# Interim Joint Technical Assessment Report:

Light

- Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards

for Model Years 2017

- 2025

Office of Transportation and Air Quality U.S. Environmental Protection Agency

Office of International Policy, Fuel Economy, and Consumer Programs

National Highway Traffic Safety Administration U.S. Department of Transportation

California Air Resources Board California Environmental Protection Agency

September 20102017

- 2025 Technical Assessment

ii



## Table of Contents

Executive Summary

................................ ................................ ................................ .... v
1 Introduction

................................ ................................ ................................ .... 1

- 1

1.1 Purpose of this Report

................................ ................................ ................................ ........ 1

- 1 1.2 National Program for Model Years 2012

- 2016

................................ ................................ 1

- 2 1.3 Standards for 2017 and Beyond

................................ ................................ ......................... 1

- 4 1.4 Future Technical Work and An alysis for the Joint Federal Rulemaking

........................... 1

- 5 Chapter 1 References

................................ ................................ ................................ ................... 1

- 7

2 Technical Input from Stakeholders

................................ .............................. 2

- 1

2.1 Overview of Stakeholder Outreach Process

................................ ................................ ....... 2

- 1 2.2 Input from Various Stakeholder Groups

................................ ................................ ............ 2

- 1 2.2.1 Automobile Original Equipment Manufacturers

................................ ..................... 2

- 1 2.2.2 Automotive Suppliers

................................ ................................ .............................. 2

- 8 2.2.3 Non

- Governmental Environmental Organizations

................................ .................. 2

- 9 2.2.4 State and Local Government Organizations

................................ .......................... 2

- 10 2.2.5 Infrastructure Providers

................................ ................................ ......................... 2

- 11 2.2.6 Labor Unions

................................ ................................ ................................ ......... 2

- 11 Chap ter 2 References

................................ ................................ ................................ ................. 2

- 13

3 Technology, Cost, Effectiveness and Lead

- time Assessment

...................... 3

- 1

3.1 What technologies did the Agencies Consider?

................................ ................................ . 3

- 1 3.2 How did the Agencies Determine the Costs and Effectiveness of Each of These Technologies?

................................ ................................ ................................ .............................. 3

- 1 3.2.1 How are Cost and Effectiveness Estimates Different from the 2012

- 2016 Rule?

... 3

- 1 3.2.2 Costs from Tear

- down Studies

................................ ................................ ................. 3

- 2 3.2.3 Costs of HEV, PHEV, EV, and FCEV

................................ ................................ .... 3

- 4 3.2.4 Mass Reduction Impacts and Costs

................................ ................................ ......... 3

- 7 3.2.5 Indirect Cost Multipliers

................................ ................................ ........................ 3

- 11 3.2.6 Cost Adjustment to 2008 Dollars

................................ ................................ ........... 3

- 12 3.2.7 Costs Effects due to Learning

................................ ................................ ................ 3

- 13 3.2.8 Cooled EGR Cost and Effectiveness

................................ ................................ ..... 3

- 13 3.2.9 HEV Effectiveness

................................ ................................ ................................ . 3

- 14 3.2.10 Ongoing Vehicle Simulation to Update Effectiveness

................................ .......... 3

- 14 3.3 Vehicle Manufacturer Lead Time

................................ ................................ .................... 3

- 15 3.4 Other Technologies Assessed

................................ ................................ ........................... 3

- 19 3.4.1 Types of engine technologies that improve fuel economy and reduce CO 2 emissions include the following:

................................ ................................ ................................ ........... 3

- 19 3.4.2 Types of transmission technologies considered include:

................................ ....... 3

- 22 3.4.3 Types of vehicle technologies considered include:

................................ ............... 3

- 23 3.5 Technology Packages in OMEGA

................................ ................................ ................... 3

- 27 Chapter 3 References

................................ ................................ ................................ ................. 3

- 292017

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iii 4 Infrastructure Assessment

................................ ................................ ............. 4

- 1

4.1 Overview

................................ ................................ ................................ ............................ 4

- 1 4.2 Electric Vehicle Infrastructure

................................ ................................ ........................... 4

- 2 4.2.1 DOE Charging Infrastructure Projects Underway

................................ ................... 4

- 2 4.2.2 Home Charging Adequacy

................................ ................................ ....................... 4

- 6 4. 2.3 Charging System Cost

................................ ................................ .............................. 4

- 9 4.2.4 Battery End

- of

- Life Value Assessment and Secondary Use Applications

............ 4

- 12 4.2.5 Potential Impacts on the Electric Utility and Distribution Infrastructure

.............. 4

- 12 4.2.6 Voluntary Standards to Support PHEV & EV Infrastructure

................................ 4

- 14 4.3 Hydrogen Infrastructure Overview

................................ ................................ .................. 4

- 17 4.3.1 Status Today

................................ ................................ ................................ ........... 4

- 17 4.3.2 Prospe cts for Cost and Technology Improvement

................................ ................. 4

- 21 4.3.3 Infrastructure Rollout Strategy

................................ ................................ .............. 4

- 21 4.3.4 Policies and Partnerships

................................ ................................ ....................... 4

- 22 4.4 Conclusions

................................ ................................ ................................ ...................... 4

- 24 Chapter 4 References

................................ ................................ ................................ ................. 4

- 25

5 Incentives and Flexibilities

................................ ................................ ............ 5

- 1

5.1 Overview of Existing Incentives and Flexibilities in the MYs 2012

- 2016 Program

......... 5

- 1 5.2 Potential Credit Programs, Incentives, and Other Flexibilities for 2017 and Later

........... 5

- 4 5.3 Input on Non

- regulatory Incentives from Stakeholders

................................ ..................... 5

- 7 Chapter 5 Refere nces

................................ ................................ ................................ ................. 5

- 10

6 Analysis of Scenario Costs and Impacts

................................ ....................... 6

- 1

6.1 Context

................................ ................................ ................................ ............................... 6

- 1 6.2 Analytic Approach

................................ ................................ ................................ ............. 6

- 1 6.3 Development of Technology Pathways

................................ ................................ .............. 6

- 6 6.3.1 Model Years Considered

................................ ................................ .......................... 6

- 6 6.3.2 Scenario Stringencies Assessed

................................ ................................ ............... 6

- 7 6.3.3 Technology Pathways Considered

................................ ................................ ........... 6

- 8 6.4 Other Key Inputs to the Analysis

................................ ................................ ..................... 6

- 11 6.5 Results of Analysis

................................ ................................ ................................ ........... 6

- 13 6.6 PH EV and EV Battery Cost Sensitivity Assessment

................................ ....................... 6

- 27 Chapter 6 References

................................ ................................ ................................ ................. 6

- 29

7 Other Key Factors

................................ ................................ .......................... 7

- 1

7.1 Potential Impacts on the Economy and Employment

................................ ........................ 7

- 1 7.1.1 Impacts on Auto Manufacturers, Suppliers, and Auto Industry Employment

......... 7

- 1 7.1.2 Impacts on Vehicle Sales

................................ ................................ ......................... 7

- 2 7.1.3 Impacts on the U.S. Economy

................................ .... Error! Bookmark not defined. 7.1.4 Summary

................................ ................................ ................................ .................. 7

- 2 7.2 Upstream GHG Emissions

................................ ................................ ................................ . 7

- 3 Chap ter 7 References

................................ ................................ ................................ ................... 7

- 4 Appendix A: The Baseline and Reference Vehicle Fleet

........................ ........ A

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Appendix B: Package Cost and Effectiveness

.......................................................... . B

- 1 Appendix C: Reserved

........................................................................ C

- 1 Appendix D: Air Conditioning

.................................................................................. D

- 1 Appendix E: Key Inputs to the Analysis

................................................... E

- 1 Appendix F: EPA Documentation of OMEGA model Analysis

........................ F

- 1 Appendix G: Infrastructure..................................................................G

- 12017

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v 

## Executive Summary

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Adminis tration (NHTSA

, a modal administration within the Department of Transportation ) (―the agencies‖) are collaborating with the California Air Resources Board (CARB) to build on the

success of the first phase of the National Program to regulate fuel economy and greenhouse gas (GHG) emissions from U.S. light

- duty vehicles. The strong and coordinated first phase of standards for model years (MY) 2012

- 2016 was completed in April 2010, ensuring t hat all manufacturers can build a single fleet of U.S. vehicles to meet the new harmonized standards.

On May 21, 2010, the President called on the agencies to take additional coordinated steps to bring about a new generation of clean vehicles. 1 Among othe r things, the agencies were tasked with researching and then developing standards for MY 2017 through 2025 that would be appropriate and consistent with EPA‘s and NHTSA‘s respective statutory authorities, in order to continue to guide the automotive sector along the road to reducing its fuel consumption and GHG emissions, thereby ensuring the corresponding energy security and environmental benefits. During the public comment period for the MY 2012

- 2016 proposed rulemaking, many stakeholders encouraged EPA a nd NHTSA to begin working toward standards for MY 2017 and beyond that would maintain a single nationwide program. Se veral major automobile manufacturers and CARB sent lette rs to EPA and NHTSA in support of a 2017 to 2025 MY rulemaking initiative outlined in the President‘s May 21 st announcement.

In his May 2010 memorandum

, the President recognized that, by acting expeditiously, our country could take a leadership role in addressing these global challenges. He stated that

, ―America has the opportunity to lead the world in the development of a new generation of clean cars and trucks through innovative technologies and manufacturing that will spur economic growth and create high

- quality domestic jobs, enhance our energy security, and improve our environment

. ‖ The effort described in the Presidential Memorandum represents a continuation of the National Program to control GHGs and reduce oil consumption from the transportation sector. As directed by the President, NHTSA and EPA, in close coordination with CAR B are working together under a carefully coordinated set of steps to further control GHG emissions and reduce oil consumption from the transportation sector.
In response to the President‘s request and to craft a clear regulatory path for the automobile ind ustry, the agencies have collaborated with CARB to prepare this joint Technical Assessment Report to inform the rulemaking process and provide an initial technical assessment for that work. In accordance with the Presidential Memorandum, the agencies are also issuing a joint Notice of Intent to Issue a Proposed Rulemaking (NOI). The NOI announces plans for initiating a joint rulemaking which will be designed to improve the fuel efficiency and reduce the

1 Presidential Memorandum: ―Improving Energy Security, American Competitiveness and Job Creation, and Environmental Protection Through a Transformation of Our Nation‘s Fleet of Cars And Trucks,‖ Issued May 21, 2010, published at 75 Fed. Reg. 29399 (May 26, 2010), also available at http://www.whitehouse.gov/the

- press

office/presidential

- memorandum

- regarding

- fuel

- efficiency

- standards

.2017

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vi

GHG emissions of passenger cars and light

- duty truck s built in MYs 2017

- 2025. The joint federal rulemaking will undergo a full notice

- and

- comment process, consistent with law and Administration policies on openness, transparency, and sound science.

EPA, NHTSA, and CARB are issuing this joint Technical Asse ssment Report in response to Section 2(a) of the Presidential Memorandum. Section 2(a) of the Presidential Memorandum requests that EPA and NHTSA ―Work with the State of California to develop by September 1, 2010, a technical assessment to inform the rule making process, reflecting input from an array of stakeholders on relevant factors, including viable technologies, costs, benefits, lead time to develop and deploy new and emerging technologies, incentives and other flexibilities to encourage development a nd deployment of new and emerging technologies, impacts on jobs and the automotive manufacturing base in the United States, and infrastructure for advanced vehicle technologies.‖ This report provides an overview of key stakeholder input and addresses the
t opics noted in the memorandum, and presents the agencies‘ initial assessment of a range of stringencies of future standards. Chapter 1 of this report provides a further introduction and overview of the light

- duty vehicle related sections of the May 21, 2 010 Presidential Memorandum, and also of the final rule establishing CAFE and GHG standards for MYs 2012

- 2016 light

- duty vehicles.

During June through August 2010, EPA, NHTSA, and CARB held numerous meetings with a wide variety of stakeholders to gather in put to consider in developing this Technical Assessment Report, and to ensure that the agencies had available to them the most recent technical information. These stakeholders included the automobile original equipment manufacturers (OEMs), automotive sup pliers, non

- governmental organizations, states and state organizations, infrastructure providers, and labor unions. The agencies sought these stakeholders‘ technical input and perspectives, consistent with the President‘s request, on the key issues that s hould be considered in assessing a national program to reduce greenhouse gas emissions and improve fuel economy for light

- duty vehicles in model years 2017

- 2025.
The agencies requested the OEMs‘ input regarding several key areas including technology deve lopment, key regulatory design elements, infrastructure issues, perspective on the impacts on the U.S. manufacturing base and jobs, and potential regulatory incentives and flexibilities. The OEMs presented detailed and confidential technical information t o the agencies addressing these topics. A common theme across the auto firms is they are all heavily investing in advanced technologies including hybrids, plug

- in hybrid electric vehicles, electric vehicles, including fuel cell vehicles, next generation i nternal combustion engines, and mass reduction technologies, and companies expect to increase their offerings and sales of these technologies significantly in the future. The companies generally stated, however, that the degree to which these advanced tec hnologies will penetrate the U.S. market in the 2017

- 2025 time frame depends upon a number of challenges and factors, as discussed in Chapter 2 of this report. EPA, NHTSA and CARB also met with a cross section of automotive suppliers to seek their input o n the advanced technologies they are developing which could be implemented in the 2017

- 2025 time

frame. The agencies further received input from infrastructure providers. Many of the automakers and automotive suppliers provided input on the need for vehi cle charging locations needed for the electrical charging of EVs and PHEVs to support their introduction into the2017

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vii market. Chapter 2 aggregates and summarizes information gathered from the OEM, automotive supplier, and infrastructure provider meetings and describes how the agencies used the information to inform this report.

The agencies also received input from numerous non

- governmental organizations, including environmental organizations; representatives from the National Association for Clean Air Agenc ies (NACAA), the Northeast States for Coordinated Air Use Management (NESCAUM), and approximately 10 individual state and local governments; and the United Auto Workers (the UAW). All of these stakeholders strongly supported the President‘s call for conti nuing the National Program approach and setting new fuel economy and greenhouse gas standards for light

- duty vehicles for the 2017

- 2025 model years. Chapter 2 also provides an overview of issues that were raised during discussions with the states, non

- gov ernmental organizations, and the UAW.

As discussed in Chapter 3, the agencies have conducted an initial t echnology c ost,

e ffectiveness and l ead

- time a ssessment for MYs 2017

- 2025. The agencies assessed the cost, effectiveness, and availability of over 30 vehicle technologies that manufacturers could use to improve the fuel economy and reduce CO 2 emissions of their vehicles during MYs 2017

- 2025. The chapter describes technologies that are readily available today, but also other technologies that are not c urrently in production but are beyond the research phase and under development, and which are expected to be in production in the 2017

- 2025 timeframe. The technologies considered in this report fall into five broad categories: engine technologies, transmi ssion technologies, vehicle technologies, electrification/accessory technologies, electric drive technologies including hybrid technologies and mass reduction.

Consistent with stakeholder input obtained over the summer, Chapter 3 identifies how electric drive vehicles can be an important part of the vehicle mix that will likely be used to meet increasingly stringent fuel economy and GHG emission standards. Electric drive vehicles including hybrid electric vehicles (HEV), battery electric vehicles (EVs), plug

- in hybrid electric vehicles (PHEVs) and hydrogen fuel cell vehicles (FCVs)

, can dramatically reduce petroleum consumption and GHG emissions compared to conventional technologies. A dditionally , given their use of fuels that can eventually be derived from entirely renewable and zero carbon

resources , the agencies note that these technologies have significant potential to transform the vehicle s of the future to a low carbon fleet.

Stakeholders, particularly the OEMs, emphasized to the agencies that the future rate of penetration of these technologies into the vehicle fleet is not only related to future GHG and CAFE standards, but also to future gasoline fuel prices, future reductions in HEV/PHEV/EV battery costs, the overall performance and consumer dema nd for the advanced technologies, access to electric vehicle recharging locations and, for fuel cell vehicles the development of a hydrogen refueling infrastructure

. In the case of EVs and PHEVs

, electric charging locations are needed in the form of charg ing systems , most often at home

, but potentially also at the workplace and other locations such as stand

- alone facilities and public parking locations in order to facilitate significant, wide

- spread penetration of these vehicle technologies . In the case o f FCVs, hydrogen fueling stations are needed to support commercialization. Chapter 4 provide s a2017

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viii

description and assessment of current activities and technologies, discussion of costs

, and prospects for technology improvement

, as well as a summary of needs for successful infrastructure deployment to support electric drive vehicle commercialization. The agencies worked closely with the Department of Energy (DOE) in our assessment of electric vehicle charging requirements and issues and DOE was a contributor to this Chapter, in addition to other technical aspects of this report.

The final rule for MYs 2012

- 2016 provides for several flexibilities, including averaging, banking and trading provisions for credit carry

- forward and carry

- back, various additional cr edits opportunities, and advanced technology incentives. The MYs 2012

- 2016 program also includes additional leadtime flexibilities under the CAA for smaller volume manufacturers. Several stakeholders provided input on the need to continue many of these f lexibilities for the MYs 2017

- 2025 program. Chapter 5 provides an overview of these flexibilities as they exist in the MYs 2012

- 2016 rule as well as the stakeholder input the agencies have received regarding their potential applicability in the MYs 2017

- 2 025 program. Also, Chapter 5 provides an overview of

non

- regulatory approaches that can promote the commercialization of low

- GHG light

- duty vehicle technologies

. Chapter 6 presents an analysis of future levels of control of GHG emissions conducted for this Technical Assessment Report. 2 Four scenarios of future stringency are analyzed for MYs 2020 and 2025, starting with a 250 gram/mile estimated fleet

- wide level in MY 2016 and lowering CO 2 scenario targets at the rates of 3% per year, 4% per year, 5% per year, and 6% per year, respectively. For each of those rates of increase in stringency, the agencies considered the effects of the industry following four potential ―techn ology pathways,‖ ―A,‖ ―B,‖ ―C,‖ and ―D.‖ The agencies developed these different technology pathways in order to capture both the current levels of uncertainty regarding the potential rate of penetration of various advanced technologies and to illustrate mo re than one approach that the auto industry could take in responding to future targets. This approach was also informed by our meetings with the auto companies, whom are pursuing a range of different technology paths for the future, with different compani es placing relative emphasis on different technologies. The agencies present the results of this assessment in terms of six broad metrics: per

- vehicle cost increase, net lifetime vehicle owner savings, payback period to the consumer, net reduction in GHG emissions, net reduction in fuel consumption, and vehicle technology penetration mix, as shown in the tables below. Chapter 6 presents the results of this initial analysis for projected costs, emissions reductions, and lifetime fuel savings, and also prov ides the technology projections that were used in the analyses. Chapter 6 also discusses the fact that this preliminary assessment does not include consideration of all statutory requirements and other factors that will be assessed in the upcoming Federal rulemaking. Consideration of these factors is expected to affect cost assessments and may affect the proposed standards.‖

2 These GHG emissions levels can be translated to mpg

- equivalent levels through simple math, but we note that they would not necessarily translate directly into equivalent CAFE standards due to their inclusion of credits for A/C improvements, which is permi ssible for CAA standards but not for CAFE standards.2017

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ix The following summary tables show the fundamental quantitative conclusions from this initial assessment. As shown Table ES

- 1, automo tive technologies are available, or can be expected to be available, to support a reduction in greenhouse gas emissions, and commensurate increase in fuel economy, of up to 6 percent per year in the 2017

- 2025 timeframe. Greater reductions come at greater incremental vehicle costs. The per vehicle cost increase ranges from slightly under $1,000 per new vehicle for a 3 percent annual GHG reduction, increasing to as much as $3,500 per new vehicle to achieve a 6 percent annual GHG reduction. Consumer savings would increase with the lower GHG emissions and higher fuel economy. For the different scenarios analyzed, the net lifetime savings to the consumer due to increased vehicle efficiency range from $4,900 to $7,400. The initial vehicle purchaser will find the higher vehicle price recovered in 4 years or less for every scenario analyzed.

Table ES

- 1 : Projections for MY 2025 Per

- Vehicle Costs, Vehicle Owner Payback,

and Net Owner Lifetime Savings 1, 2

Scenario New Fleet

g/mile CO2 Target (MPGe) 2 Tech

Pat h Pe r

- Vehicle

Cost I ncrease ($) Payback

Period (years) Net Lifetime

Owner Savings ($)

3%/year 190 (47) A $930 1.6 $5,000 B $850 1.5 $5,100 C $770 1.4 $5,200 D $1,050 1.9 $4,900 4%/year 173 (51) A $1,700 2.5 $5,900
B $1,500 2.2 $6,000 C $1,400 1.9 $6,200 D $1,900 2.9 $5,300 5%/year 158 (56) A $2,500 3.1 $6,500
B $2,300 2.8 $6,700 C $2,100 2.5 $7,000 D $2,600 3.6 $5,500 6%/year 143 (62) A $3,500 4.1 $6,200
B $3,200 3.7 $6,600 C $2,800 3.1 $7,400 D $3,400 4.2 $5,700
1. Per

- vehicle costs represent the increase in costs to consumers from the MY 2016 standards. Payback period and lifetime owner savings use a 3% discount rate and AEO 2010 reference case energy prices. The gasoline price used for this estimate is $3.49/gallon in 2025 and increases over time to a maximum of $4.34/gallon in 2050. 2. The targets evaluated were CO2 targets which could be meet through reductions in CO2 as well as through air conditioning system hydroflurocarbon reductions converted to a CO2 equivalent value. MPGe is the equivalent MPG value if all of the CO2 reductions came from fuel economy improvement technologies. Real

- world CO2 is typically 25 percent higher and real

- world fuel economy is typically 2 0 percent lower. Thus, the 3% to 6% range evaluated in this assessment would span a range of real world fuel economy values of approximately 37 to 50 mpg, which correspond to the regulatory test procedure values of 47 and 62 mpg, respectively.2017

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x

As shown in Table ES

- 2, the increased ve hicle efficiency would result in substantial societal benefits in terms of the GHG emission reductions and the petroleum use reductions. In the analyzed scenarios for 2025 model year vehicles, lifetime GHG emissions would be reduced from 340 million metri c tons (3 percent annual improvement scenario) to as much as 590 million metric tons for a 6 percent annual improvement scenario. For the same range of scenarios, lifetime fuel consumption for this single model year of vehicles would be reduced by 0.7 to 1.3 billion barrels.

Table ES

- 2: Estimated CO2e and Fuel Reductions for the Lifetime of MY 2025 Vehicles 1,2
Scenario Lifetime CO2e Reduction

(million metric tons, MMT) Lifetime Fuel Reduction (Billion Barrels) 3%/year 340 0.7 4%/year 410

- 440 0.9 5%/year 440

- 530 1.1 6%/year 470

- 590 1.3 1. Fuel reductions are the same for each of the four technology pathways, but CO2e reductions vary as a function of the penetration of EVs and PHEVs in each of the four technology pathways evaluated (due to an increase in upstream emissions). 2. For ref

erence, the National Program in MY 2016 is projected to reduce 0.6 billion barrels of fuel and 325 MMT CO2e over the lifetime of MY2016 vehicles.

Table ES

- 3 illustrates the levels of technology required to achieve the different GHG and fuel economy levels that were analyzed by the agencies. The types of vehicle technologies sold in 2025 to meet more stringent emission and fuel economy standards depends on the stringency of the adopted standards, the success in fully commercializing at a reasonable cost eme rging advanced technologies, and consumer acceptance. The analysis for this report illustrates a wide range of possible outcomes, and these will likely vary by vehicle manufacturer. The potential fleet penetrations for gasoline and diesel vehicles, hybri ds, plug

- in electric vehicles, or electric vehicles also may vary greatly depending on the agencies‘ assumptions about what technology pathway s industry choose.

As shown in Table ES

- 3, at the 3 or 4 percent annual improvement scenarios, advanced gasoline a nd diesel powered vehicles that do not use electric drivetrains may be the most common vehicle types available in 2025 . In the 3 percent to 4 percent annual improvement range, all pathways use advanced, lightweight materials and improved engine and transm ission technologies. Table ES

- 3 also shows that h ybrid vehicle penetration under the 3 and 4 percent annual improvement scenarios vary widely due to the assumptions made for each technology pathway, ranging from roughly 3 to 40 percent of the market in 20 25.

Under the 5 or 6 percent annual improvement scenarios hybrids could make up from 40 percent to 6 8 percent of the market. In Path D, where a manufacturer makes no improvement in gasoline and diesel vehicle technologies beyond MY 2016, e lectric vehicl es begin to penetrate2017

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xi the market at the 4 percent annual improvement rate and may have as high as a 16 percent market penetration under the 6 percent annual improvement scenario.

Table ES

- 3 : Technology Penetration Estimates for MY 2025 Vehicle Fleet

Scenario Technology

Path New Vehicle Fleet Technology Penetration

Mass Reduction 1 Gasoline &

diesel vehicles HEVs PHEVs 2 EVs 3%/year Path A 15% 89% 11% 0% 0%

Path B 1 8 % 97% 3% 0% 0% Path C 18% 97% 3% 0% 0% Path D 15% 75% 25% 0% 0% 4%/year Path A 15% 65% 34% 0% 0%

Path B 20% 82% 18% 0% 0% Path C 2 5 % 97% 3% 0% 0% Path D 15% 55% 41% 0% 4% 5%/year Path A 15% 35% 65% 0% 1%

Path B 20% 56% 43% 0% 1% Path C 25% 74% 25% 0% 0% Path D 15% 41% 49% 0% 10% 6%/year Path A 14% 23% 68% 2% 7%

Path B 19% 48% 43% 2% 7% Path C 26% 53% 44% 0% 4% Path D 14% 29% 55% 2% 14%
1. Mass reduction is the overall net reduction of the 2025 fleet relative to MY 2008 vehicles. 2. This assessment considered both PHEVs and EVs. These results show a higher relative penetration of EVs compared to PHEVs. The agencies do believe PHEVs may be used more broadly by auto firms than indicated in this technical assessment.
Chapter 7 discusses other key factors for the MYs 2017

- 2025 light

- duty vehicle rulemaking that the agencies are considering, including the potential impact on the employment and vehicle sales and upstream GHG emissions.

In conclusion, the three agencies ha ve received important input from a range of stakeholders to inform the extension of the National Program to MYs 2017

- 2025. Auto manufacturers, states, environmental groups and the United Auto Workers have expressed support for a continuation of the Nation al Program. All auto firms are heavily invested in developing advanced technologies which can reduce fuel consumption and GHGs significantly beyond the MYs 2012

- 2016 standards. Manufacturers are developing many technologies that would enable them to even tually achieve appreciable improvements in fuel economy levels, including advanced gasoline engines, hybrid electric vehicles, EVs, and PHEVs. The three agencies have performed an initial assessment of potential future standards (annual reductions in the range of 3 to 6% per year, or 47 to 62 mpg in 2025 if the industry achieved all of the2017

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xii

increases through fuel economy improvements), which demonstrates that advanced technologies can be used to achieve substantial reductions in fuel consumption and GHGs. The agencies analyzed four technology pathway scenarios that the industry could pursue to achieve more stringent targets, recognizing there are a wide range of pathways individual manufacturers could pursue. One pathway scenario relied upon significant ma ss reduction and advanced next generation gasoline vehicles, the second focused on hybridization and electrification of the fleet (HEVs, PHEVs, EVs), and the third was a blend of the first two. The fourth pathway emphasizes an EV and PHEV focused approach , with a lesser degree of emphasis on advanced gasoline, HEV, and mass reduction approaches. Based on this analysis and the assumptions employed, the agencies found that the per

- vehicle cost increases for a 2025 vehicle ranged from $770 to $3,500 across t he range of stringency targets and technology pathways. The fuel savings achieved by MY 2025 vehicles meeting these more stringent targets would result in a net lifetime savings of between $4,900 and $7400. The GHG reductions ranged from 340 to 590 millio n metric tons and fuel reduction ranged from 0.7 to 1.3 billion barrels over the lifetime of MY 2025 vehicles. We emphasize that this Technical Assessment Report reaches no specific conclusions regarding the levels of stringency to propose for MYs 2017

- 202 5. The report is an important step in a continuation of the National Program, but significant work remains to be done to support a future federal rulemaking.2017

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1

- 1 

## 1 Introduction

1.1 Purpose of this Report

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA, a modal administration within the Department of Transportation ) (―the agencies‖) are collaborating with the California Air Resources Board (CARB) to build on the success of the first phase of the National Program to regulate fuel

eco nomy and greenhouse gas (GHG) emissions from U.S. light

- duty vehicles. The strong and coordinated first phase of standards for model years (MY) 2012

- 2016 was completed in April 2010, ensuring that all manufacturers can build a single fleet of U.S. vehicle s to meet the new harmonized standards.

On May 21, 2010, following the completion of the first phase of the National Program, the President called on the agencies to take additional coordinated steps to bring about a new generation of clean vehicles. 1 A mong other things, the agencies were tasked with researching and then developing standards for MY 2017 through 2025 that would be appropriate and consistent with EPA‘s and NHTSA‘s respective statutory authorities, in order to continue to guide the automoti ve sector along the road to reducing its fuel consumption and GHG emissions, and to ensure the corresponding energy security and environmental benefits. Following the President‘s announcement, se veral major automobile manufacturers and CARB sent lette rs t o EPA and NHTSA in support of a 2017 to 2025 rulemaking initiative as outlined in the President‘s Memorandum

. In addition to the President‘s directive, many stakeholders in their comments during the MYs 2012

- 2016 rulemaking encouraged EPA and NHTSA to mai ntain a single nationwide program, and to extend the National Program beyond the first phase by beginning to work toward standards for MY 2017 as soon as practicable.

The President called on the agencies to begin the next phase of the National Program in response to t he urgent and closely intertwined challenges faced by our nation of dependence on oil, energy security, and global climate change . R educing total petroleum use by U.S. light

- duty vehicles decreases our economy‘s vulnerability to oil price sh ocks. Reducing dependence on oil imports from regions with uncertain conditions enhances our energy security. The need to reduce energy consumption is more crucial today than it was when the Energy Policy and Conservation Act was enacted in the mid

- 1970s . Net petroleum imports now account for approximately 57 percent of U.S. domestic petroleum consumption, 2 and the share of U.S. oil consumption for transportation is approximately 72 percent. 3 Moreover, world crude oil production continues to be highly c oncentrated, exacerbating the risks of supply disruptions and their negative effects on both the U.S. and global economies. Light

- duty vehicles also account for about 41 percent of all U.S. oil consumption

, B making them the largest single oil

- consuming tr ansportation segment in the U.S. Light

- duty vehicles emit four GHGs

— carbon dioxide ( CO 2 ) , methane (CH 4 ) , nitrous oxide (NO X ) , and hydrofluorocarbons (HFCs)

– and are responsible for nearly 60 percent of all mobile source GHGs and over 70 percent of Section 202(a) mobile source GHGs

. In 2007, CO 2 emissions represent ed about 94 percent of total GHG emissions from light

- duty vehicles (including HFCs), and the CO 2 emissions measured by EPA fuel economy compliance tests represent ed about 90 perc ent of al l light

- duty vehicle GHG emissions. 4

, 5Chapter 1

1

- 2

In his May 2010 memorandum

, the President recognized that by acting expeditiously, our country could take a leadership role in addressing these global challenges, stating that ―America has the opportunity to lead the world in the development of a new generation of clean cars and trucks through innovative technologies and manufacturing that will spur economic growth and create high

- quality domestic jobs, enhance our energy security, and improve our environment .‖ NHTSA and EPA, in close coordination with CARB, have started the process, through this report, to evaluate the potential for cleaner and more efficient vehicles that would transform our nation‘s fleet of cars and trucks in the future. Our work would extend the National Program and would entail a carefully coordinated set of steps to further control GHG emissions and reduce oil consumption from the transportation sector.
To answer the President‘s call and to craft a clear regulatory path for the automobile industry, the agencies have collaborated with CARB to prepare this Technical Assessment Report to inform EPA‘s and NHTSA‘s upcoming rulemaking process and provide an initial technical assessment for that work. Section 2 of the President‘s Memorandum sta tes that this Technical Assessment Report should reflect stakeholder input on relevant factors including: ―viable technologies, costs, benefits, lead time to develop and deploy new and emerging technologies, incentives and other flexibilities to encourage development and deployment of new and emerging technologies, impacts on jobs and the automotive manufacturing base in the United States, and infrastructure for advanced vehicle technologies.‖ This report provides an overview of key stakeholder input rece ived to date, and addresses the applicable topics noted in the May 2010 Presidential Memorandum.

Section 2 of the President‘s Memorandum also states that EPA and NHTSA should issue a joint Notice of Intent to Issue a Proposed Rulemaking (NOI) following the Technical Assessment Report announcing plans to promulgate a next phase of standards for this sector, including plans for ― gathering any additional information needed to support regulatory action .‖ The NOI is also to include ― potential standards that could be practicably implemented nationally for the 2017

- 2025 model years and a schedule for setting those standards as expeditiously as possible, consistent with providing sufficient lead time to vehicle manufacturers .‖ 6 The joint federal rulemaking init iated with the NOI will be designed to improve the fuel economy and reduce the GHG emissions of passenger cars and light trucks built in MYs 2017

- 2025, and will follow the full notice

- and

- comment process, consistent with law and Administration policies on openness, transparency, and sound science.

1.2 National Program for Model Years 2012

- 2016

The National Program came about, in part, because of a historic agreement between diverse interests to set in motion a national fuel efficiency policy announced by th e President on May 19, 2009. 7 Several automakers and their trade associations also announced their support for the National Program at that time

. In collaborating between the public and private sector, the United States has already shown leadership throu gh enactment of the first

- ever harmonized GHG emissions and fuel economy standards for light

- duty vehicles.

On April 1, 2010, NHTSA and EPA issued joint final r ule s establishing standards for GHG emissions and fuel economy for passenger cars, light

- duty

- tr ucks, and medium

- duty2017

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- 3 passenger vehicles ( ― light

- duty vehicles ‖ ), which we referred to collectively as the National Program. 8 The agencies found that this first phase of the National Program will achieve substantial reductions of GHG emissions and improve ments in fuel economy from the light

duty vehicle part of the transportation sector, based on technology that is already being commercially applied in most cases and that can be incorporated at a reasonable cost.

EPA and NHTSA established two separate se ts of standards, each under its respective statutory authorit y . EPA set national CO 2 emissions standards for light

- duty vehicles under section 202 (a) of the Clean Air Act. These standards will require the fleet of vehicles to meet an estimated combined average emissions level of 250 grams/mile of CO 2 in model year (MY) 2016 , which the agencies explained is equivalent to a fuel economy level of 35.5 miles per gallon if all the reductions were achieved through improvements in fuel economy, although the CO 2 standards also gave credit for air conditioning improvements that reduced GHGs other than carbon dioxide . NHTSA , in turn, set CAFE standards for passenger cars and light trucks under EPCA, as amended by EISA. 9 T hese standards will require manufacturers o f those vehicles to meet an estimated combined average fuel economy level of 34.1 mpg in model year 2016

, which is the maximum feasible amount of improvement that the agencies estimated could be required using fuel economy

- improving technology alone, witho ut regard to the A/C credits permitted by EPA under the CAA. The standards for both agencies begin with the 2012 model year, with standards increasing in stringency through model year 2016. They represent a harmonized approach that will allow industry t o build a single national fleet that will satisfy both the GHG requirements under the CAA and CAFE requirements under EPCA/EISA.

The MY 2012

- 2016 standards are together expected to result in approximately 960 million metric tons of total carbon dioxide equivalent emissions reductions and approximately 1.8 billion barrels of oil savings over the lifetime of vehicles sold in 2012 through 2016. In total, the combined EPA and NHTSA 2012

- 2016 standards will reduce GHG emissions from the U.S. light

- duty fleet approximately 21 percent by 2030 over the level that would occur in the absence of the National Program. These actions also will provide important energy security benefits, as light

- duty vehicles are about 95 percent dependent on oil

- based fuels and much of the petroleum consumed by the U.S. is imported

. The National Program for MYs 2012

– 2016 was developed in close coordination with many key stakeholders including California and several other states. In 2004

, CARB approved standards for new light

- duty vehicles, which regulate the emission of not only CO 2 , but also other GHGs. Since then, thirteen states and the District of Columbia, comprising approximately 40 percent of the light

- duty vehicle market, have a dopted California‘s standards. On June 30, 2009, EPA granted California‘s request for a waiver of preemption under the CAA. 10 The granting of the waiver permits California and the other states to proceed with implementing the California emission standards

. These standards apply to model years 2009 through 2016

.

T o promote the National Program for MYs 2012

- 2016

, in May 2009, California agreed to accept compliance with the national standards as meeting its requirements. This action allow s the single nation al fleet produced by automakers to meet the two Federal requirements and to meet California requirements as well.Chapter 1

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The MYs 2012

- 2016 standards adopted by NHTSA and EPA for passenger cars and light trucks are attribute

- based standards , specifically based o n vehicle footprint. E ach manufacturer will have a GHG and a CAFE standard unique to its each of its fleet s , depending on the footprints of the vehicle models and the volumes produced by that manufacturer. A manufacturer will have separate footprint

- base d standards for cars and light trucks. With the footprint

- based standard approach, EPA and NHTSA believe there should be no significant effect on the relative distribution of different vehicle sizes in the fleet, which should mean that consumers will stil l be able to purchase the size of vehicle that meets their needs.

As described in the final rule, EPA and NHTSA expect that automobi le manufacturers will meet the MYs 2012

- 2016 CAFE and GHG standards by utilizing currently

- available technologies. Althoug h many of these technologies are available today, the emissions reductions and fuel economy improvements will involve more widespread use of these technologies across the light

- duty vehicle fleet. These include improvements to engines, transmissions, and tires, increased use of start

- stop technology, improvements in air conditioning systems, increased use of hybrid and other advanced technologies, and the initial commercialization of electric vehicles and plug

- in hybrids. NHTSA‘s and EPA‘s assessment of likely vehicle technologies that manufacturers will employ to meet the MYs 2012

- 2016 standards is discussed in the final rule and in the Joint TSD for the final rule.

The MYs 2012

- 2016 standards also provide a number of com pliance flexibilities to manufacturers. While the flexibilities vary in their compliance applicability based on whether the manufacturer is meeting the CAFE standard or the GHG standard, both standards also allow some of the same flexibilities. These fle xibilities are discussed further in Chapter 5 below.

1.3 Standards for 2017 and Beyond
In response to the President‘s call to continue and expand a strong, coordinated National Program, and in order to achieve critical a dditional reductions in oil consumption and GHG emissions from light

- duty vehicles , a number of stakeholders stepped up to offer their support and commitment to fulfilling the President‘s vision. After release of the President‘s May 2010 Memorandum, CARB issued a letter supporting the rulemaki ng process to establish MY 2017

- 2025 standards. 11 In its letter, CARB committed to work in partnership with EPA and NHTSA to: (1) evaluate technologies; (2) engage with manufacturers and other stakeholders to fully explore the capability of technologies; ( 3) evaluate possible approaches to increase in the marketplace the use of advanced technologies; and (4) identify potential GHG emissions standards with the expectation that the annual rate of improvement would be in the 3 to 6 percent range.

Several manuf

acturers also sent letters of support for the 2017

- 2025 rulemaking initiative following the President‘s announcement, committing to engaging in a process to continue a single national program beyond 2016. 12 The letters generally stated the manufacturers‘ a greement with a set of guiding principles, developed by the agencies, for the rulemaking process. These guiding principles include: (1) that EPA and NHTSA will work to develop strong, coordinated national GHG emissions and CAFE standards for light

- duty2017

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- 5 ve hicles manufactured in MY 2017

- 2025 that enable manufacturers to build a single light

duty national fleet that satisfies all federal and state requirements; (2) that EPA and NHTSA will seek input from an array of stakeholders including automobile manufactu rers, infrastructure providers, labor unions, and environmental organizations, and the agencies will work with the State of California and other states in this process; (3) that the agencies and CARB will develop a technical assessment to inform the rulema king process; (4) that a mid

term technology review would be appropriate; and, (5) that the future regulatory program should enable consumers to still have a full range of vehicle choices.

The guiding principles also included a description of the proces s for developing this Technical Assessment, including: (1) meeting with stakeholders individually to gather currently available information on viable technologies, costs, benefits, lead times, incentives and other flexibilities and to evaluate other relev ant factors, such as infrastructure ; (2) evaluating emerging technologies to further reduce GHG emissions and improve fuel
economy; (3) identifying the capabilities to commercialize new and existing GHG and fuel economy technologies, including potential co sts and market barriers associated with such technologies; and, (4) evaluating possible approaches to help establish in the marketplace an increase in the use of advanced technologies, including, but not limited to, plug

- in hybrid, battery electric and fue l cell vehicles

.
1.4 Future Technical Work and Analysis for the Joint Federal Rulemaking
This report represents EPA, NHTSA, and CARB‘s initial assessment of the costs, effectiveness, and lead

- time considerations for a range of advanced vehicle technologies tha t can significantly increase fuel economy and decrease GHG emissions and it includes new information that has been gathered since the 2012

– 2016 federal final rule. As discussed above, and presented in the Executive Summary and in detail in Chapter 6, th e report also presents an analysis for a range of increasing levels of potential stringency for 2020 and 2025, along with costs and benefits for using certain advanced technologies for achieving those targets. This is an important first step for EPA and N HTSA in meeting the requirements of the President‘s Memorandum, which will also include the agencies issuing a Joint Notice of Intent, a Joint Notice of Proposed Rulemaking, and a Joint Final Rule in the future.

Being the first step, it is important to not e that this Technical Assessment must be viewed in the context of the additional work NHTSA and EPA will do going forward. The two agencies have a number of significant, on

- going projects which will inform the future joint Federal rulemaking. As discusse d in Chapter 3, these include: new technical assessments of advanced gasoline, diesel, and hybrid vehicle technology effectiveness being conducted with Ricardo, Inc.; several new projects to evaluate the cost, feasibility, and safety impacts of mass reduct ion from vehicles; and an on

- going project with FEV & Munro to improve our cost estimations for advanced technologies; further consideration of battery life, durability, cost and safety; consideration of several technology cost factors including Indirect C ost Multiplier values, time based learning over extended periods of time; maintenance costs; and further review of the leadtime needed to implement advanced technologies. An analysis of the effects of mass reduction on vehicle safety has not been included in this Technical Assessment. For the 2017

- 2025 NPRM, NHTSA and EPA will conduct an analysis of the effects of the proposed rulemaking on vehicle safety, including societal effects. CARB isChapter 1

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- 6

undertaking a study of the safety effects of a future vehicle d esigned for high levels of mass reduction, and CARB is coordinating with EPA and NHTSA on that study. In addition, EPA and NHTSA will continue to meet with and consider input from the full range of stakeholders as we develop the joint Federal rulemaking. All of this future information will enhance the accuracy of our technological assessment.

In addition, the assessment of scenarios and the accompanying results presented in Chapter 6 of this report should be considered an initial analysis because it does not consider the full range of factors which EPA and NHTSA must consider for a rulemaking under our respective statutory authorities. As discussed in Chapter 6, these include (but are not limited to): consideration of the full range of societal benefits, including consumer welfare effects, specific evaluation of potential safety implications of future standards, consideration of the costs and feasibility of the standards for individual automotive firms, and the development of separate attribute

- based stand ards for passenger cars and light

- duty trucks for each model year covered by the rulemaking.2017

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- 7 Chapter 1 References

1 Presidential Memorandum: ―Improving Energy Security, American Competitiveness an d Job Creation, and Environmental Protection Through a Transformation of Our Nation‘s Fleet of Cars And Trucks,‖ Issued May 21, 2010, published at 75 Fed. Reg. 29399 (May 26, 2010), also available at http://www.whitehouse.gov/the

- press

office/presidential

- memorandum

- regarding

- fuel

- efficiency

- standards

.

2 Source; Transportation Energy Data Book Edition 28

3 Source: EIA Annual Energy Outlook 2010 released May 11, 2010.

4 U.S. Environmental Protection Agency. 2009. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990

- 2007. EPA 430

- R

- 09

- 004.

5 U.S. Environmental Protection Agency (2010) . Regulatory Impact Analysis : Final Rulemaking to Establish Light

- Duty Vehicle Greenhouse Gas Emission Standards and Corporate Averag e Fuel Economy Standards, Chapter 2

, page 2

- 4 . EPA

- 420

- R

- 10

- 0 09 . Available at: http://www.epa.gov/otaq/climate/regulations.htm

.

6 Presidential Memorandum, See Note 1

.

7 R emarks by the P resident on N ational F uel E fficiency S tandards, May 19, 2009, available at http://www.whitehouse.gov/the

- press

- office/president

- obama

- announces

- national

- fuel

- efficiency

- policy

, see also http://www.whitehouse.gov/the

- press

- office/remarks

- president

- national

- fuel

- efficiency

- standards

8 75 FR 25324 ( May 7, 2010 )

.

9 49 U.S.C. 32902

10 74 FR 32744 (July 8, 2009).

11 The California Air Resources Board commitment letter is available at: http://www.epa.gov/otaq/climate/regulations.htm.

12 The manufacturer commitment letters are available at: http://www.epa.gov/otaq/cli mate/regulations.htm.2017

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- 1 

## 2 Technical Input from Stakeholders

2.1 Overview of Stakeholder Outreach Process

As mentioned above, the May 21, 2010 Presidential Memorandum requests that EPA and NHTSA, working with the State of California, develop a Technical Assessment to inform the rulemaking process ―reflecti ng input from an array of stakeholders on relevant factors, including viable technologies, costs, benefits, lead time to develop and deploy new and emerging technologies, incentives and other flexibilities to encourage the development and deployment of new and emerging technologies, impacts on jobs and the automotive manufacturing base in the United States, and infrastructure for advanced vehicle technologies....‖ 13

To fulfill that request, during June through August 2010, EPA, NHTSA, and CARB held numerous meetings with a wide variety of stakeholders to gather input to consider in developing this Technical Assessment Report, and to ensure that the agencies had available to them the most recent technical information directly from the stakeholders themselves. These stakeholders included many automobile original equipment manufacturers (OEMs), automotive suppliers, non

- governmental organizations, states and state organizations, infrastructure providers, and labor unions. For many of the meetings with the OEMs, as well as labor unions, representatives from the federal Council of Environmental Quality and the White House Office of Energy and Climate Change also participated. The agencies sought these stakeholders‘ technical input and perspectives on the key issu es that should be considered, as the President‘s memo identified, in assessing a national program to reduce greenhouse gas emissions and improve fuel economy for light

- duty vehicles in model years 2017

- 2025. NHTSA and EPA anticipate continuing the product ive dialogue with stakeholders as our joint federal rulemaking to develop the new national program proceeds, in order to continue to ensure that our analysis reflects the best available information.

2.2 Input from Various Stakeholder Groups

2.2.1 Automobile Original Equipment Manufacturers

EPA, NHTSA and CARB met with twenty different automotive OEMs to discuss the development of a national program for MYs 2017

- 2025. As discussed below, these include very large firms which sell large volumes of vehicles in the U.S. (and in most cases around the world), small and medium sized firms who sell relatively low volumes of vehicles in the U.S., and three relatively new ―start

- up‖ automotive firms whose business strategy for the U.S. market is focused on the production of all electric vehicles and/or plug

- in hybrid electric vehicles. These meetings included senior management and staff from both the companies and the three agencies.

EPA, NHTSA and CARB met with eleven of the manufacturers with the largest U.S. vehicle sales vo lume to seek their input on both the key technical and policy issues that the agencies should consider in developing the MYs 2017

- 2025 technical assessment. TheChapter 2

2

- 2

agencies met individually with the following companies: General Motors, Ford, Chrysler, Toyot a, Honda, Nissan, Hyundai, Kia, Volkswagen, BMW, and Daimler. These manufacturers account for more than 90 percent of the vehicles produced for sale in the United States. While the views they expressed and the forecasts they shared for the future vehicle market covered a considerable range, especially in terms of specific details, the agencies view this range as unsurprising, considering uncertainty regarding key factors ( e.g. , fuel prices) in the 2017

- 2025 time frame, the relatively long

- time frame over which requested companies to consider (15 years into the future) and considering manufacturers‘ various strategies for competing in the automotive market. A number of messages were stressed by all or nearly all manufacturers and we have summarized those b elow. The agencies have carefully considered the information and views these manufacturers have shared, and NHTSA and EPA will continue to do so as part of the formal rulemaking process for post

- 2016 CAFE and GHG emissions standards.

In addition, the ag encies met with several medium to smaller volume manufacturers, including Mitsubishi, Jaguar Land

- Rover, Ferrari, Aston

- Martin, Lotus, and McLaren. These medium and smaller volume manufacturers may face unique compliance challenges because they sell a lim ited number of vehicle types in the U.S., and/or they serve relative small market segments that tend to value highly priced luxury vehicles with very high levels of vehicle performance (e.g., vehicles with very rapid acceleration and top vehicle speeds) mu ch more highly than fuel economy, such that fuel

- saving technologies ( e.g. , turbochargers), even when applied, are often used to increase performance rather than to increase fuel economy. Several of these manufacturers have traditionally been ―fine

- payers‖ under the CAFE system, and like all manufacturers

— including those that do comply with CAFE standards

— are required to pay ―gas guzzler‖ taxes for specific models with especially low fuel economy levels. The input from these medium and smaller volume manuf acturers will be important to the agencies in determining how to structure the national program for MYs 2017

- 2025.

The agencies also met with new entrants to the automotive industry who are focusing on development of electric vehicles and/or plug

- in hybrid electric vehicles, including Fisker, Tesla, and BYD. These electric vehicle manufacturers provided input regarding the cost of key EV technologies ( e.g. , batteries), the outlook for expanding the EV market, and the need for infrastructure and public ince ntives to support PHEV and EV purchase and operation.
The agencies requested the OEMs‘ input in the following key areas, consistent with the President‘s memorandum:

Technology development status for MYs 2017

- 2025. For each major technology development a rea we requested details regarding effectiveness, costs, technology development and future product introduction plans, and the anticipated market penetration in the 2017

- 2025 timeframe. The major technology areas in which the agencies specifically sought information included powertrain improvement for advanced gasoline and diesel engines and transmissions, hybrid vehicles (HEVs), plug

- in hybrid electric vehicles (PHEVs) and electric vehicles (EVs) (with a focus on battery technology for HEV/PHEV/EVs), fuel cell vehicles, and vehicle mass reduction, as2017

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- 3 well as thermal management technologies including air conditioning improvements.

Key regulatory design elements

Infrastructure issues

Perspective on the impacts on the U.S. manufacturing base and jobs

Potential incentives and flexibilites

In response, the automotive OEMs presented detailed technical information to the agencies addressing these topics, and requested confidential treatment for much of it. In order to respect these requests for confidenti ality, the agencies cannot reveal specific details of the business information provided at these meetings, but taken in the aggregate, the following summarizes information gathered from the OEM meetings. It is important to note that while we requested inf

ormation for the 2017

- 2025 time frame, nearly every manufacturer indicated that they do not have detailed product development and launch plans which extend 15 years into the future. In general, the firms‘ plans for 2010

- 2015 are fairly well defined, most firms do have product plans which extend into the 2016

- 2020 time frame, and no firm had product plans of any significant detail which cover the 2021

- 2025 time frame. Below we summarize the general trends we heard from the OEMs in the following broad areas : advanced gasoline/diesel engine and transmission technologies; vehicle mass reduction technologies; HEV, PHEV, EV technologies; fuel cell vehicle technologies; air conditioning and other technologies; regulatory program design; electric vehicle charging infrastructure, and; perspectives on US manufacturing and automotive

- related jobs.

Advanced gasoline/diesel engine and transmission technologies
Nearly universally, the manufacturers agreed with the agencies‘ projections in the MYs 2012

- 2016 final rule th at the following technologies will be much more prevalent in 2016 and beyond than they are today. These unclude more efficient turbocharged direct injection downsized gasoline engines (turbo

- GDI engines) as well as, for larger displacement engines, a mix of turbo

- GDI engines and some products with GDI coupled with cylinder deactivation and advanced valve timing control

- all matched with more efficient 6+ speed automatic or dual

- clutch transmissions. C However, beyond this particular combustion and transmi ssion technologies, OEM feedback with regard to what technologies would be employed to meet future more stringent CAFE and GHG standards was mixed. Companies indicated that they intended to pursue a variety of different strategies, including diesel, lean burn gasoline direct injection, homogeneous charge compression ignition, high Brake Mean Effective Pressure (BMEP) D turbocharged/cooled exhaust gas recirculation systems, and

C See

, e.g. , id . at 25621

- 25624.
D Brake Mean Effective Pressure is the average amount of pressure in pounds per square inch (psi) that must be exerted on the piston to create the measured horsepower. Th is indicates how effective an engine is at filling theChapter 2

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other advanced engine configurations. Some of these technologies are still in d evelopment, and OEM comments usually noted that while they remain promising advanced powertrains, further development will still be needed to bring them to production. For example, while manufacturers were often optimistic about upcoming advanced gasoline engine technologies, some also cited concerns such as launch performance of highly

- downsized turbocharged engines (though most of those manufacturers also stated they are working to resolve this issue), or the sens i tivity of emission controls on lean

- bur n engines to gasoline sulfur content

. Several manufacturers also indicated that nationwide increases in gasoline minimum octane levels could be important to attain the maximum potential fuel efficiency and GHG emissions improvements for advanced gasoline engines while avoiding driver dissatisfaction with not being able to use regular octane fuel. While there was general consensus that more can be done for gasoline engines, there was no general consensus, and in some cases no projections were provided, reg arding the projected costs of these technologies in the 2020 to 2025 time frame.

Vehicle mass reduction technologies

Nearly all OEMs had strategies for reducing the mass of their vehicles, that in many cases were described as a new or improved technical ap proach. Some firms stated that they would also be taking advantage of opportunities to reduce engine size without compromising vehicle power/weight ratios and thus maintain or increase vehicle performance. The majority of manufacturers stated that they w ere making every effort to remove weight from their vehicles through careful redesigns, material substitution, and mass reduction compounding going forward. Nearly every automotive firm indicated that vehicle mass will actually decrease over the 2010 to 2 025 time frame, though the level predicted level of mass decrease varied significantly across the firms. Nevertheless, several OEMs indicated that vehicle safety technologies, both those driven by regulation and those planned by the firms to meet internal company objectives or voluntary standards, would add mass to vehicles in the future and this would partially off

- set the gains they would see if the focus were only on mass reduction and the current status

- quo with respect to vehicle safety related techno logy. A few firms also speculated that future criteria pollutant emission standards may also result in a small increase in mass that would partially offset the other mass reduction technologies being considered by the companies.

Manufacturers cited varie d plans to change vehicle designs and/or increase the use of high

- strength steel (HSS), ultra

- high strength steel, aluminum, composites, and/or other materials in order to offset these increases and achieve further mass reduction.

Manufacturers generally indicated that universal material substitution (such as a complete switch from steel to aluminum body

- in white structures) would not be feasible to implement across the majority of their high volume vehicle product lines in the 2017

- 2025 time frame due to cost constraints as well as many other engineering and manufacturing challenges. Therefore, while more lighter

- weight materials might be seen in the future, most

combustion chamber with an air/fuel mixture, compressing it and achieving the most power from it. A higher BMEP value contributes to higher overall efficiency.2017

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- 5 OEMs expressed that they still saw the need to continue utilizing steel on many of the
struc tural components of vehicles. Also, most manufacturers indicated they either currently use significant levels of HSS and/or plan to increase use of HSS in response to recently

promulgated MYs 2012

- 2016 standards, which some emphasized could mean that furt her mass reduction through MYs 2017

- 2025 would necessitate more aggressive (and, therefore, potentially more expensive) strategies. Balancing all of these factors, most manufacturers generally estimated the potential to reduce actual vehicle mass ranges from 10% to 15% between today (2010) and 2025.

A number of firms also discussed the more advanced light

- weight materials such as carbon fiber and magnesium. While these materials can offer very significant mass reduction, in general these materials are only used on more exotic luxury or high performance vehicles. There are, of course, examples of vehicles today which use carbon fiber, but they tend to be very expensive, ultra

- high performance vehicles (such as the limited edition Ferrari Enzo, or the Me rcedes SLR MacLaren) or in other cases the amount of carbon fiber in the vehicle is for a few select components (such as in the high performance Corvette ZR1 or the high performance Lexus ISF). A number of automotive firms are exploring the ability to pro duce a less expensive automotive grade carbon fiber, but in general companies did not see carbon fiber, or for that matter magnesium, as playing a major role in the 2017

- 2025 time frame.

HEV, PHEV, EV technologies

Virtually all of the manufacturers are pl anning for greater electrification of their fleet, although there were varying degrees of this: from 12 volt stop

- start systems, to full hybrid electric vehicles (HEV), to plug

- in HEVs (PHEV), to electric vehicles (EV). OEMs stated that the relative pene tration of these technologies varied greatly depending on a number of factors, including, future gasoline fuel prices, future decreases in battery costs, anticipated regulatory fuel economy/GHG requirements. In particular for PHEV and EVs, OEMs also ident ified the charging infrastructure development and costs as well as external (federal, state and local) incentives, and consumer demand/acceptance of vehicles requiring recharging and which may have reduced range (in the case of EVs) as additional factors w hich will impact the future penetration of these technologies. For example, with regard to consumer demand, a number of OEMs expressed reservations regarding the potential, without government assistance, to increase significantly the market for PHEVs and EVs, much beyond the likely first

- adopters who have already indicated interest in purchasing these vehicles. Nevertheless a number of the firms suggested that in the 2020 time frame their U.S. sales of HEVs, PHEVs, and EVs combined could be on the order o f 15

- 20% of their production, and while not all firms provided forecasts out to 2025, some did indicate that this percent of production could grow to be on the order of 40

- 50%, depending on the factors described above

. Other firms provided lower projectio ns for the 2020 to 2025 time frame, or no projection at all.

All of the major OEMs recognize that for PHEV and EV vehicles, the battery costs are by far the most significant contributor to the cost increase over a gasoline vehicle. Universally the OEMs be lieve that large

- format lithium

- ion batteries offer the most promising trade

- off between battery performance, weight, size, and costs. A large number of lithium

- ion battery chemistries and designs are being explored and considered for commercialization. With respect to costs, there also was a wide range in OEM

- projected battery

- pack cost in theChapter 2

2

- 6

2020 to 2025 timeframe, with the majority of estimates in the $300/kW

- hour to $400/kW

hour range for 2020 and $250 to $300/kW

- hour range for 2025

.
Fuel cell vehicle technologies

A number of the larger automotive firms described active research and product development programs they have underway with respect t o fuel cell vehicles. Several companies have planned limited product introductions for California with in the next several years. The companies that discussed such programs identified two major challenges for fuel cell vehicles: reducing vehicle system costs and the development of a refueling infrastructure.

With respect to costs, several of the firms had specific technology development roadmaps which they estimated could significantly lower the costs of fuel cell vehicles over the next ten to fifteen years, which they indicated could potentially make fuel cell vehicle incremental costs competitive with al l electric vehicles in the 2020 to 2025 time frame.

With respect to infrastructure, while the OEMs noted that California is actively working to develop and expand a hydrogen refuel infrastructure centered in Southern California, they also stressed that wit hout a significant development in other regions of the U.S., fuel cell vehicles will not be able to penetrate the market beyond limited, centrally fueled fleet programs.

For the U.S. market, most major firms expressed a belief that fuel cell vehicles will play a significant role in the longer

- term. Several firms expect that this will be in the time frame beyond 2025 for the nation as a whole, outside of specific geographic areas (such as California) where a refueling infrastructure is being developed.

Air conditioning and other technologies

Many of the OEMs stated that they were anticipating switching air conditioner (A/C) refrigerant from the current R134a (with its high global warming potential, GWP) to the much lower HFO1234yf as soon as they could, wit h most firms projecting this would occur between now and approximately 2018. Many OEMs noted, however, that this switch is dependent on EPA SNAP approval, E as well as availability and price from suppliers for the new refrigerant. Manufacturers noted that these two issues had the potential to delay much of the switchover to HFO1234yf, with the period of the delay depending upon the specifics of EPA‘s future action and how the market place forces play out with respect to the supply and demand for the new

re frigerant..

With regard to other vehicle technologies, each of the companies had their own suite of other technologies that would improve efficiency based on their unique expertise and

E The Significant New Alternatives Policy (SNAP) Program is EPA's program to evaluate and regulate substitutes for the ozone

- depleting chemicals that are being phased out under the stratospheric ozone protection provis ions of the Clean Air Act (CAA). Before any new or substitute refrigerant can b e utilized in mobile A/C applications, EPA must receive a SNAP submission and reach a determination. If EPA finds the substitute acceptable, its use must comply with conditions set forth in the SNAP determination.2017

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- 7 product plans. These included aerodynamic improvements, friction red uction, further reductions in tire rolling resistance, and a number of other technologies that cannot be described in detail given confidentiality restrictions.

Regulatory program design input

Specific company suggestions for the appropriate design of r egulatory programs, often relating to OEM

- specific strategies for coming into compliance under various scenarios and their particular desired program flexibilities, were considered to be confidential business information by all of the manufacturers. These suggestions varied greatly depending on the specific company, as did manufacturers‘ plans for future compliance. However, there was universal consensus that a national program should continue, and that a single national fleet should be able to comply wit h California and federal GHG standards as well as federal CAFE standards.

Several OEMs also discussed the importance of a mid

- term technology review which would occur after the 2017

- 2025 standards are promulgated. The May 19, 2010 support letters from a ll of the OEMs and the two major automotive trade associations also supported the concept of a mid

- term technology review. In addition, several OEMs were supportive of the continuation of attribute

- based standards and of separate standards for cars and tr ucks.

Electric vehicle charging systems
A number of the automakers provided input on the electrical vehicle charging systems needed for EVs and PHEVs. The OEMs generally agreed that most charging will occur at home and will be Level 1 or Level 2, with a greater likelihood of Level 2 charging as vehicle range and size increases. F OEMs suggested that workplace charging, if available, could significantly increase the vehicle‘s daily driving range (under the assumption the vehicle can be charge two times in a day, once at home in the morning, and once at work during the day) and may help to increase market appeal of EVs and PHEVs. OEMs also indicated that public charging (Level 2 or Level 3 quick charging) could provide additional comfort to EV/PHEV owners and may help to facilitate the mass adop tion of these vehicles. OEMs also generally agreed that costs of electric vehicle service equipment installation will vary widely by the age of the house, location of the charging equipment, and difficulty of installation. Some urban locations without ded icated parking, such as apartments and townhouses with street parking, may present charging challenges. These issues are discussed in more detail in Chapter 4 below.

A number of OEMs also indicated that they believe that federal and state incentives

are helpful in encouraging charging system development and charge point deployment. In addition, stakeholders emphasized that standardization of charging facilities and codes for

F Details regarding EV and PHEV charging levels are included in Chapter 4 of this report. In general, Level 1 charging uses a lower voltage than Level 2. Level 1 chargers require more time for battery charging than Level 2. As discussed in Chapter 4, there is also a Level 3 charging approach, sometimes called ―quick charging‖, which uses even higher voltages and takes even less time than Level 1 or Level 2.Chapter 2

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installing equipment will streamline and encourage the widespread deployment of charging infrastructure and promote the adoption of PHEVs and EVs. Some OEMs also suggested that

so

- called ―smart metering‖ equipment and strategies could enable consumers and utilities to choose the best time to charge vehicles for the lowest cost while maintaining maximum vehicle availability.

Perspectives on US manufacturing and automotive

- related jobs

Not all manufacturers discussed potential impacts on jobs and the U.S. manufacturing base, but of those that did, many were optimistic about the opportu nities to build fuel

- efficient cars in the United States and the concurrent boost to the U.S. job market. Most OEMs were predicting significant increase in sales after the drop in 2009, and further sales increases into 2017+, with concomitant increases in U.S. manufacturing jobs. Further, OEMs stated that increased technological content in vehicles will likely require more development, testing, and additional manufacturing requirements and thus potentially lead to more jobs in the supplier chain, both in the U.S. as well as abroad. Several manufacturers noted that Federal government stimulus bill investments, as well as additional incentives provided by a number of state and local governments, were an important factor in locating manufacturing operations for electrification components (including new battery, electric motor, and power electronic manufacturing facilities) in the U.S., and that continuation of this type of investment would be an important consideration to locating future facilities in the U. S.

2.2.2 Automotive Suppliers

EPA, NHTSA and CARB met with a cross section of automotive suppliers to seek their input on a number of key technical issues. Suppliers conduct their own research and development on a wide variety of automotive products that direct ly and indirectly influence the fuel economy and CO 2 emissions of vehicles. The agencies met individually with the following companies and associations: Delphi, Bosch, Denso, Borg Warner, Honeywell, Valeo, Johnson Controls, A123, BYD, Dupont, the America n Iron and Steel Institute and a number of their member companies, the Aluminum Transportation Group (a part of the Aluminum Association) and a number of their member companies, and the Rubber Manufacturers Association and a number of their tire manufactur ing company members. We note that there are a very large number of automotive suppliers, making it impossible to meet with even all of the major companies given the time frame for this technical assessment report. The companies and associations with whom we met represent a small but significant fraction of these suppliers, given their importance in the market and/or the uniqueness of their product offerings.

The agencies requested input in the following key areas: expected technology development status for MYs 2017

- 2025, cost, effectiveness, and potential limitations of technologies, and impact on jobs. In response, as with the automotive OEMs, the supplier companies presented detailed technical information to the agencies addressing these topics, and requested confidential treatment for much of it. In order to respect these requests for confidentiality, the agencies cannot reveal specific details of the business information provided at these meetings, but taken in the aggregate, the following summariz es information gathered from the supplier meetings.2017

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- 9 In general, the suppliers were optimistic that supplier

- developed advanced technologies could play a critical role in 2017

- 2025 vehicles, and they were actively engaged with OEMs for not only applicati on of near

- term technologies but also collaborative development of production road maps for technologies currently in the R&D phases within their organizations. Generally the suppliers stated that future R&D activities would allow them to decrease costs, increasing production capacity, and produce innovative solutions for OEM needs. However, suppliers also independently discussed some of OEMs key issues

— such as the potential future penetration and challenges for large market adoption of HEVs, PHEVs, EVs , and FCVs. Some suppliers‘ cost estimates were more consistent with or even lower than the figures used by the agencies in the present analysis. The steel and aluminum industry emphasized that weight can be reduced in vehicles without sacrificing safety

, although the agencies note that the assessment of safety identified by these industries does not include the type of detailed aggregate societal impacts assessment that NHTSA and EPA will conduct for the upcoming joint Federal rulemaking.

On the issue of potential job impacts, suppliers strongly supported the recent federal funding for advanced battery development. Suppliers stated that this has already led to many engineering and manufacturing jobs created in the U.S., in part due to Federal stimulus fu nding, and expressed confidence that this sector will continue to grow.

On the issue of infrastructure, some of the suppliers did discuss issues regarding EV/PHEV vehicle infrastructure. In general, their themes on this topic were consistent with what w e also heard from the OEMs discussed above.

2.2.3 Non

- Governmental Environmental Organizations

The agencies also received input from numerous environmental organizations, including the Natural Resources Defense Council, Union of Concerned Scientists, Environment al Defense, Sierra Club, the American Council for an Energy

- Efficient Economy, Safe Climate Campaign, Environment America, and the National Wildlife Federation. These environmental organizations stated that they are very supportive of the President‘s call for setting new fuel economy and greenhouse gas standards for light

- duty vehicles for the 2017

- 2025 model years. These groups believe this will help to cut U.S. oil dependency and move the nation toward a clean energy economy. The groups stated that the y support setting standards at the maximum technically feasible level in order to bring new technologies to the marketplace, calling on the agencies generally to establish future standards which would push efficiency limits on conventional internal combust ion engine vehicles, bring hybrids into mainstream commercial production, and pull advanced electric

- drive vehicles into the market. These organizations requested that the agencies establish standards for 2017

- 2025 which would put light

- duty vehicles on a path to achieve an 80 percent reduction (from 2005 levels) in global warming emissions by 2050. The groups also encouraged EPA and NHTSA to work quickly to propose and finalize the new standards.

The environmental groups emphasized that the rulemaking pr ocess be open and transparent to the public. They commended the transparency of the process thus far, and expect it to be continued moving forward. The environmental groups stated that transparency is critical in several specific areas, including manufac turers‘ compliance, test data, technologyChapter 2

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costs, modeling of technology adoption ( e.g. , EPA‘s OMEGA model and NHTSA‘s Volpe model), vehicle safety assessments, assumptions of advanced vehicle adoption, and accounting for electric vehicle upstream emissions and other off

- cycle factors.

Another issue raised by the environmental groups was the concept of a mid

- term technology review, as indicated in the auto manufacturers‘ letters supporting the President‘s memorandum. The environmental groups emphasized that any mid

- term technology review, if conducted, should not undermine innovation, should be very narrow in scope, and be a one

time review after 2020. They stated that a technology review should not create uncertainty regarding the requirements established by the agencies, or be considered an ―escape route‖ to delaying requirements. They also stated that a technology review may be unnecessary if the 2017

- 2025 standards can be achieved by using multiple technology pathways, as opposed to a single, ―silver

- bu llet‖ technology.

The environmental groups requested that EPA and NHTSA continue to rely on what they characterized as reasonable discount rates when evaluating the consumer benefits of fuel savings, so as to not undervalue the consumer benefits of higher fuel economy standards. The groups reiterated prior arguments that discount rates higher than the 3 and 7 percent rates recommended in OMB guidance documents are inappropriate, due to the highly imperfect automobile market, with limited information, unc ertainty of future gasoline prices, and a limited set of options with regard to fuel economy. The groups expressed interest in working on the discount rate issue with EPA, NHTSA, and others during the upcoming joint federal rulemaking process.

These group s stated that the standards should rely on an updated and accurate safety analysis, consistent with EPA and NHTSA‘s discussion of this issue in the final rule for the MY2012

- 2016 standards. The environmental groups stated that their understanding of the

a nalysis in the MYs 2012

- 2016 rule is that vehicle mass reduction can be applied in a way that saves lives while also cutting fuel consumption and GHG emissions. The groups expressed support for the commitments made by NHTSA in the MYs 2012

- 2016 final rule , as discussed below in Chapter 3, to collaborate with EPA, CARB and the Department of Energy, in conducting further safety and mass reduction research.

Finally, the environmental groups stated that the tailpipe compliance calculation for electric

- drive ve hicles should account for upstream GHG emissions due to electricity and hydrogen generation. Their concern is that if manufacturers are allowed to treat EVs (or the electric portion of a PHEV) as 0 grams of CO 2 /mile for compliance purposes, they may be ab le to meet the standards through producing only a small number of electric

- drive vehicles, while avoiding fuel economy improvements in conventional vehicles. Further discussion of this issue is contained in Chapter 7.

2.2.4 State and Local Government Organizati ons
The agencies met with representatives from the National Association for Clean Air Agencies (NACAA), the Northeast States for Coordinated Air Use Management (NESCAUM), and approximately 10 individual state and local governments. The state and local org anization stressed broad objectives, and generally expressed strong support of the2017

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- 11 agencies‘ efforts to develop a national program for the 2017

- 2025 timeframe. The states emphasized, consistent with California‘s letter supporting the Presidential memorand um, that the agencies should evaluate a range of potential standards of 3 to 6 percent annual increases in stringency for the 2017

- 2025 time frame. The states expressed a strong preference toward the higher stringencies in that range, stating that the sta ndards must be technology forcing in order to help them achieve their individual and regional GHG reduction goals.

The states also strongly supported the collaborative process in which EPA, NHTSA, and CARB are engaging in order to assess the technical info rmation going into the 2017

- 2025 assessment. Several states mentioned activities they have underway to develop the infrastructure needed to support electrified vehicles. The states also expressed support for transparency in the process of developing the technical assessment, and the eventual proposed rulemaking, and an interest in continued dialogue.

2.2.5 Infrastructure Providers

The agencies met with representatives from the Electric Power Research Institute (EPRI) and charging infrastructure providers. EPR I believes the focus for EV and PHEV charging systems should be on home charging, with a goal of a seamless installation process (permitting, electrical installation, inspection) for homeowners. However, EPRI recognizes that home charging infrastructure i s expensive, estimating an average cost of about $1,500 for home charging installations. Some charging infrastructure providers see a more important role for public charging, which could expand EV/PHEV markets to people who live in apartments, condominiums , or otherwise do not have garage access for convenient home charging. EPRI believes more work is needed to assess how workplace and public charging infrastructure should be developed, both in terms of where to best locate stations for consumers‘ convenien ce and who should own the them (e.g., municipalities, private sector, employers, utilities).

EPRI believes that overall electric utilities will be able to support the rollout of EVs and PHEVs. However, there is a possibility of isolated impacts on some residential transformers, particularly in neighborhoods with older distribution systems. To mitigate these potential impacts, EPRI suggests that early notification to the local utilities of EV/PHEV charging plans would help the utilities assess any potent ial need for upgrades to the electric power delivery system. EPRI also believes that potential stresses on power delivery systems can be mitigated by the wise application of smart charging, which has the potential to even out charging loads. Charging infr astructure providers generally agreed with this assessment. EPRI is currently examining these issues.

2.2.6 Labor Unions

EPA, NHTSA and CEQ met with representatives of the United Auto Workers (the UAW). The UAW was supportive of continuing the National Progr am for 2017 and beyond. The UAWs overarching concern was how the future development and market penetration of advanced vehicle technologies will impact automotive industry manufacturing employment in the United States. The UAW stated their general belief that a high percentage the sub

systems and vehicle assembly for hybrid electric vehicles sold in the U.S. today are notChapter 2

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manufactured in the United States. The UAW is concerned that this trend could continue, and that the potential future introduction of plug

- in hybrid electric vehicles and electric vehicles in addition to the potential future expansion of hybrid electric vehicles could results in an overall decline in the automotive manufacturing jobs in the United States. The UAW stated that the
governm ent funding for advanced technology vehicles had made an important difference in the past year, resulting in many companies deciding to manufacturer batteries, electric motors, and vehicle assembly plants in the U.S.; the UAW was concerned that without the continued economic support from the federal government, future manufacturing facilities for these advanced technology vehicles may not occur in the U.S.

In addition to this important issue, the UAW made two specific requests which they would like the fede ral government to consider in the development of the 2017

- 2025 joint federal rulemaking. The UAW believes it is important for the agencies to analyze and report the net domestic employment effects of any future proposed standards. In addition, the UAW

re quested that future regulations include provisions with respect to GHG emissions from automobiles other than the CO2 captured by the CAFE program for the eventual integration of those emissions regulations with any broader national GHG program that might b e developed by Congress or that may be proposed by EPA under the Clean Air Act in the future. Specifically the UAW was referring to methane, nitrous oxide, and hydroflurocarbon emissions, as well as CO2 emissions related to a vehicles air conditioning sys tem operation, which is not capture under today‘s CAFE test procedures. Finally, the UAW raised some concerns with the future projections contained in the Energy Information Administration‘s Annual Energy Outlook reports and the accuracy of those reports projections regarding future improvements in fuel economy absent new standards.2017

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- 13 Chapter 2 References

13 75 Fed. Reg. 29399 (May 26, 2010).2017

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- 1 

## 3 Technology, Cost, Effectiveness and Lead

- time Assessment

3.1 What technologies did the Agencies Consider?

The agencies assume, in this analysis, that manufacturers will add a variety technologies to each of their vehicle model platforms in order to improve their fuel economy and GHG performance. In order to analyze a variety of regulatory control scenarios (as we do in this report), it is thus essential to understand what is feasible within the timeframe of the rule. Technical feasibility of potential standards requires a thorough study of the technologies available to the manufacturers. This study includes an assessment of the cost, effectiveness, as well as the lead time of the technologies. The lead time relates to the availability, development time, and manufacturability of the technology within the normal redesign periods of a vehicle line (or in the design of a new vehicle). As we describe below, lead time issues can in turn affect the cost as well as the technology penetration rate (or caps) that are assumed in the analysis.

The agen cies considered over 30 vehicle technologies that manufacturers could use to improve the fuel economy and reduce CO 2 emissions of their vehicles during the 2017

- 2025 timeframe. A majority of the technologies described in this chapter are readily available today, are well known, and could be incorporated into vehicles once product development decisions are made. These are ―near

- term‖ technologies and are identical to those applied in the 2012

- 2016 light

- duty rule. Other technologies considered may not cur rently be in production, but are beyond the initial research phase, under development and are expected to be in production in the next few years. These are technologies which can, for the most part, be applied both to cars and trucks, and which are capabl e of achieving significant improvements in fuel economy and reductions in CO 2 emissions at reasonable costs in the 2017 to 2025 timeframe. The agencies did not consider technologies that are currently in an initial stage of research because of the uncerta inty involved in the lead time available to implement the technologies with significant penetration rates for this assessment.

3.2 How did the Agencies Determine the Costs and Effectiveness of Each of These Technologies?

3.2.1 How are Cost and Effectiveness Estim ates Different from the 2012

- 2016 Rule?

Virtually all of the technologies considered in this analysis are identical to those described in the 2012

- 2016 light

- duty CAFE and GHG final rule. Those that are new or modified are described in greater detail in this chapter. In general, the costs of fuel consumption improvement technologies considered in this assessment are taken straight from the 2012

- 2016 light

- duty CAFE and GHG final rule, with six exceptions that impact individual technology costs in differe nt ways. The first exception is that the agencies have reconsidered the costs for several technologies for which extensive tear

- down studies were completed during development of the MYs 2012

- 2016 final rule. These teardown studies were conducted under th e continuing EPA contract with FEV and Munro in support of that rulemaking and were discussed in detail in the Technical Support Document. 14 The secondChapter 3

3

- 2

exception is that the agencies have reconsidered the costs for hybrid electric vehicles (HEV), plug

- in hy brid (PHEV ), electric vehicles (EV ), and fuel cell electric vehicles (FC E V ), due in part to the rapid changes taking place in battery technology and cost estimation methods based on the expert judgment of the Department of Energy (DoE), EPA, CARB, and NHTS A and using updated costs as compared to the 2012

- 2016 light

- duty rule. The third exception is that the agencies have updated the cost for mass reduction based on more recent studies. The fourth exception is that the indirect cost markups (ICM) used in th e 2012

- 2016 light

- duty rulemaking and have added an additional factor of 0.06 to each. This factor has been added to reflect return on capital of 6% in the automotive industry, described further below. 15 The fifth exception is that cost estimates have bee n updated to reflect 2008 dollars while the 2012

- 2016 light

- duty rule expressed costs in terms of 2007 dollars. This update was done using a ratio of GDP price deflators in a manner consistent with the procedure used in the 2012

- 2016 light

duty rule. The sixth exception is that learning effects have been allowed to continue beyond the 2016 model year so that the individual piece costs in the 2017 and later model years will, in general, be lower than the costs estimated for the 2012

- 2016 model years. We no te, however, that the type of learning

– volume

- based or time

- based, as described in the 2012

- 2016 light

- duty rule

– has not changed. Each of these exceptions is discussed in more detail below and in Appendix B.

Most of the effectiveness numbers of the technologies have also not changed from the previous final rule. The few changes that were made are also described below. The agencies are pursuing additional work to update the effectiveness of virtually all of the technologies listed in this chapter.

3.2.2 Costs from Tear

- down Studies

The agencies have updated costs of certain technologies that had been based on tear

down studies conducted during the 2012

- 2016 rulemaking. The agencies believe that the best method to derive technology cost estimates is to conduct studies involving tear

- down and analysis of actual vehicle components. A ―tear

- down‖ involves breaking down a technology into its fundamental parts and manufacturing processes by completely disassembling v ehicles and vehicle subsystems and precisely determining what is required for its production. More details about tear down studies can be found in the studies supporting the 2012

- 2016 light

duty rule as well as the FEV and Munro Associates report for EPA

. 16

, 17 This tear

- down method of costing technologies is often used by manufacturers to benchmark their products against competitive products. Historically, vehicle and vehicle component tear

- down has not been done in large scale by researchers and regulato rs due to the expense required for such studies.

To

- date, such tear

- down studies have been completed on the six technologies listed below. These completed tear

- down studies provide a thorough evaluation of the component or system cost relative to their baseline (or replaced) technologies. A more detailed description of these technologies can be found in the Technical Support Document prepared for the 2012

- 2016 light

- duty final rule. 14 For these technologies, the agencies have relied on the tear

- down data available and scaling methodologies used in EPA‘s ongoing study with FEV. Note, this costing methodology has been published and has been peer reviewed. 182017

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- 3 1. Stoichiometric G gasoline direct injection and turbo charging with engine downsizing (T

- DS) for a large DOHC (dual overhead cam) 4 cylinder engine to a smaller DOHC 4 cylinder engine. 2. Stoichiometric gasoline direct injection and turbo charging with engine downsizing for a SOHC (single overhead cam) 3 valve/cylinder V8 engine to a SOHC V6 engine. 3. Stoichiometric gasoline direct injection and turbo charging with engine downsizing for a DOHC V6 engine to a DOHC 4 cylinder engine. 4. 6

- speed automatic transmission replacing a 5

- speed automatic transmission. 5. 6

- speed wet dual clutch transmission (DCT) replacing a 6

- speed automatic transmission.

In addition, FEV and EPA extrapolated th e engine downsizing costs for the following scenarios that were based on the above study cases:

1. Downsizing a SOHC 2 valve/cylinder V8 engine to a DOHC V6. 2. Downsizing a DOHC V8 to a DOHC V6. 3. Downsizing a SOHC V6 engine to a DOHC 4 cylinder engine. 4. Downsizing a DOHC 4 cylinder engine to a DOHC 3 cylinder engine.

In the 2012

- 2016 light

- duty rule, the agencies relied on the findings of FEV in part for estimating the cost of these technologies. However, for some of the technologies, NHTSA and EPA m odified FEV‘s actual estimated costs. This was done because FEV based their costs on the assumption that these technologies would be mature when produced in large volumes (450,000 units or more). The agencies believed that there was some uncertainty
rega rding each manufacturer‘s near

- term ability to employ the technology at the volumes assumed in the FEV analysis with fully learned costs. There was also the potential for near term (earlier than 2016) supplier

- level Engineering, Design and Testing (ED&T) H costs to be in excess of those considered in the FEV analysis because existing equipment and facilities need to be converted to the production of new technologies and may lead to stranded capital I if done too rapidly. The agencies consider the FEV result s to be generally valid for the 2017

- 2025 timeframe because the factors considered in the 2012

- 2016 light

- duty rule should no longer exist and sales volumes of 450,000 units are likely due to, at least in part, the new GHG and fuel economy requirements. M ore detail on which specific technologies are

G Stoichiometric Gasoline Direct Injection refers to a gasoline fueled spark

- ignition internal combustion engine with direct fuel injection into the combustion chamber that is designed to operate primarily at a chemically balanced ratio of air and fuel thus allowing the effective use of standard precious

- metal based (Rh combined with Pd and/or Pt) three

- way exhaust catalysts for control of c riteria pollutants
H Product Development Costs are the ED&T costs incurred for development of a component or system. These costs can be associated with a vehicle specific application and/or be part of the normal research and development (R&D) performed by companies to remain competitive. In the cost analysis, the product development costs for suppliers are included in the mark

- up rate as ED&T suppliers.
I Stranded Capital is defined as manufacturing equipment and facilities owned by a vehicle manufacturer that cannot be used in the production of a new technology.Chapter 3

3

- 4

impacted by this change is presented in Appendix B. The agencies will continue to review the FEV results and methodology as necessary in the upcoming federal rulemaking.

3.2.3 Costs of HEV, PHEV, EV, and FCEV

The agencies have also reconsidered the costs for HEVs, PHEVs

, EVs , and FC E Vs as the result of two issues: The first issue is that there is a rapid development taking place on electrified vehicle technologies and an effort has been made to capture the results from the most recent analyses. The second i ssue is that the 2012

- 2016 rule employed a single $/kWhr estimate and did not consider the specific vehicle and technology application for the battery when we estimated the cost of the battery. Specifically, ba tteries used in HEVs versus EVs need to be considered appropriately to reflect the design differences and differences in cost per kW

- hr as the power to energy ratio of the battery changes for different applications. For this assessment, the agencies have used a battery cost model developed by Argonne National Laboratory (ANL) for the Vehicle Technologies Program of the U.S. Department of Energy (DoE) Office of Energy Efficiency and Renewable Energy. The model developed by ANL provides unique battery pack cost estimates for each of the three major types of electrified vehicles. The DoE has established long term industry goals and targets for advanced battery systems as it does for many energy efficient technologies. ANL was funded by DoE to provide an ind ependent assessment of Li

- ion battery costs because of their expertise in the field as one of the primary DoE National Laboratories responsible for basic and applied battery energy storage technologies for future HEV, PHEV and EV applications. A basic des cription of the ANL Li

- ion battery cost model and initial modeling results for PHEV applications were published in a peer

- reviewed technical paper presented at EVS

- 24 19

. ANL has extended modeling inputs and pack design criteria within the battery cost mode l to include analysis of manufacturing costs for EVs and HEVs as well has PHEVs. 20 A complete
peer

- review of the model and its inputs and results for HEV and EV applications is pending

, and ANL expects to have a peer review completed within 1 year. NHTSA and EPA will consider the results of the peer review as we develop the future joint federal notice of proposed rulemaking. The agencies expect to continue to work with DOE and ANL (as well as battery manufacturers, OEMs, and other stakeholders) to get the most up to date information for the upcoming NPRM.

The agencies have decided to use the ANL model for estimating large

- format lithium

ion batteries for this assessment for the following reasons. The ANL model has been described and presented in the pub lic domain and does not rely upon confidential business information (which would therefore not be reviewable by the public). The model was developed by scientists at ANL who have significant experience in this area. The model uses a bill of materials met hodology which the agencies believe is the preferred method for developing cost estimates. The ANL model appropriately considers the vehicle applications power and energy requirements, which are two of the fundamental parameters when designing a lithium

- i on battery for an HEV, PHEV, or EV. The ANL model can estimate high volume production costs, which the agencies believe is appropriate for the 2025 time frame. Finally, the ANL model‘s cost estimates, while generally lower than the estimates we received from the OEMs, is consistent with some of the supplier cost estimates the agencies received from large

- format lithium

- ion battery p ack manufacturers. A portion of the data was received from

on

- site visits done by the EPA.2017

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- 5 The ANL battery cost model is based on a bill of materials approach in addition to specific design criteria for the intended application of a battery pack. The costs include materials, manufacturing processes, the cost of capital equipment, plant area and labor for each manufacturing step as well as the design criteria include a vehicle application‘s power and energy storage capacity requirements, the battery‘s cathode and anode chemistry, and the number of cells per module and modules per battery pack. The model assumes use of a lami nated multi

- layer prismatic cell and battery modules consisting of double

- seamed rigid containers. The model also assumes that the battery modules are air

- cooled. The model takes into consideration the cost of capital equipment, plant area and labor for each step in the manufacturing process for battery packs and places relevant limits on electrode coating thicknesses and other processes limited by existing and near

- term manufacturing processes. The ANL model also takes into consideration annual pack pro duction volume and economies of scale for high

- volume production.

The cost outputs from the ANL model used by the Agencies to determine 2025 HEV, PHEV and EV battery costs were based upon 500,000 packs/year production volume and the use of a common cathode and anode chemistry, LiMn2O4

- spinel for the cathode and graphite for the anode. The agencies assumed a change in battery state of charge (% SOC) of 50% for HEVs, 70% for PHEVs and 80% for EVs in 2025. The agencies also estimated 2020 HEV, PHEV and EV ba ttery costs based upon the same battery chemistry and a production volume of 100,000 packs/year. EPA considered one other battery chemistry, LiFePO4

- graphite. While it is expected that other Li

- ion battery chemistries with higher energy density, higher pow er density and lower cost will likely be available in the 2017

- 2025 timeframe, the specific chemistry used for the cost analysis was chosen due to its known characteristics and to be consistent with publicly available information on current and near term H EV, PHEV and EV product offerings from Hyundai, GM and Nissan. 21

, 22

, 23

, 24 The cost of active materials is somewhat higher for LiMn2O4

- spinel than for LiFePO4, but battery pack costs are generally higher for LiFePO4 when comparing battery packs with the same e nergy and power requirements. This is due primarily to the lower energy density of LiFePO4 relative to LiMn2O4

- spinel. We expect that incremental improvements in battery energy density will continue through 2025 and thus the higher energy density represen ted by the choice of a LiMn2O4

- spinel cathode/graphite anode within the ANL cost model is more appropriate for determining the future cost of batteries in the 2017

- 2025 timeframe

. Examples of the cost outputs from the ANL model used by the agencies in thi s analysis are shown in Table 3 .2

- 1 and Table 3 .2

- 2

. A more detailed discus s ion of battery pack costs is contained in Appendix B. The agencies note that costs used in the analysis are lower than the costs generally reported in stakeholder meetings, which ranged from $300/kW

- hour to $400/kW

- hour range for 2020 and $250 to $300/kW

- hour range for 2025. Because of uncertainty with regard to future battery costs, the agencies also conducted a sensitivity study using PHEV and EV battery pack costs approximately $100/kW

- hr higher and $50/kW

- hr lower than the costs estimates from the ANL battery cost model. Further details regarding the sensitivity analysis are described Chapter 6 of this report and in Appendix B, section B4.2.1.3.Chapter 3

3

- 6

Table 3 .2

- 1 : Direct Manufacturing Costs on a $/kWh

- basis f or Large Car HEVs, PHEVs and EVs (2008 dollars, markups not included).

Application Direct Manufacturing Cost, MY2020 (100,000 packs/year volume) Direct Manufacturing Cost, MY2025 (500,000 packs/year volume) $ $/kW

- hr $ $/kW

- hr P2 HEV Battery Pack $801 $1,214 $641 $971 PHEV20 Battery Pack $2,916 $324 $2,333 $259 PHEV40 Battery Pack $4,285 $238 $3,428 $190 EV75 Battery Pack $5,847 $217 $4,678 $173 EV100 Battery Pack $7,443 $191 $5,954 $153 EV150 Battery Pack $11,005 $175 $8,804 $140

Table 3 .2

- 2 : Direct Manufacturing Costs on a $/kWh

- basis for subcompact HEVs,

PHEVs and EVs (2008 dollars, markups not included).

Application Direct Manufacturing Cost, MY2020 (100,000 packs/year volume) Direct Manufa cturing Cost, MY2025 (500,000 packs/year volume) $ $/kW

- hr $ $/kW

- hr P2 HEV Battery Pack $541 $1,177 $433 $941 PHEV20 Battery Pack $2,187 $347 $1,749 $278 PHEV40 Battery Pack $3,244 $251 $2,595 $201 EV75 Battery Pack $4,013 $197 $3,211 $157
EV100 Battery Pack $5,143 $184 $4,115 $147 EV150 Battery Pack $7,666 $170 $6,133 $136

The potential for f

uture reductions in battery cost and improvements in battery performance will play a major role in determining the overall cost and performance of future PHEVs and EVs. The U.S. Department of Energy manages major battery

- related R&D programs and partnerships, and has done so for many years , including the ANL model utilized in this report . DOE has reviewed the battery cost projections underlying today‘s TA R. DOE supports the cost projections, and while the overall projections are in some cases optimistic, DOE believes they are reasonable for a long

- term, technology

- based assessment as utilized in this report. In addition, as discussed above, DOE intends t o work with ANL to ensure the ANL model undergoes a thorough peer review

. Finally, DOE recommends that the agencies consider evaluat ing a range of assumptions for rulemaking, including the evaluation of other battery cost estimation models as appropriate

. NHTSA and EPA intend to conduct additional analysis for the NPRM and final rule that is consistent with the se recommendations from DOE

. The agencies have also carefully reconsidered the power and energy requirements for each electrified vehicle type, which has a significant impact on the cost estimates for HEVs, PHEVs, and EVs as compared to the estimates used in the 2012

- 2016 rulemaking. In addition, the agencies have considered battery pack costs separately from the remainder of the systems added to each type of electrified vehicle. The advantage of separating the battery pack costs from other system costs is that it allows each to carry unique indirect cost2017

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- 7 multipliers and learning effects which are important given that battery technology is an

eme rging technology, while electric motors and inverters are more stable technologies. We note that, for this analysis, the agencies have assumed batteries will be capable of lasting the lifetime of the vehicle J , which is consistent with what manufacturers h ave shared with us are the expected customer demands from this technology. Manufacturers have acknowledged, however, that there may be some performance degradation in the batteries over time. For the NPRM, the agencies may analyze the maintenance cost di fferences among technologies, including batteries. Lastly, the agencies have focused attention on an emerging HEV technology known as a P2

- hybrid, a technology not considered in the 2012

- 2016 light

- duty rule.

A P2 hybrid is a vehicle with an electric dr ive motor coupled to the engine crankshaft via a clutch. The engine and the drive motor are mechanically independent of each other, allowing the engine or motor to power the vehicle separately or combined. This is similar to the Honda HEV architecture wi th the exception of the added clutch, and larger batteries and motors. Examples of this include the soon

- to

- be sold Hyundai Sonata, Elantra and the Nissan Fuga (expected to be rebadged as an Infiniti product for the North American market). The agencies b elieve that the P2 is an example of a ―strong‖ hybrid technology that is typical of what we will see in the timeframe of this rule. The agencies could have equally chosen the
power

- split architecture as the representative HEV architecture. These two HEV‘ s have similar average effectiveness values (combined city and highway fuel economy), though the P2 systems may have lower cost due to the lower number of parts and complexity.

The effectiveness used for vehicle packages with the P2

- hybrid configuration within this analysis reflects a conservative estimate of system performance. Vehicle simulation modeling of technology packages using the P

- 2 hybrid configuration is currently underway under contract with Ricardo Engineering. The agencies plan to update the effectiveness of hybrid electric vehicle packages using the new Ricardo vehicle simulation modeling runs prior to the NPRM.

The agencies have also considered, for this analysis, the costs associated with in

- home chargers expected to be necessary for PHEVs and EVs. Further details on in

- home chargers and their estimated costs are presented in Section 4.2.3 and Appendix B. Details of the updated HEV, PHEV, EV and FCEV costs are presented in Appendix B

.
3.2.4 Mass Reduction Impacts and Costs

Mass reduct ion encompasses a variety of techniques ranging from improved design, and increased component integration to the application of lighter and higher

- strength materials. Initial mass reduction can be further compounded by reductions in engine power and ancil lary systems (transmission, steering, brakes, suspension, etc.) to provide increased vehicle mass reduction overall. The agencies recognize there is a wide diversity and range of complexity

J Median life of a passenger vehicle is 13.8 years and 14.5 years for light trucks. Lu, S., NHTSA, Regulatory Analysis and Evaluation Division, ―Vehicle Survivability and Travel Mileage Schedules ,‖ DOT HS 809 952, 8

- 11 (January 2006). Available at http://www

- nrd.nhtsa.dot.gov/Pubs/809952.pdf (last accessed March 1, 2010).Chapter 3

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for mass reduction and material substitution technologies, and th at there are many techniques that automotive and other industry suppliers and manufacturers are using or plan to use to achieve the levels of this technology that the agencies model in our analysis. Manufacturers‘ opinions in stakeholder meetings over the summer varied widely as to how much mass reduction could be realized and at what cost in the time frame of 2017

- 2025, ranging from some mass increase to 10

- 15 percent mass reduction. While the agencies limited the amount of mass reduction in our analysis for the MYs 2012

- 2016 final rule to 10 percent, for the purposes of this Technical Assessment Report the agencies have considered three levels of mass reduction that could be achieved in 2025 compared to a baseline 2008 vehicle: one pathway with less aggre ssive mass reduction of 15 percent, one with 20 percent mass reduction, and one with technology forcing mass reduction of 30 percent. The agencies assume, as part of these reduction amounts, that vehicle size and full functionality are maintained. We not e t he ability of the industry to reduce mass beyond 20% while maintaining vehicle size and functionality is an open technical issue

, which the agencies are carefully evaluating and will continue to as we move forward. We also note , as discussed in the MYs 2012

- 2016 final rule, that the agencies believe that the effects of vehicle mass reduction on safety should be evaluat ed from a societal perspective (including an analysis or fatalities and casualties) , which could affect the maximum levels used for rulem aking. This analysis has not been included in this report. NHTSA and EPA will include a thorough safety assessment of mass reduction for the upcoming joint federal NPRM and final rule.

With respect to the feasibility of reducing mass by 15

- 30 percent by 2025, the agencies discussed the application of mass reduction technologies at length in meetings with vehicle manufacturers in preparation for this Technical Assessment Report. One of the challenges the manufacturers identified with respect to mass redu ction was the feasibility of substituting some lower density materials for higher density materials. These material substitution issues included material availability, forming, joining, painting, corrosion, reparability, and impact performance. The agenc ies have established a collaborative team among DOT/NHTSA, DOE and EPA to address vehicle mass reduction and mass/safety issues generally, and have undertaken work on several tasks to begin addressing these particular issues identified by the manufacturers , including 1) a peer review of the Lotus Engineering report 25 regarding holistic vehicle mass reduction opportunities, 2) a 2 nd phase of analysis by Lotus Engineering using computer aided engineering (CAE) to assess phase 1 designs for functional and safet y performance, to modify designs as necessary to achieve performance levels similar to the baseline vehicle, and to determine the mass reduction that is feasible, 3) a DOE funded project investigating the amount of mass reduction that is technologically fe asible, and 4)a DOE funded project consisting of an actual vehicle build (Multi Material Vehicle

– MMV K ). NHTSA and EPA may fund other studies to explore the feasible amount of mass reduction and cost for MY 2017

- 2025 separately from the study contracted to Lotus engineering by CARB. Computer Aided Engineering (CAE) tools would be used to analyze the structure of the vehicle. The proposed design should meet at least the

K DOE Notice of Intent to Issue Funding Opportunity Announcement N.:DE

- FOA

- 000239. http://www.netl.doe.gov/business/solicitati ons/NOTICE%20OF%20INTENT.pdf2017

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- 9 same functional objectives as the baseline vehicle. If funded, this study would be f inished in time for the final rule for MYs 2017

- 2025.

With respect to cost, in the MYs 2012

- 2016 final rule, NHTSA and EPA applied a cost of $1.32 per pound of mass reduction, and the limit of mass reduction (penetration cap) was set to 10% 14

. This cost estimate was based on three studies: 2002 NAS report 26 , Sierra Research 27 , and MIT 28 . For the purposes of this Technical Assessment Re port, however, the agencies expect based on the meetings this summer with OEMs, that manufacturers will be capable of mass reduction levels greater than 10 percent net in the 2017

- 2025 timeframe. The agencies recognize that higher percentages of mass reduc tion may result in higher costs and that these costs are likely to increase non

- linearly with increasing mass reduction levels. Furthermore, the agencies and OEMs also recognize that there is some initial amount of mass reduction which can be accomplishe d with zero or very little cost (much lower than that estimated in the 2012

- 2016 rule). Thus, in this report, the agencies have begun updating their mass reduction cost model to reflect this progressively increasing level of cost. A preliminary

non

- linea r cost model employed for this current analysis is shown in t he figure below . The figure shows the present cost model in comparison to the costs used for the 2012

- 2016 final rule. The agencies have relied on a parabolic shape for the cost curve

– where t he cost per pound increases as the square of the percentage mass reduction. The endpoint of the model is based on an average of the final rule costs and the results from the Lotus Engineering mass reduction study. A more complete description of how this cost model was developed is described in Appendix B. F or the purposes of the upcoming federal rulemaking, the agencies intend to improve the model using additional studies that are expected to be complete before the NPRM and final rule

– the agencies do n ot intend for this preliminary model to be the final cost model used. T he federal interagency mass/safety team ha s initiated several work tasks to inform and update the cost model , including meeting with vehicle manufacturers, updating DOE‘s 2007 study on feasibility and cost, and EPA funding a 3 rd party cost assessment of the Lotus Report.Chapter 3

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- 10

Figure 3.2

- 1: Mass R eduction C ost M odel in D ollars per P ound in M odel Y ear 2020

C ompared to the Lotus R esults and 2012

- 2016 Final Rule C ost.

With respect to the effects of net vehicle mass reduction amounts of 15

- 30 percent on overall societal safety, the federal interagency mass/safety group has been meeting several times a week since shortly after the MY 2012

- 2016 rule was released to coord inate study of the effects of mass reduction and vehicle size on societal safety. This work will be used to update the safety model for future federal rulemaking. The agencies are conducting several statistical studies using a common database with update d historical crash data (MY 2000

- 2007 FARS data, common state accident data and updated vehicle attributes). The studies include an updated NHTSA study of the relationship between vehicle mass, size and safety, two separate DOE funded fatality and casualt y vehicle mass, size and safety analyses to be performed by Lawrence Berkeley National Laboratory, and peer reviews of the methodologies used in over 20 significant reports published.

NHTSA is also looking into conducting two additional studies of crash c ompatibility that may help inform the effects of mass reduction and design on societal safety. If conducted, these studies may use vehicle models developed for the CARB funded Lotus phase 2 study and /or the potential NHTSA and EPA study for the feasible a mount of mass reduction and cost for MY 2017

- 2025. These studies may inform how designs that incorporate lower density or higher strength materials

, meet FMVSS regulations

, and perform well in NCAP and IIHS tests, affect vehicle crash compatibility. The findings may be used to help inform the effects of mass reduction on societal safety. Because this study2017

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- 11 cannot begin until the Lotus or NHTSA/EPA studies have been completed, and this study requires significant modeling work, there is some risk the study will not be completed in time to inform a final rule.

3.2.5 Indirect Cost Multipliers

Since the 2012

- 2016 rulemaking, the agencies have reconsidered the indirect cost multiplier approach and believe it to be more appropriate to include in the ICM a factor to

r eflect return on invested capital. In the automotive industry, this is on the order of 6%. 29 To account for this, the agencies added a 0.06 factor added to the ICMs used in the rulemaking. These values are shown in Table 3 .2

- 3

. A note of clarification on the table, the low, medium and high complexity levels are meant to account for the complexity of integrating a technology into a vehicle. For examp le, adding variable valve timing to an engine is relatively not difficult and, for that reason, we would consider it a low complexity technology. By contrast, converting to a hybrid powertrain is considerably more complex to do and, for that reason, we wo uld consider it a high complexity technology. The indirect costs are higher for the high complexity technology given the higher level of effort (and therefore costs) that would be incurred to implement the technology. The near term and long term values r eflect the way that indirect costs are expected to change over time as new technologies are implemented. In the near term, the indirect costs are highest because the development effort is underway, the warranty costs are higher, etc. In the long term, ma ny of these costs are no longer attributable to regulatory changes and, therefore, are no longer applied. Similarly, the warranty costs, while still present, have come down because the technology has achieved mature status and those costs have returned to an average level. For this assessment, the near term and long term cutoff points are different for different technologies. In short, conventional gasoline technologies are considered long term beginning in 2017

, hybrid technologies are considered long t erm beginning in 20 20 , advanced gasoline technologies and both range extended and full electric vehicles are considered long term beginning in 2022

.
Table 3 .2

- 3 Comparison of Indirect Cost Multipliers used in the 2012

- 2016 Rulemaking versus this Assessment Report Complexity 2012

- 2016 Rulemaking Assessment Report

Near term Long term Near term Long term Low 1.11 1.07 1.17 1.13 Medium 1.25 1.13 1.31 1.19 High 1 1.45 1.26 1.51 1.32 High 2 1.64 1.39 1.70 1.45

For this analysis, the indirect costs are estimated by applying indirect cost multipliers (ICM) to direct cost estimates. ICMs were developed by EPA during the 2012

- 2016 light

duty rulemaking as a basis for estimating the impact on indirect costs of indiv idual vehicle technology changes that would result from regulatory actions. Separate ICMs were derived for low, medium, and high complexity technologies, thus enabling estimates of indirect costs that reflect the variation in research, overhead, and other indirect costs that can result from the application of various technologies in direct response to a regulatory action.Chapter 3

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- 12

Previous NHTSA and EPA rulemakings applied a retail price equivalent (RPE) factor to estimate indirect costs and mark up direct costs to the retail level. Retail Price Equivalents are estimated by dividing the total revenue of a manufacturer by their direct manufacturing costs. As such, it includes all forms of indirect costs for a manufacturer, regardless of whether all of those costs change in response to the regulatory action and assumes that the ratio applies equally for all technologies. ICMs, in contrast, are based on RPE estimates that are then modified to reflect only those elements of indirect costs that would be expected to

c hange in response to a regulatory action. For example, warranty costs would be reflected in both RPE and ICM estimates since new technologies, whether added in response to a regulatory action or other reason, will almost always incur some level of warrant y expense. In contrast, marketing costs might only be reflected in an RPE estimate and not an ICM estimate for a particular technology if the new technology added in response to a regulatory action is not one expected to be expressly marketed to consumers . Because the ICMs developed for the 2012

- 2016 rulemaking are for individual technologies, many of which are relatively simple to implement (e.g., variable valve timing), they often reflect a subset of RPE costs; as a result, the RPE is typically higher t han an ICM. This is not always the case, as ICM estimates for complex technologies may reflect higher than average indirect costs due perhaps to increased R&D and/or integration demands, with the resulting ICM larger than the averaged RPE for the industry

. Precise association of ICM elements with individual technologies based on the varied accounting categories in company annual reports is difficult. Hence, there is a degree of uncertainty in the ICM estimates. The agencies are continuing to study ICMs a nd the most appropriate way to apply them, and it is possible revised ICM values may be used for the upcoming NPRM. For that reason, the agencies have considered the range of data in the survey responses used to develop the ICMs used in the 2012

- 2016 rule

. 30 The survey data showed a standard deviation of 0.14 to 0.21 on the short term ICMs against average values ranging from 1.16 (for the low ICM) to 1.64 (for the high ICM). The coefficient of variance (the standard deviation divided by the average) woul d then be roughly 12% for the low ICM and 13% for the high ICM. Based on these results, the ICM values could range from 13% lower to 13% higher than the primary ICM values. Using the range of cost estimates presented in Chapter 6 for future potential s cenarios, this range of ICMs could result in an approximate change in 2025 costs between +/

- $100 to as much as +/

- $450, depending on the overall level of the 2025 targets analyzed.

As mentioned earlier, the agencies have also conducted some sensitivity s urrounding the issue of battery costs. A more complete discussion of this is presented in Chapter 6.

3.2.6 Cost Adjustment to 2008 Dollars

As noted above, the costs presented in the 2012

- 2016 rule have been updated from 2007 dollars to 2008 dollars using the Gr oss Domestic Product (GDP) Price Deflator. T he GDP Price Deflator is one means of adjusting the value of the dollar in different years. The data we have used, which is indexed to 2005, shows that it takes $1.062 in 2007 dollars and $1.085 in 2008 dollars to purchase a $1 item in 2005. 31 Therefore, we have adjusted all of the 2012

- 2016 costs, valued in 2007 dollars, by a factor of 1.022 (1.085/1.062) to express costs in 2008 dollars.2017

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- 13 3.2.7 Costs Effects due to Learning

The agencies have also reconsidered learni ng effects. For this assessment, we continue to reflect the phenomenon of volume

- based learning curve cost reductions in our modeling using two algorithms

– ―volume

- based‖ for newer technologies and ―time

- based‖ for mature technologies. The observed pheno menon in the economic literature which supports manufacture learning cost reductions are based on reductions in costs as production volumes increase, and the economic literature suggests these cost reductions occur indefinitely, though the absolute magnitu de of the cost reductions decrease as production volumes increase (with the highest absolute cost reduction occurring with the first doubling of production). 32 The agencies use the terminology ―volume

- based‖ and ―time

- based‖ to distinguish among newer tech nologies and more mature technologies, and how we apply learning cost reductions in our assessment. Our volume

- based learning algorithm applies for the early

, steep portion of the learning curve and is estimated to result in 20 percent lower costs after two full years of implementation (i.e., a 2014 MY cost would be 20 percent lower than the 2012 and 2013 model year costs for a new technology being implemented in 2012). Our time

- based learning algorithm applies for the flatter portion of the learning cur ve and is estimated to result in 3 percent lower costs in each of the five year s following first introduction of a given technology. Once two volume

- based learning steps have occurred (for technologies having volume

- based learning applied), time based lea rning would begin. For technologies to which time based learning is applied, learning would begin in year 2 at 3 percent per year for 5 years. Beyond 5 years of time

- based learning at 3 percent per year, 5 years of time

- based learning at 2 percent per ye ar, then 5 at 1 percent per year become effective. Going forward, the agencies intend to investigate industry learning curves in more detail and whether learning should continue to be applied indefinitely, or whether cost reductions due to learning shou ld go to zero after some period of time. The learning curve used in this assessment may be modified for the rule making.‖

3.2.8 Cooled EGR Cost and Effectiveness

While not considered in the 2012

- 2016 light

- duty rule, the agencies have considered an emerging tec hnology referred to as cooled exhaust gas recirculation (cooled

- EGR) as applied to downsized, turbocharged GDI engines. The agencies have considered this technology as an advanced gasoline technology since, as noted, it is emerging and not yet available i n the light

- duty gasoline market. While a cooled or ―boosted‖ EGR technology was discussed in the 2012

- 2016 light

- duty rule, the technology considered here is comparatively more advanced than the one considered previously, and as such, the agencies have c onsidered new costs and new effectiveness values for it. The details behind those updated costs and effectiveness values are presented in Appendix B. The effectiveness values used for vehicle packages with cooled EGR within this analysis reflect a conser vative estimate of system performance at approximately 24

- bar BMEP. Vehicle simulation modeling of technology packages using the more highly boosted and downsized cooled EGR engines (up to 30

- bar BMEP) with dual

- stage turbocharging is currently underway a s part of EPA‘s contract with Ricardo Engineering as described below. The agencies plan to update the effectiveness of vehicle packages with cooled EGR using the new Ricardo vehicle simulation modeling runs prior to the NPRM.Chapter 3

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- 14

3.2.9 HEV Effectiveness

At time of this publication, the effectiveness of HEVs requiring equivalent towing capacity to their traditional, gasoline powered counterpart (large pick

- up trucks for example) is similar to those used in the 2012

- 2016 light

- duty rule for vehicles . For several other subclasses, the agencies increased HEV effectiveness by approximately 2% based on published data for new HEVs that have entered production since the last study was complete (including the new Toyota Prius, Ford Fusion hybrid and others L ). In additio n, for the Large Car, Minivan and Small Truck subclasses, the agencies further increased HEV effectiveness by assuming that towing capacity could be reduced from their current rating M to approximately 1,500 pounds for some vehicles in these subclasses wit hout significantly impacting consumers‘ need for utility in these vehicles. N The agencies believe that the towing capacity in these HEV classes was maintained at an overly stringent performance level in the technical analysis of the 2012

- 2016 rule. The a gencies believe that consumers who require higher towing capacity could acquire it by purchasing a vehicle with a more capable non

hybrid powertrain (as they do today). O Moreover, it is likely that some fraction of consumers who purchase the larger engine option do so for purposes of hauling and acceleration performance

, not just maximum towing.

A reduction in towing capacity allows greater engine downsizing, which increases estimated overall HEV system incremental effectiveness by 5 to 10 percent and bri ngs estimated absolute HEV system effectiveness to approximately 30 percent for Large Cars, Minivans, and Small Trucks, similar to the HEV effectiveness value assumed for Small Cars and Compact Cars. P Refer to Appendix B for a more detailed summary of the effectiveness values assumed for both towing and relaxed towing HEVs.

L The agencies will continue to evaluate hybrid effectiveness estimates through vehicle simulation research currently underway but will not be completed as of the publication of this NOI and TAR.
M Current small SUVs and Minivans have an approximate average towing capacity of 2000 lbs (without a towing package), but range from no towing capacity to 3500 pounds

. N We note that there are some gasoline vehicles in the large car/minivan/small truck segm ents sold today which do not have any towing rating.
O The agencies recognize that assuming that certain consumers will choose to purchase non

- hybrid vehicles in order to obtain their desired towing capacity could lead to some increase in fuel consumptio n and CO 2 emissions as compared to assuming that towing capacity is maintained for hybrid vehicles across the board and all vehicles are therefore hybrids. However, the agencies think it likely that the net improvement in fuel consumption and CO 2 emission s due to the increased numbers of hybrids available for consumers to choose will offset any potential increase in fuel consumption and CO 2 emissions resulting from consumers selecting the higher

performance non

- hybrid powertrain vehicles.
P The effectivene ss of HEVs for heavier vehicles which require conventional towing capabilities is markedly less because the rated power of the IC engine must be similar to its non

- hybrid brethren. As such, there is less opportunity for downsizing with these vehicles.2017

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- 15 3.2.10 Ongoing Vehicle Simulation to Update Effectiveness

The other critical factor in the assessment of the cost

- effectiveness of technologies is the effectiveness value Q associated with a pa rticular technology. The agencies have, in general, used the same effectiveness estimates used in the 2012

- 2016 light

- duty rule.

To assess the effectiveness of emerging technologies and advances in conventional technologies in the 2017 to 2025 timeframe, EPA also commissioned an extension of earlier vehicle simulation modeling work with Ricardo, Inc. Besides updating the technology effectiveness estimates of the previous work, the present study substantially broadened the scope to include two new vehicle classes and several advanced technologies, including P2 and other HEVs. Among the major additions:

1. Two new vehicle classes inten ded for use in EPA‘s OMEGA model: a subcompact car and a light heavy

- duty truck 2. Highly

- boosted and significantly downsized direct injection gasoline engines, including lean

- burn R and stoichiometric/cooled

- EGR variants 3. 8

- speed automatic and dual

- clutch tra nsmissions 4. Advanced hybrids, including P2 and powersplit S hybrids 5. Vehicle mass reduction, in conjunction with engine downsizing

The Ricardo study has not been completed to a degree that allow results to be used for this analysis, but EPA and NHTSA expect to use the findings from this work to inform the estimates of technology effectiveness used for the model year 2017

- 2025 NPRM.

3.3 Vehicle Manufacturer Lead Time

With respect to the practicability of the standards in terms of lead time, during MYs 2017

- 2025 ma nufacturers are expected to go through the normal automotive business cycle of redesigning and upgrading their light

- duty vehicle products, and in some cases introducing entirely new vehicles not i n the market today. This assessment allows manufacturers t he time needed to incorporate technology to achieve GHG reductions and improve fuel economy during the vehicle redesign process. This is an important aspect of the assessment, as it avoids the much higher costs that would occur if manufacturers need to ad d or change technology at times other than their scheduled redesigns. This time period also provides manufacturers the opportunity to plan for compliance using a multi

- year time frame, again consistent with normal business practice. Over these 9 model ye ars, there will be an opportunity for manufacturers to evaluate , presumably, every one of their vehicle model platforms and add technology in a cost effective way to control GHG emissions and improve fuel economy. This includes all the technologies consid ered here and redesign of the air

R Lean

- burn simply means less fuel per unit air than would be used under stoichiometric combustion. Lean burn operation is a way to reduce throttling losses and allows for higher compression ratios and

, thus

, better performance and/or fuel efficiency.
S Thi s is the HEV architecture initially developed by Toyota and now more widely used in several models.Chapter 3

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- 16

conditioner systems in ways that will further reduce GHG emissions and improve fuel
economy

. Most vehicles would likely undergo two redesigns during this period.

Even with multiple redesign periods, it is still likely t hat some of the more advanced and costly technologies (such as cooled boosted EGR engines, or advanced (P)HEVs) may not be able to be fully implemented within the timeframe of this rule. These limitations are captured in ―maximum technology penetration ra tes‖ within the modeling analysis.

In order to assess the four technology pathways, we developed ―Maximum Technology Penetration Rates‖ which we could implement within the OMEGA model in order to represent the four pathways. Each technology path was def ined by these maximum technology penetration rates, which were specified as the maximum modeled fleet penetration of classes of technology into the new vehicle fleet in MY 2020 and MY 2025 (these broad classes of technology as described in detail below). We developed these penetration rates based on agency expert judgment with regard to a number of factors such as manufacturer production capacity, vehicle suitability, technical feasibility considerations, as well as our goal of purposely analyzing multiple potential pathways for this technical assessment. The maximum technology penetration rates serve as exogenous limits on technology application within the OMEGA model and are shown in Table 3 .3

- 1

.2017

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- 17 Table 3 .3

- 1 Scenario Maximum Technolog y Penetration Rates Technology MY 202 0 3 MY 2025

Path A Path B Path C Path A Path B Path C Path D Conventional SI 100% 100% 100% 100% 100% 100% 100% Advanced SI 10% 30% 40% 50% 75% 100% 0% Hybrid vehicles 40% 30% 40% 75% 50% 75% 60% Electric Vehicle 4% 4% 8% 8% 8% 15% 20% Plug

- in Hybrid 4% 4% 8% 8% 8% 15% 20% Mass Reduction 1,2 15% 15% 25% 15% 20% 30% 15%

1 The mass reduction shown is with respect to the 2008 MY.
2 The mass reduction shown is not an actual phase

- in cap, but the maximum amount of mass reduction which could be allowed on any vehicle.
3 Technology Path D was not run in MY 2020, please see chapter 6 for a discussion of this topic.
The broad technology cl asses evaluated for purposes of this analysis are defined below and a brief discussion of the limiting factors considered are presented. For a more detailed discussion of any individual technology, please see t he joint Technical Support Document for the 2 012

- 2016 rule and Appendix B of this report:

Conventional Spark Ignition (SI)

- This technology category includes all technologies that are not contained in other categories such as gasoline direct injection engines, cylinder deactivation, six and eight sp eed automatic and dual clutch transmissions, and
start

- stop micro

- hybrid technology. Most of these technologies were anticipated as being available in the MY 2012

- 2016 time frame in the recent NHTSA and EPA final rule, and it is expected manufacturers cou ld expand production to all models by model year 2025, and therefore the maximum technology penetration rate is set at 100% for all four pathways.

Advanced SI

- This technology includes gasoline spark ignition engines which are currently under development by OEMs and suppliers and are not anticipated to be widely used in the 2012

- 2016 time frame. For purposes of this analysis, based on
agency exper t judgment to define these advanced SI engines, we modeled a direct injection gasoline engine with cooled exhaust gas recirculation, and with a larger degree of engine downsizing and higher level of turbocharging as compared to the turbo

- downsized engines included in our analysis for the MYs 2012

- 2016 final rule. This technology is discussed in more detail above and the appendix B, and is similar to the technologies that many OEMs indicated were underdevelopment and which they anticipate will be introduced into the market in the 2017

- 2025 time frame. As there are no production vehicles presently using these technologies, we set the maximum technology penetration rate for these technologies at less than 100% in MY 2025 for Paths A and B.

Hybrid

– While t he agencies recognize there are many types of full

- hybrids either in production or under development, for the purposes of this analysis we have specifically modeled two types of hybrids, P

- 2 and 2

- Mode type hybrids. TheseChapter 3

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- 18

technologies are discussed in det ail in Chapter 3. While the agencies expect the proliferation of these vehicles to increase in this timeframe, the maximum technology penetration rate are set at less than 100% due to potential battery supply constraints, as well as industry

- wide engineeri ng and capacity constraints, for converting the entire new vehicle fleet to strong hybrids in this time frame. The four path ways using varying levels in order to capture both the current uncertainty with how rapidly these technologies can penetrate into the new vehicle fleet in the 2017

- 2025 time frame as well as the potentially different strategies auto companies may choose with respect to the degree of HEV penetration they may pursue.

Plug

- in Hybrid (PHEV)

- This technology includes PHEV‘s with a range of 20 and 40 miles and is discussed above. The maximum technology penetration rates are set at less than 100% due to the same general potential constraints as listed for the HEVs, but are lower for PHEVs due to the current status of the development of th ese advanced vehicles. Further, as discussed in Appendix B, we project that PHEV technology is not available to some vehicle types, such as large pickup. While it is possible to electrify such vehicles, there are tradeoffs in terms of cost, electric ra nge, and utility that would reduce the appeal of the vehicle to a narrower market.

Electric Vehicle (EV)

- This technology includes vehicles with actual on

- road ranges of 75, 100, and 150 miles. The actual on

- road range was calculated using a projected 30% gap between two

- cycle and on

- road range. These vehicles are powered solely by electricity and are not powered by any liquid fuels. The maximum technology penetration rates are set at less than 100% due to the same general potential constraints as di scussed for PHEVs. Further, as with PHEVs, and as discussed in Appendix B, we assume that EV technology is not available to some vehicle types, such as large pickups. While it is possible to electrify such vehicles, there are tradeoffs in terms of cost, range, and utility that would reduce the appeal of the vehicle to a narrower market. These trade

- offs are expected to reduce the market for other vehicle types as well, and for this analysis we have considered this in the development of the maximum techno logy penetration rates we use for the four pathways. Although the agencies have assumed that range limitations would entail no loss in value to EV owners, we will further consider the reasonableness and applicability of this assumption, and will conduct o ur analyses for the forthcoming NPRM accordingly. T

Mass Reduction

- This technology includes material substitution, smart design, and mass reduction compounding. The actual amount of reduction from the 2008 baseline was determined based on confidential b usiness information provided by vehicle manufacturers, assessments provided by material suppliers, and existing studies in the literature, including the 2010 report from Lotus Engineerin g. As discussed above as well as in Chapter 1 and Appendix B, NHTSA a nd EPA intend to conduct a thorough

T If the agencies determine that the loss of range does entail some loss in value to vehicle owners, we anticipate that accounting for this loss in value would affect our estimates of potential EV application rates and our estimates of the private and socia l benefits of new standards that could lead to increases in EV application rates.2017

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- 19 assessment of the levels of the levels of mass reduction that could be achieved which is both technologically feasible and which can be implemented in a safe manner for the joint federal NPRM.

3.4 Other Technologies Assessed

In addition to the technologies already mentioned, the technologies generally considered in the agencies‘ analysis are briefly described below. They fall into five broad categories: engine technologies, transmission technologies, vehicle technologies,

e lectrification/accessory technologies, hybrid technologies and mass reduction. For a more detailed description of each technology and their costs and effectiveness, we refer the reader to Chapter 3 of the Joint TSD, Chapter III of NHTSA‘s FRIA, and Chapte r 1 of EPA‘s final RIA. 33 Technologies to reduce CO 2 and HFC emissions from air conditioning systems are discussed in Appendix D. We note that not all of these technologies were actually modeled in the analysis for this Technical Assessment Report given the agencies‘ decision to simplify that analysis as d iscussed further below in Section 3.5 and in Chapter 6, but all of the technologies will be available for the models in the upcoming rulemaking analysis.

3.4.1 Types of engine technologies that improve fuel economy and reduce CO 2 emissions include the following:

Low

- friction lubricants

– low viscosity and advanced low friction lubricants oils are now available with improved performance and better lubrication. If manufacturers choose to make use of these lubricants, they would need to make engine changes and possi bly conduct durability testing to accommodate the low

- friction lubricants. The cost and GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule.

Reduction of engine friction losses

– c an be achieved through low

- tension piston rings, roller cam followers, improved material coatings, more optimal thermal management, piston surface treatments, and other improvements in the design of engine components and subsystems that improve engine oper ation. The cost and GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule.

Conversion to dual overhead cam with dual cam phasing

– as applied to overhead valves designed to increase the air flow with more than two valves per cylinder and reduce pumping losses. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effect s have continued to decrease piece costs.

Cylinder deactivation

– deactivates the intake and exhaust valves and prevents fuel injection into some cylinders during light

- load operation. The engine runs temporarily as though it were a smaller engine whichChapter 3

3

- 20 s ubstantially reduces pumping losses. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece costs

. Variable valve timing

– alters the timing of the intake valve, exhaust valve, or both, primarily to reduce pumping losses, increase specific power, and control residual gases. The GHG and fuel economy effectiveness is unchanged from estimates used for 20 16 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece costs.

Discrete variable valve lift

– increases efficiency by optimizing air flow over a broader range of engine operati on which reduces pumping losses. Accomplished by controlled switching between two or more cam profile lobe heights. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece costs.

Continuous variable valve lift

– is an electromechanical or electrohydraulic system in which valve timing is changed as lift height is controlled. 34

, 35

, 36

, 37 This yields a wide range of performance optimization and volumetric efficiency, including enabling the engine to be valve throttled. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost ha s changed only in that learning effects have continued to decrease piece costs.

Stoichiometric gasoline direct

- injection technology

– injects fuel at high pressure directly into the combustion chamber to improve cooling of the air/fuel charge within the cy linder, which allows for higher compression ratios and increased thermodynamic efficiency. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The costs for this technology dif fer from those used in the 2012

- 2016 light

- duty rule (refer to Table 3 .2

- 1).

Turbocharging and downsizing

– increases the available airflow and specific power level, allowing a reduced engine size while maintaining performance. Engines of this type use ga soline direct injection (GDI) and dual cam phasing

. This reduces pumping losses at lighter loads in comparison to a larger engine. The GHG and fuel economy effectiveness changed from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The current estimates reflect engines that are now entering the light

- duty vehicle market 38 or are under advanced development. 39

, 40

, 41 We now estimate an effectiveness of approximately 15% relative to a 20082017

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- 21 baseline engine technology. The costs for this te chnology also differ from those used in the 2012

- 2016 light

- duty rule (refer to Table 3 .2

- 1).

Turbocharging and downsizing with cooled exhaust

- gas recirculation (EGR)

– additional charge dilution reduces the incidence of knocking combustion and obviates the need for fuel enrichment at high engine power. This allows for higher boost pressure and/or compression ratio and further reduction in engine displacement and both pumping and friction losses while maintaining performance. Engines of this type use GD I and both dual cam phasing and discrete variable valve lift. The EGR systems considered in this assessment would use a dual

- loop system with both high and low pressure EGR loops and dual EGR coolers. The engines would also use single

- stage, variable geo metry turbocharging with higher intake boost pressure available across a broader range of engine operation than conventional turbocharged SI engines. Such a system is estimated to be capable of an additional 5% effectiveness relative to a turbocharged, do wnsized GDI engine without cooled

- EGR. 39

, 42

, 43 The agencies are also considering a more advanced version of such a cooled EGR system that would employ very high combustion pressures by using dual stage turbocharging. The agencies have at our disposal only very preliminary effectiveness estimates for this approach as modeling efforts are ongoing via vehicle simulation modeling by Ricardo Engineering. The simulation modeling is similar to work that Ricardo conducted for EPA for its 2008 staff report on GHG effectiveness of light

- duty vehicle technologi es. 44 The agencies will reconsider this more advanced cooled EGR approach in the upcoming NPRM when the Ricardo simulation work should be complete. The costs for the cooled EGR system considered in this assessment (i.e., single stage turbocharging) are pre sented in Appendix B.

Diesel engines

– have several characteristics that give superior fuel efficiency, including reduced pumping losses due to lack of (or greatly reduced) throttling, and a combustion cycle that operates at a higher compression ratio and with a very lean air/fuel mixture relative to an equivalent

- performance gasoline engine. This technology requires additional enablers, such as a NOx adsorption catalyst system or a urea/ammonia selective catalytic reduction system for control of NOx emis sions during lean (excess air) operation. For purposes of this current assessment, we have not included advanced diesel engines in our modeling scenarios. During our meetings with the automotive companies, a few companies did indicate that diesel techno logy would represent a meaningful portion of their future product offerings in the US, and these companies commented that there are opportunities for improving the fuel economy/reducing CO 2 from diesel in the 2017 to 2025 time frame which they are pursuing . For today‘s assessment, the three agencies did not have sufficient time to further investigate these potential improvements for diesels, both the improvements in effectiveness and the potential costs associated with those improvements. Therefore, we di d not include dieselChapter 3

3

- 22 engines in our modeling assessment presented in Chapter 6. This does not mean that the agencies do not see a role for diesels in the future fleet since we fully expect some manufacturers will rely on diesels as part of their future st rategy. We intend to continue to work on this area of our assessment and expect to perform additional evaluations in the future regarding diesel engine technology.

3.4.2 Types of transmission technologies considered include:

Improved automatic transmission controls

– optimizes shift schedule to maximize fuel efficiency under wide ranging conditions, and minimizes losses associated with torque converter slip through lock

- up or modulation. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece
costs.

Six

- , seven

- , and eight

- speed automatic transmissions

– the gear ratio spacing and transmission ratio are optimized to enable the engine to operate in a more efficient operating range over a broader range of vehicle operating conditions. While a six speed transmission application was most prevalent for the 2012

- 2016 final rule, eight speed transmissions are

e xpected to be readily available and applied in the 2017 through 2025 timeframe. We applied the six speed transmission GHG and fuel economy effectiveness estimates used from 2016 model year vehicles in the 2012

- 2016 final rule. We plan to conduct further a nalysis to determine the effectiveness of increasing the number of available gear ratios beyond six speeds and increasing the ratio spread prior to the 2017

- 2025 notice of proposed rulemaking. The costs for a 6

- speed automatic transmission differ from tho se used in the 2012

- 2016 light

- duty rule (refer to Table 3 .2

- 1). The agencies have estimated new costs for an 8

- speed automatic transmission, which are presented in Appendix B.

Dual clutch or automated shift manual transmissions

– are similar to manual tr ansmissions, but the vehicle controls shifting and launch functions. A dual

- clutch automated shift manual transmission uses separate clutches for even

- numbered and odd

- numbered gears, so the next expected gear is pre

- selected, which allows for faster and smoother shifting. The 2012

- 2016 final rule limited DCT applications to a maximum of 6

- speeds. We applied the GHG and fuel economy effectiveness estimates used from 2016 model year vehicles in the 2012

- 2016 final rule. We plan to conduct further analysi s to determine the effectiveness of increasing the number of available gear ratios beyond six speed and increasing the ratio spread prior to the 2017

- 2025 notice of proposed rulemaking. The costs for a DCT differ from those used in the 2012

- 2016 light

- dut y rule (refer to Table 3 .2

- 1).2017

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- 23 Continuously variable transmission

– commonly uses V

- shaped pulleys connected by a metal belt rather than gears to provide ratios for operation. Unlike manual and automatic transmissions with fixed transmission ratios, conti nuously variable transmissions can provide fully variable and an infinite number of transmission ratios that enable the engine to operate in a more efficient operating range over a broader range of vehicle operating conditions. CVTs have not been considere d in this assessment.

Manual 6

- speed transmission

– offers an additional gear ratio, often with a higher overdrive gear ratio, than a 5

- speed manual transmission. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year ve hicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece costs.

3.4.3 Types of vehicle technologies considered include:

Low

- rolling

- resistance tires

– have characteristics that reduce frictional loss es associated with the energy dissipated in the deformation of the tires under load, thereby improving fuel economy and reducing CO2 emissions. The costs and GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles i n the 2012

- 2016 final rule. This is conservative as reducing rolling resistance in tires is something that can likely continue to improve. The agencies may consider adding a second level of improvement in tire rolling resistance for the upcoming NPRM.

L ow

- drag brakes

– reduce the sliding friction of disc brake pads on rotors when the brakes are not engaged because the brake pads are pulled away from the rotors. The costs and GHG and fuel economy effectiveness is unchanged from estimates used for 2016 mod el year vehicles in the 2012

- 2016 final rule.

Front or secondary axle disconnect for four

- wheel drive systems

– provides a torque distribution disconnect between front and rear axles when torque is not required for the non

- driving axle. This results in th e reduction of associated parasitic energy losses. The costs and GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule.

Aerodynamic drag reduction

– This can be achieved via two approac hes, either reducing the drag coefficients or reducing vehicle frontal area. To reduce drag coefficients, skirts, air dams, underbody covers, and more aerodynamic side view mirrors can be applied. In addition to the standard aerodynamic treatments, the a gencies have included a second level of aerodynamic technologies which could include active grille shutters, rear visors, and larger under body panels. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model yearChapter 3

3

- 24 vehicles in the 2012

- 2016 final rule. This second level of aerodynamic technologies was not considered in the 2012

- 2016 light

- duty rule and, as such, the estimated costs are new and are presented in Appendix B.

Mass Reduction

– Already mentioned above.

Types of elec trification/accessory and hybrid technologies considered include:

Electric power steering (EPS)/ Electro

- hydraulic power steering (EHPS)

– is an electrically

- assisted steering system that has advantages over traditional hydraulic power steering because it replaces a continuously operated hydraulic pump, thereby reducing parasitic losses from the accessory drive. Manufacturers have informed the agencies that full EPS systems are being developed for all light

- duty vehicles applications, including large trucks . The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece costs.

Improved accessories (IACC)

– may include high efficiency alternators, electrically driven (i.e., on

- demand) water pumps and cooling fans. This excludes other electrical accessories such as electric oil pumps and electrically driven air conditioner compressors. The GHG and fuel
economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece costs.

Air Conditioner Systems

– These technologies include improve d hoses, connectors and seals for leakage control. They also include improved compressors, expansion valves, heat exchangers and the control of these components for the purposes of improving tailpipe CO2 emissions and fuel economy as a result of A/C use. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. We have estimated new costs for A/C systems which are presented in Appendix D.

12

- volt micro

- hybrid (MHEV)

– also known as i dle

- stop or start

- stop and commonly implemented as a 12

- volt belt

- driven integrated starter

generator, is the most basic hybrid system that facilitates idle

- stop capability. Along with other enablers, this system replaces a common alternator with a belt

- d riven enhanced power starter

- alternator, and a revised accessory drive system. These systems incorporate an additional battery, ELDC or other subsystems to prevent voltage

- droop on restart, one of the shortcomings of previous 12V micro

- hybrid sytems relat ive to higher voltage systems. Such a system is estimated to be capable of roughly 1.5% to 2.5% effectiveness. The cost has changed only in that learning effects have continued to decrease piece costs.2017

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- 25 Higher Voltage Stop

- Start/Belt Integrated Starter Ge nerator (BISG)

– provides idle

- stop capability and uses a higher voltage battery with increased energy capacity over typical automotive batteries. The higher system voltage allows the use of a smaller, more powerful electric motor. This system replaces a standard alternator with an enhanced power, higher voltage, higher efficiency starter

- alternator, that is belt driven and that can recover braking energy while the vehicle slows down (regenerative braking). The GHG and fuel economy effectiveness is unchan ged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece costs.

Integrated Motor Assist (IMA)/Crank integrated starter generator (CISG)

– provides idle

- stop capability and uses a high voltage battery with increased energy capacity over typical automotive batteries. The higher system voltage allows the use of a smaller, more powerful electric motor and reduces the weight of the wiring harness. This system replaces a standard alternator with an enhanced power, higher voltage, higher efficiency
starter

- alternator that is crankshaft mounted and can recover braking energy while the vehicle slows down (regenerative braking). The GHG and fuel economy effec tiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. The cost has changed only in that learning effects have continued to decrease piece costs.

P2 Hybrid

– A newly emerging hybrid technology that uses a transm ission integrated electric motor placed between the engine and a gearbox or CVT, much like the IMA system described above except with a wet or dry separation clutch which is used to decouple the motor/transmission from the engine. In addition, a P2 Hybrid would typically be equipped with a larger electric machine. Engaging the clutch allows all

- electric operation and more efficient brake

- energy recovery. Disengaging the clutch allows efficient coupling of the engine and electric motor and, when combined with a DCT transmission, reduces gear

- train losses relative to PSHEV or 2MHEV systems. This technology was not included in the 2012

- 2016 GHG and CAFE rulemaking technical analysis. We have estimated new costs for this technology which are presented in Ap pendix B.

2

- mode hybrid (2MHEV)

– is a hybrid electric drive system that uses an adaptation of a conventional stepped

- ratio automatic transmission by replacing some of the transmission clutches with two electric motors that control the ratio of engine spee d to vehicle speed, while clutches allow the motors to be bypassed. This improves both the transmission torque capacity for heavy

- duty applications and reduces fuel consumption and CO2 emissions at highway speeds relative to other types of hybrid electric drive systems. The GHG and fuel economy effectiveness is unchanged from estimates used for 2016 model year vehicles in the 2012

- 2016 finalChapter 3

3

- 26 rule. We have estimated new costs for this technology which are presented in Appendix B.

Power

- split hybrid (PSHEV)

– a hybrid electric drive system that replaces the traditional transmission with a single planetary gearset and a motor/generator. This motor/generator uses the engine to either charge the battery or supply additional power to the drive motor. A second, more powerful motor/generator is permanently connected to the vehicle‘s final drive and always turns with the wheels. The planetary gear splits engine power between the first motor/generator and the drive motor to either charge the battery or supply powe r to the wheels. Power

- split hybrids have not been considered in this assessment.

Plug

- in hybrid electric vehicles (PHEV)

– are hybrid electric vehicles with the means to charge their battery packs from an outside source of electricity (usually the electri c grid). These vehicles have larger battery packs with more energy storage and a greater capability to be discharged than other hybrid electric vehicles. They also use a control system that allows the battery pack to be substantially depleted under elect ric

- only or blended mechanical/electric operation and batteries that can be cycled in charge sustaining operation at a lower state of charge than is typical of other hybrid electric vehicles. The GHG and fuel economy effectiveness is unchanged from estimat es used for 2016 model year vehicles in the 2012

- 2016 final rule. We have estimated new costs for this technology which are presented in Appendix B along with estimates of their electricity usage per mile. Battery costs assume that battery packs for PHEV applications will be designed to last for the full useful life of the vehicle at a useable state of charge equivalent to 70% of the nominal battery pack capacity.

Electric vehicles (EV)

– are vehicles with all

- electric drive and with vehicle systems powe red by energy

- optimized batteries charged primarily from grid electricity. While the 2016 FRM did not anticipate a significant penetration of EV‘s, in this analysis, EV‘s with several ranges have been included. The GHG and fuel economy effectiveness is unc hanged from estimates used for 2016 model year vehicles in the 2012

- 2016 final rule. We have estimated new costs for this technology which are presented in Appendix B along with estimates of their electricity usage per mile. Battery costs assume that batt ery packs for EV applications will be designed to last for the full useful life of the vehicle at a useable state of charge equivalent to 80% of the nominal battery pack capacity.

Fuel cell electric vehicles (FC E Vs)

– utilize a full electric drive platfo rm but consume electricity generated by an on

- board fuel cell and hydrogen fuel. Fuel cell s are electro

- chemical devices that directly convert reactants (hydrogen and oxygen via air) into electricity , with the potential of achieving more than twice the ef ficiency of conventional internal combustion engines . High pressure gaseous hydrogen storage tanks are2017

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- 27 used by most automakers for FCEVs that are currently under development. The high pressure tanks are similar to those used for compressed gas storage in more than 10 million CNG vehicles worldwide, except that they are designed to operate at a higher pressure (350 bar or 700 bar vs. 250 bar for CNG) . We have estimated new costs for this technology which are presented in Appendix B

. Due to the uncertaint y of the future availability for this technology, FCEVs were not included in any OMEGA runs.

3.5 Technology Packages in OMEGA

The large number of possible technologies to consider and the breadth of vehicle systems that are affected mean that consideration of the manufacturer‘s design and production process plays a major role in assessing the ability of the US fleet to achieve va rious GHG levels and fuel economy, and the costs associated with achieving those levels. Vehicle manufacturers typically develop their many different individual vehicle models by basing them on a limited number of vehicle platforms. Several different mod els of vehicles may be produced using a common platform, allowing for efficient use of design and manufacturing resources. The platform typically consists of common vehicle architecture and structural components, such as the underbody, chassis and suspens ion. Given the very large investment put into designing and producing each vehicle model, manufacturers cannot reasonably redesign any given vehicle every year or even every other year, let alone redesign all of their vehicles every year or every other ye ar. At the redesign stage, the manufacturer will typically upgrade or add all of the technology and make all of the other changes needed so the vehicle model will meet the manufacturer‘s plans for the next several years. This includes meeting all of the fuel economy, emissions, safety, and other requirements that would apply during the years before the next major redesign of the vehicle. This is in contrast to what would be a much more costly approach of trying to achieve small increments of reductions o ver multiple years by adding technology to the vehicle piece by piece outside of the redesign process.

However, making all of these changes at once typically involves significant engineering, development, manufacturing, and marketing resources to create a new product with multiple new features. In order to leverage this significant upfront investment,

manu facturers plan vehicle redesigns with several model years‘ of production in mind.

That said, vehicle models are not completely static between redesigns as limited changes are often incorporated for each model year. This interim process is called a ―refre sh‖ of the vehicle. It generally does not allow for major technology changes although more minor ones can be done (e.g., aerodynamic improvements, valve timing improvements), usually aimed at improving the vehicle‘s market appeal. We note, though, that m ore major technology upgrades that affect multiple systems of the vehicle thus occur at the vehicle redesign stage and not in the time period between redesigns.

In determining the projected technology needed to meet the standards, and the cost of those tec hnologies, EPA is using an approach that accounts for and builds on this redesign
process and bundles technologies into ―packages‖ to capture synergistic aspects and reflect progressively larger CO 2 reductions with additions or changes to any given package . As an input to this approach, EPA groups technologies into packages of increasing estimated costChapter 3

3

- 28

and effectiveness. EPA determined that 19 different vehicle types provided adequate resolution required to accurately model the entire fleet. We discuss t he approach to developing packages and how those packages are used in the OMEGA model in Appendix B.

For the reader‘s reference, we note that NHTSA‘s CAFE Compliance and Effects Model (often referred to as ―the Volpe model‖), which NHTSA uses for CAFE rule making analysis was not used for purposes of this Technical Assessment Report, also assumes manufacturers add most technology to vehicles as part of the vehicle redesign and freshening process. While the CAFE model considers technologies similar to those considered by EPA‘s OMEGA model, the CAFE model accumulates discrete technologies incrementally, taking into account model

- estimated cost effectiveness, as well as engineering and other constraints. While the CAFE model does not require that packages be d etermined exogenously, in the analysis supporting the MYs 2012

- 2016 CAFE standards, the CAFE model often formed packages similar to those included in EPA‘s analysis supporting the MYs 2012

- 2016 GHG emissions standards. Although NHTSA is not, in today‘s re port, presenting analysis performed using the CAFE model, the agency will do so in support of the upcoming NPRM for post

- MY 2016 CAFE standards.2017

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- 29 Chapter 3 Refer ences

14 Joint Technical Support Document: Rulemaking to Establish Light

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15 Rogozhin, A., et al., Using indirect cost multipliers to estimate the total cost of adding new technology in the automobile industry. International Journal of Production Economics (2009), doi:10.1016/j.ijpe.2009.11.0 31.

16 75 FR 25324, 25382

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17 U.S. Environmental Protection Agency, ―Light

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- 1 

## 4 Infrastructure Assessment

4.1 Overview

The May 21, 2010 Presidential Memorandum specifically requests that the EPA, NHTSA, and CARB‘s joint technical assessment include an assessment of infrastructure for advanced technology vehicles. Section 3 of the Memorandum requests the Department of Energy (DOE) to promote the deployment of advanced technology vehicles by providing technical assistance to cities preparing for deployment of electric vehicles, including plug

- in hybrids and electric vehicles. Th e Memorandum also asks DOE to work with stakeholders on the development of voluntary standards to facilitate the robust development of advanced vehicle technologies and coordinate these efforts with DOT/NHTSA and EPA. Because of DOE‘s key role in these ar eas, EPA, NHTSA, and CARB have closely collaborated with DOE in developing our assessment of infrastructure issues, and DOE contributed significantly to this chapter.

Th is te chnical assessment report identifies electric drive vehicles as an important part of the vehicle mix that will likely be used to meet fuel economy and GHG emission reduction standards. Electric drive vehicles

, including battery electric vehicles (EVs ) , plug

- in hybrid electric vehicles (PHEVs ), and hydrogen

- fueled fuel cell electric ve hicles (FC E Vs ), have the potential to dramatically improve fuel economy and reduce GHG emissions compared to conventional technologies. Further, given their use of fuels that eventually could be derived from entirely renewable and zero carbon resources, t hey have a large potential to transform the vehicle future to a low carbon fleet and significantly reduce U.S. petroleum imports.

These technologies require new infrastructure to become a significant part of the vehicle fleet. In the case of EVs and PHEVs

, electric charging infrastructure is needed in the form of charging stations, most often at home , but also at the workplace or other public locations, such as parking lots or retail stores. While at present, few public charging points are available , ther e are significant projects underway to deploy new electric

- drive vehicle charging infrastructure across the U.S. and to collect data to facilitate analyses of future need s . In the case of FC E Vs, hydrogen fueling stations analogous to gasoline stations are needed to support commercialization.

DOE has begun efforts to support a shift to electric

- drive vehicles by coupling a long history of advanced vehicle research and development with more recent efforts to develop a holistic view of electric

- vehicle infras tructure by compiling internal expertise, seeking input from outside experts and stakeholders and identifying areas where further investigation is needed. These combined efforts indicate that most electric vehicle owners will charge at home using equipme nt they pay to install and electricity from a grid that utility providers are capable of upgrading, where necessary, to meet charge demand. It is expected that 97 to 99% of charging energy will be delivered at home. 45 Home charging capability is not seen as a hurdle to electric vehicles in the near future. However, driver demand for and interaction with public infrastructure is not as well understood, so several DOE

- supported projects will deploy public charging stations and collect data to inform an anal yses of the role that public infrastructure will play nationally. These projects are currently underway and will be completed within the next 3

- 4 years. Additionally, DOE is coordinating governmentChapter 4

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interaction with cities to share best practices. DOE is further coordinating with both national and international organizations, and with other federal agencies, to ensure that the development of codes and voluntary standards for electric

- vehicles and support infrastructure happens as smoothly and quickly as p ossible.

This chapter provide s an assessment of both electric charging infrastructure needed to support electric vehicles (EVs) and plug

- in hybrid electric vehicles (PHEVs) and the hydrogen infrastructure needed to support fuel cell electric vehicles (FCE Vs). The electric vehicle infrastructure section summarizes current activities to demonstrate and deploy electric recharging infrastructure, the current availability and future potential of home recharging, the costs of charging systems, the potential im pacts on the electric grid and distribution network, and government cooperation in developing voluntary codes and standards. The hydrogen infrastructure section discusses the current status of hydrogen fueling stations, the costs of hydrogen and refuelin g stations, prospects for cost and technology improvement, a strategy for how a hydrogen infrastructure could roll out to support fuel cell vehicle introductions, and potential policies and public/private partnerships that could further facilitate infrastr ucture development.

4.2 Electric Vehicle Infrastructure

A shift from petroleum

- powered to electric

- drive vehicles will involve a parallel shift in refueling: Where gasoline and diesel fuel vehicles refill at a gas station, electric

- drive vehicles recharge at a charging station. Three charging levels are currently under consideration. 46 Level 1 charging uses a standard 120 volt (V), 15

- 20 amps (A) rated (12

- 16 A usable) circuit and is available in standard residential and commercial buildings. Level 2 chargin g uses a single phase, 240 V, 20

- 80 A circuit and allows much shorter charge times. Level 3 charging

— sometimes colloquially called ―quick‖ or ―fast‖ charging

—uses a 480 V, three

- phase circuit, available in mainly industrial areas, typically providing 60

- 1 50 kW of off

board charging power.

This electric vehicle infrastructure section summarizes current activities to demonstrate and deploy electric recharging infrastructure, the current availability of home recharging, the cost of electric vehicle support e quipment (EVSE), the potential impacts on the electric grid and distribution network, and government cooperation in developing industry

- recognized electric vehicle support equipment standards.

4.2.1 DOE Charging Infrastructure Projects Underway

The Department of Energy (DOE) recognizes the importance of the variety of factors that will contribute to the success of grid

- connected vehicles and is currently undertaking numerous activities to study and address them. Through the American Recovery and Reinvestment A ct of 2009 (ARRA), DOE has awarded cost

- shared grants to companies under the Transportation Electrification Initiative to establish development, demonstration, evaluation, and education projects to accelerate the market introduction and penetration of adva nced electric drive vehicles. The Transportation Electrification Initiative, its component projects, and other DOE electric

- drive vehicle infrastructure activities are discussed below.2017

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- 3 4.2.1.1 American Recovery and Reinvestment Act: Transportation Electrificat ion Initiative

Funded through the ARRA, the Transportation Electrification Initiative provides approximately $400 million in federal funding, leveraged through cost

- shared grants with industry and educational institutions, to develop, demonstrate, and eval uate electric drive vehicles and charging infrastructure. Through the projects funded under this activity, over 13,000 electric

- drive vehicles will be deployed in conjunction with nearly 23,000 charging stations, starting in 2010 and to be completed in th e next 3

- 4 years, in residential, commercial, and public locations, in numerous and diverse geographic locations nationwide.

The majority of the vehicles deployed through Transportation Electrification projects will be privately

- owned light

- duty vehicles; however, many medium

- duty trucks incorporating advanced electric and plug

- in hybrid electric powertrains will be developed and demonstrated in a wide range of geographic, climatic, and operating environments. Additionally, the vast majority of electric ve hicle charging infrastructure deployed through these projects will be Level 2 (220V), 3.3

- 6.6 kW charging stations, though several hundred Level 3 DC ―fast‖ chargers will also be deployed along corridors linking cities within deployment areas. For private ly

- owned vehicles and commercial fleet vehicles, Level 2 chargers will be installed at the vehicle owners‘ residences or the central fleet parking area, where the vehicles will most likely be domiciled for overnight charging. Many more Level 2 charging st ations will be deployed in commercial and public locations, which may provide vehicle owners the opportunity to travel in expanded geographic areas without the ―range anxiety‖ that could otherwise limit electric vehicles‘ utility. The effect of charging s tation availability (Level 1, 2 and 3) on driver behavior will be studied as part of this initiative. Some researchers believe the duration of a driver‘s experience with an EV has more to do with reducing range anxiety than public charging, and that publi c charging may reduce ―purchase anxiety‖ instead. 47

The coordinated deployment of electric drive vehicles and charging infrastructure under the Transportation Electrification Initiative will facilitate DOE ‘ s collection and analysis of a comprehensive set of data from both the vehicles and the charging stations. U Vehicle data collected will include parameters such as vehicle miles driven, battery state

- of

- charge, GPS location, and, in the case of PHEV s and FC E Vs, the liquid fuel consumption. Infrastructure data collected will include parameters such as charger connect/disconnect times, charge event start/stop times, average and peak power delivered, and total energy delivered per charge event. Evaluation of t his data, managed by Idaho National Laboratory, will provide critical information regarding the influences on vehicle and charging infrastructure use, performance, and location suitability. These data collection and analysis activities will identify how c onsumers use electric drive vehicles; where, when, and how frequently they charge the vehicles; how usage and charging behavior impact the performance of the vehicle; what the impacts are to the electric grid; how consumers respond to pricing signals with respect to vehicle charging; and a myriad of other questions related to consumer

U A condition of participating in the program will be that participants agree to data collection.Chapter 4

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acceptance and market viability of grid

- connected vehicles. After the projects are completed in the 2013

- 2014 timeframe, t his information will then be used to guide the much broader deployment of electric drive vehicles and charging infrastructure in the future.

A summary of infrastructure

- related projects funded through the Transportation Electrification Initiative follows in Table 4 .2

- 1 , which shows, for each project: the number of charging stations and e lectric vehicles to be deployed, the targeted locations and timeframe for deployment and data collection, and the intend ed benefit of the data to be collected. Additional information about each of these projects is in Appendix G.

Table 4 .2

- 1 ARRA Transportation Electrification Initiative and Clean Cities Projects Summary

Proje ct Level 2

Charging Stations Deployed Vehicles Location Time

frame a Data Collected

ECOtality North America ($115M) 14,850

(and 320 Level 3) 8,500

light

duty cars AZ, CA, DC,

OR, TN, TX 2010

-

2013 operational and charging behavior of electric

- drive vehicle

owners

Coulomb Technologies ($15M) 5,000 2,600 light

duty cars CA, DC, FL, MI,

NY, TX, WA 2010

-

2014 operational and charging behavior of electric

- drive vehicle

owners Navistar ($39M) 950 950 medium

duty trucks CA 2010

- 2013 performance and suitability of medium

duty electric vehicles and support infrastructure required General Motors ($30M) 650 125 light

duty cars CA, FL, MI, NY,

NC, SC, TX, VA, DC 2010

-

2013 light

- duty vehicle usage and operational needs, supporting vehicle design and infrastructure planning Smith Electric Vehicles ($32M) 500 500 medium

duty trucks CA, GA, MO,

NJ, NY, OH, OR, TX, DC 2011

-

2013 applicability of electric

- drive powertrains in vocational medium

duty trucks South Coast Air Quality Management District ($45M) 378 378 medium

duty trucks and shuttle CA, CT, GA, HI,

KY, LA, MD, MI, MO, NJ, NY, OH, OR, PA, TN, TX, WI, DC 2010

-

2013 PHEV technologies for Class 4/5 vehicles2017

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- 5 buses
Chrysler Group LLC ($48M) 153 153 light

duty trucks AZ, CA, CO, HI,

MA, MI, MO, NV, NY, ND, TX 2011

-

2013 real

- world product viability and quantified benefits

Clean Cities ($115M) 500

- 550 100 light

duty and 280 heavy

duty vehicles CT, IL, MI, MO,

NC, NY, OH, TX, UT, WA, WI 2010

-

2011 charging station usage

a Timeframe is approximate. More details about all Transportation Electrification Initiatives are found in Appendix G.

Smart Grid
The ARRA authorizes DOE‘s Office of Electricity to administer the Smart Grid Investment Grant (SGIG), which supports projects to update today‘s electric grid to a ―smart grid‖

— a modernized electric grid utilizing real

- time two

- way communication for improved reliability, efficiency, security, and safety and the possibility of dynamic pricing and even vehicle

- to

- grid energy exchang e (in which a charged vehicle battery provides energy to the grid). As part of the projects supported with these grants, 12 awardees plan to deploy approximately 100 charging stations. Additionally, under DOE‘s Smart Grid Regional Demonstrations, electri c vehicles (EVs) and plug

- in hybrid electric vehicles (PHEVs) are part of several smart grid technology demonstrations projects. In most of the regional demonstration projects, grid

- connected vehicles are integrated in broader smart grid technology deploym ent activities. Because EV/PHEVs are a relatively nascent technology, their contribution to the overall smart grid technology deployment and regional demonstration activities is likely to be small, particularly in the early years of the multi

- year deploym ent and demonstration programs.

4.2.1.2 Other Projects

Through its national laboratories, DOE also supports other various projects aimed at overcoming barriers related to electric drive vehicles and their interaction with the electric grid. These projects target the development of codes and standards that govern the vehicle

grid interface, including communications between the vehicle, the charging infrastructure, and the electric grid. Additional projects are intended to streamline the process of deploying electr ic vehicle charging infrastructure and minimize the impact on electricity generation, transmission, and distribution resources. Together, activities conducted through the national laboratories will help speed the wide

- spread adoption of electric drive tra nsportation technologies.

Many stakeholders have expressed the need for timely and standardized local permitting procedures for installing electrical vehicle supply equipment. The National Electric Vehicle Infrastructure Permitting Project at the National Renewable Energy Lab (NREL) seeks to standardize local permitting procedures to speed the deployment of EVSEChapter 4

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across the U.S. NREL has drafted a National Electric Vehicle Charging Station Permit template, 48 which conforms to Article 625 of the National Ele ctric Code, and is engaging select cities to promote the use of this permit to streamline the process of installing electric vehicle supply equipment. This draft permit is intended to establish a mechanism for local jurisdictions to provide a simplified a pproval process for the installation and operation of electric vehicle charging equipment

, rather than the existing wide variety of permitting procedures that currently exist at the local level. Adoption of the draft permit could reduce the typical admini strative delays that might otherwise impede the deployment of charging infrastructure and slow the market adoption of grid

- connected vehicles. This draft permit was created with input from industry and electrical contractors, and will allow electric vehic le charging stations to be installed quickly and safely in the municipalities where the process is adopted. Other organizations have published similar documents: Pacific Gas & Electric‘s (PG&E) released an ―Electric Vehicle Infrastructure Installation Gu ide‖ in 1999

, 49 and the Electric Power Research Institute (EPRI) published ―Plug

- in Electric Vehicle Infrastructure Installation Guidelines‖ in 2009. 50

4.2.2 Home Charging Adequacy

Charging availability affects consumer value and the development of the EV/PHEV market. 51

, 52 Understanding the number of American consumers who can plug

- in a vehicle at home is instructive in estimating the number of who might choose to own an electric drive vehicle. More charging points enable more potential EV/PHEV buyers, but the ro le of an additional charging point depends on whether it is attached to a home, a workplace or a public place. A home charging point may enable a new EV/PHEV buyer, while a workplace charge point may make the prospective car buyer who already has home cha rging availability more determined to own a PHEV or EV. Availability of adequate home recharging will likely have the most impact on deployment, because home is usually where a vehicle parks the most often and longest, resulting in more recharging energy and fuel

- saving benefit. Based on past experience, 97%

- 99% of charging energy is delivered at home. 53 Even with available workplace or public charging, consumers will probably feel it is more convenient and less stressful to ch arge at home. Surveys show that consumers state stronger preferences for home recharging. 54 Other surveys show that EV users with home recharging rarely use public recharging 55 and some PHEV users choose not to use available public recharging during weekdays because of the inconvenien ce they perceive. 56

There may be opportunities for supplemental charging outside the home. Public charging stations with Level 2 or Level 3 charging, possibly offered by restaurants, supermarkets, gyms, or health centers, can extend the electric range in an equivalent sense, which may be especially important for a EV driver in an unexpected long distance trip. The ability of a charging point to extend the electric range depends on both the length of available charging time and the charging speed. Higher char ging speed may be more necessary in public places where consumers usually do not park their vehicles as long as at home or the workplace. But for consumers with home charging and typical driving patterns, topping off partially a depleted battery can be mor e desirable than recharging a fully depleted one, which reduces the need for high charging speed. For home or workplace charging, the usual long parking time makes expensive upgrades to faster charging less necessary, especially for PHEVs with a small bat tery.2017

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- 7 As described above, three charging levels are currently under consideration. 57 Level 1 charging uses a standard 1 20 V, 15

- 20 amp s (A) rated (12

- 16 A usable) circuit and is available in standard residential and commercial buildings. Level 1 charging f or 7

- 9 hours of home nighttime is sufficient to fully charge a small PHEV20. V
, W Level 2 charging uses a 240 V, 20

- 80 A circuit, enabling a much shorter charge time. With Level 2 charging, a full recharge requires less than 4 hours for a PHEV40 SUV and abo ut half hour for a PHEV10 small car. Level 3 charging uses a 480 V, three

- phase circuit, typically providing 60

- 150 kW of off

- board charging power. Level 3 charging for PHEVs is probably not necessary due to small battery capacity and the vehicles‘ interna l combustion engine range extended design. For this reason, it is not envisioned that manufacturers will equip all PHEVs with capab ility for accepting Level 3 charging. In addition, due to the relatively small battery when compared to an EV, battery char ge can be completed at home or workplace where vehicle parking duration is normally long. H igh cost

, lack of 3

- phase power , and potential safety

concerns also make Level 3 implementation in these places unlikely, at least for the near term.

Nevertheless, Level 3 charging may be more beneficial to EV owners who lack the hybrid

- drive backup of a PHEV. An EV midsize car with 150

- mile driving range will likely require more than 10 hours of Level 2 charging to reach a full recharge, but only 2

- 3 hours with Le vel 3 charging. Fast

- charging an EV with 100

- mile driving range can provide 80 miles of urban

- driving range in less than 30 minutes. 58 In commercial places where drivers park and conduct personal or business activities, 1

- 2 hours of Level 3 charging is sufficient to provide an 80% recharge X
, 59 for most EV s.
Level 1 charging may prove to be appropriate for a significant fraction of the initial EV market. Tesla has report ed that , based on their experience, there is potential for approximately 25% of the 244

- mile range Tesla Roadster EV to make use of Level 1 charging

. 60 It may also be more appropriate to consider average charge times that correspond to normal daily use instead of what is required for the exceptional circumsta nce to charge a fully depleted EV. At t he national average of 28 miles of driving per day, a small EV would only require ~7 kWh to charge. This would require less than 5 hours with a standard Level 1 cordset. An important feature available on many Level 1 cordsets or grid

- connected vehicles is the ability for the user to select a lower

- than

- usual charge rate so that users may make use of lower

- capacity, non

- dedicated Level 1 circuits until a dedicated circuit is installed.

V For the purposes of estimating charging times, it is assumed that a small EV consumes ~200 AC Wh/mile, mid

- size EV or PHEV is 300 AC Wh/mile, and larger PHEV SUV is 350 AC Wh/mile; Level 1 charging power is assumed to be 1.44 kW nominal; Level 2 is 3.3 kW nominal on 20 A rated circuits (208 x 16); and Level 2 charging is 6.6 kW nominal on 40 A circuits (208 x 32).
W A PHEV20 is a PHEV with a 20

- mile charge

- depleting range, or, the range of battery operation over which energy is consumed from the battery at a greater rate than it is recharged through regenerative breaking. Once
t he battery is sufficiently depleted, the vehicle operates in charge sustaining mode, during which time the energy captured through regenerative breaking is roughly equivalent to the rate of battery energy consumption; this mode is identical to the operatio n of a grid

- independent HEV. The nomenclature is analogous for PHEV with larger (e.g., PHEV40 has a 40

- mile charge

- depleting range) or smaller (PHEV10 has a 10

- mile charge

- depleting range) batteries.
X OEMs have indicated that fast charging is expected to replace 80% of max state

- of

- chargeChapter 4

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Currently, there are approximately 1,000 charging stations i n the United States. 61 Most of these stations allow public access, while the rest are restricted for workplace use. Home charging, which is not included in this count, is considered more important for EV/PHEV market s uccess, 62 which is understandable since home is where a vehicle parks the most often and longest.

Although there is not clear data indicating home charging capacity, two indicators of charging readiness are the availability of a garage or carport, where th e electric circuit is usually equipped, and the proximity of an electrical outlet

. Having a garage or carport does not necessarily mean charging readiness, as a garage may lack parking functionality. Y For example, garages in old homes can be too small to hold today‘s large vehicles, forcing the owners to park their vehicles on the driveway, and some garages may mainly be used for non

parking purposes. One alternative measurement of home charging readiness is the availability of an electric outlet where th e vehicle is usually parked when arriving home. According to a survey conducted by University of California, Davis (UCD)

, 63

, 64 61%, 52%, 44%, and 36% of the U.S. new vehicle buying households have an electric outlet within 50, 25, 15, and 10 feet

, respective ly, from the home parking location. Z These percentages are slightly lower than the garage ownership share in the American Housing Survey or the share of detached single house in the 2001 N ational H ousehold T ravel S urvey data.

T he home charging availabil ity for a specific consumer will need to be differentiated among EV/PHEVs with different battery capacity. The electric outlets in existing homes are most likely ready for Level 1 charging, which is about sufficient for fully recharging a PHEV20 SUV during normal nighttime, provided the outlet is not being heavily utilized by other loads. Shorter available charging time or owning a vehicle with a larger battery make the capability to fully charge overnight with a Level 1 system less likely , but upgrading to a Level 2 system in such cases will allow full recharge to happen more quickly

.
The DOE

- supported infrastructure projects described above in section 4.2.1 will collect data that significantly improve the understanding of how consumers interact with electric

- vehicle support infrastructure

. With respect to the availability of home charging, thes e data collection and analysis activities will identify how consumers use electric drive vehicles and infrastructure and how consumers respond to pricing signals with respect to vehicle charging as well as a myriad of other questions related to consumer ac ceptance and market viability, which can eventually be used to guide the much broader deployment of electric drive vehicles and charging infrastructure in the future.

Y Based on the 2001 National H ousehold Travel Survey (NHTS), 63.8% of the U.S. households live in detached single houses. According to the American Housing Survey (AHS), 62.5% of homes in the U.S., regardless of home typ e, include a garage or carport. The share is a little higher (65.4%) for year

- round occupied homes, much lower (45.1%) for vacant homes and much higher (81.5%) for new constructions up to 4 years old. The closeness between the share of detached single hous es from the 2001 NHTS data and the share of garage ownership from the AHS data should not be interpreted as that the form of detached single house is an equivalent indicator of garage ownership. The estimation closeness is more likely a coincidence, since not all detached houses include a garage or carport, and some homes with a garage or carport are attached homes.
Z These estimates are based on the one

- day 24

- hour travel diary completed by respondents from 2

, 373 U.S. households that represent U.S. new veh icle buying households

.2017

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- 9 4.2.3 Charging System Cost

Charging an electric vehicle or plug

- in hybrid will generally requi re specialized equipment, including:

A charger that converts electricity from alternating current (AC) from the electricity source to direct current (DC) required for the battery, and also converts the incoming 120 or 240 volt current to 300 or higher volt s. Grid

- connected vehicles carry an on

- board charger capable of accepting AC current from a wall plug (Level 1 circuit) or, from a Level 2 charging station. On

- board charger power capability ranges from 1.4 to 10 kW and is usually proportional to the veh icle‘s battery capacity. AA The lowest charging power, BB 1.4 kW, is expected only when grid

- connected vehicles are connected to 120 volt (Level 1) outlets, and all currently known PHEV and EV on

- board chargers are expected to provide at least 3.3 kW

c hargin g when connected to a Level 2 (220 volt, 20+ A) charging station. The latest SAE connection recommended practice, J1772, allows for delivery of up to ~19 kW to an on

- board vehicle charger. For higher capacity charging, a charging station that delivers DC current to the vehicle is incorporated off

- board in the wall or pedestal mounted.

The charging station needed to safely deliver energy from the electric circuit to the vehicle, called electric vehicle support equipment (EVSE). The EVSE may at a minimum, be a specialized cordset that connects a household Level 1/120V socket to the vehicle; otherwise, the EVSE will include a cordset and a charging station (a wall or pedestal mounted box incorporating a charger and other equipment). Charging stations may in clude advanced features such as timers to delay charging until off

- peak hours, communications equipment to allow the utility to regulate charging, or even electricity metering capabilities. Stakeholders are working on which features are best located on th e EVSE or on the vehicle itself, and it is possible that redundant capabilities and features may be present in both the vehicle and EVSEs in the near future until these issues are worked out. EVSE and vehicle manufacturers are also working to ensure that current SAE

- compliant ―basic‖ EVSEs are charge

- compatible with future grid

- connected vehicles.

Some public charging stations will likely include fee collection equipment or will be networked with nearby fee

- collection equipment already in use for parking f ee collection. Under some local regulations, owners of charging stations cannot resell electricity; CC unless the utility itself owns the stations or can directly bill the vehicle owner, the station owner can only charge a flat or t ime

- based fee to the vehi cle driver. This may require credit/debit card readers, pay

- to

- park kiosks or standard parking meters (in a commercial parking lot, kiosks or meters could already be available, so no additional equipment may be needed), or radio

frequency ID cards linked to a subscription service. For the utility to directly bill the vehicle

AA Current mini

- e‘s and Tesla Roadsters presently have 11

- 19 kW on

- board charger capability, though such high

on

- board power levels are not expected to be common in the majority of upcoming EV/PHEVs.
BB Some EVs will have an 840W char ge setting to allow for a shared Level 1 circuit
CC One exception is provided by the California Public Utilities Commission; it concluded in July 2010 that companies that sell electric vehicle charging services to the public will not be regulated as public utilities.Chapter 4

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owner, the charging station or vehicle must include a communication link to the utility that will identify the vehicle or owner.

An electric circuit located close to where the vehicle parks. A Level 1 circuit is standard household current, 120V AC, rated at 15 or 20 A (12 or 16 A usable). A Level 2 circuit is rated at 208 to 240V and up to 80 A and is similar to the type of circuit that powers electric stoves (up to 50 A) and dryers (usually 30 A). Generally, level 1 and 2 circuits used for electric vehicle recharging must be dedicated circuits, DD i.e. , there cannot be other appliances on that circuit. For a Level 2 circuit, the homeowner or other user must install a charging station and will need a permit.

Optionally, separate metering (EUMD, end use measuring device) for the EV charger to allow time

- of

- day rates for EV recharging; otherwise, homeowners may choose to pay standard rates for EV charging or to have all household electri city on time

- of

- day rates, either option with a single meter.

Protection for the charging stations, including wheel stops, protective bollards, etc. Where vandalism is a concern, additional costs may be incurred for fencing or security equipment.

In add ition to the costs of purchasing and installing charging equipment, charging station installation may include the costs of upgrading existing electrical panels and installing the electrical connection from the panel to the desired station location. These costs may be dramatically lowered if new construction incorporates the panel box and wiring required for charging stations, or even includes charging stations or outlets for charging stations as standard equipment.

In addition to Level 1 and 2 charging sta tions, ―Level 3‖ commercial recharging stations may be installed in areas where 3

- phase power is available; these can deliver 300V

600V, 3

- phase 150

- 400 A DC power for rapid charging of EVs. These may be viewed as equivalent to gas station pumps due to a similar look.

The current costs of charging stations are highly variable depending on the level of service (Levels 1 through 3, and alternative power capabilities within these categories), location (individual residence, grouped residences, retail or busin ess, parking lot or garage), level of sophistication of the station, and installation requirements, including electrical upgrading requirements. Estimated costs for charging stations are included in table below.

Table 4 .2

- 2 Estimated Costs for Charging Stations 65 , 66 , 67 , 68 ,a

Level Location Equipment Installation

DD Some manufacturers are planning for lower

- power level 1 charging which can be accomplished on a shared 120V circuit.2017

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- 11 1 Single Residence $30

- $200 (charge cord only,

included at no cost to consumer with EV/PHEV) when an accessible household plug (e.g., in a garage or adjacent to a driveway) with a ground fault interrupter is already available $400

- $1000+ may be necessary depending on difficulty of installing a new circuit at the desired location, but in most cases, owners with sufficient panel capacity would opt for a more capable 220 VAC Level 2 installation instead of a Level 1 dedicated circuit because the additional installation cost is only marginally higher

2 Residential, Apartment Complex, or Fleet Depot b 3.3 kW EVSE (each): $300

-

$4,000

6.6 kW EVSE (each): $400

- $4,000 3.3

- 6.6 kW installation cost: $400

- $2,300 without wiring/service panel upgrade, or $2,000

- $5,000 with panel upgrade

2 Public $400

- $3,800+ for each EVSE $3,000

- $7,000+ installation cost, varying significantly with distances from service entrance and number of EVSEs installed

3 Public $ 8 ,000

- $50,000

a Detailed information on charger cost for each charging level and location and specific sources for cost estimates are available in Appendix G.
b Level 2 EVSE installation costs vary considerably for single

- family residences, multi

- family residences, and fleet depots, depending upon the need for wiring and service panel upgrade s. The range depicted here reflects the anticipated variability of these costs. However, EPRI estimates that the typical residential Level 2 installation costs to be approximately $1,500. See Appendix G for additional information.

For the 2017

- 2025 period, there is a major potential for cost reduction in EVSEs if either or both PHEVs and EVs enter the market in substantial numbers

– particularly if strong markets for these vehicles develop, as expected, in Europe and Asia and EVSEs are manufactured globally and compete for market share in this country. Although the reducti on potential for installation costs would likely be somewhat smaller than for equipment costs, installation costs may also be reduced by incorporating EV requirements into building codes for new construction, and through standardization of procedures and b etter training and availability of installers. For purposes of the analysis presented in Chapter 6, the agencies‘ estimated costs for Level 1 and Level 2 in

- home charging equipment for the 2017 to 2025 time frame is within the range of the values shown abo ve and is detailed in Appendix B4.2.2.6.Chapter 4

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4.2.4 Battery End

- of

- Life Value Assessment and Secondary Use Applications

At the end of an EV/PHEVs useful life, the battery will likely not be fully exhausted and could be used for a number of other tasks. Such a used battery would have a secondary use value and this expected value could be applied to the original purchase price of the vehicle (minus an appropriate discount rate) to lower the overall cost, making electric vehicles more affordable for the American public . These batteries could be used in utility peak load reduction a nd management, substation upgrade deferrals, and grid stabilization applications, as well as renewable energy installations to store solar and/or wind power. 69 Several electric utilities curr ently use large sodium

- sulfer ( NaS ) batteries for these purposes and are explorin g used EV/PHEV batteries as substitutes. These applications have specific requirements that could possibly be met by used automotive batteries.

This is a field being intensel y studied at the present time and there is some uncertainty as to the extent of the market, as well as the value to the original vehicle purchaser. A
summary of one such forthcoming study supported by DOE is in Appendix G.

4.2.5 Potential Impacts on the Electri c Utility and Distribution Infrastructure

The overall distribution system capacity is expected to be adequate for EV charging. However, t he effect of EV charging on specific circuits within the localized distribution system has not been fully evaluated an d the impacts are not clearly understood ; though, this issue is under study by EPRI, DOE, and several electric utilities

. 70 Understanding the relationships between EV charging and the distribution system allows utilities to plan for additional stresses pla ced upon their systems as a result of EV charging.

Distribution system components which may be at risk due to the increased loading are substations, primary and laterals feeders, and distribution transformers. Distribution transformers are of primary concern. Distribution transformers may be impacted by several factors, including total EV penetration, EV clustering, time of charging, ambient operating conditions and thermal characteristics of the transformer, the prevalence of air conditioning, and th e topography and age of the distribution system. These factors affect the cumulative thermal history of transformers, leading to their increased ―thermal aging‖ and potential loss of transformer life. DOE and others are studying the effect of PHEV/EV charging on thermal aging of distribution transformer insulation.

Transformers are also impacted differently under Level 2 versus Level 1 charging. W ith more OEMs making public announcements to offer EVs , which are generally more likely to utilize Level 2 charging than PHEVs, the re is further discussion of potential impacts to the infrastructure. Since Level 2 charging allows for charging power up to 14 times that of Level 1 charging

, the distribution system impacts could be much more severe under Level 2 charging assumptions.2017

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- 13 Load diversity EE becomes an issue further upstream in radial distribution systems. With diversified load profiles, peaks by individual loads are averaged out. The secondary transformer is the first distribution system component that will be exp osed to the large current. Thus, it is expected that EV/PHEV charging will have the greatest impact on those components. The diversity of distribution system component vintages, sizing, and design practices varies greatly across the U.S. Older distribution systems, which were initially designed to support lower per

- customer demand, are more likely to be affected by PHEV/EV charging than newer distribution systems, which were designed to support higher per

customer demand.

Potential distribution system impacts reported in the literature indicate that overall and, particularly, in newer residential developments (30 years and younger) and rural areas, distribution system capacity is expected to be adequate for EV charging. However, the potential f

or distribution system overloading exists with higher concentrations of charging vehicles in older residential neighborhoods, such as those in some coastal or mid

- western metropolitan areas. 71 These areas may be of concern to utility infrastructure planner s.

Time

- of

- use (TOU) rates FF may incentivize customers to delay charging to off

- peak periods later at night. While TOU rates are likely to shift loads, they will not alleviate potential negative impacts on the distribution infrastructure. S mart load contr ol technologies may be required in order to sequence charging or to perform load coordination strategies for charging vehicles in order to mitigate possible distribution transformer impacts.

The preceding discussion yields several important conclusions abo ut the potential impacts on the electric utility and distribution infrastructure:

The overall electrical distribution system capacity is expected to be adequate for EV/PHEV charging.

There is some potential for localized impacts on distribution transformer s, especially in older neighborhoods, depending on EV/PHEV charging load concentrations. However, t he success of electric vehicles will not be limited by possible disruptions in the distribution system. Additional research is required to understand the ma gnitude and extent of the issue.

Smart load control technologies that include sequencing and coordinating the charging of vehicles for Level 2 charging could help mitigate possible transformer impacts.

EE Load diversity refers to electric loads which come online at random times. Non

- diversified loads come online at the same ti me. So, if EV owners come home at 6:00 PM and plug in to charge, the load is not diversified.
FF TOU pricing is a special electric rate feature under which the price per kilowatt

- hour depends on the time of day; prices can be adjusted upward during periods of peak demand and downward during off

- peak periods.Chapter 4

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- 14

4.2.6 Voluntary Standards to Support PHEV & EV Infrastructur e
DOE has several ongoing activities to support the development of voluntary standards. These activities can be expected to accelerate under the May 21, 2010 Presidential Memorandum‘s request for DOE to work with stakeholders on the development of volunta ry standards and coordinate its efforts with the Department of Transportation, NHTSA, and the EPA. 72 While these efforts on voluntary standardization are important in enhancing long

- term success of EV/PHEVs, they are not a prerequisite for a successful nea r

- term market launch.

On a conceptual level, electric

- drive vehicles differ from conventional gasoline vehicles in the way they are repowered: conventional vehicles are refueled and electric vehicles are recharged. But, on a practical level, the means b y which repowering happens is also very different. Where gasoline pumps and measurement standards are already well established, the equipment and measurement devices facilitating and governing electric

- drive vehicle recharging are still being discussed. Coordination of the means by which EVs and PHEVs communicate with the grid

— both in terms of hardware and software

— offers the benefit of assuring that all electric

- drive vehicles can plug in almost anywhere.

The primary link between the DOE vehicle techno logy activity and industry standards is the S ociety of A utomotive E ngineers (SAE)

. The most significant development to date has been the adoption of the voluntary standard SAE J1772, specifications for the electrical connector between EV/PHEVs and electri c vehicle supply equipment (Levels 1 and 2 charging). DOE national laboratories have provided expertise, development and testing resources to support new SAE standards, as discussed further in the following sections.

4.2.6.1 Opportunities for Voluntary Standardiz ation

There are numerous opportunities for standardization (or harmonization) in the plug

- in vehicle

- grid system, including hardware, software, communication and the human

- machine interface (the device through which a driver interacts with the smart grid a nd/or charging device)

– as exemplified in the following figure:2017

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- 15 Figure 4.2

- 1 Opportunities for Standardization/Harmonization in the Plug

- in Vehicle

Grid System

Seve ral opportunities for standardization/harmonization are identified in the preceding simplified concept of vehicle

- grid interaction (and, others are possible). Starting from the vehicle and moving upstream to the utility, the first opportunity is the charge c oupler

— the physical connector and vehicle receptacle for hybrid and electric vehicle charging and the means by which the vehicle interacts with EVSE. Several additional opportunities are within the EVSE: first, the permitting process to facilitate the ins tallation of EVSEs, to be coordinated at the local government level; second, the compact metrology, or small device the EVSE uses to measure energy consumption; and, third, the method of communication

— both in terms of hardware (wired and wireless universal communication technologies) and software/protocols (grid operator

- home

- vehicle communication). At the utility, software can be standardized or harmonized to facilitate grid

- wide smart management with targeted goals such as balancing supply and demand and sequencing vehicle charging.

4.2.6.2 Defining voluntary standards

―Voluntary‖ standards, i.e., those not required by regulation, GG address essentially all aspects of automobiles and are issued by several organizations around the world; for example the Society of A utomotive Engineers (SAE) in the US, the Int ernational Organization for

GG Although voluntary in some regions of the US, SAE J1772 is essentially a regulatory requirement in California and many other states that have adopted the CA ZEV Regulation because California requires vehicles to comply with J1772 in order to earn ZEV credit.Chapter 4

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- 16

Standardization (ISO) or the International Electrotechnical Commission (IEC) in Europe and the Japan Automobile Research Institute (JARI) in Asia. The electrical content of automobile s adheres to standards developed by the Institute of Electrical and Electronics Engineers (IEEE) and, as plug

- in vehicles and EVSE utilize the electric power grid, they are subject to standards by Underwriters Laboratories (UL) as well as the fire and buil ding safety standards by the National Fire Protection Association (NFPA) including the National Electrical Code (NEC).

4.2.6.3 Standards for Electric Vehicle to Grid Interface

The Grid Interaction Technical Team (GITT) was initiated in 2009 to identify issues

re garding vehicle electrification and related grid impacts, set functional requirements for the vehicle

- grid interface and cooperate on key issues/projects to enable plug

- in vehicles (PHEVs and EVs). The members include DOE (the Vehicle Technologies Program and the Office of Electricity Delivery and Energy Reliability), the domestic auto industry and selected electric utilities. Current DOE

- funded projects under the auspices of the GITT focus on some of the immediate needs of the vehicle

- grid interface, inc luding:

A draft national template to streamline the permitting and installation process of electric vehicle supply equipment

The human

- machine interface (HMI) for charger

- grid communication standards validation

Technology development to support universal vehicle

- grid communication

Standards for PHEV/EV Communications Protocol

4.2.6.4 SAE Standards Development

SAE is working with stakeholders to develop EV/PHEV and infrastructure

- related standards. SAE J1772 is a stand ard for the ―Electric Vehicle and Plug

- in Hybrid Electric Vehicle Conductive Charge Coupler,‖ and describes the physical, electrical, functional, and performance requirements for all grid

- connected vehicles in North America. Work is also progressing towar ds the development of improved grid connectivity for electric vehicle charging infrastructure through lower cost, secure, universalized wired and wireless communications technologies.

SAE is working with organizations and consortia such as the Internationa l Organization for Standardization ( ISO )

, International Electrotechnical Commission ( IEC )

, utility companies, the Institute of Electrical and Electronics Engineers ( IEEE )

, Electric Power Research Institute ( EPRI ) , ZigBee Alliance, HomePlug Power Alliance, automotive OEMs and suppliers, and many others in the development of specifications and standards to address the requirements of the SmartGrid strategy. Several national laboratories directly support the committee activities, including A rgonee N ational L ab , I daho N ational L ab , N ational R enewable E nergy L ab , O ak R idge N ational L ab, and P acific N orthtwest N ational L ab

.2017

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- 17 A full list of applicable SAE standards

— both completed and upcoming

— is provided in Appendix G.

4.2.6.5 International Cooperation and Activities

In creasingly, vehicles are being developed to compete in a worldwide market. A manufacturer can realize significant cost savings by building a large number of standardized vehicles in several countries. International harmonization of EV/PHEV charging equip ment and protocols can help speed the market penetration of these vehicles by more rapidly lowering the costs of these components.

International cooperation relies on the members and projects of the joint DOE

- auto industry

- utility Grid Interaction Tech Tea m (see previous section) as well as national laboratory personnel that directly support the SAE standards committees to interact to promote global vehicle

- grid interoperability through outreach and programmatic support for harmonization of US, European and Asian codes & standards in selected international venues

. Specific support is provided to the Administration‘s EU and China initiatives HH as well as the Departments of Commerce and State. II As mentioned in the preceding description of the SAE activities, t here are U.S. Technical Advisory Groups (USTA GS) to the ISO activities, with all the groups listed on the SAE website. JJ

4.3 Hydrogen Infrastructure Overview

When run on hydrogen, fuel cell electric vehicles (FCEVs) produce zero tailpipe emissions making hydr ogen an attractive alternative fuel. When produced from the reformation of natural gas (the method used for the vast majority of H2 currently produced) hydrogen reduces well

- to

- wheel (WTW) GHG (CO 2 equivalent) emissions by approximately 50 percent. 73 Unlike infrastructure for EVs and PHEVs, where the option of home charging exists, the successful rollout of FCEVs depends on the early and strategic placement of publicly accessible infrastructure to enable market penetration. This section of the report include s discussion on hydrogen infrastructure status today, costs and projections for technology improvement, rollout strategies, policies, and conclusions.

4.3.1 Status Today

4.3.1.1 Infrastructure Technologies

Hydrogen is produced through a variety of processes. Some are mo re suited for large scale centralized production; others are more often associated with on

- site distributed production at traditional fueling stations. Most common technologies utilized today include:

HH e.g., Smart Grid

- EV Working Group of the EU

- US Energy Council, EU

- US Transatlantic EV Workshop, US

China Vehicle and Battery Technology Workshop
II e.g., EU  ̳green‘ trade mission, COP 15 and COP 1 6 UN Framework Conventions on Climate Change
JJ See http://www.sae.org/servlets/works/Chapter 4

4

- 18

Steam methane reformation

- The U.S produces over 9 mi llion tons of hydrogen annually. Ninety Five percent of that amount is produced from natural gas by steam methane reformation (SMR) at large scale centralized plants. Most is used at petroleum refineries, for food processing and other industrial uses. Rene wable hydrogen may also be reformed from biogas, landfill gas and ethanol for example. High daily throughput stations (100+ kg/day) with ample space can utilize onsite steam reforming on

- site. Electrolysis

- Electrolysis systems use electricity to split water into hydrogen and oxygen. The technology is compact, reliable, and has been used for decades in industrial, military and space applications. Today‘s typical station electrolyser produces 60 kg/day and requires approximately 55kW

- hr of electricity to generate a kilogram of hydrogen. A clean, renewable electricity source (such as hydro, wind, photovoltaic or natural gas fired plant) can minimize upstream GHG emissions from electrolysis. Delivery

- For those stations not producing hydrogen onsite, ty pically high pressure gaseous product can be delivered to the site in batches that can supply the station for a few days or even weeks, depending on station throughput. This method is easy to build but needs refilling regularly. Another common delivery me thod is trucked cryogenic liquid hydrogen, which is stored in much larger quantities at the station

. Pipeline

– There are over 300 miles of hydrogen pipeline in Texas, Louisiana and California serving industrial demand. The hydrogen is not fuel cell grade and is of relatively low pressure (350

– 1500 psi typically). With minimal clean

- up and added storage, compression, and dispensing equipment, this option can be an economical source for hydrogen infrastructure placement, where pipelines exist. Co

- gener ation

- High temperature fuel cells for stationary or ancillary grid electricity production (hydrogen energy stations) can provide a fuel source for a hydrogen infrastructure. A jointly funded DOE/CARB/South Coast Air Quality Management District (SCAQMD) p roject at a waste water treatment plant near Los Angeles features a molten carbonate fuel cell run on treated anaerobic digester gas. The fuel cell produces electricity to run the plant, and tail gas from the anode will be further cleaned, compressed and dispensed at the on

- site hydrogen station for FCEVs. 74

4.3.1.2 Federal Demonstration Programs

The map below shows locations of hydrogen stations (includes lift trucks and transit bus stations) in the U.S. 75 Since 2004 the U.S. DOE Hydrogen Program has worked with multiple partners in several states including California, New York, Florida, Michigan and Washington D.C. to demonstrate FCEVs and infrastructure. The program worked in partnership with industry, a cademia, national laboratories, and Federal and international agencies to help overcome technical barriers through research and development of hydrogen production, delivery, and storage technologies, as well as to address safety concerns and develop model codes and standard. NREL has reported that over 130,000 kg of hydrogen has been produced or dispensed in 23 of the Nation‘s 56 stations.2017

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- 19 4.3.1.3 California Demonstration Programs

Although there is much FCEV activity ongoing throughout the U.S. many OEMs are fo cusing their pre

- commercial vehicle rollouts in California. The state‘s Zero Emission Vehicle (ZEV) regulation requires large volume automakers to produce a certain number of ―pure‖ zero emission and ―near zero‖ emission vehicles for sale in California as a percentage their overall sales. 76 To date, over 250 fuel cell vehicles have been deployed in the State fueling at over 26 limited access, private and public access fueling stations.

The SCAQMD which includes the greater Los Angeles area has been operatin g its ―Five Cities‖ hydrogen stations for over five years now. Each fueling station supports OEM FCEVs and a fleet of five gas/electric hybrid vehicles that have been converted to run on hydrogen. The aim of the project is to stimulate demand for hydrogen fueling, accelerate the expansion of the region‘s hydrogen fueling network, and educate the public on hydrogen powered vehicles. City officials and staff have used the converted hybrids in everyday city fleet driving and showcased them to community groups , neighborhood associations and schools.

To support continued roll out of FCEVs in California, the state has committed to partnering with infrastructure providers to develop a network of stations in the greater Los Angeles area, Sacramento and in the San Francisco Bay Area. The following chart shows infrastructure and co

- funding amounts for stations supporting OEM FCEV rollouts. Cost share in most cases varied between 50

- 70% of expected station costs.

Table 4.3

- 1 Public Access Stations Nearing Completion in CaliforniaChapter 4

4

- 20

Location & Station Proposer State Funds ( Millions) Total Cost

Estimated (Millions) Capacity

Kg H2/ day Technology

Emeryville $2.7 $5.56 60 Electrolyzer 100 % renewable

Oakland $4.1 $ 5.96 180+ Liquid Delivery 33 % Biogas credits San Francisco Airport $1.7 $2.41 120 Liquid Delivery

Burbank $300K/yr Not Available 100 Gas deliver and On

- site Steam Methane Reformation
Los Angeles

- CSULA $2.7 $4.4 60 Electrolyzer 100% renewable
Los Angeles

- UCLA $1.7 $4.32 140 On

- site Steam Methane Reformation

Torrance $0 Not Available 50 Pipe line supplied

Harbor City $1.7 $2.47 100 High pressure delivered Hydrogen

Fountain Valley $2.7 $8.19 100 High Temperature Fuel Cell; 100 % renewable from digester gas
Newport Beach $1.7 $4.03 100 On

- site Steam Methane Reformation

4.3.1.4 Station and Hydrogen Costs

The following chart shows actual and estimated ranges of costs to build 350/700 bar demonstration pre

- commercial hydrogen stations in California. The figures include: site preparation, permits, engineering, capital equipment, utility connections, construction

, renewables, and installation. It excludes operation and maintenance and real

- estate. The third column figures are predicted cost ranges determined from an Institute of Transportation Studies (ITS) workshop held at the University of California, Davis. Appendix G shows information regarding the cost of hydrogen in the U.S. through 2050.

Table 4.3

- 2 Actual and Estimated Station Costs by Technology

Technology Station capacity kg/day CARB Cost

$M 2008

- 11 ITS Est Cost

$M 2012

- 17 77 Tube trailer delivery 100 1 0.4

- 1.0 High pressure composite delivery 100 1.0

- 1.7 0.8

- 1.0 Liquid delivery 100+ 1.7

- 2.7 1.1

- 1.4 Onsite electrolyzer(s) 60

- 130 2.0

- 4.0 (renewable) 1.4

- 2.0

Onsite SMR 100

- 140 2.5

- 4.0 1.4

- 2.0 Energy station/gasifier 100+ 6.0

- 8.5 (renewable) n/a2017

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- 21 4.3.2 Prospects for Cost and Technology Improvement

Over the past several years, the DOE Hydrogen Program has tracked, set targets, researched and funded studies to better predict the costs to transition to different alternative fuels. The DOE 2009 target infrastructure performance metrics for hydrogen were set at $3/gasoline gallon equivalent (gge) w ith a target average hydrogen fueling rate of 1.0 kg/minute. NREL reported that average fueling rates have improved from 0.66 kg/min in 2006 to 0.77 kg/min in 2009, and early market hydrogen costs at an on

- site natural gas reformation station ranged from $ 7.70

– $10.30, and onsite electrolysis ranged from $10.00

– $12.90 /gge. 78 In this NREL study, the number of refuelings by all OEMs with both Generation 1 and Generation 2 vehicles totaled 25,811. 79 However, independent of this project, industry panels con cluded that at 500 replicate 1500 kg/day stations/year, distributed natural gas reformation could produce $2.75

– $3.50/kg and distributed electrolysis at $4.90

- $5.70/kg. 80 With the increased efficiency of FCEV relative to conventional vehicles, this mak es hydrogen potentially competitive to conventional fuels such as gasoline.

4.3.3 Infrastructure Rollout Strategy

To help ensure that hydrogen infrastructure is in place to match planned vehicle rollouts, CARB and the California Energy Commission (CEC) conduct ed a confidential survey of OEMs. The following table shows the estimated number and timing of FCEV releases through the year 2017. The survey, conducted in late 2009, included an additional breakdown of regions and cities/clusters in both northern and sou thern California.

Table 4.3

- 3 California Hydrogen Fuel Cell Vehicle Rollout Estimates

Year/Period 2010 2011 2012 2013 2014 2015

- 2017 Cumulative Number of Vehicles CARB/CEC 2009 Survey 92 30 95 69 839 44,706

4.3.3.1 Station Location Strategy

Pre

- commercial hydrogen infrastructure will roll out in phases consisting of ―clusters

. ‖ A Hydrogen Cluster could be a city or group of cities, group of neighborhoods or unincorporated areas that are or will be targeted as a unit in which OEMs plan to pl ace FCEVs. Clusters have already been developed in southern California. The Santa Monica/West Los Angeles area, the Torrance/Redondo Beach areas, the Hollywood area, and the Irvine/Newport Beach areas each have at least one station operating with more und er construction to ensure increased convenience, sufficient redundancy, and increased capacity for future vehicle rollouts. 81

Depending on availability and customer acceptance, as vehicle numbers increase, station number and capacity will increase within the Clusters. Bridging stations connectingChapter 4

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- 22

the clusters and regions as well as destination (vacation cities for example) will b e added to the infrastructure. Infrastructure will expand and ―secondary Clusters‖ will develop as the FCEV market expands and the vehicles become more main stream.

4.3.3.2 Station Specifications

Pre

- commercial hydrogen stations have made the transition from bei ng ―behind the fence,‖ to a near full retail experience. Station performance specifications now include 3

– 5 minute back

- to

- back fills, both 350 and 700 bar dispensers, convenient 24/7 hours, with no attendant required and easy pay pumps. Extensive Codes and Standards have been developed to help ensure stations are designed and built to a consistently high standard, are safe and are compatible with all OEM vehicles. Appendix G provides a list of Codes and Standards that have been developed for hydrogen i nfrastructure.

4.3.4 Policies and Partnerships

Government policies and partnerships can assist in focusing work on the most important tasks needed for implementation of hydrogen infrastructure. Foremost in any alternative fuel vehicle rollout, timing and exec ution of alternative fuel infrastructure is difficult to achieve without help. A classic chicken and egg dilemma exists, more so with hydrogen than with most alternative fuels because of the newness of the fuel and the initial investment needed.

4.3.4.1 Partnersh ips

Partnerships such as the California Fuel Cell Partnership, made up of OEMs, energy companies, industrial suppliers, academia and government, have created important tools, communication pathways and served to build relationships between OEMs and fuel su ppliers specific to hydrogen and fuel cell implementation efforts. Memoranda of Understanding (MOUs) like ―H2 Mobility‖ in Germany for example are also being explored as a useful way to bridge the uncertainty regarding fueling needs and vehicle rollout pl ans. These MOUs between partners such as auto manufacturers, energy companies and local governments can formalize vehicle/infrastructure strategies and or goals surrounding vehicle volumes, timing, location and necessary fueling capacity. MOUs in German y and Japan between major energy companies and OEMs will help define the business case for hydrogen stations and prepare for vehicle introductions.

4.3.4.2 Government Funding

Federal, State and local co

- funding for both vehicle incentives and infrastructure costs will likely be necessary for some years as a way of sharing risk with early adopters of FCEVs. For example, in California, Assembly Bill 118 (2008) added a vehicle registration fee to motorists to generate a fund for alternative fuel investments to help reach energy, GHG and air quality goals. An annual investment plan is developed and serves as a guidance document for the allocation of funding. Funding from this program has been made available for many alternative fuels, including hydrogen infrastructure

. 822017

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- 23 Table 4.3

- 4 Scenarios of Government Support for Hydrogen Fuel Cell Vehicles and Infrastructure: Three Policy Cases *

* This table is for illustrative purposes only and does not necessarily reflect a recommendation that specific policies should be adopted at this time.

4.3.4.3 Regulatory Incentives and Requirements

Short of the government support for development of new hydrogen stations to kick start the market sufficiently so that stati on volumes grow on their own, other policies or requirements may be necessary as shown in the three scenario table above. 83 California is exploring a variety of approaches including both regulatory incentives and possible requirements for installation of s tations to ensure that enough stations are available to market FCEVs successfully.

California’s Low Carbon Fuel Standard: Adopted in 2009, the Low Carbon Fuel Standard (LCFS) requires producers and importers of gasoline to ensure that the mix of fuel they sell into the California market meets, on average, a declining standard for GHG emissions. The standard is measured on a lifecycle basis in order to include all emissions from fuel consumption and production, including the ―upstream‖ emissions that are maj or contributors to the global warming impact of transportation fuels. Because hydrogen has a very low well to wheel carbon content, some regulatory incentive exists for energy companies to provide hydrogen as part of their compliance strategy.Chapter 4

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- 24

Cle an Fuel s O utlet : In the 1990s when it was thought that California‘s Low Emission Vehicle regulation would need alternative fuel vehicles to meet the strict fleet average tailpipe standards, CARB adopted the Clean Fuels Outlet regulation that would require the ins tallation of an alternative fuel pump if a specified number of alternative fuel vehicles needing that fuel were marketed in California. This was California‘s approach to ensuring alternative fuel would be available when vehicles came to market. The thres holds that would trigger this program have not yet been reached. The program is currently being reviewed in the context of how it might be used to ensure sufficient hydrogen fueling stations.

4.4 Conclusions

T he c ombined understanding of home recharging, e lectric vehicle charging system
cost s , and ongoing work to develop voluntary standards indicate that infrastructure to support electric

- drive vehicles will be adequate to support EV/PHEV rollout in the near term. For areas where relative inexperience impl ies uncertainties

— such as the need for and use of public infrastructure, and vehicle battery second ary uses

— DOE activities have been designed and are underway to inform future decisions: Infrastructure deployment projects are underway and over the next 3

- 4 years will establish regional public charging networks and collect data on how and when consumers use them to clarify the future role of public charging in the U.S. In addition to confronting these technology challenges, DOE will continue to support a c ommunication and information campaign at the local, national, and international levels. At the local level, DOE will continue to share information and best practice examples to ensure that cities and local planning organizations receive the best methods f or facilitating vehicle electrification and the infrastructure to support it. At the national and international levels, DOE will continue to coordinate government activities to ensure that national and international voluntary standards for electric vehicl es and support infrastructure work for U.S. auto manufacturers, utilities, and c onsumers

. Regarding hydrogen, the considerable learnings brought about by DOE and other programs, and the leadership, partnerships and funding commitment of California have

en abled pre

- commercial hydrogen infrastructure to be built today. OEMs are sharing FCEV rollout strategies with government leaders so public resources can be paired with private sector investment. A number of automobile manufacturers have stated publicly th at initial, early commercial production of FC E Vs could begin as early as 2015 if infrastructure is ready. A general understanding has been achieved regarding how to create hydrogen station networks using clusters in specific first markets. Government pol icies including regulations and incentives are being developed to support and help guide the progress and help ensure

success.2017

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- 25 Chapter 4 References

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– The California Zero Emission Regulation‖, California Environmental Protection Agency, Air Resources Board April 2010.

77 Institute of Transportation Studies, University of California Davis, Workshop, Roadmap for Hydrogen and Fuel Cell Vehicles in California: A Strategy through 2017, May 5, 2009.

78 http://nrel.gov/hydrogen/proj_learning_demo.html.

79 ―Controlled Hydrogen Fleet Infrastructure Demonstration and Validation Project‖, NREL, Composite Data Project Spring 2010 .

80 ―Current (2009) State of the Art Hydrogen Production Cost Estimate Using Water Electrolysis‖, NREL September 2009. http://hydrogen.energy.gov/pdfs/46676.pdf and Distributed Hydrogen Productio n From Natural Gas: Independent Review, National Renewable Energy laboratory, October 2006. www.hydrogen.energy.gov/pdfs/40382.pdf.

81 ―Hydrogen Fuel cell Vehicle and Station Deployment Plan: A Strategy for Meeting the Challenge Ahead,‖ California Fuel Cell Partnership February 2010.2017

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- 27 82 ―2010

- 2011 Investment Plan for the Alternative Renewable Fuel and Vehicle Technology Program,‖ Californ ia Energy Commission, CEC

- 600

- 2010

- 001

- CTD.

83 ―Analysis of the Transition to Hydrogen Fuel Cells & the Potential Hydrogen Energy Infrastructure Requirements‖ ORNL/TM

- 2008/30.

Additional References

FreedomCAR and Fuel Partnership Codes and Standards Technical Team. Codes and Standards RD&D Roadmap

– 2008

. http://www1.eere.energy.gov/vehiclesandfuels/pdfs/program/cstt_roadmap.pdf

MYPP (Multi

- Year Research, Develo pment, and Demonstration Plan) 2007. Hydrogen Codes and Standards

. Washington, D.C.: U.S. Department of Energy, Energy Efficiency and Renewable Energy. http://www1.eere.energy.gov/hydrogenandfuelcells/mypp/pdfs/codes.pdf

NRC (National Research Council) 2010. Review of the Research Program of the FreedomCAR and Fuel Partnership: Third Report . Washington, D.C.: The National Academies Press. http://www.nap.edu/catalog.php?record_id=12939

NREL (National Renewable Energy Laboratory) 2010. Vehicle Codes and Standards: Overview and Gap Analysis . Washington, D.C.: U.S. Department of Energy, Energy Efficiency and Renewable Energy. www.nrel.gov/docs/fy10osti/47336.pdf.2017

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## 5 Incentives and Flexibilities

This Chapter includes three sections. Chapter 5.1 provides an overview of the regulatory flexibilities and incentives contained in the MYs 2012

- 2016 final rule for the National Program. Chapter 5.2 includes a discussion of the potential regulatory flexib ilities and incentives for MYs 2017 and later which the agencies received input on during our meetings with stakeholders. Chapter 5.3 contains a summary of the non

- regulatory incentives which the agencies received input on during our meetings with stakeho lders. We note that some of the flexibilities discussed in this Chapter were used in our analysis of future scenarios in Chapter 6, though not all. As a result, when EPA and NHTSA undertake analysis for the upcoming federal rulemaking, we would not proje ct additional per

- vehicle cost reduction potential attributable to the flexibilities that have already been used to the current analysis. Chapter 6 contains a detailed discussion of the flexibilities we considered in the analytical
assessment.

5.1 Overview of Existing Incentives and Flexibilities in the MYs 2012

- 2016 Program
EPA‘s and NHTSA‘s programs for MYs 2012

– 2016 provide compliance flexibilit ies to manufacturers, some indefinitely (such as those required by statute), and some that are designed, pursuant to agency discretion, to ease the transition during the early years of the National Program to increasingly stringent regulations

. Th ese flexibilit ies are intende d to help provide sufficient lead time for most manufacturers to make necessary technological improvements and reduce the overall cost of the program, without compromising overall environmental and fuel economy objectives.

Under the CAFE program, Congress required through EPCA and EISA that NHTSA provide three specific types of compliance flexibilities

– credits earned for over

- compliance with a given standard, credits available due to production of alternative fuel vehicles, and the option of paying civil penalties in lieu of compliance. KK For the CAFE program, 49 U.S.C. 32903 allows manufacturers to earn credits (denominated in tenths of a mpg) if their fleet average fuel economy for either passenger cars or light trucks exceeds an applicable CAFE standar d. Credits may be applied to compliance with a standard in any of the 3 consecutive model years immediately before the model year in which the credits were earned (referred to as ―carry

- back‖), or in any of the 5 model years immediately after the credits were earned (referred to as ―carry

- forward‖). Credits may also be transferred by a manufacturer from one of their fleets to another, or traded (sold) to other manufacturers. Credits may not, however, be used to comply with the domestic minimum passenger car standard, and transferred credits are subject to a statutory cap, preventing manufacturers from increasing a fleet CAFE level by more than 1

- 2 mpg with transferred credits, depending on the model year. For purposes of the MYs 2012

- 2016 GHG standards, EPA adopted similar averaging, banking, and trading

KK We note that small volume manufacturers ( i.e. , those that produce less than 10,000 vehicles for sale worldwide) may also petition NHTSA for an exemption from the genera lly

- applicable CAFE standards and potentially obtain their own individual fuel economy standards under 49 U.S.C. 32902(d), but NHTSA does not consider this a generally

- available compliance flexibility like the others listed above, given the production volu me limit.Chapter 5

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provisions allowing manufacturers to bank over

- compliance credits, transfer the credits between their passenger car and light truck fleets, and trade them to other manufacturers. EPA, did not include the EISA cap on transfers

– thus, for purposes of GHG compliance, manufacturers may transfer credits infinitely between their passenger car and light truck fleets.

EPCA has also long contained manufacturing incentives for alternative fuel automobiles. ―Dedic ated‖ ( i.e. , ―pure‖) alternative fuel vehicles and ―dual

- fueled‖ ( i.e.
, ―flexible

- fuel‖ or ―flex

- fuel‖) alternative fuel vehicles both receive special calculations to boost their fuel economy levels for compliance purposes under 49 U.S.C. 32905 and 32906. In EISA, Congress provided for a phase

- out of the alt

- fuel credit, so that while manufacturers can raise their CAFE levels up to 1.2 mpg using the alt

- fuel credit through model year 2014, the amount of possible increase due to the credit decreases by 0.2 mpg each year until it phases out entirely after MY 2019. For purposes of the MYs 2012

- 2016 GHG standards, EPA will allow FFV credits in line with CAFE program limits , but only during the period from MYs 2012 to 2015. In MY 2016 and later, EPA will allow manufacturers to incorporate the emissions performance on alternative fuels by basing the FFV‘s compliance value on test values for both gasoline and the alternative fuel, weighted according to data provided by manufacturer s demonstrating that the alternative fuel is actually being used by FFVs in

- use

. The final compliance flexibility mandated by statute for the CAFE program, at 49 U.S.C. 32912, is the option of paying civil penalties in lieu of compliance with an applicable CAFE standard in a given model year. Some manufacturers face unique compliance challenges because they serve relatively small market segments that tend to value vehicle performance and utility much more highly than fuel economy. For these manufacturers, fuel

saving te chnologies (such as, e.g. , turbochargers), even when applied, are often used to increase performance or utility rather than to increase fuel economy. Some of these manufacturers have relied on this flexibility in past and recent model years, and for CAFE purposes, some manufacturers may continue to do so in the future. The CAA does not have a similar civil penalty flexibility

– manufacturers who do not comply with applicable standards may not certify their vehicles for sale in the U.S.

For CAFE purposes, EPCA and EISA are fairly prescriptive with regard to what compliance flexibilities may be offered, but for GHG purposes, the CAA gives EPA broader authority to craft compliance flexibilities through regulation. The following paragraphs detail the flexibil ities developed by EPA for the MYs 2012

- 2016 GHG program, in addition to the averaging, banking, and trading provisions and FFV credits noted above.

EPA Air Conditioning System Credits : Air conditioning (A/C) systems contribute to GHG emissions in two way s. First, h ydrofluorocarbon (HFC) refrigerants, which are powerful GHG s , can leak from the A/C system (direct A/C emissions)

. Second, o peration of the A/C system also places an additional load on the engine, which results in additional CO 2 tailpipe emiss ions (indirect A/C related emissions) . EPA allow s manufacturers to generate credits by reducing either or both types of GHG emissions related to A/C systems

. EPA Temporary Lead

- time Allowance Alternative Standards (TLAAS) : Manufacturers with limited produ ct lines may be especially challenged in the early years of the National2017

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- 3 Program, and need additional lead time. Manufacturers with narrow product offerings may not be able to take full advantage of averaging or other program flexibilities due to the limi ted scope of the types of vehicles they sell. For example, some smaller volume manufacturer fleets consist entirely of vehicles with very high baseline CO 2 emissions. Their vehicles are above the CO 2 emissions target for that vehicle footprint, but do no t have other types of vehicles in their production mix with which to average. Often, these manufacturers pay fines under the CAFE program rather than meet the applicable CAFE standard. EPA believes that these technological circumstances call for more lea d time in the form of a more gradual phase

- in of standards . For these reasons, EPA included a temporary lead

- time allowance for manufacturers that sell vehicles in the U.S. in MY 2009 and for which U.S. vehicle sales in that model year are below 400,000 v ehicles. T his allowance will be available only during the MY 2012

- 2015 phase

- in years of the program. A manufacturer that satisfies the threshold criteria will be able to treat a limited number of vehicles as a separate averaging fleet, which will be sub

ject to a less stringent GHG standard. LL Specifically, a standard of 25 percent above the vehicle‘s otherwise applicable footprint target level will apply to up to 100,000 vehicles total, spread over the four year period of MY 2012 through 2015. In addition, manufacturer s with between 5,000 and 50,000 U.S. vehicle sales in MY 2009 will have an increased allotment of vehicles, a total of 250,000, compared to 100,000 vehicles (for other TLAAS

- eligible manufacturers). In addition, the TLAAS program for these manufacturers would be extended by one year, through MY 2016 , for a total of five years of eligibility. For the smallest volume manufacturers, those with below 5,000 U.S. vehicle sales, EPA did not set standards but instead deferred standards unt il a future rulemaking.

EPA Early Credits: EPA established opportunities for early credits in MYs 2009

- 2011 through over

- compliance with a baseline standard. T he baseline standard is set to be equivalent, on a national level, to the California standards. C redits can be generated by over

compliance with this baseline in one of two ways

– over

- compliance by the fleet of vehicles sold in California and the CAA section 177 states ( i.e. , those states adopting the California program), or over

- compliance with th e fleet of vehicles sold in the 50 states. EPA is also providing for early credits based on over

- compliance with CAFE, but only for vehicles sold in states outside of California and the CAA section 177 states. Under the early credit provisions, no early FFV credits are allowed, except those achieved by over

- compliance with the California program based on California‘s provisions that manufacturers demonstrate actual use of the alternative fuel. EPA‘s early credits provisions are designed to ensure that th ere would be no double counting of early credits. C redits for over

- compliance with CAFE standards during MYs 2009

- 2011 will still be available to be carried forward for

m anufacturers to use toward compliance with CAFE in future model years, just as before

. EPA Advanced Technology Incentive: EPA provid es an additional temporary incentive to encourage the commercialization of advanced GHG/fuel economy control technologies

-- including electric vehicles (EVs), plug

- in hybrid electric vehicles (PHEVs), and fuel cell

LL EPCA does not permit such an allowance. Consequently, manufacturers who may be able to take advantage of a lead

- time allowance under the GHG standards would be required to comply with the applicable CAFE standard or be subject to penalties for non

- compliance , unless they qualified for an exemption/alternative CAFE standard under 49 U.S.C. 32902(d).Chapter 5

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vehicles (FCVs)

-- for model years 2012

- 2016. The advanced technology vehicle incentive program includes a zero gram/mile emissions compliance value for EVs and FCVs, and the electric portion of PHEVs, for up to the first 200,000 EV/ PHEV/FCV vehicles pr oduced by a given manufacturer during MY 2012

- 2016 (for a manufacturer that produces less than 25,000 EVs, PHEVs, and FCVs in MY 2012), or for up to the first 300,000 EV/PHEV/FCV vehicles produced during MY 2012

- 2016 (for a manufacturer that produces 25,00 0 or more EVs, PHEVs, and FCVs in MY 2012) . For any production of EV/PHEV/FCV vehicles greater than this amount, the compliance value for the vehicle will be greater than zero gram/mile, set at a level that reflects the vehicle‘s net increase in upstream GHG emissions in comparison to the gasoline vehicle it replaces. MM The Final Rule notes: ―EPA will reassess the issue of how to address EVs, PHEVs, and FCVs in rulemakings for model year 2017 and beyond, based on the status of advanced technology vehicle commercialization, the status of upstream GHG emissions control pr ograms, and other relevant factors.‖ 84

EPA Off

- cycle Credits: EPA is also providing an o ption for manufacturers to generate credits for employing new and innovative technologies that achieve GHG reductions that are not reflected on current test procedures. Examples of such potential ―off

- cycle‖ technologies might include solar panels on hybrids, adaptive cruise control, and active aerodynamics, among other technologies. This optional credit opportunity is currently available through the 2016 model year. Credits must be based on real additional reductions of CO 2 emissions and
must be quantifiable and verifiable with a repeatable methodology.

5.2 Potential Credit Programs, Incentives, and Other Flexibilities for 2017 and Later
During the agencies‘ outreach with stakeholders, manufacturers provided early input that several of the flexibility provisions in place for MYs 2012

- 2016 should be retained for MY 2017 and later. Environmental groups also provided early input, as discussed below. As EPA and NHTSA develop the proposed rule for MY 2017 and beyond standards, the agencies will continue to consider the potential need for incentives and flexibilities in the 2017 and later program, including whether and how some of EPA‘s MYs 2012

- 2016 provisions could be applied to the new program, as well as whether any additional provisions would be appropriate to address lead

- time issues. Changes to flexibilities provided under EPCA/EISA would require new legislation; NHTSA intends to develop any proposed standards within the context of its statutory framework.

Most manufacturers support EPA continuing 3

- year credit carry

- back to cover prior debits

, 5

- year credit carry

- forward for use in future years , credit transfers between car and truck categories , and credit trading betwee n manufacturers

. One manufacturer noted support for unlimited credit carry

- forward. These provisions, collectively known as Averaging, Banking, and Trading (ABT), have been an important part of many mobile source programs under CAA Title II, both for fue ls programs as well as for engine and vehicle programs. EPA believes, and manufacturers have confirmed, that ABT is important because it can help to address many issues of technological feasibility and lead

- time, as well as considerations of

MM See 75 FR 25436

- 25437.2017

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- 5 cost. NN EPA w ill strongly consider proposing to continue these provisions in the MY 2017 and later program, as these types of compliance flexibilities will remain important as standards become more stringent. As discussed above in Section 5.1, these provisions are
req uired by EPCA and EISA for the CAFE program.

While not a flexibility in the same sense as other credit programs and incentives discussed in this chapter, several manufacturers supported the continued use of attribute

- based standards using the vehicle‘s foo tprint for setting GHG standards, consistent with EISA‘s requirement that CAFE standards be attribute

- based. A number of manufacturers also supported the use of separate passenger car and light

- truck standards for the GHG standards, consistent with EISA‘s requirement that CAFE standards for cars and trucks be separate, though one manufacturer indicated a single combined passenger car and truck standard (though still attribute

- based) should be considered.

Several smaller volume manufacturers have expressed continued concerns regarding lead

- time, and support for additional flexibility to address the unique needs of small volume manufacturers such as the TLAAS program described above. In the MYs 2012

- 2016 Final Rule, EPA determined that smaller volume manufa cturers needed additional lead time to meet the standards because their CO 2 baselines are significantly higher and their vehicle product lines are limited, reducing their ability to average across their fleets compared to larger manufacturers

. The need for this type of flexibility is tied closely to the level of stringency of the standards to be proposed, and will be analyzed in that context.

EPA deferred small volume manufacturers (SVMs) with annual U.S. sales less than 5,000 vehicles from the MYs 2012

- 2 016 standards. EPA plans to consider establishing standards for these very small volume manufacturers as part of the MYs 2017

- 2025 rulemaking. SVMs noted in discussions that SVMs only produce one or two vehicle types but must compete directly with brands that are part of large manufacturer groups that have far more resources available to them. There is often a time lag in the availability of technologies from suppliers between when the technology is supplied to large manufacturers and when it is availabl e to small volume manufacturers. Also, incorporating new technologies into vehicle designs costs the same or more for small volume manufacturers, yet the costs are spread over significantly smaller volumes. Therefore, SVMs typically have longer model lif e cycles in order to recover their investments. SVMs further noted that despite constraints facing them, SVMs need to innovate in order to differentiate themselves in the market and often lead in incorporating technological innovations, particularly light weight materials. Under the CAFE program, manufacturers who manufacture less than 10,000 passenger cars worldwide annually may petition for an exemption from generally

- applicable CAFE standards, in which case NHTSA will determine what level of CAFE would be maximum feasible for that particular manufacturer if the agency determines that doing so is appropriate. 85

NN NHTSA notes that it is statutorily prohibited from considering availability of credits (including the fuel economy credit s for alternative fuel capability) in determining what levels of CAFE stringency would be maximum feasible for a given model year. 49 U.S.C. 32902(h).Chapter 5

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Several manufacturers have also expressed support for the continuation of A/C system credits. EPA is strongly considering A/C credits for MYs 201 7

- 2025. EPA has included A/C credits in the initial emissions modeling done to support this report, as described in Chapter 6 and Appendix D. EPA plans to further evaluate the methodology used to determine credits, including A/C

- related test procedures.

Some manufacturers have also expressed support for the continuation of EPA‘s off

cycle credits program. The off

- cycle credits for new and innovative technologies are currently available only through MY 2016. Manufacturers have noted that as long as t he credits represent real

- world off

- cycle emissions reductions, the credits should be able to be generated beyond MY 2016. One manufacturer noted that company innovations do not end with MY 2016 and that technologies will always exist which do not show up on the test cycles. Also, credits give additional incentives for company investments in R&D and innovations. EPA understands this perspective and will evaluate the off

- cycle credits provisions in the context of the MYs 2017

- 2025 program, including the p otential need to update the technology eligibility criteria for determining whether a technology qualifies as new and innovative.

Some manufacturers encouraged EPA to continue to offer FFV credits. EPA finalized provisions in the MYs 2012

- 2016 Final Rul e to treat MY 2016 and later FFVs similarly to conventional fueled vehicles

, in that FFV emissions would be based on actual CO 2 results from emission s testing on the fuel s on which it operates

. In calculating the emissions performance of an FFV, manufacturer s may base FFV emissions in part on vehicle emissions test results on the alternative fuel, if they can demonstrate that the alternative fuel is actually being used in the vehicles . Performance will otherwise be calculated assuming use only of conventional fuel . The manufacturer must establish the ratio of operation that is on the alternative fuel compared to the conventional fuel. The ratio will be used to weight the CO 2 emissions performance over the 2

- cycle test on the two fuels. EPA will consider whether it is appropriate to retain this approach in the MYs 2017

- 2025 rulemaking. In addition, one manufacturer raised the concept of providing credits for CNG vehicles and vehicles operating on E

- 25 and other bio

- fuels.

In the MYs 2012

- 2016 Final Rule, EPA established four pathways for manufacturers to earn early credits prior to MY 2012, and established baselines against which manufacturers can earn credits. For MY 2017 and later, we believe the credit carry

- forward provisions are sufficien t to provide manufacturers with credits for achieving reductions beyond those required by the MYs 2012

- 2016 standards. No additional baselines or other provisions would be needed if the credit carry

- forward provisions remain in place.

For advanced techn ology vehicles, manufacturers support an advanced technology vehicle incentive in the form of a 0 g/mile compliance value for electric operation for MYs 2017 and later. Two manufacturers also expressed support for additional credits in the form of ―bonus‖ credits or multipliers for advanced technology vehicles. EPA proposed a credit multiplier for MYs 2012

- 2016 advanced technology vehicles but did not finalize it for reasons described in the Final Rule. 86 Some environmental and public interest groups expr essed concern that the 0 g/mi value does not adequately capture upstream emissions from the charging of electrified vehicles, and believe an upstream emissions factor should be included2017

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- 7 in the compliance calculation for electrified vehicles. For CAFE comp liance purposes, the fuel economy of such vehicle models is determined consistent with petroleum equivalency factors (PEFs) issued by DOE. 87 Current EVs do not receive infinite fuel economy ratings that would be equivalent to a 0 g/mi CO 2 emission rate; f or example, the MY 2008 Tesla Roadster received a fuel economy ratings of 248 mpg (equivalent to about 36 g/mi CO 2 based on gasoline). EPA understands that the treatment of upstream emissions for EVs, fuel cell vehicles, and the electric portion of PHEVs i s a critical issue for the upcoming rulemaking, and this issue is further discussed in Chapter 7.

5.3 Input on Non

- regulatory Incentives from Stakeholders

In addition to the regulatory incentives and flexibilities discussed in the previous section, the agenc ies recognize that there are many non

- regulatory approaches that can promote the commercialization of low

- GHG light

- duty vehicle technologies. These approaches are outside the regulatory authority for NHTSA and EPA, but were raised in many of our stakeho lder meetings (in particular the OEMs and the automotive supply firms) as potentially important drivers in the development and commercialization of advanced technology vehicles. This section will only identify and briefly discuss those non

- regulatory
stra tegies which were raised by stakeholders in our recent meetings. This is by no means a comprehensive list or discussion of the potential non

- regulatory policies and incentives which could encourage low GHG/high fuel economy vehicles.

Federal research and development

The federal government performs automotive research and development (R and D) that is ultimately transferred to the private sector. Several of the OEMs identified this type of R and D support as an important the development of advanced vehicle technologies. The Department of Energy (DOE) is the federal lead on automotive R and D with extensive programs carried out at its national laboratories. DOE‘s FY2010 budget for the Vehicles Technologies Program is $311 million, with major technology foc uses on hybrid electric systems, advanced engines, lightweight materials, and fuels technologies . Other federal agencies have smaller programs, such as EPA which has a FY2010 budget of about $16 million . One major focus of EPA‘s program has been hydrauli c hybrids, which are currently being commercialized in heavy

- duty vehicles. The Federal Transit Administration (FTA) of the Department of Transportation (DOT) has a number of ongoing research and development activities focusing on leading edge propulsion systems for buses designed to reduce operating costs and harmful emissions. These activities include studies and demonstrations on vehicles using plug

- in hybrid electric, fuel cell, battery

- dominant, and hydraulic hybrid technology. 88

Federal financial assistance for private sector R and D and capital investment

Several of the OEMs and the automotive supply companies suggested that federal assistance for R and D programs, as well as for capital investment, can play an important role for the introduction of advanced technology vehicles. Historically, the federal government has periodically provided financial assistance for private sector R and D through favorable tax policies. More recently, the federal government has taken a much more proactive role in stimulating private sector investments in new technologies by providing grants and low

-Chapter 5

5

- 8

interest loans to automakers and suppliers for R and D and capital investment in breakthrough technologies with the potential to reduce fuel consumption and GHG emission s. For example, DOE has an Advanced Technology Vehicles Manufacturing Loan Program that has received appropriations of $7.5 billion for grants and loans to support the development of advanced technology vehicles and associated components in the United Sta tes

. 89 The FTA has provided approximately $100 million and plans to award an additional $75 million in FY 2010 under the Transit Investments for Greenhouse Gas and Energy Reduction (TIGGER) Program. 90 Through this Program, public transit agencies partner a nd contract with private sector organizations, manufactures, system designers and integrators in acquiring and deploying new technologies and systems that reduce energy and greenhouse gases. Additionally, through the National Fuel Cell Bus Program (NFCBP), the FTA is leading a $50 million Federal effort with the support and leverage of an additional $50 million in local and private contributions for the innovative design and demonstration of fuel cell powered vehicles that have zero or

near

- zero emissions. The ultimate objective of the NFCBP is the commercialization of fuel cell buses. An additional $13.5 million has been appropriated under the Program in FY 2010

.
Economic incentives for low

- GHG vehicles

Some automakers told the agencies that the federal and state tax credits and grants played an important role in sparking the initial hybrid vehicle market, and could play an even more important role in promoting PHEVs and EVs in the future. Advanced technology vehicles often have higher up

- front costs, du e to more expensive components and/or lower production volumes, and any strategy that can reduce or offset the higher up

- front cost to consumers can remove one of the most important barriers to greater consumer demand. The Energy Policy Act of 2005 establ ished temporary federal income tax credits for buyers of new hybrid, diesel, dedicated alternative fuel, and fuel cell vehicles that meet certain requirements. For example, while available, consumers who purchased new hybrid vehicles received federal
tax credits that ranged from a few hundred dollars to as much as approximately $3

, 000 for the Toyota Prius, the hybrid vehicle with the highest fuel economy. The federal hybrid vehicle tax credit has been phased out for many manufacturers who have exceeded th e cumulative 60,000 production cap per manufacturer for hybrids and diesel vehicles. More recently, the American Recovery and Reinvestment Act of 2009 extended the tax credits to PHEVs and EVs, which are now eligible for a federal tax credit up to $7

, 500 per vehicle for the first 200,000 cumulative vehicle production per manufacturer.

Some states, such as California, h ave also adopted state gran ts for certain advanced technology vehicles. To date, both federal and state tax credits and grants for new vehi cle purchases have been provided to consumers, but it is also possible for tax credits to be directed to manufacturers who sell advanced technology and/or low

- GHG vehicles.

Another direct approach for reducing the up

- front cost of advanced technology or lo w

GHG vehicles to consumers would be a state sales tax exemption for buyers of vehicles that meet certain requirements. Of course, without limitations such as cumulative production caps, federal tax credits and exemptions from state sales taxes could have important impacts on government revenues.

Non

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- 9 S ome automakers have specifically indicated that high occupancy vehicle (HOV) access has been an important incentive for hybrid

- electric vehicle owners, and c ould potentially be for EV and PHEV owners as well

. By providing two important incentives

— reduced travel time and improved trip time reliability

— HOV lane access can be a big incentive in some urban areas. The Safe, Accountable, Flexible, Efficient Transp ortation Equity Act (SAFETEA

- LU) of 2005 allows an exemption from the HOV occupancy requirement for vehicles certified as ―low emission and energy

- efficient.‖ Some state and local governments have allowed drivers of certain advanced technology vehicles to use HOV lanes regardless of the number of vehicle occupants . A nalyses have suggested that HOV access has been an effective incentive in promoting hybrid vehicle sales in certain urban

areas

. OO

Economic incentives for electric vehicle recharging systems/in stallation

One way to promote grid electricity use in EVs and PHEVs would be financial support for vehicle recharging infrastructure. The American Reinvestment and Recovery Act provides for a 50% tax credit on the installation of home charging equipment

, up to a maximum cost of $2,000, and on installation of commercial equipment up to a maximum cost of $50,000. This tax credit expires at the end of 2010

. Current home recharging systems cost on the order of $2000 or so. These costs are expected to drop as charging systems become more widespread and in higher volumes, as discussed further in Chapter 4. Public high

voltage quick charging systems cost much more. Federal grants and/or tax credits to reduce this cost would address another barrier to consumer demand. Many automakers have also raised the practical challenges involved in the permitting process for charging stations. Federal coordination to establish streamlined standards and codes for permitting processes could assist in EV and PHEV commercial ization. PP Several of the OEMs and automotive suppliers suggested that these types of financial incentives for electric vehicle recharging systems can play an important role in encouraging the purchase of PHEVs and EVs.

Tax incentives or disincentives

Ther e are a number of tax incentives and disincentives that could be considered as part of an overall strategy to promote low

- GHG light

- duty vehicle technology, such as higher gasoline taxes (which would improve the relative economics of other fuels), a gasoli ne price floor (which would preclude the risk of extremely low gasoline prices undercutting other vehicle fuels), and reduced or zero alternative fuel taxes (for example, electricity currently pays no excise/road tax, and there is uncertainty about whether this would be maintained if and when EVs and PHEVS gain greater market share). A few of the OEMs suggested that higher fuel taxes could be used to encourage the purchase of high fuel economy/low GHG vehicles.

OO See, for example, ―Impact of High Occupancy Vehicle (HOV) Lane Incentives for Hybrid Vehicles in Virg inia,‖ David Diamond, LMI Research Institute, in Journal of Public Transportation, Vol. 11, No. 4, 2008, pages 39

- 58. Accessed at http://www.nctr.usf.edu/jpt/pdf/JPT11

- 4Diamond.pdf

. PP See di scussion in Chapter 4.Chapter 5

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Vehicle Labeling

Several stakeholders have em phasized the need for the federal government to educate consumers about the energy and environmental performance of vehicles in general and advanced technology vehicles in particular. On A ugust 30, 2010, EPA and NHTSA jointly announced proposed changes to the current fuel economy label for MY 2012 and beyond that will provide new information (such as tailpipe CO 2 emissions) that will help consumers make more informed purchase decisions. 91 Among other changes, the joint proposal includes several potential n ew label designs for PHEVs and EVs.

Chapter 5 References

84 75 Fed. Reg. 25435, 25341 (May 7, 2010).

85 49 U.S.C. 32902(d).

86 75 Fed. Reg. 25434, (May 7, 2010).

87 65 Fed. Reg. 36986

- 36992 (June 12, 2000). See also 49 U.S.C. 32904(a).

88 See

, e.g. , http ://www.fta.dot.gov/documents/HydrogenandFuelCellTransitBusEvaluations42781

- 1.pdf.

89 http://www.atvmloan.energy.gov/

90 See http://www.fta.dot.gov/planning/planning_environment_114 24.html for more information on FTA‘s TIGGER Program.

91 Revisions and Additions to Motor Vehicle Fuel Economy Label, Proposed Rule, http://www.epa.gov/fueleconomy/regulations.htm#sticker.2017

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## 6 Analysis of Scenario Costs and Impacts

6.1 Context
The President‘s May 21 memorandum indicates that today‘s technical assessment should inform the rulemaking process, and that the subsequent (to the technical assessment) Notice of Intent (NOI) to Issue a Proposed Rule should describe, among other things, potential standards that could practicably be implemented for the 2017

- 2025 model years.
For today‘s technical assessment, the agencies conducted an initial fleet

- level analysis of improvements in overall average GHG emissions and fuel economy levels. We have analyzed a range of potential stringencies for model year s 2020 and 2025 (i.e., progressively lower GHG targets). We have also analyzed more than one illustrative technological pathway by which these GHG targets could be met. We considered these different technology pathways in order to address the difficu lties in forecasting a single pathway and a single cost estimate for the penetration of different advanced technologies into the light

- duty vehicle fleet at this time. We also believe this approach reflects the diversity in strategies we heard from the OE Ms during the stakeholder outreach meetings, who at this time indicated they are each pursuing a range of technologies which they may use in the 2017

- 2025 time frame. The agencies believe that the analyses presented in this technical assessment permit a re asonable initial and approximate evaluation of the relative potential costs and effects of the aggregate stringency levels evaluated in this report.

This analyses began with methods and information developed and applied in support of the recently

- promulga ted GHG standards for the 2012

- 2016 model years, and also reflect updates to the forecast of the future light vehicle fleet, as well as updates to the range and characteristics of anticipated GHG and fuel

- saving technologies (as discussed in Chapter 3).

However, we note, as discussed further below, that several of the simplifications employed here would not be used for purposes of a full Federal rulemaking analysis. This includes the requirements for both EPA and NHTSA to promulgate standards which meet each agency‘s statutory requirements. The agencies have therefore provided a number of caveats to today‘s analysis, discussed at greater length below.

6.2 Analytic Approach

This report presents modeling results that provide the technical basis for the analysi s provided by EPA, NHTSA, and CARB in this chapter. The modeling was performed by EPA

us ing the OMEGA model, which EPA utilized in the MYs 2012

- 2016 light

- duty vehicle rulemaking. The key inputs for the analysis (e.g., the technology costs and effectiven ess) are a result of the joint technical assessment of EPA, CARB, and NHTSA, as described in Chapter 3 of this report.
OMEGA is EPA‘s vehicle greenhouse gas cost and compliance model, and it can be used to simulate how manufacturers might respond to a spe cified vehicle CO 2 emission standard. Broadly, the model starts with a description of the future vehicle fleet, includingChapter 6

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different vehicle platforms

, QQ sales, base CO 2 emissions, attributes such as vehicle mass and the extent to which CO2 reducing/fuel sa ving technologies are already utilized

. For the purpose of this analysis, ove r 60 vehicle platforms were used to capture the anticipated important differences in vehicle and powertrain design and utility between now and model year 2025 . The model is the n provided with a list of technologies which are applicable to various types of vehicles, along with their cost and effectiveness and the percentage of vehicle sales which can receive each technology during the time frame of interest. The model combines t his information with economic parameters, such as fuel prices and a discount rate, to project how technologies c ould be added to vehicles in order to meet various levels of GHG control. The result is a description of which technologies could be added to e ach vehicle platform, along with the resulting cost , in order to meet a specified GHG performance level

. RR We note that for purposes of this Technical Assessment Report, NHTSA did not perform modeling using the CAFE model, also referred to as the Volpe model SS , to help analyze potential fuel economy standards as NHTSA has in recent CAFE rulemakings. The Volpe model simulates how manufacturers might respond to potential fuel economy standards on a yearly basis and supports analysis of fuel economy improving technologies, economic effects, environmental effects and safety effects. For today‘s technical assessme nt, the agencies decided to use the OMEGA model. In upcoming joint rulemaking, NHTSA and EPA plan to make use of the CAFE and OMEGA models, respectively, for purposes of examining potential future CAFE standards and GHG emissions standards.

As discussed a bove, for this technical assessment, the vehicle fleet was analyzed as one single industry wide fleet, irrespective of individual manufacturer differences. The size and composition of the fleet is otherwise equivalent to our projection of the entire fleet through model year 2025. 92 Treating the entire fleet as a single fleet assumes, for example, averaging GHG performance across all vehicle platforms is possible irrespective of who the individual manufacturer is for a particular vehicle platform. This ca n be thought of as analyzing the fleet as if there was a single large manufacturer, instead of multiple individual manufacturers. Alternatively, it is equivalent to an assessment that assumes there are no statutory limits on the ability to transfer credit s between passenger car and light truck fleets (which is the case under the CAA, but not under EISA), there are no market limits on the ability to trade them between manufacturers, and that all manufacturers fully utilize such flexibilities and experience no transaction costs in doing so.

QQ Vehicle platforms represent aggregations of similar vehicle models built by a manufacturer

– for example, the Dodge Caliber, Jeep Compass and Jeep Patriot are built from a single platform, and include a mix of passenger cars and li ght trucks.
RR A description of OMEGA‘s specific methodologies and algorithms, as well as a copy of the peer review documentation, is on the EPA website at http://www.epa.gov/oms/climate/models.htm

. SS DOT‘s CAFE Compliance and Effects Modeling System (commonly referred to as ―the Volpe model‖) is available at http://www .nhtsa.gov/Laws+&+Regulations/CAFE+

- +Fuel+Economy/CAFE+Compliance+and+Effects+Modeling+System:+The+Volpe+Model , which also provides model documentation, source code, inputs and outputs from NHTSA‘s MY 2012

- 2016 rulemaking analysis, and links to prior versi ons and analyses.2017

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- 3 This approach allows evaluation of multiple scenarios in the context of a long

- term technology

- driven assessment. It focuses the analysis on the technology itself, independent of the individual manufacturer, and produces a result that indicates how the fleet could hypothetically achieve greater GHG reductions and increased fuel economy in the most efficient manner. This approach also allows the assessment for this report to be performed without consideration of the partic ular shapes of the passenger car and light truck attribute

based curves, which are required by statute for CAFE purposes and will define the future federal standards. The unlimited averaging that is modeled may reach the same result irrespective of any sp ecific attribute curves, and as long as the curves are calibrated to the flat standard that is modeled here (without prejudging the outcome of those curves, which will be carefully evaluated as part of the federal rulemaking process), the same fleet averag e may be required.

We note that while the single fleet analysis approach simplifies some aspects of the analysis and does offer some advantages, there are also important limitations which will be addressed during the formal rulemaking process. Some of th ese limitations are statutory

– the requirements for CAFE under EPCA and EISA are more prescriptive than for GHG standards under the CAA. Some of these limitations are more informational in nature

– for example, a simplified analysis leaves the agencies u nable to consider certain information about the potential effects of standards that the public (and particularly, the regulated manufacturers) are accustomed to seeing in NHTSA and EPA analyses . The agencies recognize and emphasize again that today‘s anal ysis, while reasonable at this early stage in developing a National Program for post

- MY2016 standards, is a first step , and that much more work will need to be completed for the upcoming NPRM, including full modeling by both EPA and NHTSA that will address each of the limitations , as discussed further below. As with the MYs 2012

- 2016 final rule, the agencies‘ analyses for the NPRM will examine attribute

- based standards under which each manufacturer is subject to its own individual passenger car and light t ruck CAFE and CO 2 requirements, where the standard for each manufacturer is based on the production

- weighted average of its passenger car and light truck targets, with the targets established in the attribute

- based curves. In the upcoming rulemaking both EPA and NHTSA will also consider more than the overall industry

- wide perspective provided in this Report, and intend to analyze potential future CAFE and GHG standards in a manner similar to that done for the MYs 2012

- 2016 rulemaking. For further informat ion on the kinds of comprehensive analyses performed for the MYs 2012

- 2016 rulemaking, see 75 Fed. Reg. 25324 (May 7, 2010).

EPCA as amended by EISA require s separate attribute

- based CAFE standards for passenger cars and light trucks, for each model year, that are the maximum feasible standards for that fleet of vehicles in that model year. TT Today‘s analysis combines the passenger car and light truck fleets, considers flat standards, and considers only a single model year out of the nine model years that w ill be covered by the rulemaking.

TT 49 U.S.C. 32902.Chapter 6

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EPCA as amended by EISA allow s manufacturers to pay fines in lieu of compliance UU and subject to certain limitations allow s manufacturers to earn, trade, and transfer credits (and also earn credits for production of alterna tive

- fueled vehicles in addition to simple over

compliance with applicable standards), VV but do es not allow the availability of credits to be considered in determining what standards would be maximum feasible. WW Today‘s analysis combines the passenger cars and light trucks of all manufacturers into a single fleet, which is equivalent to assuming fully efficient trading and transfer of credits but is not allowed under EPCA, and does not include the additional credit that manufacturers would get under EPCA and EISA for alternative

- fueled vehicles.

In determining what passenger car and light truck standards would be maximum feasible in each model year, EPCA as amended by EISA require s NHTSA to consider and balance four statutory factors: technological feasibili ty, economic practicability, the effect of other motor vehicle standards of the Government on fuel economy, and the need of the United States to conserve energy. While the tables of information presented below concerning technology cost, effectiveness, an d lead

- time, fuel savings and GHG emissions avoided, and other things, would help to inform NHTSA‘s consideration of many of the statutory factors, this information alone may not be sufficient for purposes of a full rulemaking analysis. Other pieces of in formation have historically been used to decide what standards would be maximum feasible for each fleet for each model year, as discussed below.

By modeling a single fleet rather than separate fleets for different manufacturers, we show the most cost

- effec tive hypothetical path for the industry, as a whole, to any specific overall average fuel economy level or GHG emission level. Differential impacts on individual manufacturers, based on the different standards applicable to them given the production

- weigh ted average of their specific passenger car and light truck targets (with the targets established in attribute

- based curves), are thus not reflected in the current analysis. In addition, in representing the market as a single fleet produced by a single ma nufacturer, today‘s analysis exhausts available technologies only when, given input assumptions regarding technology applicability and phase

- in potential, no further technology can be applied to any vehicle model. In contrast, in past rulemakings when the fleet is represented in terms of discrete manufacturers‘ separate passenger car and light truck fleets, some manufacturers have been estimated to exhaust available technologies in some model years at stringencies well below those that would cause the aggregated manufacturer of a combined fleet to do so. This occurs because manufacturers produce different mixes of vehicles, with different levels of baseline technology utilization.

This is information that has historically been relevant to NHTSA‘s determinations of whether standards are economically practicable. XX Understanding and recognizing the

UU 49 U.S.C. 32912.
VV 49 U.S.C. 32903, 32905, 32906.
WW 49 U.S.C. 32902(h).
XX For example, in its recent analysis of its final MY 2016 CAFE standards, NHTSA estimated that required CAFE levels for passenger cars would average 37.8 mpg, but would range from 34.2 mpg (for Jaguar) to 41.1 mpg (for Porsche). Additionally, that same ana lysis estimated that passenger car cost increases (relative to2017

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- 5 differential impact of standards on manufacturers is one of the issues with which NHTSA has grapple d in det ermining maximum feasible standards. While the agency should not key its standards to the least capable manufacturer, the agency should be aware of the impacts in making its decision, since economic practicability is determined in part by the effects of t he standards on vehicle manufacturers

. The results presented in this report represent what the three agencies expect a hypothetical comprehensive

- line vehicle manufacturer could achieve, given the assumptions made here regarding the composition of the fle et and the availability, cost, and effectiveness of various technologies. Note that the results presented here assume trading between auto firms, which has not occurred in the past and may not occur in the future. A mong actual full

- line vehicle manufactu rers, we expect that a manufacturer

- specific assessment based on footprint

- attribute standard curves will result in costs which are higher and lower for the actual full

- line manufacturers than a fleet

- wide average due to the differences among their product offerings. With respect to smaller volume manufacturers and very low volume manufacturers (many of whom only produce high

- performance luxury vehicles), the agencies would expect that, in general, the level of technology they would require and the costs t hey would incur would be higher than presented today, all other things being equal. Thus, i n future analysis done for the joint federal rulemaking NHTSA and EPA would expect individual companies‘ projected costs will be higher or lower than the costs show n here, depending on their particular fleet mixes . The results of this more detailed analysis which will look at individual manufacturers could potentially change NHTSA‘s evaluation of what CAFE standards are maximum feasible.
In addition, today‘s analysi s includes estimates of cost increases associated with the application of additional fuel

- saving technology, as well as estimates of the corresponding reductions in fuel consumption and CO 2 emissions, but does not include estimates of the corresponding soc ial benefits. In the rulemaking the agencies will consider a much broader ranges of impacts of the standards. YY Estimates of social benefits both reflect and inform NHTSA‘s consideration of the four statutory factors, and are often a subject of great inte rest among commenters to CAFE and GHG rules.
Finally, today‘s analysis does not include an evaluation of potential safety effects of new standards. NHTSA has historically considered safety effects along with the four statutory factors in determining appro priate levels of CAFE stringency, a practice recognized approvingly in case law over several decades

. EPA also considered the potential safety effects of the 2012

- 2016 GHG standards in that recent rulemaking. Although today‘s analysis

compliance with the MY 2011 standard) would average $907 in MY 2016, but would range from $126 for Toyota to $1,884 for Ford. NHTSA also found that, without using credits, instances of technol ogy exhaustion among a number of manufacturers would increase rapidly as stringencies increase faster than 4% annually. The aggregated approach of today‘s analysis would have shown almost no technology exhaustion among the regulatory alternatives consider ed by NHTSA in the MY 2012

- 2016 final rule. See

, e.g. , 75 Fed. Reg. at 25600 (May 7, 2010).
YY For example, NHTSA‘s and EPA‘s analysis supporting the MYs 2012

- 2016 final rule include estimates of social benefits associated with fuel costs (setting aside ta xes), economic impacts of petroleum dependence, the social cost of carbon dioxide emissions (and criteria pollutant emissions), social costs ( e.g. , additional highway congestion) and benefits (the value of additional travel) of additional travel demand ind uced by fuel economy increases, and other factors.Chapter 6

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considers significa ntly greater levels of mass reduction than considered for the MYs 2012

- 2016 final rule, it does not yield estimates of the corresponding safety implications. As discussed in Chapter 3, NHTSA

, EPA , and DOE have undertaken a number of important, new safety

- focused analyses to inform the future joint Federal rulemaking

. NHTSA and EPA will include a detailed assessment of safety impacts at that time.

Section 202(a) of the Clean Air Act, in contrast, provides broad discretion regarding how EPA can consider r elevant factors in establishing GHG emissions standards for light

duty vehicles. For example, in setting GHG standards

, section 202(a) of the CAA allows for the consider ation of the availability of transferred or traded credits earned for over

compliance, the availability of credits for the use of advanced technologies and for A/C, and other credit

- generation mechanisms. This broader discretion to reflect anticipated manufacturer behavior in response to available compliance flexibilities could allow stand ards established under the CAA to be more stringent than could be established under EPCA as amended by EISA, because the CAA allowed analysis would be able to show that more stringent standards could be feasible when those flexibilities are taken into acco unt. However, as noted in several other locations in this report, there is significant additional information and analysis which EPA (and NHTSA) believe are necessary in order to support the future federal rulemaking, and EPA intends to develop a detailed analysis similar to that performed for the MY2012

- 2016 standard setting rulemaking, and to consider many of the same kinds of factors as it did in that rulemaking.

We emphasize again, however, that the upcoming rulemaking to develop the next phase of the National Program will be based on a full analysis that is consistent with both the statutory framework that provided under EPCA as amended by EISA , and the flexibili ties that can be considered under the CAA , just as the detailed analysis for the MYs 2012

- 2016 was conducted. With these explanations and caveats, NHTSA and EPA believe today‘s analysis provides a useful means of comparing the scenarios discussed below.

6.3 Development of Technology Pathways

The analysis for this Technical Assessment Report considers two model years

– 2020 and 2025; four ―technology pathways‖

– ―A,‖ ―B,‖ ―C‖ and ―D;‖ and four potential rates of increase in fleetwide average stringency

– 3%/y ear, 4%/year, 5%/year, and 6%/year. This section of Chapter 6 discusses each of these elements, 6.4 describes other key inputs employed in the analysis, 6.5 presents the results of the analysis., and in 6.6 we present a sensitivity assessment related to b attery cost estimates.

6.3.1 Model Years Considered

The analysis for this Technical Assessment Report considered two model years, 2020 and 2025

. Vehicles are typically redesigned every 5 years on average, and tend to receive a more modest ―refresh‖ between major redesigns. By assessing potential scenarios at a five

year increment, we base our assessment on an assumption of the efficient use of cap ital2017

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- 7 investments, engineering, financing, and other resources. ZZ This approach predicts that manufacturers therefore have the opportunity to redesign vehicles by 2020, and again by 2025.

6.3.2 Scenario Stringencies Assessed

For each model year and each technolo gy pathway (described below) we analyzed four potential GHG targets representing a 3, 4, 5 and 6% decrease in GHG levels

-- that is, starting with a 250 gram/mile overall average requirement in MY 2016, the g/mile CO 2 scenario fleet

- wide target was lowered at the rates of 3% per year, 4% per year, 5% per year, and 6% per year. AAA The 3, 4, 5, and 6% annual stringency increases were chosen for evaluation because they represent a reasonably broad range of targets for this initial assessment and because the rat es of increase are consistent with CARB‘s letter of commitment in response to the President‘s memorandum. The assessment for each scenario is characterized using four broad metrics: per

- vehicle cost increase, vehicle technology mix, net reduction in GHG e missions, and net reduction in fuel consumption. BBB

The scenario stringencies are shown below in terms of the specific grams/mile CO2 values analyzed for MY 2020 and 2025, and like the 250 g/mile standard, include the potential usage of air conditioning emissions reductions ( Table 6.3

- 1 ). Air conditioning emissions reduction in the 2025 time frame was estimated at 15 grams compared to a 2008 baseline system for al l four technology paths. CCC

, 93 The increase in estimated air conditioning reductions relative to those projected in the MYs 2012

- 2016 timeframe is largely due to an anticipated increase in the use of alternative refrigerants. DDD Note that EPA has not made any determination at this time whether reductions due to improvements in air conditioning should be treated as a credit or a requirement during the 2017

- 2025 timeframe.

ZZ The MYs 2012

- 2016 final rule discusses the 5

- year vehicle redesign practice in much more detail; see 75 FR at 25445 and 25573.

AAA For this assessment these future targets were modeled as a flat, or univ ersal, standard, rather than as attribute

- based standards. Since the difference between attribute

- based and flat standards is that flat standards apply the same requirement to every manufacturer in the fleet, while attribute

- based standards allow differen t requirements depending on the vehicles that each manufacturer produces for sale, modeling the entire new vehicle fleet as if it were a single automotive firm causes flat standards and attribute

- based standards to produce the same average required stringe ncies. For the upcoming joint federal rulemaking, NHTSA and EPA will propose attribute

- based standards.
BBB Additional impacts from fuel economy/CO 2 standards such as co

- pollutants, the social cost of carbon, or energy security premiums could be quantifie d. While this text does not discuss these topics, as discussed above, they are extensively discussed in the recent 2012

- 2016 final rule and will be discussed in the upcoming joint federal rulemaking.
CCC While the air conditioning reductions were modeled in this analysis, their relative cost

- effectiveness suggests that manufacturers will use them to meet any standard. As the MYs 2012

- 2016 final rule allowed for a similar crediting program, all costs and benefits from the A/C system control are present in th e reference case (MY 2016) as well. A more complete discussion of the potential reductions in leakage from air conditioning systems is presented in Appendix D to the Technical Assessment Report.
DDD In this analysis, EPA anticipates that prior to the MY 2020 timeframe, low GWP refrigerants will be approved under the Significant New Alternatives Policy Final Rule (1994). The use of low GWP refrigerants in this analysis does not indicate a decision on behalf of EPA.Chapter 6

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- 8 Table 6.3

- 1 : Modeled GHG Targets

Scenario Title CO2 Target (g/mile) in MY 2020 (MPG) CO2 Target (g/mile) in MY 2025 (MPG) 3% per year 221 (40) 190 (47) 4% per year 212 (42) 173 (51) 5% per year 204 (44) 158 (56) 6% per year 195 (46) 143 (62)
Note: The targets evaluated were CO2 targets which could be meet through reductions in CO2 as well as through air conditioning system hydroflurocarbon reductions converted to a CO2 equivalent value. MPGe is the equivalent MPG value if all of the CO2 reductions came from fuel economy improvement technologies. Real

world CO2 is typically 25 percent higher and real

- world fuel economy is typically 2 0 percent lower. Thus, the 3% to 6% range evaluated in this assessment for MY 2025 would span a range of real world f uel economy values of approximately 37 to 50 mpg, which correspond to the regulatory test procedure values of 47 and 62 mpg, respectively.
The reference case GHG emissions scenario assumes no further improvements in CO2 emissions from the 2016 final rule standards, which are projected to produce a fleet wide average of approximately 250 grams CO 2 per mile. This projected fleet wide average is assumed to remain in place indefinitely. We also assume that the fleet mix, including market segmentation, is unc hanged between scenarios, though it does change over time from 2016 to 2025 as discussed in Appendix A. Additionally, we did not explicitly model any crediting schemes in this analysis, other than the air conditioning emission reductions which are a funda mental component of EPA‘s MYs 2012

- 2016 program, and the allowance of unlimited

car

- truck credit transfer and inter

- manufacturer trading which result from combining individual manufacturers into a single industry

- wide fleet.

6.3.3 Technology Pathways Considered
As discussed in the introduction to this Chapter, the use of distinct ―technology pathways‖ illustrate that there are multiple mixes of advanced technologies which can achieve the range of GHG targets we analyzed. The approach of considering four technol ogy pathways for this assessment was chosen for several reasons. First, in our stakeholder meetings with the auto manufactures, the companies described a range of technical strategies they were pursuing for potential implementation in the 2017

- 2025 time f rame. For example, some firms are pursuing an HEV focused strategy and others a mass reduction and next generation gasoline/diesel engine focused strategy. Using multiple technology pathways allows the agencies to evaluate how different technical approac hes could be used to meet progressively more stringent scenarios.

Second, this approach helps to generally capture the uncertainties we see with forecasting the potential penetration of and costs of different advanced technologies into the light

- duty veh icle fleet ten to fifteen years into the future at this time. As discussed in Chapter 3, there is significant on

- going technology development work occurring at the auto companies and in the broader automotive supply base on a large range of advanced techn ologies. The three agencies also have on

- going technology cost, safety, and effectiveness work which has not been completed. Therefore we believed it is appropriate for this initial technology assessment to consider more than one technology pathway.2017

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- 9 Wha t are the four technology pathways?

Pathway A is intended to portray a technology path focused on HEVs, with less reliance on advanced gasoline vehicles and mass reduction, relative to Pathways B and C.

Pathway C represents an approach where the industry f ocuses most on advanced gasoline vehicles and mass reduction, and to a lesser extent on HEVs.

Pathway B represents an approach where advanced gasoline vehicles and mass reduction are utilized at a more moderate level, higher than in Pathway A but less than Pathway C.

Pathway D represents an approach focused on the use of PHEV, EV and HEV technology, and less reliance on advanced gasoline vehicles, mass reduction.

For MY 2025, as will be seen in the following section which presents the results of the

assessm ent, as the CO2 stringency scenario increases progressively from 3% per year to 6% per year, the extent of electrification of the fleet (the combined penetration of HEVs, PHEVs, and EVs) increases for each of the three pathways. However, the degree of ele ctrification is highest for Pathways A and D, and the least for Pathway C. This occurs because under pathway C, there is a higher degree of mass reduction and a higher penetration of advanced gasoline, which means that the penetration of HEV/PHEV/EVs need ed to achieve the CO2 stringency is lower, as compared to Pathways A, B and D. This impact is seen clearly for the 4%, 5%, and 6% per year stringency scenarios. However, for the 3% per year scenario the distinction between Pathways B and C are very small , because the level of stringency is low enough that it requires only a modest level of mass reduction and advanced gasoline vehicle technology and the degree of electrification needed to meet the CO2 target (190 g/mile CO2 in MY 2025) for Pathways B and C is minimal. Pathway D has the highest level of EVs, and also high levels of HEVs, in particular when compared to Pathways B and C.

For MY 2020, in contrast, there is little distinction between the technology projected for the technology pathways A, B, an d C for the 3%, 4%, and 5% per year scenarios, because the overall level of stringency for each of these scenarios in MY 2020 is modest, and the overall difference between the MY2020 emission target for 3%, 4%, and 5% per year is small compared to in MY 20 25. For example, the 3% and 4% per year targets in MY 2025 are 17 g/mile CO 2 apart, but in MY 2020, the 4% per year target is only 9 g/mile more stringent than the 3% per year scenario (See Table 6.3

- 1 above). The combination of the less stringent target s in MY 2020 and the smaller delta between the emission targets results in only small differences between Pathways A, B, and C for the 3%, 4%, and 5% per year targets for MY2020. Only with the most stringent scenario analyzed for MY 2020, the 6% per year scenario, is there a significant difference in the technology penetrations between Pathways A, B and C for MY 2020. Note that due to time constraints we were not able to assess MY2020 for Pathway D.

All four of these pathways include significant amounts o f mass reduction, relative to 2008 model year vehicles, ranging from 15 to 30% in 2025. The ability of the industry toChapter 6

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reduce mass at the higher end of this range is an open technical issue which the agencies are carefully evaluating and will continue to as we move forward. In addition, as discussed in the joint 2012

- 2016 NHTSA and EPA final rule, the effects of vehicle mass reduction on safety should be analyzed from a societal fatality perspective, which could affect the maximum levels used for the futu re joint federal rulemaking. Although those effects have not been included in this Report, the two agencies will consider them for the future joint federal rulemaking. As discussed in Chapter 3, NHTSA

, EPA , and DOE have a number of on

- going projects in t his area which will inform the future joint federal rulemaking.

The agencies note that these pathways, of course, are meant to represent ways that manufacturers could respond to eventual standards, and do not represent ways that they must respond to those standards. EPA‘s GHG standards and NHTSA‘s CAFE standards are performance

- based and not technology mandating

– manufacturers have wide discretion to apply the technologies that they choose in meeting the standards.

How are the different technology pathwa ys implemented in the analysis?

In order to analyze four distinct technology pathways, we developed maximum technology penetration rates which we could implement within the OMEGA model. These maximum technology penetration rates are discussed in Chapter 3 . These penetration rates were informed by the range of technology approaches we heard from different auto companies, and represent the three agencies ‘ initial assessment of potential technology feasibility and lead time considerations for model year 2025

.

A large number of technologies were considered by the agencies and are used in th is analysis (see Chapter 3 for a detailed discussion of all the technologies considered). For the purposes of evaluating the four technical pathways, we assessed the imp act of approaches which placed a different emphasis on broad technology classes. The broad technology classes evaluated for purposes of this analysis are defined below. For a more detailed discussion of any individual technology, please see Chapter 3 of this report:

Conventional Spark Ignition (SI)

- This technology category includes all technologies that are not contained in other categories such as gasoline direct injection engines, cylinder deactivation, six and eight speed automatic and dual clutch tr ansmissions, and
start

- stop micro

- hybrid technology.

Advanced SI

- This technology includes gasoline spark ignition engines which are currently under development by OEMs and suppliers and are not anticipated to be widely used in the 2012

- 2016 time frame . For purposes of this analysis, based on the agencies expert judgment to define these advanced SI engines, we modeled a direct injection gasoline engine with cooled exhaust gas recirculation, and with a larger degree of engine downsizing and higher level of turbocharging as compared to the turbo

- downsized engines included in our analysis for the MYs 2012

- 2016 final rule. This technology is discussed in detail in chapter 3, and is similar to the technologies that many OEMs indicated were underdevelopment and which they anticipate will be introduced into the market in the 2017

- 2025 time frame.2017

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- 11 Hybrid

– While the agencies recognize there are many types of full

- hybrids either in production or under development, for the purposes of this analysis we have
spec ifically modeled two types of hybrids, P

- 2 and 2

- Mode type hybrids.

Plug

- in Hybrid (PHEV)

- This technology includes PHEV‘s with a range of 20 and 40 miles and is discussed in Chapter 3. As discussed in Appendix B, we project that PHEV technology is no t available to some vehicle types, such as large pickup. While it is possible to electrify such vehicles, there are tradeoffs in terms of cost, electric range, and utility that would reduce the appeal of the vehicle to a narrower market.

Electric Vehicle (EV)

- This technology includes vehicles with actual on

- road ranges of 75, 100, and 150 miles. The actual on

- road range was calculated using a projected 30% gap between two

- cycle and on

- road range. These vehicles are powered solely by electricity and are not powered by any liquid fuels. As with PHEVs, and as discussed in Appendix B, we assumes that EV technology is not available to some vehicle types, such as large pickup. While it is possible to electrify such vehicles, there are tradeoffs in t erms of cost, range, and utility that would reduce the appeal of the vehicle to a narrower market. These trade

- offs are expected to reduce the market for other vehicle types as well, and for this analysis we have considered this in the development of the

m aximum technology penetration rates we use for the three pathways as discussed in Chapter 3. Note that for this assessment, we modeled EVs and did not consider fuel cell vehicles (FCVs). An assessment could be done considering FCVs in addition to EVs. H owever, such an assessment would need to carefully consider the availability of the necessary infrastructure to support FCV penetration.

Mass Reduction

- This technology includes material substitution, smart design, and mass reduction compounding. The ac tual amount of reduction from the 2008 baseline was determined based on CBI provided by vehicle manufacturers, assessments provided by material suppliers, and existing studies in the literature, including the 2010 report from Lotus Engineerin g. As discuss ed above as well as in Chapter 1 and Chapter 3, NHTSA and EPA intend to conduct a thorough assessment of the levels of mass reduction that could be achieved which is both technologically feasible and which can be implemented in a safe manner for the joint federal NPRM.

Chapter 6.4 discusses additional key inputs used in our technical assessment, and Chapter 6.5 presents the results of the assessment.

6.4 Other Key Inputs to the Analysis

In addition to the technology effectiveness and cost estimates detailed in Chapter 3, and the development of the four technology pathways discussed above, key inputs to today‘s analysis are summarized below, and are discussed in more detail in Appendix E.

Vehicle Sales

– The vehicle sales projection is based upon output from the National Energy Modeling System (NEMS) which is maintained by the Department of Energy‘s Energy Information Administration. As in the MYs 2012

- 2016 Final Rule, the car and truck split was drawn from NEMS, while market segmentation was drawn from CSM Worl dwide‘sChapter 6

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forecasting tool. Total market size is estimated in 2025 at 17.0 million vehicles (58% cars). Cars, in the context of NEMS, are defined using the pre

- MY 2011 CAFE definition. For this analysis the DOT Volpe Center produced a custom run of NEMS. This run generated the same overall vehicle sales as the Reference Case for the Energy Information Administration‘s Annual Energy Outlook (AEO) 2010, 94 but a different sales split between cars and light trucks. A detailed discussion on this topic is presen ted in Appendix A.

On

- road Fuel Economy Shortfall

– The ―on

- road gap‖ is the difference between the fuel economy experienced and the CO 2 emissions emitted in actual driving, as opposed to the higher fuel economy and lower emission level experienced on the specified emissions tests (the FTP and the HFET). The gap includes the real

- world effects of wind, road grade, air conditioning usage, and a variety of other factors. As in the MYs 2012

- 2016 final rule, we assume a 20% gap from certification results, sim ilar to today‘s vehicles for internal combustion engines, as determined in EPA‘s 2006 fuel economy labeling rulemaking. 95 Based on engineering judgment, the 2006 labeling rule analysis, and Confidential Business Information, we estimated a larger, 30% gap from test results for power consumed by electric motors in PHEVs and EVs in

- use compared to the emissions test procedure.

Fuel Prices

– The gasoline and electricity prices used in today‘s analysis are drawn from the Reference Case Scenario AEO 2010. 96 The gasoline fuel prices were $3.49 in 2025 including all taxes. EEE Electricity prices are projected at approximately $0.11 in 2025 and gradually increase beyond that point. Beyond 2035, fuel prices were extrapolated, and the details are discussed in App endix E.

V ehicle M iles T raveled Assumptions , Survival rates

– VMT schedules and survival rates are available in Appendix E. Expected lifetime VMT is approximately 207,000 miles for cars in the 2025 time frame and approximately 246,000 miles for trucks in the 2025 time frame. While long term trends for VMT growth are uncertain, these schedules reflect the same projection methodology used in the MYs 2012

- 2016 final rule. 97 As in the 2012

- 2016 final rule, these values derive from assumptions made in AEO 2010

.
VMT Rebound

- Chapter Four of the Joint Technical Support Document to the recent MYs 2012

- 2016 final rule surveys previous studies, summarizes recent work on the rebound effect, and explains the basis for the 10 percent rebound effect EPA and NHTSA are u sing in the current technical analysis. 98 The use of a 10 percent rebound effect in this analysis reflects an assumption that the rebound effect applicable to the MYs 2012

- 2016 vehicles will remain applicable throughout future time periods. FFF The agencies plan to conduct new analysis of the expected rebound effect in this time frame in a future rulemaking.

Upstream Emissions

– The upstream emission factors for gasoline is the same as that used in the MYs 2012

- 2016 final rule (2,478 g CO 2 eq / gallon). 99 F or the present report, we rely

EEE Note fuel taxes are included when models select technology options and when conducting payback analysis. However fuel taxes are not used for calculating social benefits.
FFF It should be noted, however, that CARB, when adopting its initi al GHG standards for MYs 2009

- 2016, relied on a study that found that a rebound effect on the order of 3 percent was appropriate.2017

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- 13 upon the electricity emission factors produced by the EPA Office of Atmospheric Programs for an analysis of the American Clean Energy and Security Act of 2009 (H.R. 2454)

. 100 This scenario assumes no new power sector regulati ons, but does assume construction of new plants to replace older retired plants. In 2025, it is assumed that electricity generation at the plant is equivalent to 558 g CO 2 eq /kwh. This value should be adjusted upwards for feedstock gathering, transmissio n losses, and losses while charging the vehicle. After adjustment, the 2025 electricity emission factor is approximately 703 g CO 2 eq for each kW

- hour consumed from the battery pack.

Global Warming Potentials

– The global warming potentials (GWP) used in this analysis are consistent with the MYs 2012

- 2016 final rule and with the 2007 Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report (AR4). These GWP values are 1430 for HFC, 298 for NO 2 , and 25 for CH 4
. 101 At this time, the 1996 IP CC Second Assessment Report (SAR) global warming potential values have been agreed upon as the official U.S. framework for addressing climate change and are used in the official U.S. greenhouse gas inventory submission to the United Nations climate change framework, which is consistent with the use of the SAR global warming potential values in cur rent international agreements. There are slight differences between SAR and AR4 values, most notably a 10% increase in the value used for HFC.

6.5 Results of Analysi s
This section presents the results from our modeling assessment of future stringency scenarios using the four technology pathways described in Chapter 6.3 . The inputs are discussed in Chapter 3 of this technical report , and a detailed description of the analytic methodology is provided in Appendix F . In addition, all of the modeling input and output files used for the assessment are available on the web. GGG

This section presents the assessment results for model year 2020 and 2025. First, we present result s at a ―fleet

- wide‖ level, that is at an aggregated level for the new model year fleet in 2025, for the four technology pathways we analyzed. The four technology pathways are discussed in detail in Chapter 6.3. Second, we present results at a car

- fleet and truck

- fleet level, in order to show the range of costs and impacts at a more detailed level. This is followed by the fleet

- wide level results for the MY2020 assessment.

The following tables show summaries of per

- vehicle increases in costs, as well as fleet wide reductions in fuel consumption and GHG emission reductions. The costs, fuel savings, and GHG emission reductions are calculated against the reference fleet of MY 2025 vehicles complying with the MY 2016 standards. The listed reductions in GHG emissions and fuel consumption are cumulative over the lifetime of the selected model years, and are the delta between the GHG emissions and fuel consumption under the MY 2016 reference case and the selected emission control/fuel economy scenario.

GGG The input files, modeling tool, and output files used for this Technical Assessment Report are available at http://www.epa. gov/oms/climate/models.htmChapter 6

6

- 14

In the assessment of potential future ranges of stringency presented in this report, we based our compliance analysis on the tailpipe emissions from all vehicles

– thus EVs were evaluated at a 0 gram/mile CO2 level and PHEVs were evaluated as 0 gram/mile for the electric drive portion of the vehicles operation. For the purposes of the GHG impacts, we have included the resultant increase in upstream CO2 from the use of PHEVs and EVs in our overall calculation of the net CO 2 reductions for each of the scenarios ev aluated. As a result, a single stringency scenario may have a range of CO 2 e impacts depending on the electrification of the fleet.

Based on our initial assessment in this report, we see that the c onventional vehicle technolog ies are typically more cost e ffective than any of the other technology options, followed by advanced spark

- ignition ( SI ) engines, hybrids, electric vehicles, and PHEVs (see Table 6.5

- 2 for example)

. HHH Mass reduction, which is generally highly cost effective, is often among the first t echnologies chosen. In our modeling assessment, vehicle technologies are applied in a ranked manner that value s cost

- effective reductions in fuel consumption and CO 2 emissions.

The cost of the MY 2025 scenarios for the entire new vehicle fleet ranges from $773 (3%, Path C) to $3,455 (6%, Path A) per vehicle , as shown in Table 6.5

- 1 . Technology pathway C, which relies upon advanced gasoline technology and greater mass reduction as compared to Pathway A and B , demonstrates the lowest costs. Pathway A a nd B show a greater electrification of the fleet and somewhat higher costs.

The GHG reduction over the lifetime of the MY 2025 vehicles ranges from 343 million metric tons (MMT) CO 2 e avoided in the 3% scenario to between 531MMT and 593 MMT CO 2 e in the 6% scenario. The range in CO 2 emission reduction is due to differing degrees of fleet electrification under the technology pathways. MY 2025 vehicles, over the course of their lifetimes, will reduce between 0. 7 billion barrels of gasoline consumption under the 3% scenario to 1

. 3 billion barrels under the 6% scenario. For reference, the NHTSA & EPA National Program in MY 2016 is projected to reduce 0.6 billion barrels of fuel and 325 MMT CO2e over the lifetime of MY 2016 vehicles.

Table 6.5

- 1 : Assessment P rojections for Model Year 2025 Vehicles by Technology Path

New Fleet Target Per

- Vehicle Cost increase ($) Scenario CO2 MPGe * Path A Path B Path C Path D 3%/year 190 46.8 $9 30 $8 50 $77 0 $1,050 4%/year 173 51.4 $1,70 0 $1,5 00 $1, 400 $1,900 5%/year 158 56.2 $2,5 00 $2, 300 $2, 100 $2,600 6%/year 143 62.1 $3, 500 $3,2 00 $2,8 00 $3,400

HHH We did not assign an explicit monetary value to driving range, and as a consequence, the model typically chose shorter range electric vehicles (EV75) over longer range electric vehicles (EV150), as each produced the
same statuto ry CO 2 reduction. The agencies will consider this issue in the context of a future rulemaking.2017

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- 15 Lifetime CO2e Reduction (MMT) Lifetime Gasoline Reduction (Billion Barrels) Scenario Path A Path B Path C Path D Path A Path B Path C Path D 3%/year 3 40 34 0 34 0 340 0.7 0.7 0.7 0.7 4%/year 44 0 44 0 44 0 405 0.9 0.9 0.9 0.9 5%/year 52 0 52 0 530 440 1.1 1.1 1.1 1.1 6%/year 53 0 5 50 59 0 470 1.3 1.3 1.3 1.3

Note

– these costs, CO2 reductions, and fuel savings are relative to the 2016 EPA GHG standards * MPGe is the MPG equivalent to the CO2 target if all CO2 reductions occur from fuel economy improvement technologies. Real

- world CO2 is typically 25 percent higher and real

- world fuel economy is typically 2 0 percent lower. Thus, the 3% to 6% range evalu ated in this assessment would span a range of real world fuel economy values of approximately 37 to 50 mpg, which correspond to the regulatory test procedure values of 47 and 62 mpg, respectively. For the technical assessment, we have estimated a reductio n of 15 g/mile CO2 equivalent from air conditioning system improvements, which would not actually translate into MPG improvements

.

The penetration of HEVs, EVs, and PHEV in MY 2025 varies considerably depending on the technology pathway and scenario, as can be seen in Table 6.5

- 2

. As discussed in Chapter 6.3, Technology Pathway A places greater focus on HEV technology and less emphasis on mass reduction and advanced gasoline engine technology. Thus, in the 3%/year scenario, Path A resu lts in 11% HEV penetration, and the most stringent 6% scenario increases HEV penetration to 68% for Path A, all with approximately a 15% reduction in mass for the new vehicle fleet.

Pathway C places greater emphasis on mass reduction and advanced gasoli ne vehicle technology, and therefore the penetration of HEVs ranges from 3% up to 44% of the new vehicle fleet. The penetration of gasoline and diesel vehicles for each of the stringency scenarios is highest for Pathway C, and the degree of mass reduction is also the highest among the four pathways, ranging from 18% to 26%.

Pathway B shows a technology approach in between Paths A and C, with advanced gasoline technology and mass reductions higher than for Path A but lower than Path C, and HEV penetrations lower than Path A but higher than Path C. This trend is not as strong for the 3% per year stringency scenario because the level of stringency does not require enough advanced technology to show much of a difference between Pathways B and C.

Pathway D pl aces a greater emphasis on PHEV and EVs than the other three technology paths. As a consequence, there are lower penetrations of advanced gasoline engines and of mass reduction, but more electric vehicles than in the other three pathways.

Table 6.5

- 2 : As sessment Projections for Model Year 2025 Vehicles

New Fleet Technology Penetration Estimates Scenario Technology

Path New Vehicle Fleet Technology PenetrationChapter 6

6

- 16 Gasoline & diesel vehicles HEV PHEV BEV Net Mass Reduction III 3%/year Path A 89% 11% 0% 0% 15%

Path B 97% 3% 0% 0% 18% Path C 97% 3% 0% 0% 18% Path D 75% 25% 0% 0% 15%

4%/year Path A 65% 34% 0% 0% 15%

Path B 82% 18% 0% 0% 20% Path C 97% 3% 0% 0% 25% Path D 55% 41% 0% 4% 15%

5%/year Path A 35% 65% 0% 1% 15%

Path B 56% 43% 0% 1% 20% Path C 74% 25% 0% 0% 25% Path D 41% 49% 0% 10% 15%

6%/year Path A 23% 68% 2% 7% 14%

Path B 44% 47% 2% 7% 19% Path C 53% 44% 0% 4% 26% Path D 29% 55% 2% 14% 14%

Table 6.5

- 3 present estimates of payback period and net lifetime savings. Payback period is the number of years it takes for the higher initial cost of the vehicle to be off

- set by the vehicle‘s fuel savings. As discussed in Chapter 6.4, we used AEO 2010 reference case for fuel prices, includin g fuel taxes, and we discounted the fuel savings using a 3 percent discount rate. The net lifetime savings is the total lifetime fuel savings for the vehicle discounted at 3 percent minus the initial vehicle cost increase. As can be seen in Table 6.5

- 3, all MY 2025 scenarios, regardless of technology pathway, have a positive net lifetime fuel savings between approximately $4,900 and $7,400 , and for MY 2025 all of the scenarios and technology pathways pay back in 4. 2 years or less.

III Please note that we show net mass reduction relative to model year 2008 vehicles. In the case of PHEVs and EVs, the batteries increase the weight of the vehi cle. This battery weight increase is combined with the mass reduction technology to calculate net mass reduction for those vehicles.2017

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- 17 Table 6.5

- 3 : Estimate d Consumer Payback and Lifetime Savings For Model Year 2025 Vehicles (3% Discount Rate) Payback (years) Net Lifetime Savings ($s) Scenario Path A Path B Path C Path D Path A Path B Path C Path D 3%/year 1.6 1.5 1.4 1.9 $5,032 $5,084 $5,174 $4,882 4%/year 2.5 2.2 1.9 2.9 $5,862 $6,041 $6,198 $5,329 5%/year 3.1 2.8 2.5 3.6 $6,450 $6,705 $6,959 $5,532 6%/year 4.1 3.7 3.1 4.2 $6,162 $6,564 $7,379 $5,705 Note

– these estimates are relative to vehicle which comply with the 2016 EPA GHG standards
The following discussion presents information regarding the assessment projections of technology application and per

- vehicle cost increases at the car

- fleet and truck

- fleet level for MY 2025

. We categorized passenger cars and light trucks using the sam e category definitions as contained in the 2012

- 2016 National Program final rule. The results are presented sequentially by technology pathway (i.e., Pathway A, Pathway B, Pathway C, and Pathway D) . The costs and CO 2 emission levels discussed in this se ction reflect the same parameters as the previous fleet level summaries (Section 6.5 .1.1 ). The cost increases are relative to the same vehicles und er the MY 2016 standard, and the CO 2 e and MPGe levels include improvements to the vehicle air conditioning system, but exclude outlet electricity.

Car and Truck Fleet Information for Technology Path A for MY 2025

Table 6.5

- 4 presents vehicle segment lev el results for Technology Pathway A showing the CO2e target level by segment, the MPG

- equivalent level by segment, and the average per

vehicle cost increase by segment for the four scenario stringency levels. Table 6.5

- 5 presents the corresponding vehicle segment level technology penetration rates and mass reductions for model year 2025 under the Technology Pathway A. The results show that as would be expected, the smaller size vehicles (e.g., the subcompact/compact segment and the midsize car segment), w hich start off at a lower average CO2 level, also generally have the lowest CO2 levels under the four stringency scenarios.

As can be seen in Table 6.5

- 5, mass reduction is very cost effective across all vehicle categories, and under all stringency scen arios is at or near the maximum 15% we allowed under Pathway A. The penetration of HEV technology is significantly higher in the truck

fleet for the 3% and 4% per year scenarios, and more evenly distributed between the car and truck fleets for the 5% and 6% per year scenarios. EVs first penetrate the new vehicle fleet in the 5% per year stringency scenario at a low level, and for the 6% per year scenario EVs represent 10% of all passenger cars, and only 2% of all light

- duty trucks. PHEV technology is gen erally selected last in our assessment, and does not enter the new fleet until the assessment of the 6% per year category.Chapter 6

6

- 18 Table 6.5

- 4 : Technology Path A , Assessment Projections for Model Year 2025: CO2, MPG, and Per

- Vehicle Costs for Car and Truck Fleets Scenario Vehicle Segment CO2e Level (g/mile)* MPGe Level* Per

- Vehicle Cost Increase ($) 3%/year All Cars 174 51.2 $659

All Trucks 225 39.5 $1,485 Fleet 190 46.7 $927 4%/year All Cars 162 54.9 $1,184

All Trucks 197 45.0 $2,792 Fleet 173 51.3 $1,705 5%/year All Cars 141 62.9 $2,231

All Trucks 192 46.4 $3,106 Fleet 158 56.4 $2,515 6%/year All Cars 117 75.9 $3,629

All Trucks 198 45.0 $3,095 Fleet 143 62.0 $3,455 *note, the CO2e value includes 15 grams/mile of CO2

- equivalent reduction from air conditioning related GHGs (CO2 and HFC reductions) , and the MPGe level is equivalent MPG value if all CO2 reductions come from fuel economy improvements. Real

- world CO2 is typically 25 percent higher and real

- world fuel economy is typically 20 percent lower.

Table 6.5

- 5 : Technology Path A , Assessment Projections for Model Year 2025: New Fleet Technology Penetration for Car and Truck Fleets

Scenario Vehicle Type Net Mass Reduction (%) Net Mass

Reduction (lbs) HEV

(%) PHEV (%) EV (%) Adv. SI (%)

3%/year All Cars 15% 491 6% 0% 0% 23%

All Trucks 15% 673 24% 0% 0% 49% Fleet 15% 550 11% 0% 0% 31%

4%/year All Cars 15% 491 20% 0% 0% 46%

All Trucks 15% 673 65% 0% 0% 18% Fleet 15% 550 34% 0% 0% 37%

5%/year All Cars 15% 491 60% 0% 1% 27%

All Trucks 15% 673 74% 0% 0% 14% Fleet 15% 550 65% 0% 1% 23%

6%/year All Cars 14% 467 71% 3% 10% 15%

All Trucks 15% 665 61% 1% 2% 35% Fleet 14% 529 68% 2% 7% 22%2017

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- 19 Car and Truck Fleet Information for Technology Path B for MY 2025

Table 6.5

- 6 presents vehicle segment level results for Technology Pathway B showing the CO2e target level by car

- truck fleet , the MPG

- equivalent level by car

- truck fleet , and the
average per

- vehicle cost increase by car

- truck fleet for the four scenario stringency levels. Table 6.5

- 7 presents the corresponding car

- truck fleet technology penetration rates and mass reductions for model year 2025 under the Technology Pathway B.

As can be seen in Table 6.5

- 7 , mass reduction is very c ost effective across all vehicle categories, and under all stringency scenarios is at or near the maximum 20 % we modeled under Pathway B . The penetration of HEV technology is generally more focused in the truck

fleet, and increases overall as the level of stringency increases. In general, when compared to Pathway A, the penetration of HEVs in Pathway B is lower.

EVs first penetrate the new vehicle fleet in the 5 % per year stringency scenario

, though at a low rate of 1% for the fleet. This increases to a pproximately 7% of the fleet under the 6% per year scenario, with most of these concentrated in the passenger car vehicles. PHEV vehicles are only seen in the 6% per year scenario, and represent 2% of the vehicle fleet for Pathway B.Chapter 6

6

- 20 Table 6.5

- 6 : Technol ogy Path B Assessment Projections for Model Year 2025: CO2, MPG, and Per

- Vehicle Costs for Car and Truck Fleets Scenario Vehicle Type CO 2 e Level (g/mile) MPGe Level Per

- Vehicle Cost Increase ($) 3% All Cars 170 52.4 $753

All Trucks 233 38.2 $1,047 Fleet 190 46.7 $849 4% All Cars 160 55.7 $1,070

All Trucks 202 44.1 $2,465 Fleet 173 51.3 $1,522 5% All Cars 146 61.0 $1,748

All Trucks 183 48.6 $3,335 Fleet 158 56.3 $2,263 6% All Cars 130 68.5 $2,698

All Trucks 171 52.0 $4,327 Fleet 143 62.1 $3,227 *note, the CO2e value includes 15 grams/mile of CO2

- equivalent reduction from air conditioning related GHGs (CO2 and HFC reductions) , and the MPGe level is equivalent MPG value if all CO2 reductions come from fuel economy improvements. Real

- w orld CO2 is typically 25 percent higher and real

- world fuel economy is typically 20 percent lower.

Table 6.5

- 7 : Technology Path B, Assessment Projections for Model Year 2025: New Fleet Technology Penetration for Car and Truck Fleets

Scenario Vehicle

Type Net Mass

Reduction (%) Net Mass

Reduction (lbs) HEV (%) PHEV (%) EV (%) Adv. SI (%)

3%/year All Cars 17% 572 4% 0% 0% 46%

All Trucks 19% 848 2% 0% 0% 66% Fleet 18% 658 3% 0% 0% 52%

4%/year All Cars 20% 655 5% 0% 0% 72%

All Trucks 20% 897 45% 0% 0% 45% Fleet 20% 733 18% 0% 0% 63%

5%/year All Cars 20% 654 30% 0% 1% 62%

All Trucks 20% 897 72% 0% 0% 21% Fleet 20% 733 43% 0% 1% 49%

6%/year All Cars 19% 630 27% 2% 9% 60%

All Trucks 20% 887 88% 1% 2% 9% Fleet 19% 712 47% 2% 7% 44%2017

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- 21 Car and Truck Fleet Information for Technology Path C for MY 2025

Table 6.5

- 8 presents car

- fleet and truck

- fleet level results for Technology Pathway C, specifically the CO2e target levels, the MPG

- equivalent target levels, and the average per

vehicle cost increase for the four scenario stringency levels. Table 6.5

- 9 presents the corresponding car

- fleet and truck

- fleet technology penetration rates and mass reductions for model year 2025 under the Technology Pathway C. The results show that as with Pathway s A and B, the car fleet, which start off at a lower average CO2 level, also has a lower CO2 levels under the four stringency scenarios as compared to the truck fleet. The per

- vehicle cost increase difference between the car

- fleet and truck

- fleet is on th e order of $300 to $350 for the 3% and 4% per year scenarios, but increases to approximately $2,000 for the 5% per year scenario and $1,600 f

o r the 6% per year scenario.

As can be seen in Table 6.5

- 9 , mass reduction is very cost effective across both the car and truck fleets, and is on the order of 18% for the 3% per year scenario, and between 25 and 27% for the high stringency scenarios. The penetration of HEV technology is similar between the car and truck fleets for the 3% and 4% scenarios, but in the 5% and 6% per year scenarios is more weighted towards the truck

- fleet. Technology Path C has the overall highest use of the advanced gasoline technologies, and as can be seen the mix between the car fleet and the truck fleet is very dependent upon th e level of stringency, with higher levels under the 3% , 5% and 6% per year scenario in the car

- fleet, but similar levels between cars and trucks in the 4% per year scenario.

EVs penetrate the new vehicle fleet only in the 6% per year stringency scenario for Pathway C, and overall are concentrated in the passenger cars fleet, representing 5 % of all passenger cars, and only 1 % of all light

- duty trucks. PHEV technology is not required in this assessment under Technology Pathway C.Chapter 6

6

- 22 Table 6.5

- 8 : Technology Path C Assessment Projections for Model Year 2025: CO2, MPG, and Per

- Vehicle Costs for Car and Truck Fleets

Scenario Vehicle Type CO 2 e Level (g/mile) MPGe Level Per

- Vehicle Cost Increase ($)

3% All Cars 169 52.6 $674

All Trucks 233 38.1 $980 Fleet 190 46.8 $773

4% All Cars 154 57.9 $1,255

All Trucks 213 41.8 $1,604 Fleet 173 51.4 $1,368

5% All Cars 148 60.1 $1,420

All Trucks 178 49.9 $3,412 Fleet 158 56.3 $2,066

6% All Cars 130 68.3 $2,316

All Trucks 170 52.4 $3,909 Fleet 143 62.2 $2,833 *note, the CO2e value includes 15 grams/mile of CO2

- equivalent reduction from air conditioning related GHGs (CO2 and HFC reductions) , and the MPGe level is equivalent MPG value if all CO2 reductions come from fuel economy improvements. Real

- world CO2 is typically 25 percent higher and real

- world fuel economy is typically 20 percent lower.

Table 6.5

- 9 : Technology Path C Assessment Projections for Model Year 2025: New Fleet Technology Penetration for Car and Truck Fleets

Scenario Vehicle Type Net Mass Reduction (%) Net Mass

Reduction (lbs) HEV

(%) PHEV

(%) EV (%) Adv. SI

(%)

3%/year All Cars 17% 569 4% 0% 0% 32%

All Trucks 19% 839 2% 0% 0% 76% Fleet 18% 653 3% 0% 0% 46%

4%/year All Cars 25% 809 4% 0% 0% 96%

All Trucks 25% 1,122 2% 0% 0% 98%

Fleet 25% 909 3% 0% 0% 97%

5%/year All Cars 25% 818 8% 0% 0% 91%

All Trucks 25% 1,143 60% 0% 0% 39%

Fleet 25% 922 25% 0% 0% 74%

6%/year All Cars 27% 868 31% 0% 5% 65%

All Trucks 26% 1,180 71% 0% 1% 28%

Fleet 26% 970 44% 0% 4% 53%2017

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- 23 Car and Truck Fleet I nformation for Technology Path D for MY 2025

Table 6.5

- 10 presents car

- fleet and truck

- fleet level results for Technology Pathway D
, specifically the CO2e target levels, the MPG

- equivalent target levels, and the average per

vehicle cost incre ase for the four scenario stringency levels. Table 6.5

- 10 presents the corresponding car

- fleet and truck

- fleet technology penetration rates and mass reductions for model year 202 5 under the Technology Pathway D . The results show that as with the three
ot her pathways , the car fleet, which starts off at a lower average CO2 level, also has a lower CO2 levels under the four stringency scenarios as compared to the truck fleet. The per

vehicle cost increase difference between the car

- fleet and truck

- fleet is o n the order of $500 to $1,000 depending on the stringency of the scenario, with the exception of the 3% per year scenario, where there is little cost difference between the car fleet and truck fleet.

As can be seen in Table 6.5

- 10 , mass reduction is ver y cost effective across both the car and truck fleets, though the level of mass reduction is no higher than the 15% we considered for this Pathway

. The penetration of HEV technology is similar between the car and truck fleets in the 6% scenario, but in the 3%, 4%, and 5% scenarios are weighted more heavily towards the car fleet. Advanced gasoline engines were not allowed in this scenario

, as we were trying to asse ss a hypothetical industry approach in which no advancements in gasoline powertrain systems are pursued beyond MY2016, and all of the industry resources are concentrated on HEV, PHEV, and EV technology

. Relative to the other Technology Pathways, Technolog y Pathway D features a higher penetration of EVs and HEVs. The relatively high penetration of HEVs in the 3% scenario is due to the complete lack of advanced gasoline engines (that is, no improvement in gasoline engines and transmissions beyond what will be used in MY 2015) . More stringent scenarios require relatively higher penetrations of EVs and HEVs. The penetration of PHEV technology remains relatively low, appearing only in the 6% scenario.Chapter 6

6

- 24 Table 6.5

- 10 : Technology Path D Assessment Projections for Model Year 2025: CO2, MPG, and Per

- Vehicle Costs for Car and Truck Fleets

Scenario Vehicle Type CO 2 e Level (g/mile) MPGe Level Per

- Vehicle Cost Increase ($)

3% All Cars 166 53.4 $1,026

All Trucks 238 37.4 $1,096
Fleet 190 46.9 $1,049

4% All Cars 143 62.2 $2,215

All Trucks 235 37.8 $1,203
Fleet 173 51.4 $1,887

5% All Cars 127 69.8 $2,940

All Trucks 222 40.0 $1,917
Fleet 158 56.2 $2,608

6% All Cars 115 77.4 $3,555

All Trucks 201 44.2 $3,061
Fleet 143 62.3 $3,395 *note, the CO2e value includes 15 grams/mile of CO2

- equivalent reduction from air conditioning related GHGs (CO2 and HFC reductions) , and the MPGe level is equivalent MPG value if all CO2 reductions come from fuel economy improvements. Real

- world CO2 is typicall y 25 percent higher and real

- world fuel economy is typically 20 percent lower.

Table 6.5

- 1 1 : Technology Path D Assessment Projections for Model Year 2025:

New Fleet Technology Penetration for Car and Truck Fleets Scenario Vehicle Type Net Mass Reduction (%) Net Mass

Reduction (lbs) HEV

(%) PHEV

(%) EV (%) Adv. SI

(%)

3%/year All Cars 15% 491 30% 0% 1% 0%

All Trucks 15% 673 14% 0% 0% 0% Fleet 15% 550 25% 0% 0% 0% 4%/year All Cars 15% 489 54% 0% 6% 0%

All Trucks 15% 673 13% 0% 1% 0% Fleet 15% 549 41% 0% 4% 0% 5%/year All Cars 15% 482 59% 0% 13% 0%

All Trucks 15% 669 29% 0% 3% 0% Fleet 15% 542 49% 0% 10% 0% 6%/year All Cars 14% 467 55% 2% 19% 0%

All Trucks 15% 657 57% 2% 4% 0% Fleet 14% 528 55% 2% 14% 0%2017

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- 25 MY 2020 Results

We present here the fleet

- wide results for our MY2020 assessment. The cost of the MY 2020 scenarios for the entire new vehicle fleet ranges from $ 289 (3% ) to $ 1,057 (6%, Path A) per vehicle , as shown in Table 6.5

- 1 2 . Technology pathway C, which relies upon advanced gasoline technology and greater mass reduction as compared to Pathway A and B

, demonstrates the lowes t costs. Pathway s A and B show greater penetration of HEVs and somewhat higher costs.

The GHG reduction over the lifetime of the MY 202 0 vehicles ranges from 172 million metric tons (MMT) CO 2 e avoided in the 3% scenario to between 306 MMT CO 2 e in the 6% scenario. MY 202 0 vehicles, over the course of their lifetimes, will reduce between 0.4 billion barrels of gasoline consumption unde r the 3% scenario to 0.6 billion barrels under the 6% scenario. For reference, the NHTSA & EPA National Program in MY 2016 is projected to reduce 0.6 billion barrels of fuel and 325 MMT CO2e over the lifetime of MY 2016 vehicles.

Table 6.5

- 1 2 : Assessment Projections for Model Year 202 0 Vehicles by Technology Path

New Fleet Target Per

- Vehicle Cost increase ($) Lifetime

CO2e Reduction (MMT) Lifetime

Gasoline Reduction (Billion Barrels) Scenario CO2 MPGe * Path A Path B Path C Path A Path B Path C Path A Path

B Path C 3%/year 221 40.2 $289 $289 $289 172 172 172 0.4 0.4 0.4 4%/year 212 41.9 $399 $399 $399 215 215 215 0.5 0.5 0.5 5%/year 204 43.6 $577 $583 $565 262 262 262 0.5 0.5 0.5 6%/year 195 45.5 $1,057 $1,035 $865 306 306 306 0.6 0.6 0.6 Note

– these costs, CO2 reductions, and fuel savings are relative to the 2016 EPA GHG standards * MPGe is the MPG equivalent to the CO2 target if all CO2 reductions occur from fuel economy improvement technologie s. Real

- world CO2 is typically 25 percent higher and real

- world fuel economy is typically 2 0 percent lower. Thus, the 3% to 6% range evaluated in this assessment would span a range of real world fuel economy values of approximately 32 to 36 mpg, which correspond to the regulatory test procedure values of 40.2 and 45.5 mpg, respectively. For the technical asses sment, we have estimated a reduction of 15 g/mile CO2 equivalent from air conditioning system improvements, which would not actually translate into MPG improvements

The penetration of HEVs, EVs, and PHEV in MY 2020 varies little depending on the technolog y pathway and scenario, as can be seen in Table 6.5

- 1 3

. Pathway C places greater emphasis on mass reduction and advanced gasoline vehicle technology. Therefore, the degree of mass reduction is also the highest among the four pathways, ranging from 11% to 18%.

Pathway B shows a technology approach in between Paths A and C, with advanced gasoline technology and mass reductions higher than for Path A but lower than Path C, and HEV penetrations lower than Path A but higher than Path C. This trend is not as strong in the MY 2020 results because the level of stringency does not require enough advanced technology to show much of a difference between Pathways B and C under most stringencies.Chapter 6

6

- 26 Table 6.5

- 1 3 : Assessment Projections for Model Year 202 0 Vehicles

N ew Fleet Technology Penetration Estimates

Scenario Technology

Path New Vehicle Fleet Technology Penetration

Gasoline & diesel vehicles HEV PHEV BEV Net Mass Reduction JJJ

3%/year Path A 97% 3% 0% 0% 11%

Path B 97% 3% 0% 0% 11% Path C 97% 3% 0% 0% 11%

4%/year Path A 97% 3% 0% 0% 14%

Path B 97% 3% 0% 0% 14% Path C 97% 3% 0% 0% 14%

5%/year Path A 97% 3% 0% 0% 15%

Path B 97% 3% 0% 0% 15% Path C 97% 3% 0% 0% 15%

6%/year Path A 85% 15% 0% 0% 15%

Path B 87% 13% 0% 0% 15% Path C 97% 3% 0% 0% 18%

Table 6.5

- 1 4 present estimates of payback period and net lifetime savings for MY 2020 vehicles. Payback period is the number of years it takes the cost increase of the vehicle to be off

- set by the vehicle‘s fuel savings. As discussed in Chapter 6.4, we used AEO 2010 reference case for fuel prices, including fuel taxes, and we discounted the fuel savings using a 3 percent discount rate. The net lifetime savings is the total lifetime fuel savings for the vehicle discounted at 3 percent minus the initia l vehicle cost increase. As can be seen in Table 6.5

- 14

, all MY 2020 scenarios, regardless of technology pathway, have a positive net lifetime fuel savings between approximately $2,600 and $4,300 , and for MY 202 0 all of the scenarios and t echnology pathwa ys pay back in 2

. 2 years or less.

Table 6.5

- 1 4 : Estimated Consumer Payback and Lifetime Savings For Model Year 202 0 Vehicles (3% Discount Rate) Payback (years) Net Lifetime Savings ($s) Scenario Path A Path B Path C Path A Path B Path C 3%/year 1.0 1.0 1.0 $2,632 $2,632 $2,632 4%/year 1.1 1.1 1.1 $3,249 $3,249 $3,249 5%/year 1.4 1.4 1.3 $3,854 $3,792 $3,823 6%/year 2.2 2.2 1.8 $4,082 $4,105 $4,281
Note

– these estimates are relative to vehicle s which comply with the 2016 EPA GHG standards

JJJ Please note that we show net mass reduction relative to model year 2008 vehicles. In the case of PHEVs and EVs, the bat teries increase the weight of the vehicle. This battery weight increase is combined with the mass reduction technology to calculate net mass reduction for those vehicles.2017

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- 27 6.6 PHEV and EV Battery Cost Sensitivity Assessment

The agencies judged that there is uncertainty in the cost for EV and PHEV large

format lithium

- ion batteries in the 2025 time frame. As discussed in Chapter 3, the development of these batteries for automotive applications is occurring at a very rapid rate and the market is far from mature, thus our ability to accurately predict the costs for these technologies for the 2025 time frame is difficult. Th e cost of the battery pack is the single largest incremental cost difference between a gasoline vehicle and either a PHEV or an EV. Depending upon the vehicle range (and thus the size of the battery) and the time frame (e.g., today or the 2025 time frame) , the battery pack cost can represent on the order of 60 to 80% or more of the incremental cost of a PHEV/EV. Given the uncertainty in the costs of lithium

ion batteries in the 2025 time frame, and the significant portion of the PHEV and EV incremental co sts the battery represents, the agencies believe it is appropriate to include a sensitivity analysis on battery pack costs.

As discussed in Chapter 3, the agencies used a battery costing model developed by Argonne National Laboratory (ANL) which provides u nique battery pack cost estimates for EV and PHEVs based on various variables such as production volume, battery cell chemistry material, battery capacity and power, useable fraction of the state

- of

- charge range, etc. There are also many economic projecti ons used in the ANL model, such as cost of capital equipment, plant area, labor cost, etc. Based on 500,000 units per year production volume, and using an assumption there will be incremental improvements in battery cycle life such that the battery perfo rmance is maintained for the useful life of the vehicle, EPA derived a battery pack cost projection for 2025 EVs of approximately $160/kW

- h for EV75, $150/kW

- h for EV100, $140/kW

- h for EV150, and of 2025 PHEVs of $180/kW

- h for 40

- mile PHEVs and $250/kW

- h f

or 20

- mile PHEVs assuming the use of LiMn2O4

- spinel/graphite cell chemistry. We note that this cost is lower than the cost estimates projections obtained from our meetings with the OEMs, where the majority of the estimates were in the $300 to $400/kW

- h ran ge for 2020 and $250 to $300/kW

- h range for 2025.

Because of uncertainty in future battery costs, the agencies conducted a sensitivity assessment on the battery costs for 2025 by increasing all of the PHEV and EV battery

- pack costs by $100/kW

- hr. We also examined the potential impact of lower battery costs by reducing all of the PHEV and EV battery

- pack costs by $50/kW

- hr. The $100/kW

- hr higher cost is comparable to commodity pricing for high

- volume LiCoO2 cells for consumer applications. The $50/kW

- hr lower cost assumes a breakthrough in battery design that would approximately triple cell energy density.

We selected the 5% per year and 6% per year targets under technology Pathway B for 2025 as the scenario on which to assess the potential impact of thes e changes in Li

- ion battery costs. The results show that for the higher battery cost estimates, the projected 2025 Pathway B costs for the 5% per year targets would increase by $36 per vehicle and for the 6% per year targets would increase by $397 per veh icle. For the lower battery cost estimates, the projected 2025 Pathway B costs for the 5% per year targets would decrease by $18 per vehicle and for the 6% per year targets would decrease by $199 per vehicle. This impact on the fleet

- wide average cost as sessment is relatively modest because PHEVs and EVs represent on the order of 1% of the new vehicles under the Pathway B 5% per year scenario, and 9% under theChapter 6

6

- 28

Pathway B 6% per year scenario. However, the impact on actual PHEVs and EVs can be large. For example, for a midsize EV passenger car with a real

- world range of 100 miles (an EV100), the sensitivity analysis done by adding $100/kW

- hr to the battery pack costs increased the cost of the midsize car EV100 on the order of $5,700, and the impact of lowe ring the EV100 battery pack costs by $50/kW

- hr reduced the costs of the midsize car EV100 by $2,800.2017

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- 29 Chapter 6 References

92 Documented in Appendix A to this report.

93 See Appendix D to this report.

94 Energy Information Administration, Annual Energy Outlook 2010, Reference Case (May 2010 2009), Table 12. Available at http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html

95 EPA. 2006, Final Technical Support Document. Fuel Economy Labeling of Motor Vehicle Revisions to Improve Calculation of Fuel Economy Estimates. EPA

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96 Energy Information Administration, Annual Energy Outlook 2010, Reference Case (Ma y 2010 2009), Table 12. Available at http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html

97 EPA. Final Rulemaking to Establish Light

- Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards. Joint Technical Support Document. Chapter 4. EPA

- 420

- R

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- 901 http://www.epa.gov/otaq/climate/regulations/420r10901.pdf

. Additional details on the projections used here can be found in Appendix E of this report.

98 Sorrell, S. and J. Dimitropoulos, 2007. ―UKERC Review of Evidence for the Rebound Effect, Technical Report 2: Econometric Studies‖, UKERC/WP/TPA/2007/010, UK Energy Research Centre, London, October and Greening, L.A., D.L. Greene and C. Difiglio, 2000. ―E nergy Efficiency and Consumption

– The Rebound Effect

– A Survey‖, Energy Policy, vol. 28, pp. 389

- 401.

99 EPA. Light

- Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule Regulatory Impact Analysis Chapte r 5.

100 EPA. Analysis of H.R. 2454 in the 111 th Congress. http://www.epa.gov/climatechange/economics/economicanalyses.html

101 EPA. Final Rulemaking to Establish Light

- Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standar ds. Joint Technical Support Document. Chapter 4. EPA

- 420

- R

- 10

- 901. http://www.epa.gov/otaq/climate/regulations/420r10901.pdf . Original data found in Intergovernmental Panel on Cli mate Change. Chapter 2. Changes in Atmospheric Constituents and in Radiative Forcing. September 2007. http://www.ipcc.ch/pdf/assessmentreport/ ar4/wg1/ar4

- wg1

- chapter2.pdf. Docket ID: EPA

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- 1 

## 7 Other Key Factors

7.1 Potential Impacts on the Economy and Employment

The primary impacts of the use of advanced vehicle technologies on the economy are the net benefits that they produce. Positive net benefits result in improvements in economic welfare in the aggregate. Measures of net benefits, though, are not necessarily correlated with the effects of technologies on employment or on the auto manufacturing base in the U.S. This report does not provide a quantitative assessment of these effects. Instead, this section discusses the potential im pacts of advanced technologies on the auto industry in general and employment in the auto sector.

7.1.1 Impacts on Auto Manufacturers, Suppliers, and Auto Industry Employment

The automotive market is becoming increasingly global. The U.S. auto companies produ ce and sell automobiles around the world, and foreign auto companies produce and sell in the U.S. As a result, the industry has become increasingly competitive. Staying at the cutting edge of automotive technology while maintaining profitability and cons umer acceptance has become increasingly important for the sustainability of auto companies.

Trends in the world automotive market suggest that investments in improved fuel economy and advanced technology vehicles are a necessary component for maintaining competitiveness in coming years. For instance, most companies are expanding hybrid

- electric vehicle production to stay competitive while meeting more stringent fuel economy and emissions regulations. Fuel economy requirements in other developed countrie s are generally higher, and greenhouse gas (GHG) emissions standards tighter, than in the U.S. As automakers seek greater commonality across the vehicles they produce for the domestic and foreign markets, improving fuel economy and reducing GHGs in U.S. v ehicles should have spillovers to foreign production, and vice versa, thus yielding the ability to amortize investment in research and production over a broader product and geographic spectrum.

Auto companies are already conducting major research and inv estment activities in advanced technologies and improvements to conventional technologies to improve fuel economy and reduce GHG emissions. In addition, as discussed in Chapter 2, in recent meetings with auto firms, all expressed plans to increase signifi cantly their offerings and sales of advanced technology vehicles in coming years. Successful research and investment activities can contribute to long

- term gains in many directions. Companies that develop new technologies not only get the advantages of u sing them, but also the opportunity to license those technologies to other companies. Those technologies may have spinoffs into other sectors. For instance, research into new battery technologies may lead to improvements in other battery

- intensive uses, such as storage of wind or solar energy when the quantity of electricity demanded is lower than the amount produced.

The effects of the use of advanced technologies on U.S. auto sector employment depend on how the standards affect several factors: the n umber of vehicles produced (discussed below), the labor intensity of vehicle production, and any changes in market shares between domestically produced and imported vehicles and auto parts.Chapter 7

7

- 2

Productivity in the auto industry has been increasing over time, as automakers have improved process efficiency and enhanced vehicle quality. 102 Improved productivity has the great benefit of providing better vehicles at lower prices to consumers; it also means fewer worker

- hours needed per dollar of vehicle value. Hig her productivity leads to more efficient vehicle manufacturing, which could result in less expensive and/or improved quality vehicles. Either outcome would likely give consumers greater purchasing power, and thus lead to higher vehicle sales. Even though higher productivity implies that worker

- hours per vehicle may go down, increased vehicle sales may lead overall employment in the auto industry to increase, as it did in the 1990s (a time of both high productivity increases and employment increases). At this time it is not possible to predict the effect of production involving advanced vehicle technologies on labor needs. It is possible that the smaller

- volume production likely in the early years for advanced technology vehicles may be more labor

inte nsive than mass production, if scale economies of production are not exhausted.

Another variable affecting auto sector employment is where production takes place. The location of production will depend on how domestic production costs, especially for ad vanced technologies, compare to foreign production costs, and on the cost of transporting vehicles and parts between the U.S. and other countries. Investments in advanced technology production facilities, such as battery manufacturing and vehicle electrif ication projects, supported by the Recovery Act (for example) reduce the need for importing these parts from

overseas. 103 These investments by the Department of Energy have created immediate jobs in building this capacity, and they also help ensure that the se components can be produced in the U.S. Tax breaks and other manufacturing incentives provided by a number of local and state governments for advanced vehicle technologies, such as in Michigan, have also contributed incentives for domestic production.

7.1.2 Impacts on Vehicle Sales

The effect of advanced technologies on vehicle sales depends on the attractiveness to consumers of the new technologies and improved fuel economy relative to the increased vehicle price. In the light

- duty greenhouse gas/fuel economy rule covering 2012

- 2016, the very large fuel savings were estimated to recover the up

- front technology costs in under three years. If consumers considered at least three years‘ worth of fuel savings when purchasing a vehicle, then that rule was pr edicted to increase vehicle sales. 104 The use of advanced technologies can be expected, as in that rule, to improve fuel economy and increase vehicle costs. Chapter 6 of this report shows that more stringent standards will provide fuel savings that exceed vehicle cost increases in four years or less. The weights that consumers put on these two factors will affect total vehicle sales. 105

7.1.3 Summary

With increased globalization of auto markets, increased competitiveness in the industry, and higher fuel economy/ lower GHG standards becoming the norm around the world, auto companies have already begun to invest in new technologies that will meet future standards. These new technologies will increase the purchase prices of new vehicles, at the same time that they r educe their fuel costs; the net effect on auto sales depends on how consumers trade off those attributes. The net effect on employment will be affected not only2017

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- 3 by the effects of the proposed standards on auto sales, but also on the effects on productivit y and location of production. These investments will help the U.S. auto sector to stay on the cutting edge of auto technology.

For the forthcoming notice of proposed rulemaking for 2017

- 2025 GHG and CAFE standards, EPA and NHTSA will further investigate t he impacts of the proposed standards on the auto industry, employment. Further analysis requires information on the effects of the proposed standards on vehicle sales, on expected expenditures in the auto sector, and on any predictions of changes in locat ion of manufacturing due to the specific standards in the forthcoming proposal.

7.2 Upstream GHG Emissions

In the assessment of potential future ranges of stringency presented in Chapter 6 of this report, we based our analysis on the tailpipe emissions from al l vehicles

– thus EVs were evaluated at a 0 gram/mile CO2 level and PHEVs were evaluated as 0 gram/mile for the electric drive portion of the vehicles operation. For the purposes of the GHG impacts presented in Chapter 6, we have included the resultant in crease in upstream CO2 from the use of PHEVs and EVs in our overall calculation of the net CO2 reductions for each of the scenarios evaluated. As discussed in Chapter 6, the upstream CO2 emission factors from powerplants is based on a future business as u sual case,

The issue of upstream emissions will be considered in the MY 2017

- 2025 light

- duty vehicle joint federal rulemaking

. EPA has not considered upstream fuel

- related emissions issues in the past with respect to the non

- GHG emissions standards for m otor vehicles.

As discussed in Chapter 2, many s takeholders have expres sed opinions on this topic, with most automakers supporting the tailpipe only or zero grams per mile approach and environmental groups typically supporting a net upstream GHG emission s accounting.

EPA will be fully evaluating this issue for the MY 2017

- 2025 light

- duty vehicle GHG emissions proposal based on the status of commercialization of EVs, PHEVs, and FCVs, the potential of these technologies to provide long

- term GHG emissions sa vings, the status of and outlook for upstream GHG control programs, and other relevant factors.Chapter 7

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- 4 Chapter 7 References

102 Baily, Martin N., et al., ―Increasing Global Competition and Labor Productivity: Lessons from the US Automotive Industry,‖ McKinsey Global Institute, November 2005, http://www.mckinsey.com/mgi/publications/us_autoindustry/index.asp , accessed 8/ 17/10.

103 ―Recovery Act Awards for Electric Drive Vehicle Battery and Component Manufacturing Initiative‖ and ―Recovery Act Awards for Transportation Electrification,‖ http://www1.eere.energy.gov/recovery/pdfs/battery_awardee_list.pdf

104 This result led to q uestions why private market interactions between auto producers and consumers had not led to incorporation of these technologies into vehicles in the absence of the rule. This issue was discussed in the Preamble for that rule, Federal Register 75(88) (Fri day, May 7, 2010), in Section III.H.1, pp. 25510

- 25513, and IV.G.6, pp. 25651

- 25657.

105 Though a number of studies have included examination of the role of fuel economy in consumers‘ purchases, the results appear to be highly varied. See Greene, David L., ―How Consumers Value Fuel Economy: A Literature Review,‖ Report EPA

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- 008, Off ice of Transportation and Air Quality, U.S. Environmental Protection Agency, March 2010. EPA

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