Automakers are in a competitive race to bring more fuel-saving, low polluting choices to all consumers. CEOs like Carlos Ghosn of Nissan and investors like Warren Buffet are increasingly placing their bets on electric drive technologies. These investments, along with many others globally, mark an increasing recognition that technological innovation and competitiveness, the price of oil, and clean energy policies are driving transformation in the auto industry.
Three technology horses are in this race – batteries used in plug-in hybrid electric vehicles (PHEVs) such as the GM Volt and in battery-electric vehicles (BEVs) such as the Nissan Leaf, hydrogen used for fuel cell vehicles (FCVs) such as the Honda Clarity, and advanced biofuels that are produced sustainably. By our count, twelve major automakers are making serious investments to launch PHEV and BEV vehicles over the next five years. Several majors have also committed to commercializing FCVs in five to ten years. A number of start-up companies with serious investor backing have also entered the technology race and are introducing models of innovation to the industry. Numerous advanced biofuel companies, spurred on by policies like the low carbon fuel standard, are developing the next-generation of new fuels that will avoid competition with food-based crops.
Collectively, these efforts represent critical steps to ending our oil dependency and shifting to a clean energy economy. The key challenge for automakers, battery and fuel cell producers, low carbon fuel producers, and the U.S. government will be to further drive investment and innovation to help bring down costs. With China, Japan, South Korea, and European governments all investing heavily in electric drive and energy storage technologies, the U.S. cannot stay on the sidelines and expect to stay competitive in a clean energy economy.
Recently, a committee from the National Research Council (NRC) released a report evaluating the challenges of transitioning to PHEVs that can run on electricity from the grid or gasoline. The NRC report was sanguine about the prospects of plug-in hybrids and cited the cost of batteries as the main drawback -- leading one major newspaper to declare efforts to fund plug-in hybrids a “bad deal for taxpayers.”
The reaction misses the fact that all three horses are core enabling technologies that can work in synergy and fulfill different consumer needs. The electric drive system can run on batteries or fuel cells. The plug-in hybrid can run off advanced biofuels and either energy storage systems. Interestingly, an earlier 2008 report from the same NRC committee argued a portfolio of technologies – in conjunction with new policy drivers --
“has the potential to nearly eliminate gasoline use in light-duty vehicles by the middle of the century, while reducing fleet greenhouse gas emissions to less than 20 percent of current levels. This portfolio approach provides a hedge against shortfalls in any one technological approach and improves the probability that the United States can meet its energy and environmental goals.”
We’ll need all three horses in this race.
Not surprisingly, the findings of the current NRC report have been received with controversy, especially as automakers and battery manufacturers are beginning to commercialize PHEVs and BEVs. A debate has now begun on the battery costs assumptions used for the NRC report, which cited a range today of $1250 to 2000 per kilowatt-hour (kWh) of usable battery energy versus a Department of Energy estimate of $400 to $800 per usable kWh, a study by TIAX estimating $264 to $710 per usable kWh, and a review by the California Air Resources Board that cited a range of $580 to $800 per usable kWh. It’s clear that such wide discrepancies on cost estimates will need to be resolved before firm conclusions can be drawn from the NRC report.
That said, the NRC report does reaffirm that strong government action will be needed to transition us to electric drive, regardless of whether battery or fuel cells provide the juice. The strategic decision that the federal government needs to make is whether we transition to clean vehicles and fuels or continue to rely on a single, dirty energy source -- oil. The decision to make a transition means we need strong performance-based standards that will drive vehicle efficiency and low carbon fuels. It also means we need manufacturing and consumer incentives to help bring down the initial costs of electric-drive and energy storage technologies. The auto industry can create opportunities out of the crisis – we’re starting to see this occur. All we need to do now is to help seize victory from the jaws of defeat.
 All values reported in terms of "usable kWh energy" using the assumptions from the NRC report.