Are We Implementing the Right Automotive Strategy? Part I

A recent McKinsey & Company report forecast that the cost of automotive fuel-cells would drop 90% by 2020. The study compared FCEVs, PHEVs, EVs and ICE vehicles. I’ll discuss compressed natural gas (CNG) vehicles later.

If their forecast is accurate, what should be the best strategy for replacing the internal combustion engine (ICE)?

Is there a better strategy than one based on PHEVs and EVs?

What factors should drive this strategy?

First, there is the cost of the vehicle in 2020.

  • Assuming the cost of fuel-cells is cut 90%, as forecast in the McKinsey study, a fuel-cell powered electric vehicle (FCEV) would cost about $9,000 more than an ICE vehicle. Part of this premium is due to the cost of the high-pressure tanks for storing hydrogen on the vehicle.
  • PHEVs would cost about $8,000 more than an ICE powered vehicle in 2020, assuming the current $10,000 battery cost can be cut by 1.5% per year, which is the percentage used in the McKinsey study.
  • EVs with a limited range of 100 miles would cost about the same as PHEVs.
  • Compact PHEVs and EVs would cost about $5,000 more than and ICE and have a $4,000 advantage over FCEVs.

Second, there is the cost of the infrastructure required to support the three alternatives.

  • Fuel-cell vehicles would need hydrogen fueling stations.
  • PHEVs will require the installation of battery chargers, mostly in the home, some at downtown charging stations. Charging stations in homes, if installed, cost around $2,500. Some downtown recharging stations will be fast charging stations, costing $25,000.
  • EVs will definitely need a large number of downtown fast charging stations costing $25,000. Fleets will also probably opt for $25,000, fast charging stations.

Third, which alternative reduces oil imports by the greatest amount?

  • Of the three, PHEVs would reduce oil imports by the smallest amount as they use gasoline when the car isn’t powered by battery alone.

Fourth, which alternative reduces CO2 emissions by the largest amount?

  • Fuel-cell vehicles could make the greatest reduction in CO2 emissions if high temperature nuclear reactors are used to make the hydrogen. Fuel-cell vehicles would probably still make the greatest reduction in CO2 emissions if either electrolysis or steam-methane reforming is used to produce the hydrogen.
  • EVs would have the next largest reduction in CO2 emissions, assuming the current mix of fuels is used to generate electricity.
  • PHEVs would have the smallest reduction in CO2 emissions as they will use gasoline for some of the miles driven.

All three alternatives would be equally costly in 2030. The McKinsey study forecasts that the first-cost (i.e., selling price) of FCEVs, PHEVs and EVs will be the same by 2030. All will cost more than ICE vehicles.

However, the major drawback to fuel-cell vehicles would be the need for cylinders to store hydrogen at 5,000 or 10,000 psi on the vehicle, and the difficulty of producing hydrogen. Using electrolysis to produce hydrogen is hugely expensive and out of the question for widespread use. These problems argue against fuel-cell vehicles.

However, there is an alternative strategy that could make more sense than any of the three described above.

Are we rushing to adopt the wrong technology when we subsidize and promote PHEVs and EVs?

ICE vehicles will remain the low-cost alternative for decades, so fuel-cell vehicles, PHEVs and EVs will need to compete with them. Which alternative has the best chance of replacing ICE vehicles, and at what total cost?

Shouldn’t the issue be investigated further before we spend a fortune implementing the wrong technology?

Are companies like GE and organizations like CalCars driving the United States towards the wrong strategy?

The next article looks at the issue from another perspective.

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