ocean temperatures are warmest. What sort of impact will El Niño have on various sectors of the energy industry as it begins to peak?

Reduced Natural Gas Demand

Temperatures are expected to be above-average during the winter in large areas of the Northern Hemisphere as a result of El Niño. In terms of natural gas (NG), the three largest consumers are the United States, Russia, and China. North America tends to see greater increases in temperature during an El Niño event when compared to Asia, but both areas are forecast to have a warmer-than-average winter in significant NG heated areas. In much of the Midwestern and Northeastern regions of the United States—areas that tend to have the strongest demand for NG—a warmer winter is expected. While much of the Southern United States may see slightly colder weather, this will not cause a significant increase in NG demand. Overall, decreased NG demand does not bode well for an already decimated NG market. Inventories for NG are expected to reach all-time highs this winter.

Less Wind Energy

According to the U.S. Energy Information Administration, wind power generation fell 6% during the first half of 2015, despite an increase in wind generation capacity of 9%. The forecast shows more of the same until the spring of 2016, with wind power producing over 4% of electricity generation nationwide. Wind farms have been operating near one-third of capacity so far in 2015 and should expect more of the same through early 2016.

Increased Hydroelectric

El Niño leads to heavy rains and snow along the western coast of the Americas. While this can provide some drought relief, flooding also becomes a major concern. For markets that generate significant electricity from hydroelectric dams, the increased moisture and snow pack from El Niño are a welcome sight.

Potential Reduction in Crops for Biofuels

Palm oil is a primary feedstock for biodiesel production. Over 85% of the world’s palm oil exports are produced in Malaysia and Indonesia. For Southeast Asia, El Niño means warmer, drier weather. This can lead to drought and increased fires in the Indonesian peatlands. Haze from the fires stunts fruit growth and palm oil production. While palm oil is only one of several sources of vegetable oil used in biodiesel production, increased prices of palm oil may lead to higher production prices for biodiesels. Although the fires in Indonesia have some impact on biofuels prices, it is having a much more significant toll on greenhouse gas emissions and air quality across Asia.


Solar Lessons from the North of Chile

— October 30, 2015

Northern Chile is dominated by the Atacama Desert, and other than its large mining industry, the location is otherwise isolated. To supply this area with electricity, Chile established a local grid called Sistema Interconectado del Norte Grande (SING) that is segregated from the main grid, known as Sistema Interconectado Central (SIC).

Traditionally, electricity generation in the SING network relied on relatively expensive imports of coal, natural gas (NG), and diesel. Of the 4.97 GW of installed capacity in 2014, coal represented 42.2% and NG 47.5%. As solar energy prices dropped, the region became a hot spot for solar developers because it offered a perfect combination of high electricity prices in an area with the world’s leading insulation levels. A significant number of developers pulled the trigger and began the construction of their plants, planning to sign power purchase agreements once the project was commissioned.

The problem is that every company had the same idea at the same time. Solar projects have mushroomed in the past year. By October 2015, SING had 157 MW of installed solar capacity, 80% of which was commissioned in 2015. Solar now makes up 3% of the total generation capacity, and that was before the commissioning of First Solar’s 141 MW Luz del Norte plant, which will be the largest in Latin America. This plant is in the late stages of the construction process and it is expected to begin operations before the end of 2015.

Impact on Electricity Prices

The impact of new solar capacity on daytime wholesale electricity prices has been staggering. The average hourly wholesale electricity price in October 2015 dropped 42% between 8 a.m. and 9 a.m., whereas it fell only 10% in 2014 and 16% in 2013. In October 2014, prices averaged $54/MWh between 9 a.m. and 7 p.m. versus $67/MWh throughout the rest of the day. By October 2015, the average day-to-night differential widened to $48/MWh between 9 a.m. and 7 p.m. versus $78/MWh in the rest of the day.

Solar developers now find themselves in a predicament. Daytime electricity prices are expected to fall even further as the projects currently under construction come online, creating a death spiral that would threaten the economics of all plants and the sustainability of the whole industry. But no company wants to throw in the towel and write off all of its investment to date. The question is, who will move first?


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