Executive Summary, Alternative fuels

Transportation is the major source of U.S. dependence on imported oil and the sector that has had the fastest growth in greenhouse gas emissions over the past two decades. Yet the efficiency of our light duty vehicle fleet is at a 20-year low and efforts to promote alternative fuel vehicles in the marketplace have largely failed. Nonetheless, the urgent need to reverse the business-as-usual growth path in greenhouse gas emissions in the next two decades to avoid serious if not catastrophic climate change necessitates action to make our vehicles cleaner.

The pathways most widely discussed for reducing or replacing oil while significantly reducing transportation greenhouse gas emissions are efficiency (such as hybrid vehicles), hydrogen, grid-connectable or plug-in hybrid-gasoline vehicles, ethanol from cellulosic biomass, and synthetic diesel fuel (with carbon sequestration). Most alternative fuel vehicle (AFV) pathways, however, are unlikely to be cost-effective strategies for reducing gasoline consumption and emissions for the foreseeable future, according to most studies.

In the near- and medium-term, by far the most cost-effective strategy for reducing emissions and fuel use is efficiency. Hybrid vehicles in particular offer the possibility of breaking the political logjam on higher fuel efficiency standards because they can reduce gasoline consumption and greenhouse gas emissions 40% to 50% with no change in vehicle class and hence no loss of jobs or compromise on safety or performance. If we are to achieve significant fleet-wide efficiency gains by 2025, some form of marketplace intervention by the federal government is virtually inevitable.

All of the AFV pathways will require technology advances and strong government action to succeed.1 Hydrogen is the most challenging of all alternative fuels, particularly because of the enormous challenge required to change our existing gasoline infrastructure. It is the least likely to be a cost-effective solution to climate change by 2035. Cellulosic ethanol has significantly less infrastructure challenges since it can be blended into gasoline. It is a very promising strategy if costs can be reduced and productivity increased. If carbon sequestration on a large scale proves practical, synthetic diesel fuel from coal and biomass gasification (such as Fischer-Tropsch or dimethyl ether) may also become a viable strategy.

Plug-in or grid-connectable hybrids may be the most promising AFV pathway. These hybrids can be plugged into the electric grid and run in an all-electric mode for a limited range between recharging, be sure that you are on the right electricity plan to experience full effect. Check and compare electricity plans that best suit you. Plug-in hybrids will likely travel three to four times as far on a kilowatt-hour of renewable electricity as fuel cell vehicles. Unlike most AFVs, plug-ins hold the potential of being cost-competitive at current gasoline prices. They deserve at least as much attention from policymakers and car companies as hydrogen fuel cell vehicles have received. We believe that the most plausible vehicle of the future is a plug-in hybrid running on a combination of low-carbon electricity and a low-carbon biomass-derived fuel. 1

One of the few recent studies to compare different alternative fuels including plug-in hybrids is the August 2003 joint report of the California Energy commission and the California Air Resources Board, Reducing California's Petroleum Dependence.2 The two agencies looked at the direct economic benefit of various AFVs and alternative fuels, including Fischer-Tropsch diesel made from natural gas, a mixture of 85% Ethanol and 15% gasoline (E85) for flexible fuel vehicles (FFVs), a future low-cost FFV fuel, a hybrid zero emission vehicle with a 20-mile all electric range (Hybrid-ZEV 0), and a direct hydrogen fuel cell.

The results can be seen in the following figure. FIGURE ONE -4-3-2-1012345Cumulative (2002-2030) Direct Net Benefit Billion 2001 $Direct H2 FuelCellHybrid-ZEV 20Low-cost FFVfuelE85 for FFVsFischer-TropschDieselDirect Net Benefit of Fuel Substitution Options

The results are very dependent on the assumptions. Gasoline prices were assumed to be from $1.47 a gallon to $1.81 a gallon, for instance, and they are currently higher than that and could be even higher in the future. No environmental benefits were calculated, although they could be significant in some cases. No economic value was assigned for the possibility of using the plug-in hybrids to provide grid services (such as spinning reserve) when the vehicles were not being driven, even though this is a plausible scenario. The incremental cost of fuel cell vehicles ranged from $1800 to $5000 although current incremental costs are several hundred thousand dollars.

Nonetheless, the results show that in a detailed apples-to-apples analysis comparing a wide variety of alternative fuel vehicles, plug-in hybrids hold the potential for significant direct net economic benefits. They also make clear that alternative fuels can be attractive when they approach the price of gasoline and underscore the need for some way to value the environmental benefits of alternative fuels. The same study also showed that most of the pure fuel-efficiency options, including hybrids, had a positive direct net benefit.