Panel IV

Market Drivers: Creating Demand for Electric Vehicles

Moderator: Robert Kruse EV Consulting LLC

This panel addresses what is required to create market demand for electric vehicles, explained moderator Robert Kruse, the founding principal of EV Consulting LLC and former executive director of global vehicle engineering for hybrids, electric vehicles and batteries at General Motors. “I have a pretty impressive panel to talk about various aspects of what can be done to spur electric-vehicle adoption,” he said.

The first topic addressed market incentives. Speaker Daniel Spieling is a professor of civil engineering and environmental science and policy at the University of California at Davis, Mr. Kruse noted. He is founding director of the Institute of Transportation Studies and acting director of the Energy Efficiency Center, both at UC-Davis.

Dr. Sperling also holds an automotive engineering seat on the California Air Resources Board that has oversight responsibilities over the state’s policies regarding climate-change, alternative fuels, vehicle travel, land use, and the zero-emission vehicles program. He is co-director of the California Low-Carbon Fuel Study24 and chairs the Future Mobility Council of the Davis World Economic Forum. Dr. Sperling is an active member of 13 National Academy committees, Mr. Kruse noted.

The next speaker, Gary Smyth, was there to provide “an industry perspective in transforming the auto industry,” Mr. Kruse said. Mr. Smyth is executive director of North American research-and-development labs for General Motors. He has “a notable 20-year career with General Motors,” he explained, primarily in advanced power trains with early work on advanced

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24 Researchers at the University of California-Davis and University of California-Berkeley have been conducting a study of California’s Low Carbon Fuel Standard program since 2007. The first part of the study, Alexander E. Farrell and Daniel Sperling, “A Low-Carbon Fuel Standard for California, Part 1: Technical Analysis,” Institute of Transportation Studies, University of California, Davis, May 2007, Research Report UCD-ITS-RR-07-07. Also see Alexander E. Farrell and Daniel Sperling. “A Low-Carbon Fuel Standard for California, Part 2: A Policy Analysis, Institute of Transportation Studies, University of California, Davis, August 2007, Research Report UCD-ITS-RR-07-08.



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PROCEEDINGS 117 Panel IV Market Drivers: Creating Demand for Electric Vehicles Moderator: Robert Kruse EV Consulting LLC This panel addresses what is required to create market demand for electric vehicles, explained moderator Robert Kruse, the founding principal of EV Consulting LLC and former executive director of global vehicle engineering for hybrids, electric vehicles and batteries at General Motors. "I have a pretty impressive panel to talk about various aspects of what can be done to spur electric-vehicle adoption," he said. The first topic addressed market incentives. Speaker Daniel Spieling is a professor of civil engineering and environmental science and policy at the University of California at Davis, Mr. Kruse noted. He is founding director of the Institute of Transportation Studies and acting director of the Energy Efficiency Center, both at UC-Davis. Dr. Sperling also holds an automotive engineering seat on the California Air Resources Board that has oversight responsibilities over the state's policies regarding climate-change, alternative fuels, vehicle travel, land use, and the zero-emission vehicles program. He is co-director of the California Low-Carbon Fuel Study24 and chairs the Future Mobility Council of the Davis World Economic Forum. Dr. Sperling is an active member of 13 National Academy committees, Mr. Kruse noted. The next speaker, Gary Smyth, was there to provide "an industry perspective in transforming the auto industry," Mr. Kruse said. Mr. Smyth is executive director of North American research-and-development labs for General Motors. He has "a notable 20-year career with General Motors," he explained, primarily in advanced power trains with early work on advanced 24 Researchers at the University of California-Davis and University of California-Berkeley have been conducting a study of California's Low Carbon Fuel Standard program since 2007. The first part of the study, Alexander E. Farrell and Daniel Sperling, "A Low-Carbon Fuel Standard for California, Part 1: Technical Analysis," Institute of Transportation Studies, University of California, Davis, May 2007, Research Report UCD-ITS-RR-07-07. Also see Alexander E. Farrell and Daniel Sperling. "A Low-Carbon Fuel Standard for California, Part 2: A Policy Analysis, Institute of Transportation Studies, University of California, Davis, August 2007, Research Report UCD-ITS-RR-07-08.

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118 U.S. BATTERY INDUSTRY FOR ELECTRIC DRIVE VEHICLES hybrid cylinder de-activation and direct fuel-injection systems. Mr. Smyth earned a bachelor's and Ph. D. degree from Queens University in Belfast. The final speaker, Bill Van Amburg, discussed early adoption of hybrid vehicles. Mr. Van Amburg is senior vice-president of CALSTART, which Mr. Greenberger described as "a non-profit, fuelneutral, membership-supported consortium." He overseas five programs: heavy hybrids, new fuels, technology commercialization, fleet analysis, and consulting and industry services. "He brings 25 years of experience in marketing and technology commercialization," Mr. Greenberger said. Mr. Van Amburg's academic credentials include degrees from the UCLA Anderson School for Management, Stanford, and the University of California-Berkeley. INCENTIVES FOR THE ELECTRIC VEHICLE MARKET Daniel Sperling University of California-Davis Because he hails from "that other land, the Left Coast, the foreign country of California," Dr. Sperling began, "I am going to have a little different perspective here today." His presentation aimed to achieve four missions, Dr. Sperling said. They were to emphasize the important role of universities, explain climate and energy policy from the California perspective, promote his book Two Billion Cars,25 and explain "the market for electric vehicles and what that means for battery design, which is the main reason we are here." His focus, he said, is to address what consumers really want in electric vehicles. Research by his institute on American consumers has revealed some interesting insights, Dr. Sperling said. "What American consumers seem to want in electric vehicles is quite different from what I have been hearing today" from speakers in the symposium. The success of plug-in electric vehicles will depend largely on government policy, advances in battery technology, fuel prices, and consumer response to products, Dr. Sperling explained. "There are a lot of ways for companies to fall into the Valley of Death," he said. "But a lot of it has to do with misjudging and misunderstanding consumer responses and consumer behavior." State and local governments have implemented plenty of policies aimed at supporting electric vehicles, Dr. Sperling pointed out. The main policies include zero-emission standards by several states, greenhouse-gas emission and fuel standards for vehicles "that have very aggressive incentives for electric vehicles," tax credits for consumer purchases of low-carbon vehicles, subsidies 25 Daniel Sperling and Deborah Gordon, Two Billion Cars: Driving Toward Sustainability, New York: Oxford University Press USA, 2009.

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PROCEEDINGS 119 for manufacturers, and government-sponsored research and development, he said. While "this mlange of policies" does not always seem consistent, he said, they are "consistent in their support of electric vehicles." New Environmental Protection Agency standards for greenhouse gas emissions are especially important, Dr. Sperling said. Standards already being put into effect in California and that the Obama Administration plans to adopt for the entire nation call for emission reductions of 30 percent to 40 percent by 2016.26 "That is aggressive," he said. California is the process of issuing "the next level of standards," Dr. Sperling explained. "We are talking about at least a 3 percent reduction in greenhouse gases per mile a year, starting in 2017. 27 So however aggressive those 2016 numbers are, it is going to get even more aggressive after that." Dr. Sperling said California is working very closely with the EPA and hopes the rest of the U.S. will quickly follow its lead. In addition to putting a lot of pressure on automakers to improve fuel- efficiency, these standards are designed to push electric vehicles, Dr. Sperling explained. For example, electric vehicles will be rated as if they emit zero grams of greenhouse gasses per mile "even though in reality their lifecycle emissions are much more than that," he observed. "The intent is to incentivize EVs. There is tremendous pressure to move toward electric-drive technologies. This requirement is going to make that even more forceful." California and 10 other states have required that a certain percentage of cars sold in the state be zero-emission vehicles.28 California requires major automakers to make available 25,000 such vehicles in the state by 2014 and 50,000 by 2017. "And we are going to adopt numbers that are far more aggressive than that in 2018 and beyond," Dr. Sperling said. Low-carbon fuel standards adopted by California are another source of pressure. The state requires a 10 percent reduction in carbon-intensity of all fuels, whether they are natural gas, petroleum, bio-fuels, or hydrogen. "What this does is require that the carbon content of fuels be steadily reduced over time," he explained. The greenhouse gas benefits of bio-fuels, especially those derived from foods, are modest, Dr. Sperling noted. "So again, on the fuel side we will see strong incentive to move toward electricity as a transportation fuel." Local governments in California also are promoting the electric-vehicle industry. Municipalities are setting targets for reducing carbon from transportation. 26 The U.S. Environmental Protection Agency and the Department of Transportation's National Highway Traffic Safety Administration (NHTSA) are finalizing greenhouse gas-emission standards for model years 2012 to 2016 under the Energy Policy and Conservation Act. For details, see . 27 In July 2011, the White House, together with most of the major car companies, announced a proposal to reduce car emissions (and fuel consumption) by 5 percent per year from 2017 to 2025, and light trucks by 3.5 percent per year. These new standards are scheduled to be adopted by California in January 2012 and EPA and DOT later in 2012. see Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Proposed Rules. 28 A zero-emissions vehicle, or ZEV, emits no tailpipe emissions from the onboard source of power.

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120 U.S. BATTERY INDUSTRY FOR ELECTRIC DRIVE VEHICLES In terms of the consumer market, Dr. Sperling explained that his Institute of Transportation Studies at UC Davis has been studying alternatives fuels, from methanol to hydrogen, for 25 years. "We have done them all. We have done lots of studies and worked with lots of car companies," he said. Although Dr. Sperling said he is optimistic about the future of electric- drive vehicles, he added a cautionary note. It has taken hybrids 10 years to reach a market penetration rate of 3 percent "with a technology that is cheaper than plug-in hybrids and battery electrics, and that doesn't require any change in consumer behavior nor change in infrastructure," he pointed out. It is important to keep this conservative reality of markets in mind, he added. On the other hand, much of the pessimism one hears about electric vehicles--including at this meeting--is based on consumer assumptions that may not be valid. The dominant way of thinking of electric vehicles is that they need super-advanced batteries to make them more like gas-powered vehicles, with similar driving ranges and longer recharge times, he said. That implies "we need public recharging infrastructure so people can recharge whenever they get range anxiety," Dr. Sperling said. "This is the way engineering experts think about it." A different way to look at the issue is to study what really motivates consumers. "Electric vehicles give access to a whole new set of values and benefits," Dr. Sperling said. "Now you can avoid gas stations. Plus, everyone who drives EVs loves the driving feel of an electric vehicle." Another appeal, the Institute's surveys have found, is that "driving an EV means not financing terrorists, shorthand for not having to import oil. They don't have to support Big Oil, nor wars in the Middle East. They can support energy independence and reduce climate change, air pollution, and noise. There are many good things about electric vehicles that resonate with people." Research also is finding that "people are remarkably willing to adapt to changing conditions and constraints if they see some value in doing so," Dr. Sperling said. He cited research his Institute conducted with BMW to evaluate consumer experience with Mini E cars. The Institute conducted intense household interviews of Mini E drivers that "used the vehicles day in and day out, so they have considerable experience with them," he explained. The study found that around one-third of Mini E drivers "are perfectly comfortable with a 100-mile range as long as they have home base charging" he said, while about half of drivers say this range "kind of pushes them," Dr. Sperling said. But with minimal adaptations, even the 100-mile range will work for them." After using the vehicle for some time, only about one-sixth of Mini E drivers said the 100-mile range "was really problematic for them," he said. "But in this case, many were willing to engage in different planning and adaptation to make it work because they really like the idea of having an electric vehicle." Many drivers learned to cope with the limitations. In Los Angeles, for example, drivers began plotting out driving distances on Google to determine

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PROCEEDINGS 121 whether they would be able to make it. They studied whether there were places to charge along the way, or whether they could swap vehicles with others in the family for that day. "It turned out that a lot of them said it was fun," he said. "It was a positive experience. It was a game. It was competitive." The studies in Los Angeles also found that most Mini E drivers charged their vehicles at home at night. "Even those who had charging at their work place didn't really need it," Dr. Sperling said. "They thought they didn't even want to ask their employers about it and whether they had to pay for it. "They didn't even want to ask their employers about it and whether they had to pay for it. They didn't even want to deal with it. What we see are these people having a sense of independence." These findings are pertinent to the question of public charging infrastructure, Dr. Sperling said. The federal government and California are investing a lot in public charging stations. "The dominate way of thinking is that, yes, we need lots of public charging stations to remove this range anxiety," he said. "But what we are finding in all our research and experience is that people don't use public charging, even when it is available." Dr. Sperling pointed to the experience of Tokyo. The public power utility urged people to buy electric cars but generated little consumer response. So it set up public charging stations. This did indeed generate a response, and people started buying electric cars. The stations, however, were rarely used. "What is going on here is that the public charging stations have psychological value, but people don't use them," he said. "The question is what we do with this information. There is no business model there because it won't be used very much." One lesson is that there is no business model, there because drivers don't use public charging very much." It also means that a minimal number of stations are needed, at least in the beginning, to address consumer anxiety over the range of their cars. "Providing public charging does not appear to be critical to building an electric vehicle industry," he said. The real challenge is that consumers have no real experience with EVs, and thus it is difficult to predict consumer behavior, Dr. Sperling explained. There were a few EVs in the 1990s, such as the EV1 and Rav4 EV. But electric vehicles have never been mass-produced. The Nissan Leaf and GM Volt won't be available until December 2010. "So one conclusion you will see is that we need a lot more research and understanding of consumer behavior, because all the insights I have presented here, based on many studies over many years, are tentative and preliminary," Dr. Sperling said. The first overall conclusion of the Institute's research is that people like the concept of an electric car, he said. The second as that "the more experience they have, the more comfortable they become with owning an electric car." The general pattern is that most people have very positive impressions of the vehicles before they use them. Their favorable impression then declines the first weeks of using the vehicles as they experience limited range, but as they gain more experience, their positive attitudes return. "Some consumers will never buy the vehicles because of the limited range. They just don't want them," Dr.

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122 U.S. BATTERY INDUSTRY FOR ELECTRIC DRIVE VEHICLES Sperling said. "But there are a whole lot of them, if they stick with it and if marketing sticks with it, who will get more interested in owning an electric car." Research into consumer expectations for electric vehicle batteries also yielded surprising findings. Dr. Sperling noted that various organizations have adopted aggressive targets and design goals for range, electricity consumption, recharge times, and cost. These goals are based on "what experts say we need for consumers to be willing to buy the vehicles," he said. The Institute conducted a large national study of what kind of hybrid vehicles U.S. consumers actually prefer in terms of cost, range, and recharge time. Most consumers said they were satisfied with batteries that supply only around 2 kilowatt hours. With that kind of battery, consumers were told, they would get around 75 miles per gallon for 10 miles in a vehicle that used a blend of electricity and gasoline. "That is not very much electricity storage," he said. "But that is what people said they wanted, when they compared how much they are willing to pay for how much range and how much fuel economy." Consumers in the study rated fuel economy and reduced cost very highly as key factors. "It turns out that when you do the analysis of the fuel-economy performance of a PHEV 10 or PHEV 20 vehicle, with their small batteries, one gets a large percent of the benefits that one might get from a PHEV 40 with its much larger battery," Dr. Sperling said. "To the extent this is true, if we think about electric vehicles and plug-in hybrids in terms of their positive attributes rather than their problems, and think about what people are willing to pay for, we conclude that higher-performing batteries are not essential to launch the EV industry," he said. He noted that the findings are tentative, but that he also believes they are robust. The message is that "you can sell the equivalent of a PHEV 10 or 20, probably fairly easily," Dr. Sperling said. "It looks like this vehicle technology will get the most market penetration and will provide the most benefit in terms of fuel reduction and greenhouse gases. And it gets you on the path toward the bigger battery size of the future and it gets people more comfortable with battery use." Dr. Sperling noted that a group at General Motors is promoting ultra-small electric vehicles--with small batteries. Such vehicles are more likely to succeed in markets such as China or European cities rather than the U.S., he said. "This approach should be part of the mix as we learn how to work with attributes of batteries and electric vehicles and how to make them successful," he said. "I would suggest that if we continue to follow the path we're on, trying to create an electric vehicle that is analogous to a gasoline vehicle, we are doomed to failure." The GM Volt and Nissan Leaf "are incredibly important in terms of creating market presence for electric vehicles and early market acceptance," Dr. Sperling said. "But what I am suggesting is that in order to get a viable mass market for electric vehicles, there are different ways of thinking about it that need to be pursued."

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PROCEEDINGS 123 THE INDUSTRY PERSPECTIVE: TRANSFORMING THE AUTOMOTIVE INDUSTRY Gary Smyth General Motors Mr. Smyth began by noting that he agreed with much of what Dr. Sperling said. "You really have got to look at what personal transportation in the future will be," he said. "Is it the same as today? Is the current strategy sustainable for the future? Clearly, there will be a lot of changes." As one conducts research for vehicles such as the Volt, "you really begin to understand that what you need for the mega cities and hyper cities is very different than what you need in Texas and the Midwest," Mr. Smyth said. "It really is about a portfolio of solutions." When one steps back and looks at "what we are really trying to achieve," Dr. Smyth said, "the objective becomes energy sustainability." "That energy will have to come from multiple sources," he said. "And because of the environment, it has to be low carbon. At the same time, we have to make sure we are developing economic prosperity while we do all of that. That is the challenge we have looking forward." Dr. Smyth said GM will produce a full line of vehicles using different technologies. "Electrification is an important part of the future, but it is not the only part," he said. "It is certainly necessary, but not sufficient." Therefore, the industry must continue to dramatically improve conventional systems. "The whole portfolio of hybridization and electrification is extremely important to us." GM also must work on technologies such fuel cells and hydrogen fuel cells, he said, where companies are getting in position to introduce commercially viable products by 2015 and 2016. All of these technologies will be important, "whether you look at it from an environmental perspective or energy perspective," he said. Global demographic trends also will reshape the transportation industry. Today, half of the world's population lives in cities, he noted. That will grow to more 60 percent by 2030. Also, 80 percent of wealth by that time will be in cities. "So what types of transportation do we need for these cities? It will be very different from what we have here in the Midwest," Dr. Smyth said. "So again, it will be a portfolio of solutions." Over the past five years, GM has been developing such a portfolio, Dr. Smyth said. GM is launching several electric vehicles in 2012. The Volt, which is between a plug-in hybrid and a pure electric vehicle, was to be rolled out in seven U.S. states in the fall of 2010 and launched nationally over the following 12 to 18 months. GM also is working on fuel cell and hydrogen vehicles. "When you look at the portfolio, we already have all the options," he said. "It is not about having niche plays.

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124 U.S. BATTERY INDUSTRY FOR ELECTRIC DRIVE VEHICLES The big question regarding energy sustainability and CO2 it is not about niche plays, he said. "It is about how we transform the vehicle fleet. Car companies such as GM "already have developed the niche plays," he said. "Range anxiety," however, is a real issue with consumers. Dr. Smyth said GM learned from its experience with the EV1 electric car program in the 1990s, when range anxiety was a huge issue. "This is an area where we are not compromising the utility of the vehicle for the customers," he said. Lithium-ion batteries also are a challenge. Dr. Smyth noted that a current battery pack producing 16 kilowatt hours of power with a 40-mile range weighs 400 pounds, is six feet tall and six feet six inches long. "That is a lot of mass and a lot of volume that is required even for that range," he said. GM offers a 100,000-mile warranty on the battery pack. Regarding charging, Dr. Smyth said GM's view is similar to that of Dr. Sperling. Most of the time, electric vehicles are at home. "Having the right infrastructure at home, especially at 240 volts, makes the most sense," he said. The next priority is charging at work. He agreed that public charging "is of very limited value." Electricity is a low-cost source of energy for a vehicle, Dr. Smyth noted. At $2 per gallon, gasoline costs 7 cents per mile. At $4 per gallon, it costs 13 cents per mile. If one pays 11 cents per kilowatt hour for electricity, by contrast, the cost is 3 cents per mile. Another consideration is cost of ownership, Dr. Smyth said. Assume an average hybrid offers fuel savings of 30 percent to 40 percent. "What does that actually mean to the rational customer?" he asked. "That is the challenge we have today." A typical mid-sized family car that gets 35 miles per gallon and is driven 12,000 miles consumes about 400 gallons of gasoline a year, he said. If gas costs $3 a gallon, a hybrid saves around $300 in fuel. "Even at $6 a gallon, that is not a lot," Dr. Smyth said. It is very hard to make an economic case to consumers by focusing only on fuel economy, he said, especially when one factors in the $3,000 to $6,000 additional cost of buying a hybrid rather than a conventional car. Dr. Smyth said he agrees with Dr. Sperling that it is necessary to maximize all of the other benefits of electric vehicles. "When you look at the actual cost savings, they are really quite limited," he said. "And that is a very big challenge, especially as you go through that Valley of Death." GM has done quite a bit of recent research looking not only at the first few generations of electric vehicles, but also at Generation Three vehicles expected to arrive around 2020 and 2025. "You are still looking at very costly options" versus internal combustion engines, Dr. Smyth said. GM view the Volt as an important learning experience, Dr. Smyth said. GM engineers have put the Volt through around 1 million miles of tests so far. Battery packs have been tested for more than 4 million hours. These tests have included driving the cars through water troughs. The Volts and batteries "have

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PROCEEDINGS 125 passed with flying colors," he said. "Clearly, this is a full-utility, no-compromise vehicle." GM is working on a full range of key components for electrification. In March 2010, it opened an extensive battery laboratory in Warren and is planning an $8 million expansion, Dr. Smyth said. GM also is working on electric motors and power controls and will be exploring fuel cells, he said. The company collaborates with universities on R&D. "A lot of research is still required," he said. GM must focus on performance, real-world drive cycles, and battery life, and other areas, he said. "While we have been working on internal combustion engines for 100 years, we are still in our infancy with regard to electrification," he said. The $2 billion in federal stimulus funding "has done a lot to accelerate our capability in North America," Dr. Smyth said. GM invested $43 million in a manufacturing plant in Michigan's Brownstown Township, with the government providing $106 million, he noted. GM also invested $246 million in motor and electric-drive facilities. It received $105 million in federal funds for a plant in White Marsh, Md., to build high volumes of electric motors starting in 2013, he said. GM is working on infrastructure needed "to make this comfortable for customer," Dr. Smyth explained. The company has been working with around 300 of North America's 3,000 utility companies, many of whom have different standards, he said. It is rolling out charging facilities at seven U.S. sites in 2010 and will go national in 2011. The industry must continue to work with utilities and the government to understand how to connect to the national grid, he said. Collaboration will be crucial. The industry has gone through the initial learning stage of R&D. "The second learning stage is commercialization. It is the Valley of Death, and it won't be a narrow valley," Dr. Smyth said. "We have to work with the government and the utility companies to make sure we are producing the right technologies for our customer. We need the supply chain. We have to make it affordable to the customer." Collaboration with universities also will "not just the next generation of engineers, but the current generation of engineers," Dr. Smyth said. "Again, it's not about niche products. We have them. It is about transforming the whole vehicle fleet and how do you do it quickly." EARLY ADOPTION OF HYBRID VEHICLES Bill Van Amburg CALSTART The truck industry may be a niche market for electric vehicles. But it offers a good case study of "how we might get things moving" in the U.S., said Mr. Van Amberg, CALSTART's senior vice president. It shows how advanced technology can be rolled out by focusing on a market segment in the commercial

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126 U.S. BATTERY INDUSTRY FOR ELECTRIC DRIVE VEHICLES space, rather than the broad market. The important thing to building a market is to "get advanced vehicles out there," Mr. Van Amburg said. "You have to spur demand by supplying product." The experience of electric trucks also illustrates "the power of public- private partnerships in filling the gaps," he said. "We are really good at R&D, but we drop the ball when it comes to getting things into pre-production." The model used by CALSTART to promote advanced technologies for commercial vehicles may offer lessons for other market segments, he said. CALSTART was founded in 1992, during the last big recession, Mr. Van Amberg explained. California was facing a big brain drain, particularly in aerospace, defense, and other high tech fields. "We looked at what Michigan is really looking at: how to hold onto highly skilled talent in key industry segments and transition them into other fields." California focused on clean, advanced transportation. Today, CALSTART has 130 corporate members. One-quarter of members are in the upper Midwest, Mr. Van Amburg said, because that is the "manufacturing corridor" of the U.S. and is "where the transition is happening." The "meat and potatoes" of CALSTART's membership are small and midsized companies because that group includes most of the technology innovators, he said. Many policy makers are unaware that advanced technologies are moving into the commercial truck market, "an area not thought of as advanced technology," Mr. Van Amburg said. Hybrids now account for about 40 percent of the new market for transit busses, he said. "We also are seeing real movement, a real transition, in the truck world to advanced technologies," he said. Mr. Van Amburg displayed photos of an array of small and light trucks, from Coca-Cola and FedEx delivery trucks to semi-trailer trucks. "Every photo is of a hybrid," he said. "What looks like a pretty conventional truck, is actually is a hybrid electric, hybrid hydraulic, all-battery electric, or a plug-in electric truck." Seventy percent of these vehicles are made in early, low-volume manufacturing, he said. "They aren't prototypes. They are actually moving into full-scale manufacturing." This has "really been a sea change" in the truck industry, Mr. Van Amburg said. In many cases, he said, it is being led by the customer, who sees the value in getting better fuel economy. Tougher regulations also are driving truck electrification. On May 21, 2010, President Obama announced there will be new carbon and fuel-economy standards for trucks29 that should hit by 2014, Mr. Van Amburg noted. These are the first such rules for commercial vehicles. There also are new ozone rules "that are intriguing," he said. The EPA has announced it will strengthen current ozone rules to meet health standards. The 29 See White House Office of the Secretary, "Presidential Memorandum Regarding Fuel Efficiency Standards," May 21, 2010 ().

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PROCEEDINGS 127 rules would drop ozone limits to no more than 0.06 to 0.07 parts of per million over eight hours of pollutants such as nitrous oxide and will be phased in over 20 years. The current limit is 0.075 parts per million. The EPA will issue final standards Aug. 31, 2010, and each state must outline plans to meet them by 2013. CALSTART estimates that hundreds of U.S. counties--perhaps as many as 650--will likely fall into non-compliance due to the tougher EPA standards. "This is a little under the radar at the moment," Mr. Amburg said. "Certain areas are really going to get hammered." Southern California is an example. "The district in Southern California is now looking at this and saying it could be so bad that they may have to cease fossil fuel combustion in the basin," he said. While that may be "scare tactics," officials are calling for a renewed push for zero-emission transportation in Los Angeles, Mr. Van Amburg said. Southern California is starting to look at electrifying freight corridors. CALSTART just started a project with the Los Angeles transportation authority and ports to look at zero-emission freight movement through a 17-mile corridor of I-710 running from the area's major sea ports--the arrival points of 40 percent of cargo entering the U.S.--to the rail beds. The Department of Defense also is pushing to improve fuel efficiency, Mr. Van Amburg noted. The DOD's Quadrenial Defense Review cites climate change as a global threat for the first time, and has set a target of cutting energy use at non-combat facilities by 34 percent by 2020. That translates into a 2 percent annual reduction in fuel use, he noted. Most of the impact will be on medium- and heavy-duty vehicles. A shift toward high-efficiency trucks will create U.S. jobs, Mr. Van Amburg predicted. "We often think these high-technologies are only going into cars, but there but is a huge job and economic savings potential in the medium- and heavy-duty space as well because that is where all the freight movement is," he said. A new report by the Union of Concerned Scientists and CALSTART predicts 124,000 new jobs and $24 billion in savings to the U.S. economy if policies support high-efficiency trucks.30 The biggest gains will come in the Midwest. Hybrid trucks now on U.S. roads are found in all weight classes. Work on hybrids for long-haul trucks also is underway, he noted. Truck makers "are looking at how to solve some of the specific market niches that can use these technologies, not the whole marketplace," he said. Kenworth, Peterbilt, Navistar, and Freightliner all have regional haul hybrid tractors and are developing next- generation electric and hybrid versions. 30 Don Anair and Jamie Hall, "Delivering Jobs: The Economic Cost and Benefits of Improving the Fuel Economy of Heavy-Duty Trucks," Union of Concerned Scientists and CALSTART, 2010. (http://www.ucsusa.org/assets/documents/clean_vehicles/The-Economic-Costs-and-Benfits-of- Improving-the-Fuel-Economy-of-Heavy-Duty-Vehicles.pdf).

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128 U.S. BATTERY INDUSTRY FOR ELECTRIC DRIVE VEHICLES Oshkosh HEMMT military heavy transport and support truck Series hybrid electric drive system with ultracap energy buffer Capacity "PHETT" Plug-in, series hybrid design Balqon all-electric port trucks Up to 40-60 miles range Freightliner Custom Chassis and Enova electric parcel truck (in testing) Smith "Newton" electric truck (in early production) Navistar/Modec electric truck (in early production Q1 2010) FIGURE 11 All electric drive trucks emerging. SOURCE: Bill Van Amburg, Presentation at July 26-27, 2010 National Academies Symposium on "Building the U.S. Battery Industry for Electric Drive Vehicles: Progress, Challenges, and Opportunities." Some companies also are unveiling demonstration all-electric heavy-duty vehicles. In fact, Mr. Van Amburg said, "the first all-electric vehicle in the United States by a major manufacturer is coming from the truck industry." Navistar is testing a unique dual-mode hybrid design that uses an electric drive for speeds up to 48 miles per hour and a blended mode at higher speeds, Mr. Van Amburg explained. It is delivering its first vehicles to FedEx. The second all-electric will be from Freightliner, and the third probably will come from either GM or Nissan, he said. Vision Industries is demonstrating a fuel cell hybrid electric drayage truck. Plug-in trucks also are arriving in specific niches. For example, trucks are being fitted with extra rechargeable battery packs. This meets a market need for trucks that drive to works sites and idle while tools are operated. The engine can be shut off and the tools powered by the battery. "A lot of people are looking at this in a hybrid configuration and with an energy-storage chassis," Mr. Van Amburg said. A similar concept is being used in Class 3 trucks,31 which are popular with fleet operators. Although they are light-weight trucks, they consume nearly as much fuel as Class A heavy-haul trucks because there are so many of them, he noted. 31 A Class 3 truck is a light truck with a gross vehicle weight rating of 10,001 to 14,000 pounds.

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PROCEEDINGS 129 Hydraulic hybrids are another "intriguing new flavor," Mr. Van Amburg said. Some vehicles under development use an accumulator to store hydraulic energy. They will start appearing in late 2010, he said. What is really needed to push the transition to electrified trucks "is a coordinated set of standards, policy incentives, and regulations across the whole continuum to the market," Mr. Van Amburg said. "We have generally done a good job at the first piece, the research and development. But we have kind of been dropping the ball moving into the next level of volumes in the market to not only launch products but also justify the investment by the manufacturers and suppliers." For the past decade, TARDEC and CALSTART have explored applying advanced technologies in military vehicles through the Hybrid Truck Users Forum (HTUF), which was scheduled to hold its annual conference in Dearborn in September 2010. The task is to deploy the latest technologies "but without having to pay the Mil-spec,32 one-off price," Mr. Van Amburg explained. A big question is "how to get the robust manufacturing industry that has the capabilities of meeting our demand." The partnership looks at dual-use opportunities for both the military and commercial vehicle markets, he said. HTUF has focused on the end-user, Mr. Van Amburg said. "In the past what happened is that a lot of the technologies coming into the marketplace were pushed on the end-user rather than pulled by the end-user," he explained. So HTUF studied applications that could really add value to buyers. It also interviewed users in early "beachhead" market segments. Working groups began developing performance standards for military refuse, utility, parcel, regional heavy-haul, and other trucks. New working groups are addressing military non- tactical base vehicles. One next big goal is "to get the military and government to actually start buying the vehicles and help create that early market," Mr. Van Amburg said. "There are an awful lot of vehicles in the government fleet. How do we get them to use this advanced technology?" The military working group hopes to deploy hybrid vehicles at bases within a year. The HTUF project began when no major truck makers were involved in hybrids and there was no demand for fleets, Mr. Van Amburg said. Today, more than 2,000 such hybrid trucks on the road. Another 2,000 probably will be added in 2010, he said, and the market appears set to double every year for the next few years. "We've done it through these forums and working groups, targeting key application segments, and finding out what the user really is willing to pay for," he said. "What is the business case they are willing to accept?" The team found "tremendous interest" in hybrid trucks "as long as vehicles are as reliable and useful as vehicles they are replacing," Mr. Van Amburg said. "We think we have really sped up the introduction into the truck world by two to 32 "Mil-spec" is short for "military standard." The U.S. Department of Defense Standardization sets standards to achieve interoperability of equipment and meet certain requirements.

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130 U.S. BATTERY INDUSTRY FOR ELECTRIC DRIVE VEHICLES five years, depending on who you talk to." Hybrids are popular because they burn much less fuel than other vehicles, he said. "It's a big bang-for-the-buck investment area," he said. In the initial phase, HTUF worked on building pre-production volumes and reaching agreements to purchase common vehicles based on common performance specifications. That information was fed throughout the military in order to produce "imbedded capabilities in the future hybrid," Mr. Van Amberg said. One interesting result of the dual-use approach is that most commercial hybrid trucks now have "silent watch" and "silent mobility" capabilities required by the military, he noted. Now HTUF wants to build a sustainable market for hybrid trucks. "One thing we learned in the continuum to the market was to start with the first gap, to get people into pre-production volumes," Mr. Van Amburg said. "Let's get out of this one-off or two-off type of marketplace. Let's get into 20s, 50s, hundreds, and up to 500." By working with the truck industry, CALSTART learned that customers need help once they are into early production, he said, "because the prices are still high at that point." HUFT has formed a new research center focusing on the next round of innovation, Mr. Van Amburg said. These areas include better energy storage, more efficient components, electric steering and braking for trucks, optimized engines, and integration with alternative fuels. While the hybrid truck market is a niche compared to autos, the potential is impressive. Mr. Van Amburg estimated 30 percent of the world truck market can be "very addressable" for hybrid technologies by 2020. About 5 percent of regional heavy-haul tractors also can be hybrids. The projected numbers "aren't anything to stand up and scream about," but are sizeable nonetheless. More batteries are used in an electric truck than in a car, producing 50 to 100 kilowatt hours per vehicle. Hybrids are at a "tipping point," Mr. Van Amburg said. "It is a very exciting time. They are right on the cusp of success in the marketplace," Mr. Van Amburg said. Some drop in the cost of energy storage and components can justify premium prices of hybrid trucks by savings in fuel and brakes in four to five years, he said. "But there is a chasm to be gotten across here, and we are working with policymakers to cross that chasm." California has perhaps the nation's best and most innovative incentive program to promote electrification of trucks, Mr. Van Amburg said. It is managed by CALSTART. Rather than giving a tax credit, California pays half the incremental cost of buying a hybrid compared to a conventional truck. The subsidy is based on feedback from fleet-owners on what it would take for hybrids to make economic sense, he said. The state provides $10,000 per vehicle weighing from 10,001 pounds to 14,000 pounds and up to $35,000 for trucks weighing more than 33,000 pounds.

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PROCEEDINGS 131 21,000+/year hybrids nationally 2015 70,000+/year hybrids nationally 2020 30 Work Trucks Percentage of New Market 20 10 Class 8 Tractors 5 1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Initial HTUF Estimates FIGURE 12 Introduction/impact framework. SOURCE: Bill Van Amburg, Presentation at July 26-27, 2010 National Academies Symposium on "Building the U.S. Battery Industry for Electric Drive Vehicles: Progress, Challenges, and Opportunities." The $20 million in the program is nearly used up, Mr. Van Amburg said. Some 600 trucks were purchased through the program, increasing the number of hybrids on the road by about 30 percent, he said. "These are the kinds of models that can actually work," he said. "We really have moved the needle in terms of advancing that technology." CALSTART is working with U.S. Sen. Carl Levin on a federal incentive plan for hybrid trucks. Tax credits would apply when a truck is purchased in order "to reduce the capital cost directly to the commercial fleet," he said. Although tax credits don't work too well in the commercial market, Mr. Amburg said, "we're working with the tools that we have." Mr. Van Amburg said he also has been working with a cooperative effort with manufacturers, academia, and government facilitated by TARDEC called the Advanced Vehicle and Power Initiative. The group is gathering ideas on "what would move the ball forward in saving fuel in the military and also create an industry and jobs," he said. The initiative could be "greatly beneficial to the truck world and be really helpful to light-duty manufacturing," Mr. Van Amburg said. The AVPI calls for replacing 8 percent of the federal truck fleet each year with hybrids. "If one

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132 U.S. BATTERY INDUSTRY FOR ELECTRIC DRIVE VEHICLES looks at all government truck fleets and an annual truck turnover rate of 8 percent, this would provide significant assistance to the early market and is something we would like to see more people talking about," Mr. Van Amburg said. In sum, CALSTART's experience with trucks shows that "listening to the customer and focusing on how we target the key applications that will get the beachhead launched" was successful, Mr. Van Amburg said. "But over the long haul, we really need a coordinated plan that synchronizes our investment strategy, our incentives, and our requirements so that we can move out in a unified, long-term way." Besides long-term R&D, he said, "we need to target those gaps of moving into pre-production volumes faster and bringing in the user to target these key applications." DISCUSSION Dr. Sastry of Sakti3 remarked that it was good to hear discussion of the different sizes of battery packs needed, with some speakers talking about 50 kilowatt hours and others about 2 kilowatt hours. "The reality is that these will move up and down the scale," she said. Dr. Sastry asked what kind of infrastructure companies like GM and Ford have "to regularize, test, and control packs." Some companies have invested in that capability, "but clearly there is lots of opportunity for additional test and development capacity for the electric battery, power machine, and power electronics, Mr. Kruse said. GM has invested significantly in this area, Dr. Smyth said. "But we are still in the infancy. We really don't have real-world data yet." Issues such as high- temperature durability, low-temperature performance, how batteries fail, and accelerated testing are poorly understood, he said. "We have made a lot of progress, but a lot more needs to be done." Mr. Kruse asked his fellow panelists how important they think petroleum prices are to electric-vehicle adoption rates. Dr. Sperling said he doesn't believe fuel prices will stay really high or really low on a sustained basis. "This is probably about where they will be for a long time, except for spikes," he said. "In the end, it is more of a consumer perception thing. Yes, a high fuel price has a huge impact on peoples' psychology. At least in the price range we are talking about, it doesn't affect the economics much." Mr. Van Amburg said gas prices may not fundamentally change the economic considerations of buying a hybrid car, but they make a big difference in commercial vehicles. "When you run the numbers on hybrids just at current costs without the platform costs going down, you can make the case for a three- year turnaround at $4 and $5 easily," he said. "The two biggest variables in commercial vehicles are the up-front costs of the vehicle and the fuel price. With

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PROCEEDINGS 133 these guys, it's their work tool. They know what they use in fuel, while most consumers really don't." The case for electric vehicles can't be all about fuel, Dr. Smyth said. "If the price of fuel were high, certainly that would make it easy for us," he said. "But we have to go through this transformation, and we don't have a choice." We're pulling 85 million barrels of oil out of the ground every day." Oil in 2030 is projected to cost $105 or $110 a barrel, "and that is even with the current recession," he said. The U.S. must diversify from petroleum, Dr. Smyth said. Currently, it is more 95 percent dependent on oil. "We must come up with low-carbon alternatives." Cellulose ethanol offers potential carbon savings of around 50 percent over petroleum with advanced internal combustion engines. "There aren't any 80 percent reductions out there," he said. "We really have to look at developing alternatives and developing them rapidly if we want to drive down CO2. We have to stay on this path, and that is why we have to be working with the government to make sure this is a success." Dr. Good asked if anyone has made a serious attempt to model the entire system. "Let's assume you can get 30 percent electric vehicles in 20 years," she said. "Does anyone have a model of what the grid would have to look like? Mr. Van Amburg said he has seen good models developed by utilities. "If you are shifting your charging to night-time, and you are using off-peak energy during that trough, it doesn't have that much impact on the overall production of the grid," he said. "The biggest issue is deploying individual vehicles on the grid because of the potential draw you are getting if you had a whole bunch of electric vehicles in one neighborhood. But based on the models I've seen, it wouldn't necessary make us get into a lot more production of electricity," he said. Electric vehicle penetration of 5 percent is a very different problem than 25 percent, Dr. Good noted. "I don't think people have really run the right models yet. Even if I run off peak, I have to use more fuel to run the electricity. If I look around the country today, there are areas that have some extra capacity. But there isn't that much extra capacity running loose. I don't know that we have actually made a good model, and it seems we ought to do that fairly soon so we have answers to people about how we are going to provide that electricity. If you are trying to rev this up to 25 percent in the next 10 years, you had better get on that problem now." It will be a very long time before 25 percent of cars are electric, simply because of the rate at which vehicles in use turn over, Dr. Sperling replied. "That is a long, long way off, and we do have models on that." A more critical issue is the effect on local transformers, he said. "You have that neighborhood clustering effect that can be very disruptive," Dr. Sperling said.