Navigant Research Blog

How to Save a Half Billion Gallons of Diesel

— April 16, 2014

Hosesteps_webTrying to reduce fuel use by Class 8 over-the-road sleeper cab tractors is a key challenge facing the trucking industry and regulators.  The trucks use a tremendous amount of fuel (averaging about 6.6 mpg and traveling 80,000 to 100,000 miles per year) and have to provide the driver comfort as the trucks stop overnight.  In order to provide the overnight creature comforts (sometimes referred to as hotel power), the trucks need to have a source of energy, whether an offboard source, the large truck diesel engine, or a small energy source called an auxiliary power unit (APU).  The APU industry has been espousing the fundamental truth that utilizing APUs reduces fuel use, emissions, and associated costs by reducing idle times of the large truck engines.

Yet, one of the challenges is trying to understand just how much fuel and emissions are being offset by APUs.  Having spent a large amount of my time at the Mid-American Trucking Show (MATS) this past March, I was able to speak with almost every APU manufacturer displaying at the MATS and have been able to pull together an estimate for these savings.

First, a little more background.  It is not entirely clear when APUs first became widely available, but by the early to mid-2000s, Bergstrom, Thermo King, Carrier, and RigMaster, along with a number of other competitors, were all offering APU systems.  Today there are a lot of commonalities between the machines.  The vast majority of APUs are of two designs, either all-electric or diesel-powered.  Diesel-powered APUs use diesel from the truck’s fuel tank to fuel 2-cylinder small diesel engines from Yanmar, Caterpillar, Perkins, and others.  All-electric systems store energy in absorbed glass mat lead-acid batteries that can then be used to provide power to air conditioning compressors or inverters.  Other technologies that are being tested include fuel cells, lithium ion batteries, and compressed natural gas systems, but the cost-effectiveness of these systems remains essentially unmarketable.

Methodology and Findings

For the purpose of this macro analysis, I had to make several assumptions when it comes to the number of APUs on the road.  First, since there isn’t consensus on when the Class 8 sleeper cab APU market even started, I considered the start date to be roughly 2005, with about 35,000 units on the road by the end of that year.  While recognizing that this is a rough estimate, this at least gave me a starting point for calculating the scrappage rate of APUs.  Based on conversations during MATS and some combing of forums, I assumed the average lifespan of an APU to be about 6 years, and from there the number of APUs on the road today, which is estimated to be about 309,000 units, with about 25% being all-electric.

These 309,000 units translate into 486.5 million gallons of diesel saved by APUs on Class 8 sleeper cabs in 2013 (or about 1,576.5 gallons per APU).  Put into economic terms, at the average retail price of $3.89 per gallon for diesel in January 2014, the fuel costs offset by APUs are a staggering $1.89 billion.  Even taking into consideration the cost of new APU units ($8,000 estimated) and maintenance ($145 annually), the offset is $1.49 billion.  Put into environmental terms, the Argonne GREET model calculated the greenhouse gas emissions per gallon of diesel fuel consumed to be 20.2 lbs carbon dioxide equivalent (CO2-eq) per gallon of diesel fuel, so the emissions offset are 9.827 billion lbs of CO2-eq.  Of course, this analysis does not take into account the 116 truck stops that have electrification to allow drivers to shut off the engines overnight, which would further improve these fuel savings figures.

Estimated Gallons of Diesel Used by Class 8 Sleeper Cabs for Hoteling: 2013Dave H. APU chart for blog

(Source: Navigant Research)

Certainly, from a macro standpoint, it’s hard to argue the benefit of APUs.  Fleets with a large number of trucks are likely to see cost benefits that are compounded over a number of trucks.  The picture is more complicated for truck owner-operators that have to justify the extra upfront cost and calculate the payback on a single unit.  This payback typically ranges between 2 and 4 years depending on the APU selected and the cost of fuel, which makes the owner-operator market seem like a good place for some targeted tax incentives.

 

Flywheels Offer Hybrids a Mechanical Advantage

— April 4, 2014

It is often assumed that all hybrid vehicles must use a battery for energy storage.  But the essence of a hybrid powertrain is not necessarily engine-off operation, but to provide more efficient transportation over a stop/start journey drive cycle.  The key factor in this mode is to be able to recapture large amounts of energy very quickly and then reuse it, which requires high power density.  While batteries typically have a high energy density, they often do not respond well to high charge rates and may not be able to capture all the available energy from regenerative braking.  Larger vehicles, in particular, have a lot of kinetic energy to store when slowing down.

So the focus for hybrid vehicles is often high power density rather than high energy density.  It is this factor (as well as the lower cost) that has led some manufacturers, particularly Toyota, to continue installing nickel-metal hydride batteries when the rest of the industry has shifted to the higher energy density of the lithium ion battery.  But there are other options for higher power density, if total energy capacity is not an issue.  Ultracapacitors are one alternative and Navigant Research has produced a report on another option: Hydraulic Hybrid Vehicles.  However, a new alternative technology based on the flywheel is now in testing.

Powerful and Economical

Volvo Car Group has recently been conducting testing in the United Kingdom of a flywheel developed by Flybrid Automotive (now part of Torotrak) to determine the potential for fuel savings.  Initial results show a performance boost of 80 hp while improving fuel economy by up to 25%.  The testing uses real-world driving data from public roads and test tracks in both Sweden and the United Kingdom.  Volvo has installed the flywheel system on the rear axle of a front-wheel drive passenger car.  Under braking, the vehicle kinetic energy is used to spin a 6 kg carbon fiber flywheel at up to 60,000 rpm.  When the driver wants to accelerate again, the energy from the spinning flywheel drives the rear wheels directly via a specially designed transmission.

The benefits for the driver are that the engine can be switched off during some braking and accelerating maneuvers, plus there is extra power available when needed to supplement the internal combustion engine.  The Volvo test vehicle is about 1.5 seconds quicker than the standard vehicle going from 0 to 60 mph.

Mechanics of Storage

The Flybrid system uses the mechanical motion directly to power the transmission, so there are no energy losses transferring from one format to another.  Another type of flywheel system, developed for motor racing by Williams Hybrid Power (and since April 1, part of GKN), uses a flywheel driven by an electric motor.  Instead of storing energy chemically as in a battery, the energy is stored mechanically in the spinning flywheel and then converted back to electricity to be used by the electric drive motor.

Both systems use the same mechanical energy storage format and have to address the same issues.  Safety and reliability are important, as is longevity.  Cost is also important, and at present, the flywheel is a lot cheaper than a battery.  It’s good to see some alternative solutions being adopted by larger companies, and this topic will be covered in much more detail in our upcoming report on vehicle efficiency.

 

For Trucks, LNG versus CNG Debate Rages On

— April 4, 2014

Whether liquefied natural gas (LNG) or compressed natural gas (CNG) will fuel the trucks of the future in North America has been an open question for some time.  The stakes are high because the cost structure and infrastructure needed for the two fuels are significantly different.  The fuel tanks and fuel delivery system for natural gas trucks are more expensive for LNG than for CNG.  On the infrastructure side, LNG is distributed much like oil products are now: produced in a central location and trucked to retailers.  CNG is most often distributed through the gas grid to the retail location (though some trucking of CNG does occur).

This equates to LNG being much more capital-intensive than CNG.  Yet, LNG has advantages over CNG.  Trucks can store more LNG in a smaller space, which typically equates to either longer truck range or the same fuel in a smaller volume package than CNG trucks.  Because the energy density of LNG is higher, it has often been spoken of as the better fuel for over-the-road (OTR) trucks.

Controversy Rages On

This controversy has given new fodder for Seeking Alpha, the investor advice website.  Seeking Alpha has had a running narrative on the problems with Clean Energy Fuels Corp.’s strategy in the LNG market.  The press on the site contributed to CEO Andrew Littlefair’s update on the industry, which was in reality a thinly veiled response to investor nervousness surrounding LNG.  While most of the press on Seeking Alpha about Clean Energy Fuels has been decidedly negative, competing stock picking website The Motley Fool has analysis with a more positive spin.  Motley Fool commentators have pointed out that Clean Energy Fuels is not solely an LNG provider; it also has significant CNG investment, as well as LNG interests outside the trucking industry (specifically in the marine and rail industries).

From Navigant Research’s perspective, LNG in heavy duty trucks and buses has always seemed likely to be a niche fuel.  While growth is anticipated, CNG is likely to see faster growth and remain a much larger market.  The main reason comes down to costs.  The cost of LNG trucks is significantly higher than that of CNG trucks and the fuel costs more as well, so the incremental cost payback period is at least double that of the CNG trucks.  Additionally, the advantages of LNG trucks are insignificant when compared to CNG trucks.  Vehicle range for the two is almost identical.  CNG does take somewhat longer to refuel (though, as noted in many of the Seeking Alpha articles, this advantage is shrinking) and drivers’ hours of service rules may limit these concerns anyway, since drivers must take more breaks than in the past.

All this said, LNG does make sense in cases where trucks are being used in consistent, high mileage routes, and therefore the fuel seems unlikely to disappear – particularly in areas where LNG liquefaction plants already exist, such as near natural gas electricity turbines, ports, or rail yards.

Total Annual LNG and CNG Heavy Duty Truck Sales, North America: 2013-2022

Total Annual LNG and CNG Heavy Duty Truck Sales, North America

(Source: Navigant Research)

Navigant Research has estimated that the investment in LNG refueling infrastructure slightly outpaces CNG worldwide ($1.31 billion and $1.27 billion, respectively, in 2013).  The liquefaction plants (not included in those figures) are more difficult to pin down, since these facilities are often not targeted specifically at transportation and vary significantly by production size.  However, GE has supplied financing of $200 million for two LNG production facilities, giving an indication of facility costs.  The liquefaction plant market seems likely to be more focused on electricity production, rather than transportation, which could put the liquefaction facilities investments that are targeting vehicle refueling at more risk.  So, as controversies go, this one does have huge implications for investors.

 

Electricity Pricing and the Economics of EVs

— April 2, 2014

The hottest global market for plug-in electric vehicles (PEVs) is Norway, where PEVs accounted for nearly 5.5% of all light duty vehicle sales in 2013.  Success of PEV sales in Norway has been credited to the country’s attractive purchase incentives and tax breaks, which include exemption from all non-recurring vehicle fees, annual road taxes, all public parking fees, and toll payments, along with free access to bus lanes.  While these incentives are appealing, equal credit goes to the massive price gap between the costs of petroleum fuels and electricity in the country.

One of the most attractive aspects of PEVs is that driving on electricity is significantly cheaper than driving on gasoline or diesel.  While this is largely true in most markets, the price difference can vary significantly by market.  The most meaningful variables in fuel cost returns are the retail price of petroleum-based fuels, the residential rates for electricity (since a vast majority of PEV charging is done at the owner’s home), and the average efficiency of new conventional vehicles compared to PEVs.

The Turkish Premium

The price of retail gasoline and diesel varies sharply from country to country.  The starkest example is in Turkey and Iran: in 2012, a gallon of gasoline cost $9.61 in Turkey (highest in the world) and $1.25 in neighboring Iran.  Electricity prices are also vastly different from country to country; residential electricity rates per kilowatt-hour (kWh) in France, which gets 80% of its electricity from nuclear power, are half the rates as those in Germany.  The variation in prices for each fuel determines which markets offer the best returns for PEV owners.

The best returns on fuel costs in Europe are in Norway and the worst are in Germany.  If the average new light duty vehicle in Europe has an mpg rating of 35 and the average new PEV has a miles per kWh rating of 2.7, then on a per-mile basis, Norwegian PEV owners save $0.16 per mile while German PEV owners save only $0.05.  Given that Germany’s incentives for PEVs are far less attractive than Norway’s, it’s not surprising that the Scandinavian country (population just over 5 million) still put around 1,500 more PEVs on the road last year than did Germany (population just over 80 million).

State to State

Among U.S. states (average new vehicle mpg is now 25) the best returns are in Indiana ($0.11 per mile) and the worst are in Hawaii ($0.03 per mile).  Given current government incentives, maintenance cost reductions, an annual vehicle mileage of 12,000, and an average $12,000 premium for PEVs, a battery electric vehicle (BEV) driven in Indiana nets a return in less than 4 years – twice as fast as one driven in Hawaii.

Fuel Costs per Mile of Fuel, Select Regions: 2014

Pricing-Economics of EVs blog (04-02-14)

(Source: Navigant Research)

Because PEV returns are so varied, local utilities can significantly affect markets by introducing time-of-use (TOU) electricity rates specific to PEV owners.  TOU rates, which incentivize off-peak electricity usage, can drastically reduce per kWh prices for PEV charging.  Residential TOU rates are limited, for now, to a few utilities in the United States.  Their adoption, however, is a win-win for utilities.  TOU rates can increase utility revenue by making market conditions for PEVs better, thus increasing demand for electricity, and TOU rates shift the increased demand to manageable off-peak hours.  The final outcome is one in which utilities make more money and drivers save more money.

 

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