Transport Committee - Plug-in vehicles, plugged in policy?Written evidence from the Motor Industry Observatory
Evidence submitted to the Transport Committee inquiry into Low Carbon Vehicles by Dr Jason Begley*, Dr Nigel Berkeley*, Dr David Jarvis*, Prof Tom Donnelly*, Prof David Bailey* and Bernard Porter**.
*Motor Industry Observatory (MIO) and the Applied Research Centre in Sustainable Regeneration (SURGE), Coventry University.
**Department Mechanical & Automotive Engineering, Coventry University
Preface
1. We welcome the opportunity to comment on the questions raised in by the Transport Committee in relation to Low Carbon Vehicles. The evidence is written by a team with considerable experience in relation to the Automotive Industry and the Low Carbon Vehicle Sector in the UK, but also internationally (Donnelly et al, 2010; Begley and Donnelly, 2011; Berkeley and Jarvis, 2012; Bailey et al, 2010, 2011).
2. As an integral part of SURGE, the functions of the Motor Industry Observatory are to observe, analyse, comment and publish on developments in the automotive industry in the UK and overseas in recent years, and to assess future potential developments. MIO focuses heavily on the assembly and components sectors in the UK and nearby Europe within a global context. Research has focussed on the merger and subsequent de-merger between BMW and Rover, the latter’s subsequent sell sale to the Phoenix Group, the MG Rover Crisis of 2005 and on the sale of Jaguar and Land Rover to Tata of India. Finally, the MIO was invited to give evidence to the government enquiries into the collapse and impact of MG Rover. More recent work has analysed policies to promote low carbon automobility and the economic opportunities that may result (Berkeley and Jarvis, 2012), whilst MIO staff are part of a regional consortia running a public trial of ultra-low carbon vehicles in the West Midlands (CABLED).
3. In addressing the questions posed by the Transport Committee in relation to Low Carbon Vehicles (LCVs) our aim is to widen the debate on the promotion, adoption and acceptance of LCVs as an alternative, green transport solution key to the future development of the UK transport sector as it seeks to meet the dual challenges of reducing carbon emission and future proofing against the depletion of oil reserves. We believe the points raised in the following evidence will prove of practical use to the sponsoring ministries and aid them in clarifying their final proposals to Parliament.
Question 1: The contribution of plug-in vehicles to decarbonising transport
4. In recent years traditional cars based on Internal Combustion Engine (ICE) technology have been targeted as major contributors to global warming and accelerators of climate change and, through urban congestion in particular, as a key cause of respiratory illness (Stern, 2007; King, 2008). In the longer term, the issue of declining oil resources mean the automotive sector has begun to develop LCVs as a potential replacement technology for the future.
5. A range of viable alternatively fuelled technologies have been pursued that have been central to the development of LCVs. These can be largely classified under three categories; bio-fuels (using ICE technology but environmentally friendly fuel), electrically powered vehicles (including battery, plug-in and hybrids) and finally hydrogen-powered vehicles. Additionally it should be noted that technological improvements in ICE technology has resulted in a reduction in CO2 emission from new vehicles using fossil fuels as a power source. While this has been positive in terms of emissions reduction it has also served to offer greater competition to LCVs in the market, as these advances place newer ICE vehicles in the same emissions category as some of the higher CO2 emitting LCVs (SMMT, 2011).
6. In terms of the adoption of a LCV standard, to date a consensus has yet to emerge on which technology to favour. The use of bio-fuels has proven popular in South American countries where sugar cane in particular has provided a useful base for these bio-fuels. However, in North America and Western Europe (including the UK) the focus has been on Electric Vehicles (EVs) in their various guises. Full electric vehicles offer the best return in terms of emissions while hybrids offer a convenient bridge between ICE and LCV technology, with better performance (in terms of range and power) at the expense of higher emissions. Ultimately hydrogen is seen to be the long-term future of LCVs.
7. EVs and in particular plug-in technology offers a number of advantages that help explain the decision to focus on their use in Western Europe and the UK. Hydrogen is still considered to be many years away from mass-market penetration in terms of volume-produced technology, with the best estimates placing hydrogen technology as not being ready until approximately 2050 (NAIGT, 2009). Bio-fuel technology is dependent on switching vast swathes of agricultural land to producing the ingredients for ethanol production. This process would occur at the cost of rising food prices (as demand for arable land for planting rose) and could, if demand for bio-fuel rose high enough, make the UK vulnerable to fuel import dependency.
8. In contrast plug-in EVs and hybrids would operate off existing power supplied by the grid and in tandem with growing renewable energy exploitation would see a more controlled movement towards cleaner technology with fewer repercussions in terms of strategic resources like food and imported fuel. In terms of infrastructure plug-in EVs and hybrids are comparatively cheaper than battery replacement (which would require significant roll-out of changing stations compared to the ready availability of access the national grid) and offer consumers a much easier entry point to LCV motoring.
9. The real value then of plug-in EVs and hybrids as a technology to UK consumers is in its role as a vanguard technology, encouraging consumers to adopt green technology solutions to personal transport with accessible vehicles that act as an intermediate to the later proliferation of hydrogen transport. Plug-in EVs and hybrids act as educators for the public, demonstrating the need to consider new forms of personal transportation that are environmentally sound and future technology proof.
10. From a business perspective the technological advances utilised in plug-in EVs and hybrids are also applicable to hydrogen vehicles and represent an important R&D stage for automotive manufacturers looking for entry into the LCV sector. The technology associated with plug-in EVs and hybrids is not constrained in terms of supply and entry into the LCV market via plug-in EVs and hybrids is relatively straight forward process. These vehicles also represent a significant potential market opportunity with a target of 1.7 million plug-in electric vehicles on the roads by 2020 as encouraged by the Committee on Climate Change (RAC, 2011).
Recommendation: There are a number of technologies currently being pursued that can be classified as LCV technology. However, plug-in EVs and hybrids offer significant advantages in achieving a greener UK vehicle fleet that is not dependent on a declining resource. It is important, therefore, that the LCV sector receives clear guidance and regulation from policymakers, to ensure uniform standards are adopted and the requisite support services and infrastructure is put in place to help grow this fledgling industry. This may require offering incentives and investment to start-up and existing automotive firms wishing to exploit this niche sector.
Question 2: the uptake of plug-in vehicles and how this can be improved?
11. The uptake of plug-in EVs and hybrids to date has been low, at approximately 1% of the UK new vehicles registrations in 2010 (SMMT, 2011). A number of barriers to adoption of LCVs and in particular plug-in EVs and hybrids exist that need to be addressed by stakeholders. The vehicles themselves are comparatively costly and their performance is not on a par with traditional ICE vehicles in terms of range, power, size and refuelling speed. The public perception of these vehicles is still one of conservative caution, a situation not aided by the realisation that plug-in EVs and hybrids are only as environmentally friendly as the production techniques and power generation of electricity used to fuel them. Currently penetration rates of UK renewable energy are as low as 2% (Royal Academy of Engineering, 2010, p. 33).
12. Producers have also proven reluctant to fully invest in the research and manufacture of these vehicles while the market remains under-developed and the capital return from previous investment in ICE production facilities still has to be realised. In addition, the fuller development of clean diesel technology and environmental improvements to existing ICE technology have, arguably, slowed the rate of investment and production of LCVs. While many auto manufacturers are developing a wide range of suitable technologies there is a natural tendency to wait for the market to mature before fully committing substantial resources to the promotion of LCVs. It should be noted however that manufacturers such as Tata and Renault are very much embracing EVs in particular as a potential growth industry for the future.
13. The major stumbling block to the proliferation of LCVs is that of demand rather than supply. While technological breakthroughs are still required before LCVs can be seen as valid competitors to existing ICE vehicles, there are a number of viable LCV solutions available on the market, but to date the general public have proven reluctant to purchase these automotives. The two key concerns for motorists as shown by surveys are cost and performance. However, while important factors, too much emphasis can be placed on these concerns. For example the recent offer of a £5,000 grant for the purchase of EVs by the UK government did not readily translate into more significant numbers of cars bought (SMMT, 2011).
14. Equally, the issue of range anxiety and load capacity are only relevant for certain types of journeys and certain types of motorists. Recent findings from the CABLED LCV trials shows that the vast majority of car journeys were less than 40km (below that of the maximum distance that can be travelled on one charge of most fully electric models available for sale in the UK) and undertaken by just one occupant. The majority of triallists expressed their satisfaction with the vehicles and recommended them as ideal second vehicles for short, urban commutes. While it is not ideal that these LCVs should occupy a place as a support vehicle rather than a primary mode of transport (particularly for one car families) it nonetheless shows there is a considerably bigger market for these vehicles than has hitherto been the case.
15. Key then to the successful uptake of these vehicles is the consumer perception of their abilities. In part LCVs and EVs in particular suffer by comparison with EVs and gas-powered vehicles of yesteryear, cars that arrived amid much fanfare but quickly disappeared. It is important, therefore, that consumers are made to understand that EVs are not a fad and are in fact the start of a new phase of development for the automotive industry as a whole. Confidence in the longevity of the vehicle must be accompanied by efforts to ensure standards and norms are quickly adopted and supporting infrastructure (such as charging points) are rolled out. To date the roll out of charging infrastructure has yet to reach high saturation levels nationally. Though evidence from the CABLED trials suggests that the presence of charging points is more important than the actual use of them, commitment to developing an EV network will engender confidence in consumers. In the longer term planning for inter-city travel must also be considered to ensure consumer support remains consistent.
16. Perhaps what is ultimately required is a fundamental change of mindset about how we engage in personal transportation. After over a century of developing and advancing ICE technology, consumers are now being made aware that established patterns of travel, vehicle ownership and vehicle use are undergoing change. The role of policymakers in this transition is central and the use of incentives to encourage this switch is to be lauded. However, with significant challenges still remaining and the pace of change occurring at a slow pace, the use of disincentives to purchasing and using ICE technology may also be required, or at the very least considered. The RAC’s suggestion of a “feebate” scheme may be worth exploring, for example (RAC, 2011).
Recommendation: Significant barriers must be overcome to encourage the widespread use of plug-in EVs and hybrids. These include developing existing markets and improving consumer knowledge and understanding of the benefits of these vehicles. Demonstrator projects such as CABLED are providing significant learning that needs to be effectively disseminated. It is also recommended that the issues of consumer perception and how to incentivise purchases must be revisited. Additionally it may require some form of disincentive to existing private motoring norms and practises to bring about these changes. Commercial vehicles and corporate fleets could prove a fruitful ground for development.
Question 4: The role of plug-in vehicles alongside other technologies to reduce carbon emissions from road transport
17. The independent NAIGT report recommended that a range of technological solutions should be pursued to ease the transition from ICE to LCV technologies. The logic for this was explained as follows “It is worth resisting the temptation to pick a winner prematurely, however politically attractive it may appear. Plurality of solutions in the interim is likely and this is healthy for inter-technological competition” (NAIGT, 2009, p.45). However, the weakness of this argument is that by failing to choose one successful technology the rate of technological change could, arguably, be slowed, as consumers defer buying an emerging technology until the market is more established. Environmental imperatives make such a delay problematic. Such a diverse approach may also mean higher costs for producers looking to invest in a range of new technologies (EV, hybrids, lower emission ICE, and even hydrogen), requiring cooperation between such firms.
18. From an industrial perspective, encouraging a wide range of competing technologies therefore holds both advantages and disadvantages. On the one hand, competing technologies mean more scope for development as well as increased possibility of a technology breakthrough and potentially useful overlaps of innovation. The downside is that development in breadth rather than depth can lead to a wait-and-see attitude developing for the consumer and a sense of paralysis for the manufacturer and further down the supply chain as they become unsure which technology to favour with investment. From a government perspective competing technologies can lead to a less organised, more ad hoc development of supporting services and infrastructure that in turn discourage both consumers and producers from choosing a clear winner.
Recommendation: While pursuing a range of technologies has many beneficial business aspects as an approach, focussing on one technology could also speed up the speed of proliferation of LCVs and aid in meeting CO2 emission targets.
Question 5: Action taken by other countries to encourage the uptake of plug-in vehicles
19. Past experience shows that environmental innovation within the automotive industry has largely been in response to government regulation. Intelligent regulation can thus stimulate innovation as suggested by the “Porter hypothesis” (Ambec et al, 2011). For example EU legislation setting CO2 emissions limits on cars (130g CO2/km by 2012) has resulted in manufacturers improving engine technology to release fewer emissions. In Japan, government policy has similarly stimulated environmental innovation within the automotive sector. In the US the California Air Resources Board (CARB) has been instrumental in pushing forward a zero emission vehicles policy, which, in conjunction with federal decisions such as the 1992 Energy Policy Act have served to create a global drive to reduce emissions and introduce clean and LCV technology in the automotive industry (Wiesenthal, 2010).
20. The importance of government regulation in developing the supply side of LCV production is also mirrored in stimulating demand for these vehicles. Without government support in terms of the provision of services and infrastructure, consumer interest and more importantly belief in these vehicles as a viable, long-term alternative to ICE technology will not be created. Looking to the nations with the largest centres of vehicle production, particularly EV production is informative. In Japan the Ministry of International Trade and Industry (MITI) and its replacement body, the Ministry of Economy, Trade and Industry (METI) has created technological “visions” through collective foresight exercises in leading Japanese automotive firms. MITI/METI has also established intercompany knowledge networks, sponsored R&D, sponsored leasing and purchasing incentive programmes, subsidised electric vehicle manufacturers, encouraged public procurement of LCVs (for example electric Toyota “Rav4’s were sold to some Japanese authorities as vehicle fleets) and also facilitated market entry through developing common legislation and standards (Wiesenthal, 2010).
21. In European terms, France has been a leading force in the promotion of the LCV sector, in particular for plug-in EVs and hybrids. In September 2011 the French Ministry for Industry created a ten point charter with the commitments that Industrial representatives, highway companies, parking operators, traders and dealers must meet when offering low-carbon vehicles and related products and services to consumers, featuring high performance benefits, quality, ease of use and safety. Since 2011, a large number of vehicles have been available on the French market, for purchase or rent. The French government’s Automobile Bonus, in place since 2008, has channelled a total of €2.3 billion into the market, supporting the acquisition of 3.9 million new low-pollution vehicles (with subsidies averaging from €2,000 to €5,000 per low-carbon vehicle). Meanwhile the Recharge Infrastructures Working Group for electric vehicles is responsible for consultation and coordination of all national government issues including recharge infrastructures accessibility, EV safety, standardization, support for trials and recharge infrastructure deployment (IFA, 2012). The emphasis then, in French terms, has been on a holistic, over-arching national plan for development which has attempted to align demand and supply side measures.
22. Germany is currently trailing the US, France and Japan in the market for electrically-powered vehicles. None of the country’s top car makers is mass-producing electric cars yet and only a few thousand such vehicles are on German roads at present, most of them as part of experimental projects (Crossland, 2011). Although lagging behind France’s highly integrated approach for example, Germany has significantly stepped up investment in EVs, committing to two billion Euros in R&D by 2013 (Der Spiegel, 2012). This funding is in addition to already existing tax rebates and dedicated parking slots for these vehicles. However, unlike France and the UK, Germany has no plans to subsidise the purchase of EVs. The country is planning to have over 1 million EVs in operation by 2020, but this is a highly ambitious target as existing numbers of EVs on German roads number in the low thousands, a fraction of the 40 million strong German fleet (Crossland, 2011). Interest in pure EVs in particular remain low, with most Germans favouring petrol, diesel or hybrids. A Gartner Inc study in 2011 showed EVs as the lowest ranked preference for a motor car in Germany, with most respondents citing cost as the key stumbling block. In light of this, it makes the German decision not to subsidise the LCV sector all the more surprising.
23. In the US the question of LCVs has been divisive topic, with CARB pushing for an incrementally higher number of zero emission vehicles being introduced by producers’ year on year, for example CARB initially sought an increase in zero emission vehicle sales of 3% of total new car sales in the US in 1998 rising to 10% by 1992. This was fiercely resisted by producers and compromises were reached in terms of emissions and vehicle sale numbers, but clearly there has been an enormous effort made in the US to push the LCV agenda. In 2009 President Obama introduced the American Recovery and Reinvestment Act worth $2.4 billion dollars to promote electric vehicles. The act was divided into two funding streams, with the majority targeted at the manufacturing of advanced batteries and related drive components, while $400 million was made available for transportation electrification demonstration and deployment projects (US Department of Energy, 2009). The U.S. government also presently provides a subsidy of up to $7,500 per electric vehicle (Lee and Lovellette, 2011). The Electric Vehicle Deployment Act would, if passed, increase this subsidy to $9,500 for the first 100,000 electric vehicles sold in selected deployment communities. The Act, currently in committee, aims to award ten selected communities up to $300 million each to serve as domestic hubs for EV manufacturing and deployment. The bill also offers consumer incentives for the purchase of EVs and promotes utility modernization to accommodate EV deployment (Electrification Coalition, 2011).
24. All of these initiatives at national level demonstrate the importance of strong, co-ordinated national policy to drive forward both the production and proliferation of plug-in and hybrid EVs amongst consumers. Even in small, open, car neutral economies ie economies without a significant manufacturing presence, the importance of a clear national plan for the promotion of these vehicles is a necessity, as demonstrated by countries such as Denmark, Ireland and Israel (Begley and Donnelly, 2011). To date UK national policy related to the development of the LCV sector and the promotion of plug-in and hybrid EVs has been categorised by good intentions but ad hoc implementation. In part this has been a result of the decision to allow the LCV sector to develop according to market forces and without strong central control. The latter point has been addressed by the creation of the Office of Low Emission Vehicles and the Automotive Council, however the question of whether business led solutions will successfully develop a sector driven by environmental imperatives is open to criticism.
Recommendation: The example of Japan, the US and France demonstrate the value of strong governmental will and an over-arching national plan of action. While UK policy has been increasingly moving in the right direction in terms of strong central control, policymakers in the UK arguably need to take more forthright action to develop the sector, and to take a more holistic approach which better aligns supply and demand side measures.
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April 2012