American Automobile Fuel Consumption Debate: 01/01/2005

One of the first Lexus RX400h reviews I have seen. Here is an interesting piece:

Drive a Prius with a heavy-ish foot and no thought about fuel economy and it will still give you a better-than-average return. I tried this approach with the Lexus and ended up getting, according to the trip computer, little more than 20mpg. When I quizzed a Lexus engineer about this, he said that you have to make a conscious decision as to whether you are going to drive for economy or performance. In a car that weighs nearly 220lb more than its non-hybrid sibling, it seems you cannot have both.

Even with ICE only vehicles, the drivers have to make a choice of whether they want to drive in a more fuel efficient way or in a more sporty fuel consuming way.
Finally, the estimated price of RX400h is somewhere around 40,000 British Pounds, which is pretty steep. More on this later.

Larry Burns' logic

People often ask about GMs blitz about the fuel cell vehicles, and I wonder about it too. Many think that it is just a hoax aimed at delaying any action on fuel economy front in the near future. Some say that GM is hopelessly optimistic. Many others are simply trying to understand what the hoopla is all about. Larry Burns tries to explain *some* of the logic here:

1. Volatility in oil supplies worries GM
2. Hybrids don't "solve" the energy, environmental or congestion problems
3. When it comes to Fuel Cell Vehicles (FCVs)

3.1) Propulsion system in is much simpler since there are many fewer parts
3.2) Geometry of parts involved in FCVs is a lot simpler than ICE vehicle parts
3.3) The cost per kilowatt are now only ten times as much when they used to be 100 times as much six years ago
3.4) Production and handling of hydrogen are established industries
3.5) Cost per hydrogen station should be in the range of only $1 million
3.6) "The solution lies in the software"

Let's take these one at a time.

If GM is genuinely concerned that future of oil supplies is uncertain and while there may be a lot of oil, but it will come at the cost of a LOT of price and uncertainty, then I must applaud them for taking such a view.

While hybrids won't "solve the problem", it is too simplistic to think that they don't have a significant role to play in the solution of energy and environmental problems. In addition, we know that even smaller steps today will have significant long term impacts and will make the job of addressing longer term problems easier.

While the propulsion system is much simpler and the geometry of parts involved is simpler, it should also be kept in mind that the conventional ICE technology has kept on getting better by 1-2% EVERY YEAR. This simply means that there is a lot of catching up to do if FCVs have to compete head on with traditional vehicles in terms of reliability and performance.

Newer research and improvment in technology is rapidly bringing down the cost of FCV systems. There is no doubt about that. However, it is the last couple of zeros that are going to be the most difficult to remove. Remember that this has to be done while meeting very high performance standards which current FCV technology does not meet in many cases.

While hydrogen production and distribution is a well established business, the entire rationale for hydrogen-based vehicles is based on the premise that the hydrogen will come from very low carbon sources. Current hydrogen production does no carbon mitigation in the form of sequestration. Thus unprecedented developments in carbon capture and storage as well as renewable energy systems will have to made, otherwise the environmental argument in favoe of FCVs disappears.

In the interview, Burns only talks about 12,000 hydrogen stations. Currently, there are more than 180,000 gasoline stations in the US. Several estimates agree that for hydrogen or any other alternative (such as compressed natural gas) to really take off, at least 30,000 to 40,000 stations will be required. In addition, the cost of infrastructure extends beyond the hydrogen stations. TIAX (which bought A D Little's business in this area) has done quite a bit work on hydrogen and fuel cells for the DOE. In a recent presentation, they outlined the significant amount of risks involved in hydrogen infrastructure including long pay back periods.

The last point about FCVs offering a completely new type of product is where I think Larry Burns and GM see to be most right. What I like here is that they have an attitude that aims to completely change our notions about what it means to own and operate an automobile. In some respects, GM believes that the customers will buy a product which is new and exciting and offers value. In some respects, it is "building a better mouse trap and they will come" attitude. In either case, I think that GM may be on to something here. It is not a common sight to see a company of the size of GM which is so entrenched in its traditional products, markets and procedures trying to reinvent itself. Even fewer of those who have tried have succeeded. Never the less, it is this buzz and excitement about FCVs that I find most attractive, but I also feel that this alone is not sufficient to overcome several technical and market obstacles in the way of FCVs.

Overall, Larry Burns' logic may be slightly twisted, but he is not out of his mind. I would be very happy if GM and other car makers succeed at this effort, but at this point I am not ready to put my money on them doing so.

UPDATE:
Hydrogen Forecast has video interviews with Larry Burns, Tim Vail and Anne Asensio about the Sequel. Pay close attention to Anne Asensio's clip as she talks about aspects of vehicle design that might really get many young people excited. (Note: Flash Player and IE needed)

Meet the Sequel

Danny Hakim reported in the NYT last week about the GM Sequel. The article is all over the place, but I agree that the Sequel is totally cool. More details can be found here and here.

What GM has shown is that at least some of the obstacles associated with the Hydrogen Fuel Cell Vehicles (FCVs) can be overcome. The 300 miles range is impressive and so is the under 10 second 0-60 time. The accelaration performance indicates that the Lithiom-Ion battery in the vehicle is quite good and has been integrated nicely in the concept. The critical issue is of course the cost. In the NYT article, the chief engineer behind the Sequel Chris Borroni-Bird was quoted as saying that the vehicle is 10 times too expensive. I take it that the cost is anywhere between $250,000 to $500,000. Tom pointed out a CSM article that states that the Sequel costs more than a million dollars. The CSM article also notes that the refueling time for the vehicle is about 10 minutes. clearly, the Sequel is far away from being market ready any time soon. Never the less, it will be remembered as an important landmark, should GM be able to deliver a market ready FCV in 2015.

On Travel

I have been travelling since the 6th and will not post until I get back on the 17th, unless of course there is something very interesting that I have to talk about.
Cheers!

Arnold's Hydrogen Hummer

Forbes does a report on Forbes.com: Arnold's Hydrogen Hummer:

The H2H uses a conventional internal combustion engine powered by compressed hydrogen, even though GM's plans for its future model range involve hydrogen cars powered by energy sources called 'fuel-cell stacks.' Supposing for the sake of argument that Schwarzenegger wanted to drive the H2H around California ('I don't think that's a common occurrence,' said the Hummer spokesperson), he could refuel the car at several stations.

The majority of California's 12 to 15 hydrogen refueling stations are in the southern part of the state, although Schwarzenegger could--for example--refuel the H2H at the University of California, Davis' station if he didn't stray too far from Sacramento. Hydrogen currently costs $4 to $10 per kilogram, the unit in which it is measured, and the H2H's fuel tank holds five to six kg of hydrogen. GM believes that if hydrogen is to be commercially viable it must cost $2 to $2.25 per kg--that is, it must be competitive with gasoline prices.

From the data I have seen, the cost of delivered hydrogen (i.e. when it is ready to be put in to your vehicle at no tax) is currently estimated at about 14-40$/GigaJoule of energy or $1.68 to 4.8 per kg at the lower heating value (LHV), with the higher cost number being more likely than the lower once. In general, this cost needs to halved if Hydrogen is to make sense. Not impossible, but not at all trivial or guaranteed.

Hydrogen: Are production and storage technologies robust enough to deliver it?

That is a promising enough title for a document to make someone want to read it. If you read this two page summary of Frost and Sullivan's report, it reads like a paper put together by a college freshman in a hurry. Why would anybody pay to get these reports? May be I am missing something here. Do you have any clue?

DOE Projections of Oil Prices

Sometimes DOE does things that are a little hard to understand in the beginning. Take for example, the Annual Energy Outlook with Projections to 2025. Here is what the report says about the oil prices:

In the AEO2005 reference case, the annual average world oil price (IRAC) increases from $27.73 per barrel (2003 dollars) in 2003 to $35.00 per barrel in 2004 and then declines to $25.00 per barrel in 2010 as new supplies enter the market. It then rises slowly to $30.31 per barrel in 2025, about $3 per barrel higher than the AEO2004 projection of $27.41 per barrel in 2025. (ed. note: These are 2003 dollars) In nominal dollars, the average world oil price is about $52 per barrel in 2025. The AEO2005 world oil price forecast is characterized by decreasing prices through 2010 and moderately increasing prices thereafter. This is consistent with a forecast that projects increases in world petroleum demand, from about 80 million barrels per day in 2003 to more than 120 million barrels per day in 2025, which is met by increased oil production both from the Organization of Petroleum Exporting Countries (OPEC) and from non-OPEC nations. AEO2005 projects OPEC oil production of 55 million barrels per day in 2025, 80 percent higher than the 31 million barrels per day produced in 2003. The forecast assumes that OPEC will pursue policies intended to increase production, that sufficient resources exist, and that access and capital will be available to expand production. Non-OPEC oil production is expected to increase from 49 to 65 million barrels per day between 2003 and 2025.

Now compare this to the projections from Philip Verleger. You will find a substantial difference. EIA does have an update on its projections by taking in to account the latest futures market data. Note that these two projections differ substantially. I am looking forward to the release of the completed Annual Energy Review 2005 for a more substantial discussion of these two and other scenarios.