Document ID: EPA-HQ-OAR-2014-0827-2217
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2016-10-25T04:00Z

U.S. DEPARTMENT OF TRANSPORTATION

NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION

1200 NEW JERSEY AVENUE SE.

WASHINGTON DC, 20590	UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF AIR AND RADIATION

NATIONAL VEHICLE AND FUEL EMISSIONS LABORATORY

2000 TRAVERWOOD DRIVE

ANN ARBOR, MI  48105-2498

July 18, 2016

MEMORANDUM

SUBJECT:	Evaluation of Trailer Program Cost and Benefit Calculations
Provided by Stoughton Trailers in Public Comments

FROM:	Jessica Brakora, Engineer, Assessment and Standards Division

Office of Transportation and Air Quality

TO:	Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for
Medium- and Heavy-Duty Engines and Vehicles - Phase 2 - Dockets
NHTSA-2014-0132 and EPA-HQ-OAR-2014-0827

The agencies received public comments from Stoughton Trailers
(Stoughton) that included calculations suggesting that the agencies
overstated the benefits and understated the costs of the Phase 2 trailer
program.  These calculations indicated that the payback would be up to
66 months, which is in contrast to the agencies’ estimation of two
years.  This memo evaluates the assumptions used in Stoughton’s
calculations.

The agencies considered the calculations provided by Stoughton.  The
values assumed for barrels of oil and MMT of GHG saved were noted to be
taken from an EPA presentation to TTMA.  Any numbers presented to TTMA
would be referencing Phase 1 results.  Since trailers were not
considered in Phase 1, we cannot speak directly to these values, but we
will address the theme of the calculations.  

The calculations assume 135000 trailers built per year, based on 2013
data, an average trailer price of $28,000, a fuel price of $2.50 per
gallon, annual mileage of 45,000 miles, and a baseline tractor-trailer
fuel economy of 6.5 miles per gallon. When the program is in place, the
calculations assume 60% of the fleet will get 5% fuel savings as
full-aero trailers (at a cost of $2750 for a skirt, tail and tire
inflation system with a volume discount), 25% of the fleet will get 2.5%
fuel savings as partial-aero trailers ($1325 for skirt and inflation
system), and 15% of the fleet will get 1.25% fuel savings as non-aero
trailers ($600 for inflation system only).  The resulting fuel economy
values are 6.825 mpg, 6.6625 mpg, and 6.58125 mpg, for the full-,
partial-, and non-aero trailers, respectively.  

To start, Stoughton calculates the cost to install devices and relates
it to the total sales of the industry, then estimates the fuel savings
by adopting those technologies.  The comment indicated that a 7.4%
increase in purchase price was unacceptable, due to the “single digit
profit margin” of the trailer industry.   The agencies recognize that
trailer manufacturers have very low profit margins.  However, we expect
a majority of these costs will impact the overall cost of trailers
across the industry and should not be isolated to individual trailer
manufacturers.   

We repeated Stoughton’s calculations to address the concerns with
payback.  These calculations indicate there is an average payback across
the industry of 66 months (5.5 years).  However, the agencies’
technology costs take into account a baseline adoption rate of
technologies that we believe the industry would be applying if there
were no Phase 2 trailer regulations.  This market-driven adoption cannot
be counted against the program.  In the case of long box vans, we expect
45% of the trailers sold would have skirts or better (TTMA indicated 35%
of new long box vans have skirts today).  To account for this, we
applied a factor of 0.55 to the calculation for full-aero cost and the
5% benefit to 45% of the baseline, which resulted in a small reduction
in payback to 65 months.  

Additionally, these calculations assume a 60% effective mileage for the
aero devices, but the agencies believe the effectiveness of the
technologies is not zero for the remaining 40% of the miles.  Assuming
these low-speed miles are, on average, 25% of the high speed benefit,
gives 6.58 mpg, 6.54 mpg, and 6.52 mpg for the remaining 40% of the
miles for full-, partial- and non-aero trailers, respectively.  Applying
these values in the calculation reduces the payback to 55 months.  

The agencies also disagree with the effectiveness applied.  The full-
and partial-aero effectiveness values appear to only account for
aerodynamic improvements.  If we add 1.25% (the value applied to the
non-aero trailers) to the full- and partial-aero trailers to account for
tire improvements, the new effectiveness values reduce the payback to 43
months (3.5 years).  

Finally, most skirts are SmartWay-verified to achieve 5% reduced fuel
consumption, yet these calculations apply a 5% reduction to the
full-aero trailers that are assumed to include skirts and tails, and a
2.5% reduction to the partial-aero trailers that will likely include
skirts.  Applying an improvement of 9.25% to the full-aero trailers (a
conservative 8% for skirt and tail aero and 1.25% for tires) and 6.25%
to the partial-aero trailers (5% for skirts and 1.25% for tires) reduces
the payback to 29 months; under 2.5 years.  

The agencies rely on EPA’s MOVES model for a much more sophisticated
analysis that applies the average effectiveness of technologies for each
trailer subcategory over each year of the program with decreasing VMT
over the trailers lifetime.  However, even the simplified calculation
performed here with more closely aligned assumptions, results in a 2.5
year payback that is close to the agencies’ estimate.  

Attachment:  MemoAttachment_CostBenefit_Stoughton.xlsx

Evaluation of Trailer Program Cost and Benefit Calculations Provided in
Public Comments, Page   PAGE  2  of   NUMPAGES   4