THE ALTERNATIVE FUEL VEHICLE REPORT

All About Alternative Fuel Cars

This is a background and introduction to alternative fuel cars. If you are considering buying one, not sure if it is a good idea, and curious about what technologies you might see on the market in a year or two or ten, this report is for you. I have worked as a consultant to industry and governments around the world, and have studied the markets for electric and hybrid cars since 1991.

By Robin Segal, Ph.D. ©2005

A Bit of History-- The First Wave: The All-Electric Vehicle (EV)

What ever happened to the “EV,” the all-electric vehicle, the glorified golf cart? General Motors made it, but it was too expensive to succeed in the free market. It required too many hours to recharge the battery, and it did not drive far enough on a single battery charge, it was slow, and it had no pickup. Finally, GM leased a bunch of EVs to celebrities and wealthy Californians, until recently when it recalled them all and destroyed them in a crusher. Even leasing the electric cars was too expensive for GM.

What got this push to electric vehicles started anyway? In 1990, the California Air Resources Board, which produces all kinds of clean air rulemakings (outside of the California legislature) decided that major auto manufacturers would be required to include a small percentage of all-electric cars in their fleets for sale in California. Many states in the northeastern United States followed suit through the 1990s, and so Detroit had no choice but to attempt to produce an all-electric car.

Well, the regulations kept getting more lax and the dates pushed further into the future. Eventually, Detroit was successful in shifting their production to hybrid cars, except for the GM EV, which was simply a commercial flop.

Fifteen years after the California air regulators started the ball rolling, clean car enthusiasts are now snapping up hybrid cars all over America. Before we discuss the phenomenon, it is best that we define what a hybrid car is and isn’t.

What IS a Hybrid Car?

“Hybrid” just means more than one kind of something, in this case, right now, it means an electric motor and a gasoline engine. Depending on the car manufacturer, these two engines work together in different ways. Let’s look at what you might find in various hybrid cars, depending on make and model.

What Is IN a Hybrid Car?

Electric Motor: The electric motor complements or replaces the internal combustion engine. From idling to driving at low speeds, in accelerating during driving at higher speeds or hill climbing, the electric motor is used. This means that the vehicles internal combustion engine can be smaller and the car will drive just as effectively.

Regenerative Braking: The electric motor captures the power of deceleration, and stores it, storing it in a battery and then using it later to power the same motor to drive the car.

Automatic Start/Shutoff: The engine shuts off automatically when the vehicle comes to a stop and restarts it when the accelerator is pressed, preventing the vehicle from wasting energy while idling. These three elements vary, by make and model, in the way that they work together to achieve greater fuel economy. In some hybrid cars, the electric motor takes the car from idle to moderately fast, and then the gasoline engine takes over, and then both work together at higher speeds to accelerate the car.

Who Makes Hybrid Cars and What is their Fuel Economy?

Currently, a number of manufacturers make hybrids. Their fuel economy is rated but not necessarily achievable by all drivers. Like internal combustion engine cars, fuel economy is almost always rated better on paper than in reality. With hybrid cars, there is the additional challenge of learning to drive them in such a way as to maximize their efficiency. Fuel efficiency improvements vary from a low 5% (yes, that’s right, only 5% better,) to about twice as good as the internal combustion engine version of the same car. Here are a few of the main contenders in the 2005 model year:

Chevy Silverado Pickup Truck, automatic 4WD City/Hway mpg: 17/19 Improvement of only 5-13% over regular Silverado.

Ford Escape FEV SUV, automatic 4WD City/Hway mpg: 33/29

Honda Civic Hybrid City/Hway mpg: 48/48 Improvement of 40% over regular Civic.

Toyota Prius City/Hway mpg: 60/51

Newer vehicles set to be introduced in model years 2006 to 2008 include additional SUVs, pickups, and sedans. Saturn, Lexus, the Chevy Tahoe and others will be manufacturing hybrids, with varying savings in fuel economy.

For a comprehensive comparison of hybrid cars, SUVs and trucks, see the website compiled by the US Environmental Protection Agency and the US Department of Energy:

http://www.fueleconomy.gov/feg/hybrid_sbs.shtml

Do You WANT a Hybrid Car?

If you are thinking of buying a hybrid car, there are a few things to consider. First, why do you want one? Is it to save the environment by using less gasoline? Is it to save money by using less gasoline? If you want to save the environment, then sure, go ahead and buy a hybrid. You could also drive a smaller car, or one with less power; both of those actions would help. But if you want a big SUV, then a hybrid will certainly require less gasoline. But not that much less.

Example:

Let’s say your current vehicle gets 20 miles per gallon, and you drive fifteen-thousand miles per year. Let’s also assume that gasoline will average $3 per gallon over the next 6 years, and that you will keep your car for six years, which is about average. With these numbers, you can expect to pay $2250 per year, for gasoline. Multiply by six years and your bill comes to $13,500.

Now, if the hybrid car you buy this year gets the equivalent of 35 miles per gallon, with all else being equal you should expect to pay about $1285 per year, for gasoline. Multiply by six years and your bill comes to $7,710. Over the lifetime of the car, you will save about $5790. Sounds great, right? But wait! Hybrids now cost about $4000 more than their equivalent gasoline-powered cars. That reduces your savings to less than $2000 over six years. On the other hand, there is a $3000 tax credit for hybrid cars, so your benefit goes up again to nearly $5000 over six years.

That’s nothing to laugh at. In many major American cities, $5000 over six years buys you a medium Starbucks coffee every day for six years. And we all know that Starbucks coffee can make up in personal energy what a hybrid lacks in horsepower.

Tax Credits for Hybrid Cars

At the time of this writing, many hybrid cars are certified by the IRS for a clean-burning fuel deduction. This means that taxpayers in the United States who buy a hybrid car during calendar year 2005 may claim a tax deduction on Form 1040. Some states also offer tax incentives for hybrid cars. The tax credit is not valid on a used hybrid car.

Under the ENERGY POLICY ACT OF 2005, buyers of hybrid vehicles are eligible for tax credits, ranging from $400 to $3,400, and the amount of credits are based on fuel economy gains and life time fuel savings. Eligible hybrids must achieve at least 4% maximum available power from their rechargeable energy storage systems.

Buyers of other clean vehicles, such as Advanced Lean Burn Vehicles, Alternative Fueled Vehicles, and Fuel Cell Vehicles, are eligible for certain other tax credits: Check with your accountant for details.

Be careful that hybrids do not become too popular, otherwise the tax credit disappears! The number of vehicles eligible for the credit is capped at 60,000 per manufacturer. The credit is phased out over the next year once the cap is reached at 50% and 25% values for six months. The effective dates for these rules is January 1, 2006 to December 31, 2009.

Examples of tax credits:* Ford Escape (2wd) $2600 Honda Civic (auto) $2100 Toyota Prius $3150

(*Source: American Council for an Energy Efficient Economy)

New Technology Developments

There are, of course, many ways to measure savings and trade-offs, but a serious consideration is how quickly the technology is developing. If you buy a hybrid today, there could be a similar technology that is twice as efficient, only two years down the road. If that happens, then your 2005 hybrid will be an albatross around your neck environmentally speaking.

The point is, there is no way for us to know how fast oil prices will rise, and how fast driving technology will develop. But there are some more things to consider, if you are really interested in making the move to a clean driving technology in the next few years, whenever it is time to retire your current car:

List them here and a bit of information about each.

Clean Diesel

Sounds like an oxymoron. For decades, diesel has been associated with heavy pollution. The crop of cars imported to the U.S. in the early 1980s were indeed very dirty, and along with heavy emissions from diesel-burning trucks, diesel has a bad reputation to overcome. Today, diesel cars are much cleaner, and the engines that burn diesel are significantly more efficient than gasoline-burning engines. In fact, they are about as efficient as the average hybrid car. So, why not buy a “clean” diesel? Good question. They are viable options now, and an increasing number of manufacturers are bringing out diesel versions of cars that have never burned diesel before.

Diesel has another advantage over hybrids, and that is that it is only one technology, not two coordinated together under one hood, so it has fewer parts, and is easier to repair. It is also an older technology, which means lower repair bills and greater ease of finding someone who knows how to solve the problem.

Recent reports of 2006 models cite the diesel Volkswagen New Beetle, the Jetta and the Golf as among the highest cars in fuel economy on the market.

So far, the new diesel is sounding like a pretty good idea. But there’s more. Diesel engines can burn a fuel called “biodiesel,” which is made from plants, and it can do this with little or no alteration to the engine. Biodiesel is popular because it is clean, it is homegrown (which is popular in the farm states of America,) and it is renewable. Yet another advantage of biodiesel is that it can be added in smaller proportions, typically 20%, to diesel fuel, making diesel burn even cleaner, while not raising the price too high.

If all that is not enough to make you more curious about exploring whether there is a clean diesel car in your future, we are not at all far from seeing diesel-hybrids, meaning cars powered by diesel and electric engines, as opposed to gasoline and electric engines. In fact, buses in several cities now run successfully on diesel-hybrids. New York City has just ordered more and is planning to order no more natural gas buses. As the technology matures in the larger vehicles, diesel-hybrid will make its way into the passenger car fleet. A couple of automakers are planning to launch diesel-hybrid SUVs in under two years.

Ethanol

We hear so much about ethanol, a renewable fuel made from corn. It is grown in the midwest, and has enjoyed a lot of political support in Washington from midwestern politicians looking out for their states’ economic interests. With the price of gasoline rising so quickly earlier this year, the Ford Motor Company has just announced that it will subsidize ethanol pumps in several states in the midwest.

What is interesting to note is that many vehicles currently are capable of burning a blend of fuel that contains ethanol, however owners of these vehicles are usually not aware of this fact because of ethanol’s almost complete lack of availability across most of the United States. And when it is available, it has been prohibitively expensive.

Don’t look for a vehicle that burns ethanol, but if you live in a midwestern state, do look out for a way to feed your car ethanol, now or in the future. In the long run, however, I believe that biodiesel will overtake ethanol in the category of clean liquid fuels, if for no other reason than it is a more flexible fuel in terms of the feedstock required to make it. That is, you can make biodiesel fuel out of several different sources, while traditional ethanol comes from corn, produced almost exclusively in the midwest. It is in the auto companies’ best interest to produce cars that can be fed with widely available fuels.

Gasoline hybrid? Clean diesel? Biodiesel? Diesel hybrid? Ethanol? Which one will it be? If you want to make the move to a cleaner driving technology for your next car purchase, it will probably be one of these. One technology it probably will NOT be is a fuel cell car, or a hydrogen car. Those are just too far off.

Hydrogen Cars and Fuel Cell Cars – A Long Way Away

What is a fuel cell and when are fuel cell cars going to be on the market? We have heard a lot about fuel cells, but what are they really? Inside a fuel cell is a chemical reaction. The fuel cell takes hydrogen, adds oxygen, from air, and creates two products, water and energy, in the form of electricity, which powers a car or some other machine. Simple enough, but the challenge is getting a fuel cell light enough to be cost-effective in a car. Right now, the hydrogen is hard to store on board. It can be stored as natural gas, but then that has to be split into hydrogen and carbon-dioxide before the hydrogen can be convinced with the oxygen form the air.

It’s also important to point out that it takes energy to get the hydrogen to react in the fuel cell. Using natural gas works, but natural gas will release carbon dioxide into the atmosphere when the carbon splits off from the hydrogen (natural gas is made up of only carbon and hydrogen). We could use electricity to split hydrogen from oxygen, but currently we do not have enough renewable energy capacity to produce even a small percentage of what we would need to make that much hydrogen. So, for now, hydrogen cars RUN as clean cars, but it still takes fossil fuel and plenty of dirtier technology to make them run clean on the street.

Another area of concern is the supply infrastructure, meaning how to get the hydrogen to the car in the first place. How will today’s service stations convert their gas pumps to hydrogen pumps or natural gas supply tanks? Some analysts say the investment required for even a couple of percent of the car market to convert to hydrogen will be in the billions of dollars. Who will pay? The government? That’s a big subsidy. Detroit? Not likely these days. The oil companies that run the service stations? Why would they want to?

That’s why the hydrogen car and the fuel cell car will remain a “future target” for quite a few years to come. Don’t plan on running your next car on hydrogen. And probably not your car after your next car either.

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For lots more car buying tips and strategies: www.thecarbuyersbible.com

Robin Segal, PhD

Need some more advice? Dr. Robin Segal has a lot more tips. Author of THE CAR BUYER’S BIBLE, Robin sold cars in a high-pressure car dealership. Being behind the scenes and seeing what car buyers went through broker her heart, so she wrote a book to help people avoid stress and save money. She has been helping car buyers save money on their car purchases for years. Robin has also worked on clean air transportation planning for the United Nations, The World Bank, The EPA, and The US Department of Energy . Find THE CAR BUYER’S BIBLE at: www.thecarbuyersbible.com

Please direct any questions about this report to Robin Segal at: rsegal@nyc.rr.com