9%
Honda
10%
7%
Ford
GM
2%
Nissan
2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
FIGURE 13.2 U.S. Hybrid Market Share (June 2007)Source: “New Car Pricing: Hybrids: All,” Edmonds.com, http://www.edmunds.com/apps/vdpcontainers/do/ViewMarketModels/category=market/attribute=hybrid?mktcat=hybrid-reviews&kw=hybrid-reviews&mktid=gc28593958.
28 miles/gallon for one of the Lexus models, to the higher end of 49 to 51mpg for the Honda Civic and 51 to 60 mpg for the Toyota Prius, accordingto Consumers Guide. However, these are EPA figures and the mileage isnever as high in real driving conditions.16A hybrid vehicle typically costs a few thousand dollars more than acomparable gasoline vehicle to buy. However, this is offset by the bettergasoline mileage and by up to a $2,600 federal tax credit, which bringsdown the total cost of ownership. In addition, there are sometimes localbenefits such as being able to drive in a car pool lane even with only oneperson in the car and exemptions from sales tax, parking meter fees, andvehicle inspections.
PLUG-IN ELECTRIC HYBRID VEHICLES(PHEVs)While the current gasoline-electric hybrid vehicles are a step forward, thereal improvement will come with the next generation of gasoline-electrichybrid vehicles, which will be the plug-in hybrid electric vehicle or PHEVfor short. In a plug-in hybrid, the electric motor is the primary source ofpower and the gasoline engine is used only as a supplemental power sourcewhen needed for recharging the battery on the road, accelerating, passing,
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or going up a hill. The battery is charged by plugging a cord into a conventional 110-volt electrical outlet in the home, garage, or charge station.17The main advantage to a plug-in hybrid is that it will get even better mileage and produce even less pollution and CO2 emissions than current hybrids. Several auto manufacturers are developing plug-in hybrids formass production. Two new plug-in hybrid vehicles, the Ford Edge and theChevrolet Volt, were introduced at the 2007 Detroit Auto Show and shouldbe available in a few years. GM’s Saturn division expects to have a plug-inhybrid version of its Saturn Vue SUV available in 2009. The mileage equivalent for these vehicles is very attractive. The Chevrolet Volt, for example,is being designed to go 40 miles without a recharge. If a commuter’s dailyround trip is 40 miles or less, then no gasoline would be used at all. If theround trip is 60 miles, the car would use gas for only 20 of those milesand the overall mileage calculation would be about 150 miles per gallon,according to GM.Another big step forward will be hybrids that use ethanol rather thangasoline, making them flex-fuel hybrids that can use E85 ethanol. Whenhybrids are run on E85 and electricity, then gasoline usage will fall towards the attractive level of zero, which should ring a few alarm bells atOPEC. Ford recently announced that its current Ford Escape hybrid wouldsoon come with the option of being a flex-fuel model that can run on E-85ethanol. Chevrolet has announced that its Volt plug-in hybrid product linewill include models that can run on E85 ethanol or biodiesel.The delay in getting plug-in hybrids on the road is that they depend onnew lithium-ion battery technology. The lithium-ion battery has been usedfor years for small electronic devices like cell phones, laptops, and powertools. Now they are being adapted for heavy-duty use in automobiles.The lithium battery is a rechargeable battery like the familiar nickelcadmium battery used in many electronic devices today. However, thelithium-ion battery has some significant advantages, which include (1) highenergy capacity; (2) low self-discharge rate when not being used; (3) noneed for a periodic total discharge; (4) high current output when needed;and (5) the ability to form the battery into many different shapes dependingon space requirements.The disadvantages of the lithium-ion battery include (1) the possibility of overheating, which requires protection circuitry to keep voltage andcurrent within safe limits; (2) the battery ages even if it is not in use; and(3) the battery is currently more expensive to manufacture than older battery technologies.Safety is the biggest concern in using lithium-ion batteries in vehicles.Laptops that use lithium batteries have been known to sometimes overheatand catch fire.18 However, a great deal of work has been done to makethe lithium-ion battery safer and strong enough to power a car and the
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automobile companies believe that the safety issues have been solved. Infact, lithium-ion battery powered vehicles are already on the road today,though not in mass quantities.
HYBRID AND ELECTRIC VEHICLE PLAYERSThe world’s largest auto manufacturers are the companies that arepresently selling the vast majority of gasoline-electric hybrid vehicles. Thelarge auto manufacturers are also the companies that will be rolling outnext-generation plug-in hybrids and eventually all-electric vehicles on amass scale. As mentioned earlier, Toyota has a huge head start in producing and selling hybrids.The size of the hybrid market opportunity demands that the hybrid battery suppliers for these vehicles are also large companies with large R&Dbudgets and mass production capabilities. One company that is currentlyheavily involved in developing and selling hybrid batteries is Johnson Controls (NYSE: JCI).19 Johnson Controls currently has twelve developmentcontracts for lithium-ion plug-in hybrid vehicle batteries and three production contracts for hybrid technology. In addition, Johnson Controls andSaft Advanced Power Solutions (parent: Saft Groupe, Paris: SAFT FP) inJanuary 2006 formed a joint venture to supply advanced-technology batteries for hybrid-electric vehicles and electric vehicles.20 Other companiesinvolved in hybrid vehicles and batteries include the following:
r Altair Nanotechnologies Inc. (Nasdaq: ALTI). Altair (www.altairnano.com), with 2006 sales of $4.3 million, is involved in a variety of businesses having to do with nanomaterials and nanomanufacturing. Regarding batteries, Altair produces its NanoSafe brand of lithium-ionbatteries that are used in all-electric vehicles. In January 2007, Altairentered into a multiyear agreement with Phoenix Motorcars to supplymore than $2.0 million of lithium-ion batteries, which Phoenix Motorcars will incorporate into its all-electric SUVs.21r Valence Technology (Nasdaq: VLNC). Valence Technology(www.valence.com), with 2006 sales of $16.7 million, has developed a phosphate-based lithium-ion technology Saphion that is usedto produce lithium-ion batteries for the large appliance market including vehicles. The company says that it is close to commercializing itsSaphion product line.r GM’s lithium-ion battery partners. General Motors in June 2007 announced that it awarded two contracts for the supply of advancedlithium-ion batteries for its upcoming plug-in hybrid electric vehicle,the Chevrolet Volt. The batteries will be more thermally stable and less
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expensive than current models. The two suppliers will be: (1) Compact Power, Inc. (www.compactpower.com), which is a subsidiary ofKorean battery manufacturer LG Chem (parent company LG Group,South Korea 003550 KS), and (2) Germany-based Continental AG’sAutomotive Systems division (www.conti-online.com) (German Xetra:CON GR).
ALL-ELECTRIC VEHICLESChris Paine’s documentary film, Who Killed the Electric Car?, released in2006 at the Sundance Film Festival by Sony Pictures, provides an extremelyinteresting view of the recent history of the electric vehicle. The film’s Website can be found at www.WhoKilledTheElectricCar.com.The film documents how U.S. automakers produced a limited numberof all-electric vehicles starting in the late 1990s in response to demands ofCalifornia regulators. General Motors first built its all-electric EV1 vehiclein 1997 with a production quantity of 650 vehicles. Over the next few years,several hundred more cars were made with some improvements. The carwas a two-seater, could accelerate from 0–60 mph in about 8 seconds, hada top speed of about 80 mph, and had a driving range of about 75 mileswithout a recharge. The vehicle was useful for commuting to work andfor quick trips around town. Rather than selling the vehicles outright, GMleased the EV1 vehicles to users and retained the right to repossess thevehicles at the end of the lease term.In 2003, GM canceled the EV1 program. GM then took back the EV1vehicles from users and destroyed virtually all of the vehicles in junkyards.The film Who Killed the Electric Car? investigates why the electric vehicle program was killed. The film concludes that there was plenty of blameto go around, including consumer ignorance, automobile companies thatdidn’t want a threat to their high-end gasoline-powered vehicles and to thedealer aftermarket for auto maintenance and replacement parts, and California regulators who caved in to heavy pressure from automobile and oilindustry officials and lobbyists.The film actually provides an important cautionary lesson for investorsabout the ability of legacy companies with strong lobbying forces and political clout to sometimes bury promising technologies and products beforethey can even get off the ground. Yet the film also documents the surprising popularity of the EV1 among its users. Some EV1 users actually bandedtogether to protest the cancellation of the EV1 program and they documented how GM rounded up the vehicles and destroyed the EV1’s, presumably to prevent the electric vehicle from being a threat to their gas-guzzling
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franchise vehicles. The EV1 was actually based on rather rudimentary battery technology using lead acid batteries, meaning EV1 users would presumably be even happier with the new gasoline-electric and all-electric vehicles that will be emerging in coming years.While U.S. automakers, with their heads in the sand as usual, refusedto move ahead with an all-electric vehicle program, the U.S. governmentpushed ahead with a research program for gasoline-electric hybrids. U.S.automakers have always assumed that U.S. consumers would not buy allelectric vehicles because of the perception of weak power and limitedranges. However, the U.S. government pushed a program to bring gasolineelectric hybrid vehicles to market with the idea that U.S. consumers wouldbuy an electric/gasoline vehicle with extended ranges and low operatingcosts. Japanese automakers, which felt threatened by the U.S. government support for a hybrid gasoline-electric vehicle program, embarkedon their own aggressive hybrid research programs. The result was thatToyota emerged as the dominant hybrid vehicle manufacturer in the worldand U.S. automakers were left playing catch-up as usual.Full-sized all-electric vehicles with a reasonable range are now starting to be produced by smaller manufacturers. The electric vehicle is really very simple in its operation. The power portion of the vehicle issimply a battery, an electric motor, a foot pedal/controller to regulatethe flow of electricity to the motor, and a transmission to transfer themotor’s power to the wheels. The battery technology for all-electric vehicles is lithium-ion.There are three main small U.S. companies that are involved in producing all-electric vehicles:
r Phoenix Motorcars (privately held). Phoenix Motorcars (www.phoenixmotorcars.com) is currently in production with its all-electricsport utility truck for a variety of customers including Pacific Power& Light. Phoenix is ramping up production to about 500 vehicles peryear. The truck carries up to five people, can go from 0 to 60 mph in10 seconds, has a top speed of 95 mph, and has the usual features ofheat, air-conditioning, power windows and locks, and front airbags.The cost of the vehicle is about $45,000. These trucks use lithium-ionbatteries supplied by Altair Nanotechnologies, as discussed in the previous section. The truck has a range of 100 miles per charge and canrecharge in six hours, or in as little as 10 minutes with a special charging device.22 The company says an upgrade will extend the truck’srange to 250 miles. An independent review of the vehicle carried in PCMagazine gave the truck high marks.23 This book’s companion Website at www.ProfitingFromCleanEnergy.com has links to some videoclips demonstrating the Phoenix all-electric SUV.
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r Tesla Motors (privately held). Tesla Motors in 2007 will officially startdelivering the all-electric Tesla Roadster (www.teslamotors.com).24The Tesla Roadster is a high-end sports car that can accelerate from0–60 mph in about 4 seconds and hit a top speed of over 130 mph.Its driving range on a single charge is over 200 miles. Its rechargeable lithium-ion battery has a life of over 100,000 miles. The companysays that the Roadster’s mileage performance will be the equivalentof getting 135 miles per gallon in a gasoline-powered car. The firstproduction run of 100 cars is already sold out. The price of the highperformance sports car is about $100,000. The initial model is a twoseater convertible, but the company plans to have a four-door sedanmodel available in 2008. Forbes, in its Best Cars 2006 feature, gave theTesla Roadster a “New car that lived up to the hype” award:.25 Thisbook’s companion Web site at www.ProftingFromCleanEnergy.comhas links to video clips demonstrating the Tesla Roadster.r ZAP, Inc. (OTCBB: ZAAP). ZAP (www.zapworld.com) is a companythat sells small, all-electric vehicles, scooters, motorcycles, and allterrain vehicles. ZAP was incorporated in 1994 and had 2006 sales of$10.8 million. Most of its products are manufactured in China. Thecompany’s vehicles are generally low powered and are designed forlocal or off-road use. However, ZAP recently announced its new ZAPX Crossover, which is a full-sized all-electric vehicle that the company says will be able to travel 350 miles per charge (rapid 10 minuterecharge) at a cost of only 1 cent per mile. The company in 2006also started selling rechargeable batteries using lithium-ion and lithiumpolymer technology for use with devices like cell phones, digital cameras, and laptops.
CLEAN TRANSPORTATION INVESTMENTCONCLUSIONSWe can start from the premise that there is nothing that can save the internal combustion engine over the long haul, assuming that climate change isreal and that greenhouse gases and pollution need to be curbed. Regardless of the fuel being burned, even ethanol and biodiesel, internal combustion engines release CO2 into the atmosphere and other contaminants aswell. Moreover, the process for obtaining the fuel (gasoline or biofuels)for the internal combustion engines carries an additional set of environmental issues. Companies that provide solutions for improving the internal combustion engine can be successful for a period of time, but will
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ultimately fade if they do not migrate into alternative zero-emission propulsion technologies.Looking at the alternatives to the internal combustion engine, fuel cellvehicles at first glance present an attractive option given that a fuel cellproduces zero emissions. However, even if fuel cell vehicles eventually become economically competitive, there is the potentially insurmountablecost and logistics problem of creating and delivering hydrogen (or intermediate hydrogen products such as natural gas) to service stations acrossthe nation. As mentioned earlier, the United States cannot even get E85ethanol delivered across the nation, let alone hydrogen which is a muchmore challenging fuel from the standpoint of safety, production, storage,and delivery.The option that clearly makes the most sense for the long haul is tostart with the gasoline-electric hybrid vehicle and eventually move to theall-electric vehicle. Electricity is a “fuel” that is already delivered to everyhousehold, business and service station in the United States. Moreover, theeconomics of hybrid and all-electric vehicles are attractive because electricity is a relatively cheap source of energy. All-electric vehicles can beoperated for as little as 1 to 4 cents per mile, which is far less than the fuelcost of a gasoline engine of 10 to 20 cents per mile (depending on mileageand gasoline prices).Gasoline-electric hybrid sales are currently growing at an annual rateof more than 20 percent and that growth rate is likely to strengthen as plugin hybrids start to become available. Plug-in hybrids are likely to be farmore popular than the marketplace currently believes. U.S. automakersare skeptical about plug-in hybrids because they don’t think consumerswill be willing to take the extra step of plugging their cars into a socket torecharge them. Indeed, not all consumers park their cars near an electricoutlet where they can plug them in.However, there are already charging stations for plug-in vehicles andmany consumers are likely to be attracted to vehicles that allow them touse very little gasoline in return for the minor inconvenience of pluggingthe car in overnight. U.S. automakers have already seriously underestimated demand for current hybrid-electric vehicles as evidenced by the factthat they are so far behind Toyota in producing and selling hybrid vehicles. In fact, an executive vice president at Toyota has been quoted as saying, “In the future, the cars you will see from Toyota will be 100 percenthybrid.”26Is there enough electricity capacity in the American grid to charge upall of America’s cars? In fact, a study by the Pacific Northwest NationalLaboratory found that the current idle off-peak electricity capacity in theUnited States could power 84 percent of America’s 220 million vehiclesright now if they were all plug-in hybrid vehicles.27 That means America
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could switch overnight to plug-in hybrids and the current power systemwould be able to handle 84 percent of the extra load.Sales of advanced batteries and hybrid vehicles are likely to be significantly stronger than the market expects in coming years. Companies thatare at the forefront of battery and electric vehicle technology are likely tothrive in coming years and decades.
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Ethanol andBiofuelsLong-Term TransportationSolution or Flash in the Panuntil More EnvironmentallyFriendly Vehicle TechnologiesTake Over?
he ethanol boom is the best thing to hit U.S. farmers since theGreat Depression brought the farm subsidy system. U.S. farmers havesuffered for literally decades under the weight of falling inflationadjusted crop prices combined with rising production and land costs. WillieNelson, Neil Young, and John Mellencamp still hold the Farm Aid concertsthat these artists started during the farm recession in 1985, when many family farms were forced out of business (www.farmaid.org). But U.S. farmersnow have a new spring in their step since a major source of new demandhas emerged for their product and has driven farm profits sharply higher.Ethanol demand has driven not only corn prices sharply higher, buthas also boosted the prices of other crops such as soybean, wheat, andcotton prices because less farmland is being planted with those crops andmore farmland with corn. The U.S. agricultural sector is now a boomingindustry, both for farmers themselves and for all the businesses connectedwith agriculture.
T
BIOFUELS: WHAT ARE THEY?Biofuel is a general term that refers to a liquid or gas fuel derived frombiomass plant materials such as crops, crop waste, wood and wood products, plant oils, and similar materials. Ethanol is alcohol produced by thefermentation of sugars in corn, cane or beet sugar, or other types of plantmatter. Biodiesel is a flammable oil that is comparable to petroleum-baseddiesel fuel except that it is manufactured from various types of plant oil oranimal fats.253
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BiodieselBiodiesel is produced from vegetable oil (e.g., palm oil, soybean oil, cornoil) or from animal fats such as tallow. Biodiesel is popular in Europewhere there are more diesel passenger cars, but biodiesel has not caughton yet in the United States. Biodiesel is biodegradable and nontoxic. Purebiodiesel is B100. B20 is 20 percent biodiesel and 80 percent petroleumdiesel. B20 can be used in existing diesel engines without any modifications. B100 requires some minor engine modifications such as replacingthe engine seals with nonrubber seals and in colder climates a fuel heatingsystem may be necessary to keep the fuel from becoming too thick.
EthanolThe process of producing ethanol is essentially the same as running amoonshine still. The process involves decomposing the glucose (C6 H12 O6 )or other sugar contained in plant matter into alcohol (C2 H5 OH) andCO2 through the process of microbial (yeast) fermentation. The resultingethanol product is then treated with denaturing ingredients to make it unfitfor human consumption and to avoid liquor taxes. For American vehicles,ethanol is typically mixed with gasoline to produce E10 (10 percent ethanoland 90 percent gasoline) or E85 (85 percent ethanol and 15 percent gasoline). E10 is sometimes called gasohol. This book’s companion Web site atwww.ProfitingFromCleanEnergy.com has a link to a video providing a tourof an ethanol refinery.Ethanol is certainly not a new fuel for operating internal combustionengines. The first Ford Model T was designed to run on ethanol. Ethanol’simage received a boost when the IRL IndyCar Series, starting with the2007 season, switched to using 100 percent ethanol instead of methanol,illustrating that ethanol is a powerful fuel that can run high performanceengines.
ADVANTAGES AND DISADVANTAGESThe big benefit from ethanol is that it is derived from naturally growncrops such as corn and sugar. It is therefore a “renewable” energy sourcesince farmers can simply grow more corn and sugar next year for the nextround of ethanol production. This contrasts with an energy source such aspetroleum, which is contained in fixed quantities in the earth’s crust and isnot renewable. Once petroleum is removed and burned, it is gone.For the United States and other countries such as Brazil that arebig agricultural producers, ethanol also provides the advantage of energy
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security since the crops are grown within a country’s borders, thus reducing or even eliminating dependence on foreign sources of fuel. In fact,Brazil does not need to import any foreign oil because of its status as theworld’s second largest ethanol producer.Another big advantage of ethanol is that the ethanol industry providessignificant economic stimulus to a country’s agricultural sector and overall economy. Spending dollars at home on fuel, with economic multipliereffects for other industries, is certainly much better than sending dollars overseas to Middle East oil sheiks. In fact, the U.S. ethanol industryadded $17.7 billion to U.S. GDP in 2005, created 153,725 jobs, increasedAmerican consumer income by $5.7 billion, and provided $1.9 billion in taxrevenue to the federal government and $1.6 billion to state and local governments (thus reducing individual taxpayer contributions), according tothe research firm LEGG LLC.1 Those domestic economic benefits stand instark contrast to simply shipping dollars overseas to oil producers.Ethanol also has an advantage in that it burns more cleanly than gasoline, thus producing fewer pollutants. Ethanol produces up to one-thirdless carbon monoxide and one-quarter less CO2 than a comparable gallonof gasoline. Ethanol also eliminates the sulfur dioxide emission from gasoline that comes back to earth as acid rain. Nevertheless, ethanol is still acombustion fuel that emits greenhouse gases. The production process forethanol also releases CO2 into the atmosphere, although that is offset bythe fact that the feedstock plants absorbed CO2 during their lifetime.The main disadvantage of ethanol, at least for right now, is that ethanolin the United States is produced almost exclusively from corn, which is ahigh-value crop that is very important in the human food chain. Strong demand for corn from ethanol producers has driven the price of corn sharplyhigher, thus also raising the price of food for humans and the cost of feedstock for livestock producers.Lester Brown, who founded Earthwatch, has gone so far as to predictthat the biofuel craze will cause the price of food to skyrocket and willcause food riots.2 In fact, there have already been street protests in Mexicotied to sharply higher corn tortilla prices, which are a key food staple forthe poor in Mexico.A startling statistic is that the corn used for a single refill of a 25-gallonvehicle tank could feed one person for an entire year, according to Coop America.3 The “food versus fuel” debate will continue in coming years,but will become less important over time as ethanol producers eventuallyswitch over to cellulosic feedstocks that are cheaper and are not part ofthe human food chain.Ethanol produced from corn also has a disadvantage in that it is nota particularly efficient way to produce fuel. A large effort is required toproduce an acre of corn, including human labor, fertilizers, pesticides, and
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fuel to run farm equipment. There has been a heated debate in the pastseveral years about the net energy balance of corn-based ethanol. The U.S.Department of Energy has tried to settle the issue by citing a net energybalance ratio of 1.34, which means that for every unit of energy that goesinto growing corn and converting the corn into ethanol, we get back 1.34units of energy in the form of transportation fuel.4 A net energy balanceof 1.34 is at least above 1.0 and therefore results in net positive energyoutput, but that is still not a particularly efficient way to produce energy.This debate will fade as cellulosic ethanol comes on line, because cellulosicethanol has much higher yields. The U.S. Department of Energy cites anet energy balance of 2.62 for cellulosic ethanol, which means that 2.62units of energy would be produced for every unit of energy expended inthe production effort.5The most damning disadvantage of ethanol produced from corn inthe United States, however, is that there is simply not enough farmlandin the United States to produce all the ethanol that would be needed tocompletely replace gasoline. The situation is less severe for sugar-basedethanol, however, because the world’s big sugar producers such as Brazilhave plenty of extra land that can be cultivated with sugar if ethanol andsugar demand is high enough (although deforestation and loss of CO2 conversion may be involved in clearing that land). In any case, the land situation in the United States will be alleviated to some extent when cellulosicethanol comes on line with its higher yield of ethanol per acre of land. Inaddition, cellulosic-based products are either agricultural waste productsor low-value crops such as switchgrass, which can be grown on marginalland that may not be able to support a high-value crop such as corn.The inefficiency of using land and sun energy to produce biofuels is thetopic of an interesting article in Photon International magazine titled “Organized Wastefulness: Biofuel Is the Most Inefficient Renewable Energy.Why Not Fill the Car’s Tank Directly with Solar Electricity?”6 The authorprovides calculations indicating that one hectare of land (which is about2.5 acres) can produce enough ethanol for an automobile to travel 22,500kilometers, whereas that same amount of land containing a reasonably efficient solar photovoltaic park could produce enough electricity for a plugin electric vehicle to go 3.25 million kilometers, or 144 times farther. Theauthor’s point is that crop-based biofuels do a very poor job of converting the energy contained in sunlight (via photosynthesis) to transportationfuel as compared with solar photovoltaic power. The author’s other pointis that biofuels represent a very inefficient use of land as compared with analternative of constructing solar parks. The author makes a cogent argument that crop-based biofuels make no economic sense (or environmentalsense) as compared with encouraging the use of utility solar power andplug-in hybrid electric vehicles.
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Ethanol: Summary of Advantages andDisadvantagesAdvantagesr Ethanol is derived from renewable corn and other plant-based feedstocks. If the feedstock comes from domestic sources, then a countryis insulated from unstable sources of imported oil.r Ethanol burns more cleanly than gasoline and gives off fewer greenhouse gases, making it better for the environment