Advanced Clean Vehicles: Working to Ensure Sustainability: A CALSTART Emerging Technologies Workshop Series

Tuesday, September 27, 2011
South Coast Air Quality Management District

Efficiency and greenhouse gas emissions standards that are currently under development will reshape the light duty vehicle market over the next decade, driving dramatic improvements in efficiency and changes in vehicle technologies. The Zero Emission Vehicle program in California and other states is intended to bring increasing numbers of plug in and fuel cell vehicles to market. Automakers and others are also looking to increase the use of natural gas and other advanced technology vehicles. However, questions remain as to the viability of these advanced technology vehicles in the market. On September 27th, CALSTART and the South Coast Air Quality Management District co-sponsored a workshop and dialogue among key stakeholders on what is needed to ensure the success of the advanced light duty vehicles market. Workshop notes and key takeaways are outlined below.

Please note that, as a follow up to this workshop CALSTART is launching a coalition to figure out how to rethink these incentives and get them extended. If you have any interest in getting involved, please contact Jamie Hall, CALSTART Policy Director, at jhall@calstart.org or 510-307-8774.  

NOTE: The following are rough meeting notes. They have not been edited for content or reviewed by speakers and are intended to give a general overview summary of the workshop. Additionally, numbers cited within have not been reviewed for accuracy and should not be quoted.

Workshop Opening
•    South Coast AQMD Executive Officer Barry Wallerstein opened the workshop by highlighting the challenges and opportunities that the South Coast is currently facing. Looking ahead to the future, it is clear that we need zero emission technologies to meet both climate and air quality goals. The technology is finally coming to market, and the key is to figure out how to make the transition successful.
•    CALSTART President and CEO John Boesel noted that California’s priorities have changed over the past several years, adding climate and energy security to our air quality concerns. Meeting our longer term transportation goals will require a comprehensive approach to overcome barriers and bring about widespread deployment of zero emission vehicles. Public investments and incentives have an important role to play here. Boesel noted that California’s public investments are set to drop off dramatically over the next several years, and CALSTART is launching an effort to address this impending incentives crisis.

Keynote: John German, ICCT
John German delivered a detailed and provocative opening presentation on meeting environmental and fuel efficiency goals. He reviewed the proposed 2017-2025 standards for light duty vehicles, including a discussion of the various credits that are available, and noted that these standards will really close the gap between the US and the rest of the world.
•    Policies are needed to fill the gap between the value of fuel savings to purchasers and society
•    2025 standards are aggressive, but can be met with conventional technologies
•    Mainstream customer risk/loss aversion poses challenges for advanced technologies
•    Fuel prices alone will not drive change – the cost of driving is lower than in the past as a percentage of disposable income, and costs will continue to come down as fuel economy improves
•    Conventional tech advances will raise the bar for other technologies.
•    Gasoline engines and hybrids are improving, and hybrid costs are dropping
•    Advanced tech must be better to be accepted by mass market
•    No silver bullet – need to support development of all of these technologies, need to stay flexible

Overview of Existing Policy Spurring  - or Not Spurring - the Market
Moderator:  Jack Broadbent, Executive Officer, Bay Area Air Quality Management District    
Panelists:  Tom Cackette, Deputy Executive Officer, CARB , Anthony Eggert, Deputy Secretary for Energy Policy, CalEPA, Wendy James, Coordinator, California Clean Car Campaign,  Dr. Barry Wallerstein, Executive Director, SCAQMD  
Discussion Questions: What is the current policy landscape for encouraging the advanced technology vehicle market – what is working and what is not? Various policies will require OEMs to produce more efficient and more expensive vehicles – will incentives be needed?  If so, how much and for how long? Will the NAT GAS Act help spur and sustain the natural gas vehicle market?

Key Takeaways
•    We need both the carrot and the stick to be successful here. That means strong performance-based standards combined with smart incentives and investments.
•    On the regulatory side, performance-based standards are one of the best tools we have. This is a proven way to drive efficiency improvements. However, while these performance standards are great at encouraging incremental change, they are not good at taking technology in development stage and pushing it into the market. This is why California is trying to supplement vehicle standards with the ZEV mandate.
•    On the incentives side, we need to both (1) figure out how to extend these programs, and (2) figure out how to get more “bang for the buck.”  This means taking a step back to look at how best to achieve our multiple policy goals of clean air, reduced GHG emissions, and reduced petroleum usage. We need to figure out how to get multiple benefits and how to drive technology advancement. Forums like this one are one good place to start.

“The Galileo Advantage” (presentation on the Galileo CNG refueling system)
Enid Joffe, President, Clean Fuel Connection
Galileo offers a unique approach to CNG fueling, with compact design, small footprint, and explosion-proof container. Software learns and anticipates peak demand. Several projects coming online. This is a new approach because you can right-size the fast fill product to the demand. Really good for serving smaller fleets.

Purchasing Advanced Technology Vehicles: What Fleets Need to Lead the Way (Voice of the customer panel)
Moderator: Fred Silver, Vice President, CALSTART
Panelists: Lee Broughton, Director, Corporate Sustainability, Enterprise Holdings, Ken McKenney, Technical Support Fleet Operations, Verizon, Tony Orta, Fleet Services Manager, Southern California Gas Company, Rick Teebay, Chief, Fleet Management, Los Angeles County Dept of Public Works
Discussion Questions: How are fleets the bridge to the broader customer market? Can they lead the way in purchasing advanced technology vehicles? Are fleets concerned with strong fuel economy and GHG standards for light duty vehicles?  What do fleets need to make advanced technology vehicles work for them; how are they making these vehicles work for them now?  How have concerns and the impact of the economic downturn affected purchase plans?  Are there viable models for fleet group purchases? How do we get smaller fleets adopting advanced clean vehicles?  Can private and public fleets work together for faster adoption of advanced clean vehicles?

Key Takeaways
•    Fleets are 16% of LDV sales and a very good way to introduce products into the market. You can work with one customer to sell a lot of vehicles and get people trying the technology in a controlled environment. You also get feedback from professionals to determine strengths and challenges.
•    Advanced vehicles are currently much more expensive than traditional vehicles. This means that collaboration and problem solving are key at this stage for fleets such as SoCalGas, Verizon, and LA County that use the vehicles in their own work.
•    For rental fleets, advanced vehicles present other challenges and opportunities. Rental fleets are a petri dish for consumers to try out vehicles for ownership. However, Enterprise’s experiences to date show that many people are hesitant to pay extra money for advanced technologies. Enterprise is actually losing money on these vehicles, but keeping them as a service to their customers. Over the longer term, aftermarket value will be particularly important for rental fleets that do not hold on to their vehicles for more than 1-2 years.
•    Large fleets can move the market because they can hold companies accountable for what they build. Large fleets need to make sure that vehicles out there are really good products that are ready to go. Small fleets cannot do this.

“The Right to Breathe”
Documentary Film
Introduction: Dr. Barry Wallerstein


What OEMs Need to Continue the Investment in the Market (Voice of the Industry Panel)
Moderator: Chuck Parker, Publisher, Automotive Digest
Panelists: David Barthmuss, Group Manager, Western Region & Environment, General Motors, Dr. Jon Coleman, Fleet Sustainability and Technology Manager, Ford, Steve Ellis, Manager, Fuel Cell Marketing, Honda, Matt Sloustcher, Coda Automotive, Geri Yoza, National Manager Advanced Technology Vehicles, Toyota
Discussion Questions: What is needed to prepare the market and ensure a high chance of consumer acceptance of advanced technology vehicles?  From an OEM perspective, how important are fleet sales to keeping OEMs involved in the market - should fleets or individual consumers lead the charge?  Is there a role for consumer and environmental groups to help prepare the market?  From an OEM perspective, are group purchase aggregations a viable strategy to reduce costs and stimulate purchases?  What do OEMs think is needed to educate the customer to stimulate purchases?

Key Takeaways
•    Simply putting people in these vehicles is the key to driving sales. Word of mouth advertising and getting people in these cars really works. The technology has to be seamless and fun.
•    There isn’t room for competition in alt fuels right now. We need to collaborate and work together on alternative fuels.
•    Fleets are going to drive this. It is more cost effective to do infrastructure for fleets and more cost effective to educate fleets. Getting vehicles into fleets also gets them out there for people to see and experience. In the longer term, getting retail sales is the real goal. That’s where you change market share. Honda’s experience with the Civic NG is an example – it was originally made just for fleets, but now they are marketing to consumers directly, and individuals are well over 50% of the market.
•    Confusion around pricing for electric vehicles is a problem. This is particularly true with large up front incentives, battery replacement costs, etc. It will be difficult to make this transparent and simple for consumers.
•    If we are going to mainstream this technology and move people from high efficiency conventional tech to advanced tech, the key is to market this technology as simply being better, not being “alternative.” You need to get these vehicles out there and make them seem less unusual. It’s about demystifying the vehicle and showing the benefits. From a “sustainability” perspective, it is about doing more good, rather than doing less bad.

Extending, Improving, and Rethinking Incentive Programs for Light Duty Vehicles
Moderator: John Boesel, President & CEO, CALSTART
Panelists: Tim Carmichael, President, California Natural Gas Vehicle Coalition, Scott Keene, Environmental Attorney, Keene Law, Nichole Tyerman, American Lung Association in California, Samir Sheikh, Director, Strategies and Incentives, San Joaquin Valley Air Pollution Control District, Dean Saito, Manager, Mobile Source Strategies, South Coast Air Quality Management District
Discussion Questions: Are existing incentives still geared toward “flavor of the month” thinking perhaps to the detriment of moving forward all advanced vehicle technologies and fuels?  How can existing incentive programs be improved to get more bang for the buck?  Can a case be made for the use of performance-based incentives? Would these incentives be more effective than what we have now?  Are non-traditional and non-monetary Incentives (HOV lanes, parking, social recognition) meaningful enough to help stimulate the market?  Government incentives, tax breaks, creative financing - are these viable options to reduce costs and stimulate purchases? What else might be needed?  Do incentive programs work to accelerate the replacement of the legacy fleet (i.e. Cash for Clunkers)?  How should road taxes and tolls treat the advanced clean vehicles currently starting to roll out in California and around the country?

Key Takeaways
•    There is a societal need for a certain type of vehicle, and then there is the consumer’s need to have a vehicle that meets their needs at low cost. Incentives have a key role to play here. Unfortunately, most of the state’s clean transportation incentive programs are set to expire in the near term. We need to address this impending incentives crisis.
•    Renewing the programs that are in place is an important step, but we need to be strategic in how we package or frame these things. We need to clearly demonstrate and communicate the program benefits.
•    Achieving “success” in this area may require drastic changes to AB 118 and other programs. We should think like investors with a focus on long term goals and performance metrics. What can we get for our investments today in terms of air quality, GHG, and energy security benefits over the longer term? We need to think about how to stretch our dollars through more creative financing mechanisms and nonmonetary incentives. We also need to look at regional differences (SJ Valley is very different from Bay Area, for example).
•    In addition to incentives, we need to think about how to knock down barriers, including but not limited to high verification and certification costs for new technologies.
•    Public fleets can and should lead on advanced transportation technologies, and public investment programs could help make this a reality.
•    CALSTART is launching a coalition to figure out how to rethink these incentives and get them extended. If you have any interest in getting involved, please contact Jamie Hall, CALSTART Policy Director, at jhall@calstart.org or 510-307-8774.

Next Action Steps
CALSTART is launching a coalition to figure out how to rethink these incentives and get them extended. If you have any interest in getting involved, please contact Jamie Hall, CALSTART Policy Director, at jhall@calstart.org or 510-307-8774.  

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