For the past two years, electric vehicles (EVs) have been prominent subjects of automotive news pages, with OEMs introducing new models almost monthly.  The latest announcement is the Toyota Rav4 EV, which is scheduled to hit California dealers late this summer.  The Rav4 really exemplifies most of the EV announcements because it, like many of the EVs, will first be available in California and it will be sold in limited numbers.

This type of vehicle has been called the “compliance” EV; its main purpose is not to capitalize on the demand for EVs but rather to comply with California’s Zero Emissions Vehicle (ZEV) program, in which 10 other states participate.  Other compliance EVs are the Chevrolet Spark EV, the Honda Fit EV, and the Ford Focus Electric.  Vehicles designed specifically for compliance should not be that surprising since the first major OEM-produced ZEV, the GM EV1, was a “compliance” vehicle for the 1996 version of the California ZEV program.  Since the ZEV program has proven a major influence on the EV industry, we should examine it in greater detail to better understand and anticipate the strategy behind the way OEMs are introducing their plug-ins.

The ZEV program, which is run under the greater Advanced Clean Cars (ACC) program adopted by the California Air Resource Board (CARB), is a mandate requiring OEMs to deliver a minimum percentage of Partial ZEVs and full ZEVs to California annually.  Partial ZEVs (PZEVs) are Plug-in Hybrids, Hybrids, and low emissions conventional vehicles.  The program specifically targets large (60,000+ CA sales/annually) and intermediate (4,500-60,000 CA sales/annually) volume OEMs.  Any OEM with less than 4,500 is not regulated, but can still participate in trading credits; Tesla, Phoenix, and Zip Car do this.  (Although Zip Car is not an OEM, it participates through various allowances and exceptions within the program rules.)

Large volume OEMs like GM, Nissan, Ford, and Toyota must follow the most stringent ZEV requirements, supplying at a minimum 7.6% of their 2012 requirement (12% ZEVs) through actual ZEV credits. That works out to just under 1% of actual fleet sales.  Intermediate volume OEMs like BMW, Kia, Volkswagen, and Volvo can fulfill their entire requirement through PZEVs.  For 2012 through 2014, ZEVs must make up 12% of OEMs deliveries; from 2015 through 2017 they must make-up 14%; and after 2018, they must comprise 16%.

The program is administered using credits to determine the total value of OEM efforts that comply with the program.  So, pure ZEV deliveries accrue more credits for their makers than the more basic PZEVs do.  In this system one credit is equal to the base level ZEV.  A delivery of the most basic PZEV to California earns its manufacturer 0.2 credits, no further credits are bestowed on the manufacturer once the vehicle has been placed into production.  Neighborhood electric vehicles (NEV), and Compressed Natural Gas (CNG) vehicles also receive credits.

Credit values for each model vary as there are many additions, multipliers, and classifications awarded vehicles for a wide range of characteristics, including the use of advanced components, use in a public transportation system, and an all-electric range.  For example, a ZEV with an all-electric range of 300+ miles and fast refueling capabilities (hydrogen) can earn over 7 credits.  If an OEM accrues extra credits it can save or trade the credits with other OEMs.  The financial penalty for not meeting the requirement is $5,000 per ZEV (or credit); there is no defined price for the credit, so we can assume the traded value for a credit does not exceed $5,000.  In 2011 there were four total trades, the biggest being a trade of just under 23 credits from Tesla to Honda.

Basic ZEV Credit Ratings

*FR = Fast Refueling

Determining the credit amount for each specific technical advancement in emissions reductions technologies is one of the most important pieces of this program.  It is especially important for smaller OEMs like Tesla, Phoenix, and Zip Car, which are not regulated under the scheme, but can still profit from it by trading credits they accrue with OEMs that cannot comply on their own.  So, specific credit ratings bestowed on specific fuels or technologies can influence the direction of technological development within the industry.

An example of this influence is the new set of standards adopted in January 2012 for the years 2015 through 2025.  The new standards introduce the BEVx credit, which is used for full electric vehicles with small back up engines to extend the EV ranges in low charge situations.  Also within the new standards are requirements placed on fuel suppliers (BP, Chevron, Tesoro, etc.) to deliver cleaner fuels as part of ARB’s Clean Fuels Outlet (CFO) program.  These regulations focus particularly on hydrogen; CARB forecasts having 50 commercial stations in operation by 2025.

Many of the OEM-announced EV introductions are “compliance” vehicles and may never enter markets outside of California, but that fact should not discount the tremendous impact the ZEV program has had on the greater auto industry.  As of January 2012, 2.16 million PZEVs and ZEVs have been produced for California.  Based on the increased standards CARB introduced in January, CARB forecasts that by 2025, just under 250,000 ZEVs and PHEVs will be produced for the California market annually, or 15.4% of California’s new vehicles.  While credit for the EV revolution cannot rest entirely on the ZEV program, it deserves recognition for advancing fuel efficient technologies and helping reduce the prohibitive cost of EVs so that someday, people in other states can own a similar vehicle.

The idea of clean waterways is nothing new; however, in the past few years, several major ports have been getting special attention for their “green port” initiatives.  Since ports are densely-constructed economic zones bustling with fleets and major infrastructure, characterizing them as cities unto themselves is appropriate.  And, these cities are now going green.

Frequently ports are far removed from urban centers, so it’s difficult to appreciate the scale of their activity.  The busiest port in the world, in terms of numbers of containers, is Shanghai.  In 2011, 31,739,000 twenty-foot containers traveled through there.  While most of the world’s busiest ports are in Asia (mainly in China, Singapore, and South Korea), also ranking in the top 20 are Dubai, Rotterdam, Hamburg, Antwerp, Los Angeles, Long Beach, and Bremen.

Following this trend, the port of Long Beach is implementing a Green Port Policy that targets improvements in wildlife, air quality, water quality, and soil in the port area.  The Pacific Coast Collaborative is spearheading an even broader initiative to improve green practices at ports from Alaska to California.

Why are green ports an important cleantech trend?  Ports are closed systems.  Although vehicles (trains, trucks, ships) carry goods away from ports, the fleets and activities at a port itself remain within a fixed area.  This makes them ideal for alternative fuel fleets because infrastructure can be installed at a few key sites in a port and then entire fleets can be fuelled.

Ports also run 24 hours a day, so they are well-suited for distributed generation, especially technologies that run best at a constant rate of output, such as fuel cells.  But why stop there?  Distributed solar, green building technologies, energy storage, and microgrids would also be well-suited to ports.

While aviation biofuels have become a hot topic in the advanced biofuels industry, old-fashioned emissions regulations and escalating diesel costs are making marine shipping’s dependence on bunker fuel seem outdated.  If aviation is the hare, than marine shipping may very well be the tortoise that could emerge the winner in integrating renewable fuels in this decade.

Aside from enjoying an easier path to broader market integration, marine shipping is faced with one very large incentive driving demand for alternative fuels: MARPOL.  Originally signed in 1973, MARPOL (short for “marine pollution”) is an international convention creating a verifiable, enforceable regime to prevent pollution discharges from ships.  It has been one of the key drivers of sustainability in the marine shipping industry.

Among other things, MARPOL sets limits on nitrogen oxide (NOx) and sulphur dioxide (Sox) emissions from ship exhausts as well as particulate matter, and prohibits deliberate emissions of ozone depleting substances.  Emission Control Areas (ECA) – coastal areas, regulated by national governments, have more stringent requirements.  In 2011, the International Maritime Organization (IMO), the UN agency that regulates the shipping agency, adopted mandatory measures to reduce emissions of greenhouse gases (GHGs) from international shipping, including new requirements on energy efficiency for ships.

Shippers’ Options

According to industry representatives speaking at World Biofuels Markets held in Rotterdam, Netherlands in March, the new regulations dictate that by 2015, vessels must reduce their sulphur footprint in certain ECAs, including North America.  The impact of these restrictions will be to spur the adoption of biofuels such as lignin, algae, and biomethane based fuels, as shipping lines will not be able to route vessels away from key markets to avoid regulation.

Shipping lines have three options: 1) manage fuel use by switching among options to burn the “right” fuel in the “right” place; 2) incorporate scrubbers to clean SOx and NOx from the exhaust; or 3) switch to alternative fuels such as biofuels and liquefied natural gas (LNG).

To the first and last points, biodiesel is an especially good candidate for replacing shipping fuel since it is biodegradable, non-toxic, and essentially free of sulphur and aromatics.  It can also be dropped into the existing fuel supply chain with little or no need for engine modification and its biodegradability reduces the risk of marine pollution in case of spills.

Two key developments demonstrate that a shift is already underway:

• Maersk Line, one of the world’s largest shipping companies, is testing algae-based biofuels in anticipation of 10 percent of the world’s shipping fleets utilizing biofuels by 2030.
• Solazyme currently has a contract to supply 450,000 gallons of algal biofuels for U.S. Navy testing ahead of its plan to deploy its “Great Green Fleet” by 2016.

As discussed in Pike Research’s upcoming biogas industry report, biomethane – upgraded biogas that can be mixed with natural gas – is also attracting interest in the maritime industry and driving investment in liquefied natural gas (LNG) infrastructure at ports.

As I noted in a recent post, with access to concentrated demand centers and no viable alternative to liquid fuels, the aviation industry is gaining traction as a potential near term “win” for biofuels.

Even so, targeting biofuels and bioLNG in maritime shipping could prove to be a much easier path for biofuel and biogas producers.  While supplanting fossil fuel dependence for commercial and military aviation has obvious benefits, the hurdles are generally more onerous given the scale of risk involved.  Engine failure caused by a bad batch of biofuels, for example, would have more dire consequences for the passengers on board a plane than a cruise ship.

Compared to ground and aviation transport sectors, the international maritime shipping industry, which carries 90 percent of world trade, has been a laggard in improving its sustainability profile.  Increased utilization of biofuels will go a long way to enabling the industry and its supply chains to become increasingly carbon neutral.

Recently, at the EV 2011 VE conference in Toronto, I had the opportunity to drive the new plug-in Toyota Prius and the Chevrolet Volt back to back.  The differences in the electric-drive behavior of the two vehicles have the potential to catch people off guard as they weigh their EV choices.

GM is promoting the Volt as an electric car with a range-extending gasoline motor (REEV).  The car will deplete the battery to a certain threshold, then turn on the internal combustion engine (ICE) to recharge the battery and power the wheels.  During this charge depletion period, the driver can drive in any way she wants – jackrabbit starts, freeway speeds, a/c blasting – and the ICE won’t start until the battery hits a certain point.  If you do drive the vehicle like a teenager on her first drive without Mom or Dad, you won’t reach 40 miles.  You may not even get 20 miles, but the ICE won’t start until the batteries hit that charge depletion threshold.

With the Prius, it’s a slightly different story.  Toyota is promoting the plug-in Prius as a plug-in hybrid (presumably as opposed to an REEV).  The vehicle has an EV mode that favors the electric motor, but it also has a top speed of 62 miles per hour.  I say “favors the electric motor” because during a merge onto the freeway with a full battery charge, for example, you’ll hear the ICE start when your speed climbs to 63+ mph.  Even in the city, as I drove a Prius claiming 8 miles of EV range remaining (out of 15 miles total), when I tromped on the accelerator to get the vehicle to the 40 mph speed limit as fast as possible, the ICE kicked on to assist with acceleration and then promptly shut off again as I backed off.  I was definitely not driving like a typical EV or hybrid driver (more like that foolish teenager) – yet during my short test drive, the ICE ran for less than a minute. 

A few days later I attended a presentation by Chrysler on its Ram PHEV trucks.  Company officials referred to these vehicles as “Blended PHEVs.”  Blended PHEVs appear to be similar to the PHEV drivetrain of the Prius.  Unfortunately, I was not given the opportunity to drive the Ram PHEV to find out for myself. 

I suspect that there will be a lot of mainstream car buyers surprised by the fact that the Volt and Prius plug-in do not behave the exact same way when in EV mode.  And while I don’t hear the complaints about GM’s marketing the Volt as a range extended electric car nearly as often as I did earlier this year, I doubt this comparison would quell that anyway.  Ultimately, I doubt the plug-in Prius PHEV characteristics will turn off most drivers who are unlikely to use gas for 15 miles when driving the vehicle “properly.”  In fact, I’m more inclined to think the price and the huge number of current Prius owners will tip the scales towards Prius’ success.

However, the Volt and Prius clearly demonstrate that the contrast between an “REEV” and a “PHEV” is a bit more than a semantic difference, despite the similar basic architecture.  Whether the distinction between PHEVs and blended PHEVs is significant (I assume a Volt would be considered a PHEV and the Prius and Ram blended PHEVs) … well, that I’ll leave to the marketers to try and sort out.  I’ve said it before, and I’ll say it again: Watch out for customer confusion ahead.