Examination of Witnesses (Questions 120
- 130)
WEDNESDAY 29 MARCH 2006
MR SIMON
BARNES, MR
JOHN KINGSTON,
MR STEVE
CAUTLEY, MR
GREG ARCHER,
MR GRAHAM
SMITH AND
MR NICK
HARTLEY
Q120 Colin Challen: Given the time
lag in introducing technologies, the LowCVP's memo said, "In
the meantime we need to reduce vehicle use or fuel consumption";
what are you doing to encourage that and what more do you think
the Government should do to encourage that?
Mr Archer: We are not doing anything
to discourage vehicle use. We are focussed on the mission of market
transformation and that is our remit rather than branching out
into other issues associated with encouraging public transport,
walking and cycling, eco driving and issues of that sort. We recognise
that all of these are extremely important and our Board will be
considering whether or not to diversify the Partnership's activities
into things like eco driving over the next few months, but at
the moment the resources that we have available to us do not allow
us to cover all of those other areas, although we recognise that
they are important. There are very good organisations that are
already working in those fields and we feel that we should let
them get on with it and focus on the areas in which we have expertise.
Q121 Colin Challen: Do you have any
thoughts on what the Government should do in relation to reducing
vehicle use and fuel consumption?
Mr Archer: I think one of the
areas which needs to be addressed is the emphasis which is given
to managing carbon emissions from road transport within the Department
for Transport. The Department for Transport has a whole number
of different priorities around managing demand and congestion,
infrastructure to meet increased capacity, social equality issues;
CO2 issues are just one of their many priorities. The
Partnership has felt for some time that the absence of a sectoral
target for transport emissions and for road transport emissions
specifically means that there has not been the focus on controlling
transport emissions generally within the Department for Transport
because there is not an overall target that the Department is
trying to achieve. We recognise that they share in the PSA 20%
target but there is no clarity as to what proportion of that overall
burden the Department for Transport is actually taking. I am not
saying that transport should have the same target as other sectors;
it should just have a target that it is working towards so we
can see what progress it is actually making. It was one of the
questions that was posed in the Climate Change programme. Two
hundred pages of Climate Change programme later there is not one
mention of sectoral targets or even why the Government has decided
not to go ahead with them. Personally I think that if we had a
clear target for road transport then the Department for Transport
would have to look and say, "Okay, what are we going to achieve
through the shift to low carbon vehicles? What are bio fuels going
to deliver us? What do we need to do by way of developing the
rail infrastructure, encouraging walking and cycling and all the
other low carbon options so we can get to our carbon target?"
Without that clarity and that directional policy I am afraid the
Department for Transport will never put together the package of
measures which are needed to address this issue.
Mr Smith: An example that might
flow from such a structure around management of demand, the possibility
of road pricing, congestion charging, the extent to which that
should or should not have an environmental component associated
with it. One argument is that that would complicate what is a
new approach to demand management. Our view would be that it is
potentially a missed opportunity. With an overall target, as Greg
has mentioned, the possibility of more integration of different
aspects of the responsibility of the Department of Transport would
come into play and we believe that would be helpful.
Q122 Colin Challen: Can I briefly
return to the question of LPG which was mentioned earlier? In
the SMMT memo I do not see any reference to LPG at all and yet
you have described that experience as a disaster this afternoon.
It seems strange that you have omitted it from your memo. I heard
yesterday from Volvo that they have stopped manufacturing LPG
vehicles and I think Vauxhall followed suit. That suggests that
the market is now in its terminal phase. What lessons have been
learned from that? What discussions have been held with the Department
for Transport? Is there a willingness to understand what went
wrong and to actually improve future investment or incentives?
Mr Barnes: I think it is recognised
within the Department for Transport the issue that that has created;
I do not know that that is recognised within Treasury and I think
that harks back to not only the Department for Transport recognising
the contribution it can make here but the Treasury as well in
terms of some of the long term indications on fuels and the industry
really hopes this does not happen, for example, with bio fuels.
I think the RTFO is a good element of an idea in a structure which
goes forward but it will need the support on some of the fuel
duty issues longer term to ensure that bio fuels do not follow
the same pattern as LPG. Certainly within the fleet market the
experience is that LPG has soured that issue and I think the reason
why we do not comment on it is exactly as you said, I do not believe
there are any new vehicle manufacturers now who are offering LPG
as an option for a new car. There are still conversions taking
place and the conversion industry is still relatively strong,
but in terms of its relevance to a new car product I just believe
it is not there now. It just demonstrates the importance of having
a long term fiscal strategy and the Department for Transport and
other departments need to ensure that we have directions as manufacturers
for these issues because we are talking about design times for
us and we are talking about implementation of a fuel infrastructure
for the fuel industry. Increasingly, as we move towards bio fuels,
those two issues will become intertwined.
Mr Smith: One of the areas where
we have close alignment with the industry is in the need for technologically
neutral approaches. The Low Carbon Vehicle Partnership is not
in the business of selecting or commenting on winning or losing
technologies; it is for the vehicle industry to respond to the
structures of whichever appropriate technology will deliver the
outcome. It is the same for the fuel industry. I think the experience
of LPG was that that was picking a technology and there are inherent
dangers in doing that; the agenda moved on, other technologies
moved ahead and the benefit of LPG versus other potential technologies
became more and more questionable and as a consequence the decision
was taken to progressively remove the duty advantage. With a technology
neutral approach you avoid some of those issues and the extent
to which you either look for a silver bullet or you put government
or officials in a position of trying to forecast technological
development and then choose what they perceive to be the winner.
I think that is a high risk approach.
Q123 Dr Turner: The memo from SMMT
tells us about the heavy investment you have made in R&D and
some of the technologically sophisticated models being produced
as a result. Can you tell us a bit more about this and tell us
what kinds of further technological developments you think are
going to be available by 2020?
Mr Cautley: As you know the Ford
Motor Company invested a significant amount of money over the
last number of years in diesel capability, manufacturing capability
and design capability here in the UK. Certainly over the last
number of years I think it has totalled something like £650
million in the UK over four years. We see diesel as a key fuel
efficiency, CO2 efficiency technology and we are putting
significant levels of investment and going into the future into
that technology as well. Our diesel facilities here in the UK
provide those power units for cross-brand, our different brands
both here in Europe and the rest of the world. Certainly diesel
plays a key role as we move forward. It is a key technology and
as we move forward into other technologies that will come on stream—I
am talking now from the industry's point of view—we will
see developments in diesel and we have seen developments in Common
Rail direct injection diesel in the last few years. As Mr Barnes
and Mr Smith mentioned earlier on we are moving into micro-hybrid
technology which is Stop and Start types of technology; we are
moving into mild hybrid technology which has a form of regenerative
braking which uses the braking force from the vehicle to recharge
batteries; and then moving into full hybrid technology as well.
Each of those technologies has its own usage pattern really and
an ideal situation for using that technology and each of those
technologies are not necessarily suited to every use. For example,
looking at the hybrid side, hybrid has an extremely good CO2
benefit, fuel efficiency benefit for Stop and Start urban driving,
as does a mild hybrid with Stop and Start. If you start going
on long distance motorway driving—a fleet driver—then
that sort of technology would not necessarily provide the same
CO2 benefit that you would get in urban driving conditions.
So those technologies are suited to different usage patterns and
different consumer needs. These are key developments that are
coming on the future. We are seeing developments also in what
we call direct injection petrol engine technology as well which
is a technology which will deliver further CO2 benefits
as we move forward and hybridisation is applicable to both diesel
and to petrol as well. We can see those types of technologies
moving on over the course of the next 10 or so years across the
industry and across the vehicle ranges.
Q124 Dr Turner: Does Honda wish to
add anything to that?
Mr Kingston: Every manufacturer
looks at the market from their own perspective and decides which
technologies to invest in and which routes to go down. Honda has
invested heavily in hybrid technology. You referred to the Honda
Insight earlier which was launched in 1999 which was really a
showcase for hybrid technology. That has evolved through to the
Civic IMA and only yesterday we launched the new Civic Hybrid.
At the same time we have invested in diesel technology. In terms
of the advantages from a CO2 perspective we have invested
heavily in diesel and diesel has moved to our Civic product. Certainly
hybrid technology for us is well worth investing in.
Q125 Dr Turner: Putting driver behaviour
aside, what benefits in terms of carbon reduction, new fuels and
technology can deliver by themselves with the targets we are concerned
with, 2020 (the magic target), 2030, 2050?
Mr Barnes: I think this is where
new fuels increasingly play a part and new fuels can be introduced
not only into new cars but also potentially they work their way
through the whole car park fleet over a number of years. A car
will last for approximately 12 to 13 years so over a period of
time as the new car adapts then that benefit can go through to
the whole fleet. This is where fuels can offer a benefit; they
can start to be introduced in the whole fleet at the moment, manufacturers
manufacture cars currently to run on five% bio fuel content; we
are looking to the new European standard of bio fuels to make
that higher as we move towards the RTFO. That will cope with first
generation bio fuels but we are seeing now that there is talk
about second generation bio fuels which are far more carbon efficient
in terms of their benefits. They offer a far higher yield per
hectare in terms of the crop because you are using the whole crop
not just part of the crop. Second generation bio fuels in effect
mimic a carbon fuel so that they can be introduced into the park
without any consideration as to some of the technology in the
vehicle. Second generation will have a large impact and we would
like to see support in the UK for development of second generation
bio fuels. Second generation bio fuels ultimately lead you towards
more of the hydrogen society because you can then use that bio
fuel technology to produce hydrogen. There is a development running
through which we still think will ultimately end up with hydrogen
but we keep talking about hydrogen being 20 years away and I think
we are still talking about hydrogen being 20 years away.
Q126 Dr Turner: It is funny you should
say that; I was just coming to that. That is precisely what a
witness from Volkswagen in front of one of our sister committees
of Defra said about fuel cells. They have been a perpetual 10
or 20 years away for as long as I can remember, so what is your
take on the future practicality, the commercial reality of the
hydrogen powered fuel cell?
Mr Barnes: Cost is the main issue
in getting the cost of production down to the same cost as an
internal combustion engine. I think we are talking about £180,000
per unit at current levels of production. We know that is not
realistic once mass production comes in, but it is at what point
will that fuel cell become cost competitive with an internal combustion
engine. We should not forget that in internal combustion engine
can run on hydrogen as well as a plethora of other fuels. To achieve
a market penetration the fuel cell has to offer the cost of an
internal combustion engine and also some of the other issues such
as durability. Durability is one that still, I believe, has yet
to be cracked and internal combustion engines are now running
on 100,000-plus miles, they get better all the time, so all the
time I think we are seeing the challenge for hydrogen is increasing
as the sophistication of the internal combustion engine increases
ironically. Potentially we see mass production of internal combustion
engines making them more price competitive, so I think this is
where the eternal 15 or 20 years comes from because as the conventional
technology improves then the challenge for the fuel cell also
improves. Companies such as Honda have up to 200 fuel cell vehicles
running at the current time so they are learning an awful lot
about that technology. Translating that into mass production is
the challenge.
Mr Smith: If I could just comment
from the Low Carbon Vehicle Partnership point of view, one of
our successes was the establishment of CENEX, the Centre of Excellence
for fuel cell and low carbon technologies here in the UK. It is
still embryonic; it is supported with government funding but with
commercial stakeholders matching funding. The whole aim of the
organisation is to try and accelerate the R&D effort around
low carbon technologies to pull together the players here in the
UK and to do that for the benefit of UK plc. One of the many advantages
of that kind of an organisation is that they can bring together
those working on the fuel cell stack type of technology together
with those that are already heavily engaged—like Honda—and
other companies in hybrid technology, because many of the hybrid
components would be required in a fuel cell vehicle. All of that
effort is being focussed—or beginning to be focussed—in
the UK. It is a global industry and the UK needs to establish
its role in that industry and in the drive forward and again some
appropriate structures being put in place and hopefully progress
being made.
Mr Archer: The real challenge
is: can we mass produce fuel cells? If we are to achieve the kind
of economies of scale which will be needed then they will need
to be mass produced. The current generations of fuel cells are
not appropriate for mass production. That is one reason why their
costs are so high. If fuel cells are to come through along with
renewable hydrogen to offer the fuel of the future or the power
sources of the future, we have to find a means by which the new
generation of fuel cells can be mass produced. This is one of
the reasons why so many of the Japanese manufacturers are now
going essentially back to basics in terms of redesigns or looking
at redesigns of fuel cells to enable them to be mass produced
in the future. Hydrogen is certainly a very promising option but
so too are the second generation bio fuels which may be synthetic
fuels produced from green waste material or from woody mass and
so forth. There is still a debate and an issue to be resolved
about whether or not it is hydrogen that comes forward to be the
fuel of the future or whether or not we move to producing synthetic
forms of oil from bio mass which actually prove to be more cost
effective more quickly. Even the International Energy Agency in
their recent report indicated that they only thought that we would
get to 30% market penetration of fuel cell vehicles by 2050 and
that was even with substantial market support. We have to recognise
that it may be that other technologies come along more quickly
and therefore we never actually need to move to hydrogen and fuel
cells. That is not to say that hydrogen is not an option, but
it is not the only future option.
Q127 Dr Turner: Mr Barnes, you rightly
said that you can run a combustion engine on hydrogen and BMW
do.
Mr Barnes: Yes.
Q128 Dr Turner: However, there is
a big problem because hydrogen is so bulky.
Mr Barnes: Yes.
Q129 Dr Turner: There is a distinct
practical limitation and if it were not so bulky it would be a
very attractive option for aviation as well. Is the motor industry
involved in any research on trying to achieve more compact storage
of hydrogen so that it is less bulky?
Mr Barnes: I am afraid I am probably
not able to answer that question myself. I am sure John Hollis
from BMW would help you with that.
Q130 Dr Turner: If you could achieve
that, do you think hydrogen fuel internal combustion engine driven
cars are a practical proposition?
Mr Barnes: Certainly some manufacturers
would say that is a practical contribution and that is perfectly
possible. I think BMW's development plan is to come out with a
product on sale in the market in two or three years' time. That
will be a large car, a large Seven series car which, as you say,
is able to handle the bulk of the hydrogen.
Chairman: I am sure the Committee will
try it out when it comes out. I think we had better call it a
day there. We have had a very helpful session from you and I should
have said at the start that we are grateful for your written evidence
as well; we have had memos from both of you. I have no doubt that
these are issues which we will continue to debate for some time.
Thank you very much for coming today.
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