Fleet Electrification Roadmap

Fleet Electrification RoadmapREVOLUTIONIZING TRANSPORTATION AND ACHIEVING ENERGY SECURITYNovember 2010

Fleet Electrification RoadmapREVOLUTIONIZING TRANSPORTATION AND ACHIEVING ENERGY SECURITYNovember 2010© Copyright Electrification Coalition. The statements and data expressed in this report reflect the consensus of the Electrification Coalition but do not necessarilyrepresent the business models or individual data of any one company. Although the authors and endorsers of this report have used their best efforts in its preparation,they assume no responsibility for any errors or omissions, nor any liability for damages resulting from the use of or reliance on information contained herein.The authors have sought to obtain permission from all image, data, and chart owners and apologize to any who could not be properly traced for permission andacknowledgement.

fleet electrification roadmap 3Table of ContentsLetter from the Electrification Coalition 5Executive Summary 8PRIMERElectrification of the Transportation Sector 17Overview 19The Case for Electrification 31A Growth Sector for Jobs 40Market Outlook 42Expanding the Demand Side 44PART THREEIdentifying Fleet Opportunities 943.1 Overview 973.2 Modeling Assumptions 993.3 Key Findings 1063.4 Case Studies 111Sales, Service, Utility Cars 112Light Sales, Service, Utility, Short Haul 115Light Government 118Medium Short Haul, Sales & Service 1213.5 Fleet Adoption of GEVs in 2015 124PART ONEThe Case For Fleets 461.1 Overview 491.2 Fleet Demographics 501.3 Advantages of Fleet Operators 54Total Cost of Ownership Approach to Acquisition 56Route Predictability 58High Vehicle Utilization Rates 60Use of Central Parking Facilities 62Importance of Maintenance and Service Costs 65Lower Electricity Rates 66Alternative Business Models 67Corporate Sustainability Initiatives 70PART FOURPolicy Recommendations 1264.1 Fleet Microsystems 1294.2 Other Policies 134Conclusion 140Appendix A: Top 50 Commercial Fleets 142Appendix B: Available Vehicle Matrix 144Key to Terms 148Acknowledgements 150PART TWOFleet Challenges 722.1 Overview 752.2 Fleet Challenges 76Technology Costs 78Capital Expenditures vs. Operating Expense 83Battery Residual Value 84Fleet Infrastructure Issues 87Utility Impact of Dense Charge Networks 88Market Perception 92

4 prefacefleet electrification roadmap 5OUR MISSIONLETTER FROM THE ELECTRIFICATION COALITIONThe Electrification Coalition is dedicated to reducing America’sdependence on oil through the electrification of transportation. Ourprimary mission is to promote government action to facilitate deploymentof electric vehicles on a mass scale. The Coalition serves as a dedicatedrallying point for an array of electrification allies and works to disseminateinformed, detailed policy research and analysis.ELECTRIFICATION COALITION MEMBERSJohn T. ChambersChairman & CEO, Cisco Systems, Inc.Timothy E. ConverChairman, President & CEO, Aerovironment, Inc.Peter L. CorsellNon-Executive Chairman, GridPoint, Inc.David W. CranePresident & CEO, NRG Energy, INC.Alexander M. CutlerChairman & CEO, Eaton CorporationSteven "Mac" HellerCo-Chairman & Interim CEO, CODA AutomotivePeter A. DarbeeChairman, CEO, & President, PG&E CorporationCharles GassenheimerChairman & CEO, Ener1, Inc.Seifi GhasemiChairman & CEO, Rockwood Holdings, Inc.Carlos GhosnPresident & CEO, Nissan Motor Company, LtdJeffrey R. ImmeltChairman & CEO, General Electric CompanyRay LaneManaging Partner, Kleiner Perkins Caufield & ByersRichard LowenthalFounder & CEO, Coulomb Technologies, Inc.Alex A. MolinaroliChairman, Johnson Controls-Saft andPresident, Johnson Controls Power SolutionsReuben MungerChairman & CEO, Bright Automotive, Inc.Jim PiroPresident & CEO, Portland General ElectricMike SegalChairman & CEO, LS Power GroupFrederick W. SmithChairman, President & CEO, FedEx CorporationEric SpiegelPresident & CEO, Siemens CorporationAndrew C. TaylorChairman & CEO, Enterprise HoldingsDavid P. VieauPresident & CEO, A123 Systems, Inc.In November 2009, the Electrification Coalition releasedthe Electrification Roadmap, a comprehensive policyframework analyzing the state of the electric drive vehicleindustry and the barriers to achieving higher rates ofpenetration in America’s light-duty vehicle fleet. The goalof the Roadmap was ambitious: to transform the U.S. lightdutyground transportation system from one that is oil-dependent to onepowered almost entirely by electricity, enhancing U.S. economic prosperityand safeguarding national security. The report proposed an ambitiousfederal initiative to establish ‘electrification ecosystems’ in a number ofAmerican cities. Electrification ecosystems—also known as deploymentcommunities—were designed to move grid-enabled electric vehicles (GEVs)past early adopters and into mainstream consumer markets.The Electrification Roadmap envisioned a competitive selection processmanaged by the Department of Energy (DOE). To compete, applicantcities and communities would need to demonstrate that they had madesignificant progress toward establishing the regulatory environmentin which GEVs would thrive. The most competitive applications woulddemonstrate the support of a broad range of public and private stakeholders,including utilities, utility regulators, large local employers, vehicle andcharger OEMs, and state and local governments. The winning communitieswould be eligible for targeted, amplified, temporary subsidies for consumers,infrastructure providers, and utilities. The program was proposed to advancein two phases and expire in 2018.

6 prefacefleet electrification roadmap 7Deployment communities were designed to build criticalmomentum in the cost and learning curves that otherwiseare likely to slow the early advancement of theGEV market. Without such an approach, electric vehiclesand plug-in hybrid electric vehicles are likely to be relegatedto niche status for many years, purchased onlyby environmentalists and technological enthusiasts, innumbers far too small to meaningfully enhance nationalor economic security. InApril 2010, DOE updated itsenergy-related scenarios toreflect the expected impactof the American Recoveryand Reinvestment Act onthe entire energy economy.Despite specific GEV-relatedsubsidies included in the legislation,DOE estimated thatby 2035, there will be only 5.1million EVs and PHEVs on theroad out of nearly 300 million light-duty vehicles in theUnited States, representing less than 1.7 percent of thetotal vehicle parc.These numbers are far lower than what is possiblewithin the appropriate policy framework. They are alsofar less than what is urgently necessary to radicallytransform the transportation sector of the economy toenhance national and economic security. Therefore, theElectrification Roadmap established as a goal the deploymentof 14 million grid-enabled light-duty vehicles inthe United States by 2020 and more than 120 millionby 2030, a far more ambitious and transformative target.Ultimately, the Electrification Roadmap targeted asubstantial shift in transportation energy use, such that75 percent of light-duty vehicle miles traveled would beelectric miles by 2040 (today, 94 percent of the deliveredenergy that powers the U.S. transportation system ispetroleum-based).The strong, targeted consumer incentives envisionedby the Electrification Roadmap were designedto drive economies of scale in the electric drive batteryindustry, thereby reducing costs. But subsidies couldnot represent a credible stand-alone policy. Strongsupport for infrastructure providers was also includedto reduce the marginal cost of installing early chargingunits at home and in public, allowing entrepreneurs toexperiment with business models and providing potentialGEV customers with confidence that they would beable to reliably and conveniently refuel their vehicles,The Electrification Roadmaptargeted a substantial shift intransportation energy use, suchthat 75 percent of light-dutyvehicle miles traveled would beelectric miles by 2040.both at home and in public. The Electrification Roadmapalso outlined potentially zero-cost programs to supportdevelopment of a secondary battery market, allowing thefirst GEV consumers to feel confident that used largeformatlithium-ion batteries would have resale value.Finally, the Electrification Roadmap identified theareas in which utilities would need support and flexibilityto manage the integration of GEVs into the electricpower grid. Deploymentcommunities were designedto target those regions inwhich time-of-use pricingand other regulatory supportwas available to incentivizeconsumers to charge batteriesduring off-peak hours. Taxcredits for utility upgradeswere proposed, and utilityregulators were encouragedto allow utilities to includecertain physical and IT upgrades to the distribution networkin their rate base.This network of mutually reinforcing policies wasdesigned to expand the customer base for grid-enabledvehicles in an accelerated, but carefully planned, manner.The increased economies of scale, learning by doing,and demonstration value of the deployment communityapproach would benefit pragmatic consumers, industryparticipants, and the nation as whole.Expanding the Market for GEVs: Fleet VehiclesThe Electrification Roadmap focused on the light-dutyvehicle parc because it is the single largest homogenouscomponent of the transportation sector, with 230 millionvehicles alone that account for 40 percent of U.S.daily oil demand. Addressing the energy mix in this segmentwill ultimately be critical for improving nationaland economic security. Yet, the highway transportationsystem and the transportation economy are multifacetedand diverse, and it is possible that other segmentsbesides light-duty passenger vehicles in the consumermarket could be strong candidates for electrification andelectric drive technology. Those segments may relate tothe operational and economic challenges and benefits ofelectrification differently, and solutions to the technicaland cost barriers to adoption might be more forthcoming.In particular, the nation’s fleet vehicles stand out aspossessing unique characteristics that could make themclear beneficiaries of electric drive technology. Withmore than 16.3 million vehicles in operation in 2009, thenation’s fleets likely possess enough capacity to driveinitial ramp-up scale in the battery industry and OEMsupply chains. More important, the operational normsof certain fleet segments may allow them to rapidly surmountthe most difficult challenges facing electrificationin the passenger market. Perhaps most significantly, fleetowners may be more willing than individual consumersto focus on total cost of vehicle ownership as opposed toupfront costs. This approach advantages the economicdynamics of electric drive vehicles in cases where thehigher upfront costs vis-à-vis an internal combustionengine vehicle can be demonstrably offset through loweroperating and maintenance costs over time.Fleet owners may also benefit from operationalnorms such as centralized refueling, high vehicle utilizationrates, and predictable routing. In fact, coupledtogether, centralized refueling and highly predictablerouting could allow fleet operators to right-size batteryrequirements, avoiding the expenditure that many privateconsumers in the passenger vehicle market will bemaking on extra battery capacity that will rarely be fullyutilized. Fleet operators also tend to take advantage ofcommercial and industrial electricity rates, which aresignificantly lower than those paid by residential consumers.The prominence of vehicle leasing and managemententities in the fleet industry may also facilitate thedevelopment of innovative business models that bundlecapital expenses with fuel and operating savings in orderto make the decisions to electrify more transparent andaccessible for fleet operators.Of course, there are significant challenges that couldmake fleet operators hesitant to adopt electric drivevehicles. Fears about the reliability of the technology andthe ability of electric drive vehicles to meet fleet missionrequirements are perhaps the most important issues.Fleet operators are extremely unlikely to sacrifice overallmission for reduced transportation costs. Electricdrive technologies must, therefore, meet two discretecriteria in order to be attractive to fleet operators: theymust save money and allow fleet vehicle drivers to dotheir job effectively.Fleet electrification should not be an end in itself.By driving volume in battery and OEM supply chains,providing practical business experience with bothprivate and public charging infrastructure, and demonstratingthe reliability of electric drive vehicles toconsumers throughout the United States, electrifiedfleet vehicles would provide substantial spillover benefitsto the broader consumer market. In that sense,fleet electrification represents an additional, practical,near-term strategy for facilitating the transformationof the U.S. transportation system and improvingAmerican energy security.

8 executive summaryfleet electrification roadmap 9EXECUTIVE SUMMARYBetween 2003 and 2009, the global oil market witnessed itsmost significant period of volatility in nearly a generation.After relentlessly increasing for five years, oil prices spikedFIGURE E1Net U.S. Government Debt as a Percentage of GDP100% Debt Percent of GDP WTI, $/BBL (real $) 1008060Net Government DebtSpot WTI8060to historical highs of more than $147 per barrel in July 2008. 1Not by coincidence, the home mortgage and global financialcrises erupted just a few months later, plunging the U.S.economy into its most severe recession since World WarTwo. After retreating to less than $40 per barrel in early2009, oil prices have now averaged more than $70 perbarrel throughout 2010. 2402001990Source: DOE; IMF19952000Highly volatile oil prices have been the most persistentstructural risk to the U.S. economy for decades. Theboom and bust cycle of oil prices that has been in placesince 2003—and a number of other times since 1970—contributes to a high degree of uncertainty throughoutthe economy, resulting in reduced economic activity,higher unemployment, and expansion of publicdebt. When global oil market dynamics generate priceshocks, the result has often been a recession followedby heavy government spending.The macroeconomic significance of oil price shocksis a function of the prominent role of oil in the U.S.economy. Petroleum accounts for nearly 40 percent ofU.S. primary energy needs, more than any other fuel.123In 2008, as oil prices reached inflation-adjusted all-timehighs, American consumers and businesses spent morethan $900 billion on retail petroleum-based fuels—6.4percent of GDP. 4 While 2008 represents an exceptionalyear, economy-wide spending on petroleum fuels hasaveraged more than 5 percent of GDP since 2005, andhousehold spending on gasoline has exceeded 10 percentof median income in some regions of the United States. 5More than 70 percent of the oil we use is for transportationfuels. 6 At approximately 14 million barrels perday, the U.S. transport sector alone consumes more oil1 U.S. Department of Energy (DOE), Energy Information Administration(EIA), Petroleum Navigator, Monthly Crude Oil Spot Prices, available athttp://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htm.2 Id.3 BP, plc, Statistical Review of World Energy 2010, at 41.4 EC analysis based on DOE, Annual Energy Review 2009 (AER 2009),Table 3.5.5 Id.6 DOE, AER 2009, Tables 5.13a through 5.13d.2005than any other national economy in the world. 7 Highwaytransportation—passenger vehicles, freight trucks, andbuses—accounts for the largest share, more than 11 millionbarrels per day. 8 With no substitutes available atscale, petroleum provides 94 percent of the energy usedin transportation. 9 In short, oil powers the mobility thatis central to American prosperity and the American wayof life.This excessive reliance on a single fuel to power akey component of our economy has left the United Stateshostage to a global oil market that is likely to becomeincreasingly volatile. Rising demand for mobility inemerging market economies is driving a steady increasein global oil consumption, despite efficiency improvementsin advanced economies. Between 2008 and 2030,increased oil consumption in the transportation sectorsof China, India, and the Middle East region is expectedto account for 70 percent of the total 15 million barrelper day increase in global oil consumption. 10 Burgeoningmiddle classes and higher standards of living in theseregions will place consistent pressure on global oil suppliersto expand capacity. In the meantime, resourcenationalism, political instability, and insufficientupstream investment in many oil producing regions arecontinuing to constrain growth in oil supplies. While oilmarkets are certainly well supplied today, perhaps the7 DOE, AER 2009, Tables 5.13a through 5.13d; BP, plc, Statistical Review ofWorld Energy 2010, at 11, 12.8 DOE, Office of Energy Efficiency and Renewable Energy (EERE) ,Transportation Energy Data Book 2010, Table 1.14.9 DOE, AER 2009, Table 2.1e.10 International Energy Agency, World Energy Outlook 2010, Annex A, NewPolicies Scenario.2010201540200

10 executive summaryfleet electrification roadmap 11FIGURE E2Change in Primary Oil Demand by Region and Sector (2007-2030)FIGURE E3Annual Fleet GEV Sales ScenariosFIGURE E4Fleet GEV Parc Scenarios140 Annual Sales (000 Vehicles)250 GEV Parc (000 Vehicles)ChinaIndiaMiddle EastOther AsiaLatin AmericaAfricaOtherIndustrialNon-Energy UseTransportE. Europe/EurasiaPowerOECD EuropeOECD PacificOECD North America-200 -100 0 100 200 300 400 Million Tons Oil Equivalent120100806040Baseline20EC Policy Case200150100Baseline50EC Policy Case0201220132014201502012201320142015Source: International Energy Agency, World Energy Outlook 2009Source: PRTM Analysis70% inmost significant risk to a full global economic recoveryis that expanded economic activity will lead to higheroil demand and reduced capacity margins, propelling oilprices back toward 2008 levels.The United States has the technological and economicpower to disentangle itself from this situation.While improvements in efficiency and the targeteddeployment of alternative fuels can—and should—play arole in reducing the role of oil in the U.S. economy, a moretransformational possibility is within reach. Specifically,U.S. and global automakers have invested heavily inproducing vehicles powered by electricity from thegrid. These vehicles have the ability to fundamentallyBetween 2008 and 2030, increased oil consumption in thetransportation sectors of China, India, and the Middle Eastregion is expected to account for 70 percent of the increaseglobal oil consumption.transform our transportation sector, moving from carsand trucks that depend on costly oil-based fuels to anintegrated system that powers our mobility with domestically-generatedelectricity.Electrified transportation has clear advantages overthe current petroleum-based system. Electricity representsa diverse, domestic, stable, fundamentally scalableenergy supply whose fuel inputs are almost completelyfree of oil. High penetration rates of grid-enabledvehicles (GEVs)—vehicles propelled in whole or in partby electricity drawn from the grid and stored onboardin a battery—could radically minimize the importanceof oil to the United States, strengthening our economy,improving national security, and providing much-neededflexibility to our foreign policy. Simultaneously, such asystem would clear a path to dramatically reduced economy-wideemissions of greenhouse gases.In the process, electrified transportation wouldstem the flow of U.S. wealth abroad to pay for importedoil, which currently accounts for more than 50 percentof America’s trade deficit. 11 Dollars sent abroad to pay foroil represent a significant wealth transfer; in contrast,dollars spent at home to invest in power generation,transmission, and distribution will help to generateeconomic activity and employment in the United States.And because the battery industry tends to locate neardemand centers, a large market for GEVs in the UnitedStates should drive increased hiring in the manufactureof advanced batteries and their components.The first wave of new GEVs is expected in U.S. marketsin December 2010 and early 2011. General Motors,Nissan Motor Company, and Ford Motor Company willbe among the first automakers to introduce fully electricvehicles (EVs) and plug-in hybrid electric vehicles(PHEVs) to American consumers. Total North Americanproduction capacity is expected to surpass 350,000 unitsby 2015. 12 However, the long-term market outlook forthese vehicles is somewhat uncertain. To be sure, earlyadopters and technological enthusiasts will prove to be areliable customer base for the first several hundred thousandGEVs marketed in the United States. But in order tofully capitalize on the potential of electrification to fundamentallyimprove U.S. energy and economic security,broader market penetration is required.11 U.S. Department of Commerce, Census Bureau, Foreign Trade Statistics,available at http://www.census.gov/indicator/www/ustrade.html.12 PRTM analysis.To date, policymakers and industry participantshave focused their efforts on expanding the market forGEVs among personal-use passenger vehicles. Thisapproach is clearly justified by the role that passengervehicles play in U.S. oil consumption. Personal use carsand light-duty trucks alone account for 40 percent oftotal U.S. oil demand.However, in order to support development of theelectric drive vehicle industry and to help drive downindustry costs for consumers, alternative vehicle marketscould be important in the near term. The earlydevelopment of the electric drive vehicle and batteryindustries would benefit from a diverse customer basethat can help drive critical volumes, particularly in theperiod between 2010 and 2015, when charging infrastructureand consumer acceptance issues will constraindevelopment of the passenger market. Specifically, commercialand government fleet applications stand out ashighly viable market segments based on the operationalneeds of the vehicles and the economic factors that drivevehicle acquisition processes.Based on total cost of ownership modeling conductedfor this report, commercial and government fleetscould contribute substantial volume commitments in theearly development phases of the GEV market. The economicattractiveness of electric drive vehicles in certainapplications—coupled with operational enhancementsand targeted use of public policy levers—could drivegrid-enabled vehicle penetration in U.S. commercialand government fleets to as much as 7 percent of newacquisitions by 2015. In aggregate, the market for EVsand PHEVs in fleet applications could lead to cumulativeunit commitments of more than 200,000 EVs and PHEVsbetween 2011 and 2015.

12 executive summaryfleet electrification roadmap13PART ONEThe Case for FleetsPART TWOFleet ChallengesThere were more than 16 million public and private fleetvehicles on the road in the United States in 2009. 13 Whilethe size of individual fleets varies significantly, the top50 fleet operators together manage more than half a millioncars and trucks. 14 These vehicles perform a variety ofmissions for federal, state, and local government, and forcompanies that are familiar to nearly all Americans. Theyare postal delivery vehicles, utility and telecommunicationsservice trucks, pharmaceutical sales vehicles, urbandelivery vans, and others.The concentration of buying power associated withfleet operators and fleet management companies representsa significant opportunity to assist the early developmentof the electric drive vehicle industry. Moreover,fleets tend to possess a handful of important characteristicsthat may make them more likely than typicalconsumers to take on the potential risks of electric driveownership in anticipation of reaping financial benefitsdown the road.Total Cost of Ownership Approach toAcquisition: When asked, fleet managersrank total cost of vehicle ownership as themost significant factor driving acquisitiondecisions. 15 Consumers, on the other hand,may purchase for a variety of reasons, includingaesthetics and style, in addition to cost.Route Predictability: The most costintensivecomponent in current-generationelectric drive vehicles is the battery. In caseswhere fleet vehicles have highly predictableroutes with little variation from day to day,batteries can be right-sized to minimizeexcess capacity, reducing added upfrontinvestment in excess energy storage.13 PRTM analysis; This figure is derived from a composite of data sources,including R.L. Polk & Co., Automotive Fleet, U.S. General ServicesAdministration, GE Capital, Utilimarc, and others.14 Bobit Publishing Company, 2010 Automotive Fleet Factbook (AFB),available online at http://www.automotive-fleet.com/Statistics/.15 EC, PRTM interviews with fleet managers.0%100%High Vehicle Utilization Rates: Fleetvehicles typically have higher utilizationrates than consumer vehicles. The result maybe that fleet operators can quickly recoup thehigher upfront costs of electric drive vehicles.Use of Central Parking Facilities: Fleetsthat make use of central parking depots maybe able to avoid dependence on public charginginfrastructure and benefit from economiesof scale in single-point installation ofmultiple chargers in individual facilities.Importance of Maintenance and ServiceCosts: Particularly in fleet applications thatoperate vehicles for longer periods of timeor into high mileage ranges, the low maintenancecosts of electric drive vehicles willrepresent a substantial cost savings.Lower Electricity Rates: The electricityrates paid by commercial and industrial consumers—thosemost likely to make use of fleetvehicles and central refueling—are often significantlyless than those paid by residentialconsumers. The fuel cost per mile traveled isone of the key economic factors differentiatingplug-in electric drive vehicles from othertechnologies.Alternative Business Models: Based ontheir access to capital and larger purchasingpower, fleet managers may benefit from alternativebusiness models that can help facilitateadoption of electric drive technology.Corporate Sustainability: Commercial andgovernment enterprises may also considerelectric drive vehicles in the context of corporatesustainability initiatives. GEVs can helpmeet reduced emissions and petroleum consumptiongoals.While fleet operators do possess a number of importantqualities that could facilitate their adoption of electricvehicles, they will also face challenges. Some of the basiccost and technology hurdles for individual consumers willalso be problematic for fleets, though fleets may be betterequipped to deal with them. In addition, fleet electrificationmay come with its own set of unique challenges thatcan be addressed through a combination of careful planningand public policy support.0Technology Costs: Battery costs associatedwith the first commercially available electricdrive vehicles will result in a substantial overallcost premium. Current battery technologyis descending the cost curve as volumesincrease, but under some fleet applications, itmay be difficult to realize a return on investmentin a reasonable time period. Ultimately,fleet operators may be more willing thanpersonal-use consumers to consider multiyearpaybacks, but they will still want to seereturns relatively quickly.Capital Expenditures vs. OperatingExpense: There is typically intense competitionfor capital within a given companyor institution. The high capital cost requirementsof today’s electric drive vehicles, particularlyin applications heavier than a passengerautomobile, will prove challenging formany fleet operators. Even extremely largebusinesses may be unwilling to tie up capitalto support substantial volumes of electricdrive vehicles.Battery Residual Value: Today, estimatingthe residual value of used large-formatautomotive batteries is an educated guess atbest. Early test data suggests that lithium-ionbatteries may still possess 70 to 80 percent oftheir ability to store energy when they are nolonger fit for automotive use. But this needsto be borne out by practical experience.Fleet Infrastructure Issues: Even for fleetsthat centrally park, the cost of installingcharging infrastructure may be significant.With Level II charger costs averaging $2,000per unit, the cost of installing enough chargersto support a fleet of several dozen EVs orPHEVs could be challenging. Level III chargingmay offer faster charge times and reducedunit requirements, but costs are still too high.Utility Impact of Dense Charge Networks:Bringing a fleet of EVs or PHEVs into asmall charging space will bring an unusuallyhigh burden to those areas and mayrequire upgrades to local utility distributionnetworks. In particular, transformers servingcharging facilities may be insufficientlyrobust to support the simultaneous chargingof multiple vehicles. Utilities will need accessto information and regulatory support to dealwith these and other issues.Market Perceptions: Perhaps the mostcritical challenge affecting fleet adoption ofelectric drive technology will be fleet adopters’impressions about the technology and itsability to meet their operational needs. Evenwhen a compelling economic case exists, fleetoperators will need to be confident that thevehicle can accomplish the mission.

14 executive summaryfleet electrification roadmap 15PART THREEIdentifying Fleet OpportunitiesIn order to better understand the business, economic,and cost-saving opportunities presented by electrificationof vehicle fleets, an economic model was developedfor the Fleet Electrification Roadmap. The modelcompares the total cost of ownership (TCO) of samplevehicles by vehicle weight class and industry segmentfor a given acquisition year. Technologies consideredwere ICE, HEV, PHEV-40, and EV-100. The analysisconsiders vehicle TCO in three cases: a base case, anoptimization case, and a combined optimization pluspolicy incentives case.Base Case: The base case assumes operators purchasevehicles being offered in the market today at current specifications.Operators make no behavioral changes to reducecost. Public policy is not considered in the base case.Operators do not benefit from existing or future subsidies.Optimized Case: The optimized case assumes fleet operatorscan purchase vehicles that fit their needs and thatthey will use them in the manner that most efficientlylowers cost. Battery right-sizing and extended ownershipperiods are examples of optimized use. Operators do notbenefit from existing or future subsidies.Policy Case: The policy case builds on the optimizationcase, adding existing federal government incentives forlight-duty vehicles and assuming additional subsidies notcurrently in law for medium- and heavy-duty trucks.The model analysis suggests that electric drive vehiclesare cost competitive in a number of fleet applicationstoday—even when assuming no access to governmentsubsidies and no change in purchasing or usage patterns.In fact, traditional hybrids are a cost-effective replacementfor internal combustion engine vehicles by 2012in most of the segments where driving distance exceeds20,000 miles per year. This is a result of the relativelysmall incremental investment for an HEV compared toan ICE vehicle. In the base case, GEVs begin to emerge asthe most cost effective solution between 2015 and 2018 asbattery costs begin to fall below $400/kWh.The cost effectiveness timeline for each of the electricdrive vehicle technologies is improved by optimizingoperations and vehicle characteristics for a number offleet applications. In particular, two options stand out:optimizing the GEV ownership duration to coincidewith the battery life; and right-sizing the EV batteriesto meet the needs of low mileage fleet applications.These two actions taken by fleet operators wouldadvance the time required for PHEVs and EVs to becomethe most cost effective solutions by approximately oneyear in a number of segments. Figure E6 presents thecompetitiveness timelines for the optimized case.Finally, when current and potential future governmentincentives are considered, the cross-over point forGEV cost parity is reached within the next two to threeyears in all of the commercial segments. The incentivesassumed for this analysis include $7,500 federal tax creditsapplied for GEV passenger car and class 1-2 trucks;$15,000 tax credits applied to class 3 medium-dutytrucks; $20,000 tax credits applies to class 4-5 mediumdutytrucks; and $25,000 tax credits applied to class 6-7heavy-duty trucks. (The full credits were assumed to beavailable through 2015, after which they were rampeddown annually, reaching zero in 2020.)In all cases, this analysis implies a progression incost competitiveness from ICE, though HEV, to PHEV-40 and EV-100. Fleet owner behavior and public policycan have a dramatic impact on the rate of that progression,but rising fuel costs coupled with falling electricdrive component costs suggest that PHEVs and EVswill increase in competitiveness over time in nearly allfleet segments.FIGURE E5Lowest TCO Drivetrain Technology by Year and Segment – BaseCLASSPassengerClass 1-2Class 3Class 4-5Class 6-7FIGURE E6Lowest TCO Drivetrain Technology by Year and Segment – Operations OptimizedCLASSPassengerClass 1-2Class 3Class 4-5Class 6-7FIGURE E7Lowest TCO Drivetrain Technology by Year and Segment — Operations Optimized + Government IncentivesCLASSPassengerClass 1-2Class 3Class 4-5Class 6-7129103A4A3B4B5678129103A4A3B4B5678129103A4A3B4B5678Source: PRTM analysisSEG. NAME MI/YR 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020+Sales, Service, UtilityGovernmentTaxiRental / Car SharingSales, Service, Utility, Short HaulLight GovernmentSales, Service, Utility, Short HaulLight GovernmentMedium Short HaulMedium Utility, GovernmentHeavy Short HaulHeavy Utility, GovernmentSEG. NAME MI/YR 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020+Sales, Service, UtilityGovernmentTaxiRental / Car SharingSales, Service, Utility, Short HaulLight GovernmentSales, Service, Utility, Short HaulLight GovernmentMedium Short HaulMedium Utility, GovernmentHeavy Short HaulHeavy Utility, GovernmentSEG. NAME MI/YR 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020+Sales, Service, UtilityGovernmentTaxiRental / Car SharingSales, Service, Utility, Short HaulLight GovernmentSales, Service, Utility, Short HaulLight GovernmentMedium Short HaulMedium Utility, GovernmentHeavy Short HaulHeavy Utility, Government22K9K36K31K19K6K23K6K31K8K26K18K22K9K36K31K19K6K23K6K31K8K26K18K22K9K36K31K19K6K23K6K31K8K26K18KICE HEV PHEV 40 / EV 100ICE HEV PHEV 40 / EV 100ICE HEV PHEV 40 / EV 100

16 executive summaryPART FOURPolicy RecommendationsPRIMERThe Electrification Coalition has identified a suite ofpolicies to facilitate the adoption of grid-enabled vehiclesby fleet operators. These policies are intended tonarrowly address the specific obstacles to electric drivevehicle adoption that the Coalition identified in theElectrification Roadmap, adjusted to account for the specificchallenges faced by fleets. These policies, therefore,are intended to be consistent with the policies outlinedin the Electrification Roadmap, and to support the adoptionof electric drive vehicles in managed fleets. They arenot intended as a substitute for policies promoted by theoriginal Electrification Roadmap.Fleet Policy RecommendationsExpand the tax credits for light-duty grid-enabledvehicles purchased in deployment communities toinclude private sector fleets.Create tax credits for medium- and heavy-duty gridenabledvehicles deployed in fleets with greater than10 vehicles in operation.Create clean renewable energy bonds for fleet vehiclecharging infrastructure, and make municipal andregional transit authorities eligible for the bonds.Electrification of theTransportation SectorFleet MicrosystemsIn many cases, fleets function as a microcosm of a transportationecosystem that could manage many—if notall—of the key elements of an electrification ecosystem/deployment community. For example, a fleet mightconsist of numerous vehicles that operate together in aconfined geographical space. This is certainly true formid-sized fleets that operate as part of geographicallyconstrained organizations such as a utility or city government.For national fleets, such as parcel delivery and telecomfleets, at least a subset of their vehicles frequentlyserve individual regions or urban areas. In addition, centrallyrefueled fleets provide refueling systems for theirvehicles at a home base or bases, allowing them to closelymanage the cost and reliability of energy infrastructureaccess. Finally, in the case of a fleet attached to large commercial,industrial, or government entity, the fleet operator(or its parent) will likely have a direct relationshipwith the local utility.The various types of financial support that wouldbe available to consumers and infrastructure providersin deployment communities should be available to fleetoperators, who may serve as a kind of electrificationmicro-ecosystem—or fleet microsystem. Like electrificationecosystems, GEV fleet microsystems offer theopportunity to accelerate the adoption of grid-enabledvehicles by promoting scale and cost reductions in batteryand vehicle production. While fleets ultimately representa smaller market than general personal use autos,the obstacles to their adoption of electric drive technologyare also smaller in some cases, and can be addressedby targeted public policies.Extend the existing tax credit for electric vehiclecharging infrastructure through 2018 and expand therange of eligible costs.Allow immediate expensing of GEV purchases andsupporting infrastructure for operators of certain fleets.Make tax credits for the purchase of qualifying grid-enabledvehicles and related charging infrastructure transferable.Incentivize the establishment of special purposeentities to facilitate bulk purchasing of electric drivevehicles by fleet operators.Other Policy RecommendationsReinstate and extend the credit for medium- and heavydutyhybrid electric vehicles that utilize advanced batteries.Establish a program to guarantee the residual value of thefirst generation of large-format automotive batteries putinto service between 2010 and 2013.Increase federal investment in advanced batteryresearch and development.Ensure that federal motor vehicle regulations do notunnecessarily prohibit the development and deploymentof cost-effective PHEVs in large trucks.Clarify the tax code to ensure that Section 30D GEV taxcredits are available to consumers who purchase a GEV(without a battery) and lease the battery from the dealer ora third party at the time the vehicle is purchased.

18 primer: electrification of the transportation sectorspecial sectionspecial section fleet electrification roadmap 19ABSTRACTThe electric vehicle industry has gained significantmomentum over the past several years. Stronginvestment from the private and public sectorshas placed the United States on a path to globalcompetitiveness in advanced battery manufacturing,and there appears to be strong demand for the firstwave of grid-powered vehicles. Electric vehicles offerthe possibility of a transportation sector delinkedfrom oil, which would dramatically improveeconomic and national security while reducingemissions. While personal-use passenger vehicleswill continue to be the key market, other targets—such as commercial and government fleets—couldhelp drive early demand.Want To Learn More?Visit ElectrificationCoalition.org todownload the Electrification Roadmapor request a printed copy.OverviewTwo years after Congress passed and the president signedthe American Recovery Reinvestment Act (ARRA), thelegislation’s impact on transportation electrification isbecoming apparent. At the beginning of 2009, the UnitedStates was on a path to develop little if any domestic capacityin large-format lithium-ion battery manufacturing.Strong policy support and a well-entrenched consumerelectronics battery industry in Asia along with engrainedhigh fuel prices in Europe had given other countries asignificant head start, and the United States was poised tomiss out on a multi-billion dollar global industry.Instead, by the end of 2009, $1.98 billion in grantshad been provided to more than 30 awardees for themanufacture of advanced batteries, battery and drivetraincomponents, and other activities, including batteryrecycling. 1 Nearly 20 other awardees received a total of$356 million in transportation electrification funds. 2ARRA also revised electric vehicle tax credits forU.S. consumers. Under the new law, U.S. residents whopurchase electric drive vehicles that draw power from thegrid will be able to claim a base tax credit of $2,500 for avehicle with a battery of at least five kilowatt hours (kWh)and $417 dollars per kWh from five upward, capping at anadditional $5,000. The maximum tax credit, therefore, is$7,500. The credit applies to the first 200,000 vehicles permanufacturer, and there is no specific limit on the numberof qualifying manufacturers. 3In addition, the Department of Energy (DOE) distributed$300 million in stimulus funds to 25 recipients in theClean Cities Program. The majority of the funds were targetedtoward deploying alternative fuel infrastructure inU.S. cities participating in the program. Funds will supportthe construction of electric vehicle charging infrastructureas well as refueling stations for compressed natural gas(CNG), liquefied natural gas (LNG), biofuels and otheralternative-fueled vehicles.Beginning in 3Q 2010, the first stimulus-supportedbatteries began rolling off assembly lines in Michigan and1 U.S. Department of Energy (DOE), Office of Energy Efficiency andRenewable Energy (EERE), Recovery Act Awards for Electric DriveVehicle Battery and Component Manufacturing Initiative, available athttp://www1.eere.energy.gov/recovery/pdfs/battery_awardee_list.pdf,last accessed October 27, 2010.2 DOE, EERE, Recovery Act Awards for Transportation Electrification,available at http://www1.eere.energy.gov/recovery/pdfs/battery_awardee_list.pdf, last accessed on October 27, 2010.3 American Recovery and Reinvestment Act (ARRA), Section 1141.A worker checks production of lithium-ion automotive batteries in aJohnson Controls Advanced Power Solutions plant.Indiana. By 2012, 30 factories with the capacity to producean estimated 20 percent of the world’s advanced vehiclebatteries will exist in the United States. 4 By 2015, thesefacilities could produce enough batteries and componentsto support 500,000 plug-in hybrid electric vehicles(PHEVs) and hybrid electric vehicles (HEVs). 5At the same time, the first commercial deliveries ofa wave of new grid-enabled vehicles (GEVs) are drawingcloser. By the end of 2010, Nissan will begin selling itsall-electric Leaf into select markets, and General Motorswill begin selling the Chevy Volt. 6 Nissan has announcedplans for a wider market launch beginning in 2011. 7 FordMotor Company will introduce at least three grid-enabledvehicles by 2012, including the fully electric TransitConnect, the Focus EV, and a plug-in hybrid Escape. 8A number of other significant plug-in offerings fromstart-up vehicle manufacturers such as Coda, Bright, and4 The White House, The Recovery Act: Transforming the AmericanEconomy through Innovation (August 2010), available at http://www.whitehouse.gov/sites/default/files/uploads/Recovery_Act_Innovation.pdf, last accessed October 27, 2010.5 Id.6 Edmunds Daily, “Nissan Leaf Begins Production In Japan, U.S.Deliveries in December,” available at http://blogs.edmunds.com/strategies/2010/10/nissan-leaf-begins-production-in-japan-usdeliveries-in-december.html,(October 22, 2010); and ABC News, “NewChevy Ad Campaign to Draw on History, Future,” available at http://abcnews.go.com/Business/wireStory?id=11985920, (October 27, 2010).7 Autoblog, “Nissan announces Leaf rollout plans, 8-year batterywarranty,” available at http://www.autoblog.com/2010/07/27/nissanannounces-leaf-rollout-plans-8-year-battery-warranty/,(July 27, 2010).8 Clean Fleet Report, “Ford Plans both Electric Vehicles and Hybrids,”available at http://www.cleanfleetreport.com/hybrid-cars/ford-electricvehicles-plug-in-hybrids/,(October 15, 2009).

20 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 21FIGURE P1Electrification Industry Recipients of ARRA AwardsFIGURE P2Currently Announced North American EV and PHEV Production CapacityCell, Battery, and MaterialsManufacturing Facilities1 $299 MillionJohnson Controls, Inc2 $249 MillionA123 Systems, Inc.3 $161 MillionKD ABG MI, LLC (Dow Kokam)4 $151 MillionCompact Power, Inc. (onbehalf of LG Chem, Ltd.)5 $118 MillionEnerDel, Inc.6 $106 MillionGeneral Motors Corporation7 $96 MillionSaft America, Inc.8 $34 MillionExide Technologies with AxionPower International9 $33 MillionEast Penn Manufacturing Co.Advanced Battery SupplierManufacturing Facilities10 $49 MillionCelgard, LLC, a subsidiary ofPolypore$50-$3001815153$5-$501211 $35 MillionToda America, Inc.12 $28 MillionChemetall Foote Corp.13 $27 MillionHoneywell International Inc.14 $25 MillionBASF Catalysts, LLC15 $21 MillionEnerG2, Inc.16 $21 MillionNovolyte Technologies, Inc.17 $13 MillionFutureFuel Chemical Company18 $11 MillionPyrotek, Inc.19 $5 MillionH&T Waterbury DBA BouffardMetal GoodsAdvanced Lithium-IonBattery RecyclingFacilities20 $10 MillionTOXCO Incorporated$1-$51116Electric Drive ComponentManufacturing Facilities1 $105 MillionGeneral Motors Corporation2 $89 MillionDelphi AutomotiveSystems, LLC3 $63 MillionAllison Transmission, Inc.4 $63 MillionFord Motor Company5 $60 MillionRemy, Inc.6 $45 MillionUQM Technologies, Inc.7 $40 MillionMagna E-Car Systemsof America, Inc.Electric DriveSubcomponentManufacturing Facilities8 $15 MillionKEMET Corporation9 $9 MillionSBE, Inc.10 $8 MillionPowerex, Inc.1251716158 710Advanced VehicleElectrification1 $100 MillionElectric TransportationEngineering Corp. (ETEC)2 $70 MillionChrysler LLC3 $45 MillionSouth Coast Air QualityManagement District(SCAQMD)4 $39 MillionNavistar, Inc. (Truck)Transportation SectorElectrification5 $22 MillionCascade Sierra SolutionsAdvanced VehicleElectrification +Transportation SectorElectrification6 $31 MillionGeneral Motors7 $30 MillionFord Motor Company8 $10 MillionSmith Electric Vehicles13744631611542232713442 68117142088101813710910111712Advanced ElectricDrive Vehicle EducationProgram9 $7 MillionWest Virginia University(NAFTC)10 $6 MillionPurdue University11 $5 MillionColorado State University12 $5 MillionMissouri University ofScience and Technology13 $5 MillionWayne State University14 $4 MillionNational Fire ProtectionAssociation15 $3 MillionMichigan TechnologicalUniversity16 $3 MillionUniversity of Michigan17 $0.72 MillionJ. Sargeant ReynoldsCommunity College18 $0.5 MillionCity College of San Francisco91991914400 Thousand3503002502001501005002010Source: PRTM Estimates2011Fisker Automotive will bring currently announced NorthAmerican GEV capacity to 150,000 units by 2012 andnearly 350,000 units by 2015. 9This investment in advanced battery and electricdrivevehicle technology by both the public and privatesectors represents a commitment to dealing with a crosssectionof key challenges confronting the United Statestoday. Electric drive technologies—from HEV to PHEVand EV—are the most technologically mature and costeffectivemeans for confronting many of our nation'smost substantial economic, national security, and environmentalissues. Moreover, infant industry support forthe domestic battery industry is a first step—albeit a modestone—toward supporting a renewed manufacturingbase in the United States. Large-format batteries makeup one of the more promising components in the emergingindustries that will employ American workers in thecoming years.To fully capitalize on this investment, however,electric drive vehicles must ultimately succeed in themarketplace. The supply-side of the grid-enabled vehicleindustry has developed rapidly over the past severalyears, and the United States has begun to establish aglobal leadership position, particularly in the design andmanufacture of large-format lithium-ion batteries. Froma national perspective, however, the real challenge will beto accelerate the pace at which new technology can alterthe energy profile of the U.S. transportation sector.Technological enthusiasts and other early adopterswill likely provide strong demand for the first several hundredthousand grid-enabled vehicles. But moving beyond2012201320142015Fiat 500EV*Fisker NinaFisker KarmaTesla Model SFord Focus PHEVFord Focus EVFord Transit ConnectNissan LeafChevy Voltthis market will be challenging. Today, more than 10 yearsafter their introduction to U.S. markets, there are just 1.6million gasoline electric hybrid cars and light-duty truckson the road in the United States. Hybrids represent lessthan 1 percent of the light-duty vehicle parc.In some ways, the challenges facing consumer acceptanceof grid-enabled vehicles will be greater than thosethat faced hybrids—though their potential benefits to thenation are also substantially greater than those of traditionalhybrids. In addition to vehicle range and associatedinfrastructure issues, perhaps the most importantchallenge facing widespread adoption of grid-enabledvehicles will be cost, a factor largely determined by thebattery. Most industry participants and analysts arguethat battery manufacturing costs will fall as the industryreaches higher production volumes than currently exist,but the timeframes for such reductions are somewhatuncertain and depend heavily on early market development.Therefore, particularly in the early stages of industrygrowth, it will be important to expand the demandsideof the industry by targeting a diverse customer base.(USD in Millions)Source: DOE; EC Analysis9 PRTM Analysis.

22 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 23Oil and the U.S. EconomyFIGURE P3Liquid Fuel Consumption, Historical and ForecastThe energy impact of reduced economic and industrialactivity—as well as high unemployment—associated withthe 2007-2009 recession has been significant. Total U.S.oil consumption averaged 20.6 million barrels per day(mbd) from 2003 to 2007, equal to approximately 25 percentof the global total. 10 High fuel prices and the recessionaryconditions that began in 2007 drove oil demanddown by nearly 10 percent—from 20.7 mbd in 2007 to18.7 mbd in 2009, its lowest level since 1997. 11 In 2008 and2009, oil consumption in the United States experiencedtwo consecutive years of decline for the first time in 19years. 12 Total petroleum supplied is slightly up in 2010 at19.3 mbd, but is still well below recent averages. 13 As theU.S. economy continues to shift away from heavy industry,and as strengthened fuel-economy standards beginto impact the efficiency of new American cars and trucks,many analysts are predicting the advent of ‘peak demand’for fuels such as gasoline in the United States. 14And yet, the United States is still heavily reliant onpetroleum. In large part, this is because the United Statesstill possesses the world’s largest, most dynamic transportationsystem. At more than 14 million barrels perday, this sector alone consumes more oil than any otherindividual national economy in the world. There aremore than 230 million light-duty vehicles on U.S. roadstoday, accounting for approximately 40 percent of totaloil consumption. 15Freight trucks94%of energy delivered to the add another 8.7U.S. transportation system million vehicles,is petroleum-based today. equaling roughly12 percent of oildemand. 16 All told, the transportation sector accounts for71 percent of aggregate U.S. oil consumption. 17 Despitesignificant efforts to drive alternative fuels into the marketplace,94 percent of delivered energy in the transportsector is still petroleum-based today. 1810 BP, plc, Statistical Review of World Energy 2010, at 11, available online atwww.bp.com; SAFE Analysis.11 Id.12 Id.13 DOE, Energy Information Administration (EIA), Weekly PetroleumStatus Report, October 6, 2010, Table 1.14 Securing America’s Future Energy, “SAFE Intelligence Report: Has theU.S. Reached Peak Demand,” (October 5, 2010), volume 3, issue 12.15 DOE, EIA, Annual Energy Outlook 2010 (AEO 2010), Table A-7 andonline supplemental table 58, available at http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html, last accessed October 27, 2010.16 DOE, EIA, AEO 2010, online supplemental Table 67.17 DOE, Annual Energy Review 2009 (AER 2009), Figure 5.0.18 Id., Table 2.1e.Simply put, oil consumption and the mobility providedby petroleum fuels represent core componentsof the national economy and American way of life.Petroleum meets nearly 40 percent of total U.S. primaryenergy needs, more than any other energy source. 19Aggregate consumer expenditures on petroleum productswere as high as 6.4 percent of GDP in 2008 and are ontrack to be as much as 5 percent of GDP in 2010. 20Most conventional forecasts envision steadyincreases in total U.S. petroleum consumption between2010 and 2035. Recent Department of Energy (DOE) scenariosproject a modest decline in gasoline consumptionby 2035 relative to pre-recession levels, but most otherpetroleum products are projected to experience significantgrowth. Overall, liquid fuels consumption increasesby 6.8 percent by 2035 in DOE’s outlook. 21 Diesel and jetfuel consumption also increase by wide margins. The U.S.driving population is expected to increase from approximately237 million people in 2007 to 311 million by 2035,leading to a 13.4 percent increase in light-duty vehiclemiles traveled. 22 Freight miles traveled are expected toincrease by a staggering 51 percent by 2035. 23Light-, medium-, and heavy-duty trucks representone of the most significant growth segments forU.S. oil demand, just as they have for several decades.Since 1973, 100 percent of the growth in on-road U.S. oilconsumption has been due to rising truck demand—anincrease of 3.9 million barrels per day. 24 Though lowerin absolute numbers, these vehicles tend to be inefficientrelative to passenger cars and also typically logmuch higher levels of annual vehicle miles traveled.Continued U.S. oil dependence is neither desirablenor sustainable. Over the past several years, Americanshave been reminded of the serious economic, nationalsecurity, and environmental costs of consuming and producingpetroleum at current levels. Whether or not thesecosts are reflected in the retail price of gasoline, they areboth real and significant.19 BP, plc, Statistical Review of World Energy 2010, at 41.20 SAFE analysis based on data from DOE, AEO 2010, Table 3.5; BP, plc.,Statistical Review of World Energy 2010; DOE, EIA, October Short TermEnergy Outlook; and U.S. Bureau of Economic Analysis.21 DOE, AEO 2010, Table A-11; SAFE analysis.22 Id., online supplemental table 60.23 Id., online supplemental table 67.24 DOE, Transportation Energy Data Book 2009 (TEDB 2009), Table 1.14,available at http://www-cta.ornl.gov/data/index.shtml, last accessed onOctober 27, 2010.25 Million Barrels per Day20151050200720102015FIGURE P4Change in U.S. Petroleum Consumption1.41.31.21.1Index: 2007=11.00.90.82007201120152019FIGURE P5Change in U.S. Petroleum Demand, 1973–200812 Million Barrels per Day10864201973Source: Figure P3 — DOE, ORNL, TEDB Ed. 29; Figure P4 — DOE, AEO 2010; Figure P5 — DOE, ORNL, TEDB Ed. 29202020232025200820272030203120352035Medium- and Heavy-Duty TrucksBusesLight-Duty TrucksCarsElectric PowerRes and Comm.IndustrialOtherMilitaryRailMaritimeAviationBusesHeavy-DutyMedium-DutyLight-TruckAutoDieselJet FuelTotalGasoline

24 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 25Economic Costs of Oil DependenceFIGURE P6Monthly U.S. Petroleum Trade DeficitAlthough the United States remains the third largestproducer of petroleum in the world, U.S. oil productionhas fallen dramatically from its peak in 1970 as the sizeof new discoveries has fallen and the productivity of newwells has declined. 25 America now imports 58 percent ofthe oil it consumes, at tremendous cost to the currentaccount balance. 26 In 2007, the U.S. trade deficit in crudeoil and petroleum products was $295 billion. In 2008, asoil prices reached all time highs, that figure increased to$388 billion. 27 Based on current levels of oil imports andpetroleum prices, the U.S. trade deficit in crude oil andpetroleum products is on pace to return to pre-crisis levelsnear $300 billion in 2010. 28The share of petroleum trade in the overall U.S. tradedeficit has increased considerably in recent years. SinceDecember 2007, crude oil and petroleum products haveroutinely accounted for more than half of the monthlyU.S. trade deficit. 29 For the full year, oil trade accountedfor 56 percent of the total U.S. trade deficit in 2008 and55 percent in 2009. 30 In other words, oil now typicallyaccounts for a greater share of the U.S. trade deficitthan trade with any singlebilateral or regional tradeSince December 2007,crude oil and petroleumproducts have routinelyaccounted for more thanhalf of the monthly U.S.trade deficit.partner, such as China,NAFTA or the EU. Whilemore than 30 percentof net U.S. imports aresourced in North America,48 percent originate withOPEC member states withwhich the Unites Stateshas little else in the way ofeconomic relationships. 31A significant share of thedollars sent abroad to purchase oil from OPEC states isnot recycled into the U.S. economy, amounting to a simpletransfer of wealth.Direct wealth transfer is only one of the many economiccosts of American oil dependence. Researchersat the Oak Ridge National Laboratories (ORNL), have25 DOE, AER 2009, Figure 5.2.26 Id., Tables 5.1 and 3.9.27 Id., Table 3.9.28 DOE, EIA, October 2010 Short Term Energy Outlook; and DOE, EIA,Weekly Petroleum Status Report (October 6, 2010); SAFE analysis.29 U.S. Census Bureau, Office of Foreign Trade Statistics; EC analysis.30 Id.31 DOE, AER 2009, Table 5.4.Oil tanker moored in loading bay of oil refinery in Houston, Texas.studied at least two others. First, significant economiccosts stem from the temporary misallocation of resourcesas the result of sudden price changes. When oil pricesfluctuate, it becomes difficult for households and businessesto budget for the long term, and economic activityis significantly curtailed. Second, the existence of anoligopoly inflates oil prices above their free-market cost.As a result, some economic growth is foregone due tohigher costs for fuel and other products. ORNL studiesestimate the combined damage to the U.S. economy fromoil dependence between 1970 and 2009 to be $4.9 trillionin current dollars. 32 For 2008 alone, the cost was nearly$500 billion. 33Perhaps most tangibly, every recession over thepast 35 years has been preceded by or occurred concurrentlywith an oil price spike. In general, recessions arecaused by a myriad of factors and are damaging to nearlyall sectors of the economy. And yet, oil price spikes tendto exact a particularly heavy toll on fuel-intensive industrieslike commercial airlines and shipping companies.Additionally, automobile manufacturers tend to sufferdisproportionately as consumers dramatically scale backlarge purchases. But most important is the effect thatoil prices have on consumer spending, which representsabout 70 percent of the economy. Stated simply, whenconsumers spend more on gasoline (and heating oil), theyspend less on everything else.32 DOE, EERE, Vehicle Technologies Program, The Cost of Oil Dependence,available at http://www1.eere.energy.gov/vehiclesandfuels/facts/2010_fotw632.html, last accessed October 27, 2010.33 Id.80 Billions (Nominal $)70605040302010020002001Monthly U.S. PetroleumTrade Deficit2002FIGURE P7Oil Prices And Economic Growth10% Change in GDP86420-2-4-61970197519802003FIGURE P8Economic Costs of U.S. Oil Dependence$500 Billion $2007400300200100019701972197419761978198019821985200419902005Oil PricesLoss of Potential GDP19841986200619952007Change in GDP20002008Percent of TotalTrade DeficitSource: Figure P6 — U.S. Census Bureau; Figure P7 — U.S. Bureau of Economic Analysis; Figure P8 — Greene, David L., and Janet L. Hopson, "The Costs of Oil Dependence 2009"19881990Dislocation Losses199219941996Wealth Transfer199820002005200220092004100%90807060504030201002010per Barrel $1002006806040200-20-40-6020102008

26 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 27National Security CostsThe importance of oil has given it a place of prominencein foreign and military policy. In particular, two keyissues related to oil affect national security. First, the vulnerabilityof global oil supply lines and infrastructure hasdriven the United States to accept the burden of securingthe world’s oil supply. Second, the importance of largeindividual oil producers constrains U.S. foreign policyoptions when dealing with problems in these nations.A crippling disruption to global oil supplies ranksamong the most immediate threats to the United Statestoday. A prolonged interruption due to war in the MiddleEast or the closure of a key oil transit route would lead tosevere economic dislocation. U.S. leaders have recognizedthis for decades, and have made it a matter of stated policythat the United States will protect the free flow of oil withmilitary force. 34 Still, policy alone has consistently fallenshort of complete deterrence, and the risk of oil supplyinterruptions has persisted for nearly 40 years.To mitigate this risk, U.S. armed forces expend enormousresources protecting chronically vulnerable infra-34 RAND Corporation, “Imported Oil and U.S. National Security,” at60-62 (2009).structure in hostile corners of the globe and patrolling oiltransit routes. This engagement benefits all nations, butcomes primarily at the expense of the American militaryand ultimately the American taxpayer. A 2009 study bythe RAND Corporation placed the ongoing cost of thisburden at between $67.5 billion and $83 billion annually,plus an additional $8 billion in military operations. 35 Inproportional terms, these costs suggest that between 12and 15 percent of the current defense budget is devotedto guaranteeing the free flow of oil.Foreign policy constraints related to oil dependenceare less quantifiable, but no less damaging. Whether dealingwith uranium enrichment in Iran, a hostile regime inVenezuela, or an increasingly assertive Russia, Americandiplomacy is distorted by our need to minimize disruptionsto the flow of oil. Perhaps more frustrating, theimportance of oil to the broader global economy hasmade it nearly impossible for the United States to buildinternational consensus on a wide range of foreign policyand humanitarian issues.35 Id., at 71.FIGURE P9Global Map of Major U.S. Petroleum Imports (Million tonnes)Environmental SustainabilityThe environmental externalities of oil production andconsumption are increasingly coming into focus. Total U.S.energy-related CO 2 emissions were 5,405 million metrictons in 2009. 36 Emissions from the combustion of petroleumaccounted for 43 percent of the total, representing asignificantly larger share than emissions from coal use. 37From a sectoral perspective, electric power representsthe largest source of energy-related CO 2 emissions,accounting for 2,152 million metric tons in 2009. 38 Coalemissions make up more than 80 percent of the totalU.S. power emissions profile. 39 However, these figuresrepresent upstream emissions that result from economywideusage of electricity. In order to assess the impact ofenergy consumption of different sectors of the economy,it is also useful to consider emissions from the primaryend-use sectors reported by the Department of Energy:the industrial, commercial, residential, and transportationsectors. End-use figures incorporate the full consumptionof energy by a sector, including electricity andother energy forms.From an end-use perspective, the transportationsector is the single largest source of U.S. CO 2 emissions,having surpassed industrial emissions in 1999. 40 Total36 DOE, AER 2009, Table 12.1.37 DOE, AER 2009, Table 12.2.38 Id.39 Id.40 Id. Table 12.3.CO 2 emissions from transportation were 1,851 millionmetric tons in 2009, and 98 percent of these emissionswere from petroleum consumption. 41 In 2009, consumptionof petroleum in the transportation sector accountedfor more U.S. energy-related CO 2 emissions than the consumptionof coal for electric power production. 42International consensus is increasingly focused onreaching atmospheric greenhouse gas concentrations of 450parts per millionby mid-centuryin order to avoidthe most severeimpacts of climatechange. Thisscenario would require energy-related CO 2 emissions to bereduced by 40 percent from 2006 levels in developed countrieswhile other major economies limit their growth to 20percent. These reductions would require significant replacementof petroleum transportation fuels.In addition to negative externalities associatedwith the consumption of petroleum, the consequencesof petroleum production were also highlighted in 2010.On April 20, 2010, an oil and gas exploration rig in theGulf of Mexico experienced a catastrophic blowout,resulting in an explosion and fire. Two days later, the41 Id.42 Id. Tables 12.2 and 12.3.2009 energy-related CO 2emissions attributed to43% petroleum.CANADA 121.7EUROPE 36.2FSU 28.7MEXICO 61.2NORTH AFRICA 28.2WEST AFRICA 79.2MIDDLE EAST 86.9SOUTH AMERICA 115.7Source: BP, plc, Statistical Review of World Energy 2010, at 21Traffic on Interstate-35E and Dallas Skyline.

28 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 29FIGURE P10Share of Energy-Related CO 2 Emissions by Fuel & UseAssessing Energy Markets over the Medium Term100%80604020100FIGURE P11Energy Related CO 2 Emissions, End Use2.5 Billion Metric Tons2.01.51.00.501950195019601960Source: Figure P10 — DOE, AER 2009; Figure P11 — DOE, AER19701970198019801990Transportation becomes the leadingsource of energy-related CO 2 emissions1990200020002009Natural Gas and WasteOther CoalElectric Power CoalOther OilTransport OilTransportIndustrialResidentialCommercialThe factors that led to high oil prices and increased volatilityin the global oil market in recent years are not likelyto significantly alter over the medium and long term.Rising demand in emerging market economies coupledwith constrained growth in oil supplies is a fundamentaldynamic that has already been factored into crude oilprices.Undeterred by the global economic downturn, Chinaclocked a 6 percent increase in oil demand in 2009 andis on pace for a 9 percent gain in 2010. 44 More broadly,emerging market energy demand growth now sets thepace for the world. In particular, the rapid increase indemand for mobility in the developing world is reshapingthe global oil market. Oil demand growth in emergingmarket economies has averaged 3.6 percent annuallysince 2000, resulting in a net increase in demand of 9.6million barrels per day between 2000 and 2009. 45 Themajority of this increase was for transportation. Oildemand in the developed world actually shrunk over thesame period. Together, China and India have accountedfor 63 percent of the total global increase in oil demandsince the start of the century. 4644 DOE, EIA, Short Term Energy Outlook, Custom Table Builder, availableonline at http://www.eia.doe.gov/emeu/steo/pub/cf_query/index.cfm,last accessed October 29, 2010.45 BP, plc., Statistical Review of World Energy 2010, at 11.46 Neil King, “An oil thirsty America dived into ‘dead sea,’” Wall StreetJournal, October 9, 2010.Emerging market demand growth is placing newpressures on oil supplies. In large part, the high level ofoil price volatility beginning in 2003 resulted from oilproducers’ inability to adequately respond to the sharpincrease in demand driven by emerging market economies.Rapidly escalating oil consumption in China, India,and the Middle East stressed the global oil productionsystem to its limits. In the meantime, resource nationalism,political instability, and insufficient upstreaminvestment in many oil producing regions led to constrainedgrowth in oil supplies. The result was a rapiderosion of spare capacity within OPEC to extremely lowlevels—less than 2 percent of global demand. 47 In suchan environment, even small perturbations or changes inmarket assessments about the balance between supplyand demand can cause sharp price swings in crude oil andretail fuels.Going forward, analysts expect oil demand growth inthe Chinese, Indian, and Middle Eastern transport sectorsto make up more than 70 percent of the increase inglobal oil consumption between 2010 and 2030. 48 Today,there are approximately 30 million light-duty vehicles onthe road in China; by 2030, analysts expect that numberto increase nearly 10-fold (see Figure P12). At the sametime, growth in global oil supplies will be tenuous. Oil47 DOE, EIA, Short Term Energy Outlook, Custom Table Builder, availableonline at http://www.eia.doe.gov/emeu/steo/pub/cf_query/index.cfm,last accessed October 29, 2010.48 IEA, WEO 2009, Table 1.3.rig—Deepwater Horizon—sank in approximately 5,000feet of water. The accident severed the rig’s connectionto the seafloor, and the blowout preventer also experienceda complete failure. While estimates vary considerably,the oil spill that resulted from the DeepwaterHorizon incident likely released several million barrelsof crude oil into the Gulf of Mexico before the damagedwell was stabilized on July 15.Like any business, the global oil and gas industry isnot risk-free. The availability of relatively inexpensiveconventional oil and gas supplies is dwindling in theregions most accessible to international oil companies—the United States, Western Europe, and industrializedAsia-Pacific. To be sure, low-cost proven oil reserves stillexist in substantial quantities, but they are most commonlylocated in countries or regions that do not permitIOCs to operate freely. As a result, IOCs have increasinglyexpanded the boundaries of technological possibilities inthe regions in which they can operate. 43Finding and developing these fuels is costly and technologicallycomplex, and deepwater oil and gas explorationis expected to be at the forefront of industry effortsto expand upstream petroleum production in the comingdecades. Significant discoveries off the coast of Brazil,Greenland, Canada, and West Africa are among thepromising opportunities to produce the fuels that drivethe global economy today—and probably will for sometime. And yet, the environmental risks associated withthese projects should be an important consideration forpolicymakers. Catastrophic oil spills are extremely lowprobabilityevents. But they are also extremely high-costevents.43 International Energy Agency (IEA), World Energy Outlook 2008 (WEO2008), Table 14.1.FIGURE P12Light Duty Vehicle Stock by Region300 Millions250200150100500European Union203020152007United StatesSource: International Energy Agency, World Energy Outlook 2009ChinaIndiaJapanRussia

30 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 31FIGURE P13Oil Demand, ChinaThe Case for Electrification10 Million Barrels per Day8642019911992Sources: DOE, EIA199319941995production within the world’s most developed nations—the 30 members of the Organization for EconomicCooperation and Development (OECD)—peaked in1997 and has markedly declined each year since 2002. 49Outside the OECD, the picture is no more encouraging.More than 90 percent of global oil supplies are owned bystate-run national oil companies (NOCs). 50 While a handfulof NOCs operate like private firms at the technologicalfrontier of the industry, the majority function essentiallyas a branch of their respective central governments,depositing oil revenues in the treasury, from which theyare often diverted to other programs instead of beingreinvested in new energy projects. 51Meanwhile, the fraction of global oil reserves thatis accessible to international oil companies (IOCs) isgrowing increasingly complex and costly to produce. 52In addition to the typical costs for pipelines, tankers, andrefineries, IOCs must now invest significant additionalcapital per barrel of oil produced for specialized drillingequipment, oversized offshore platforms, and advancedupgrading facilities. As a result, the cost of production forincremental non-OPEC oil reserves has increased rapidlyin recent years. Currently, the break-even price forCanadian oil sands is estimated at between $50 and $80per barrel. 53 For projects in the Gulf of Mexico, marginal49 BP plc, Statistical Review of World Energy 2009, at 8.50 IEA, WEO 2008, Table 14.1.51 Valerie Marcel, "States of Play," Foreign Policy (Sept/Oct 2009).52 IEA, WEO 2008, at 343-53 (2008); Bernstein Research, “GlobalIntegrated Oils: Breaking Down the Cost Curves of the Majors, andDeveloping a Global Cost Curve for 2008,” at 14 - 34 (Feb. 2, 2009).53 Bloomberg Business Week, “Production Costs Climb for Canadian OilSands, Companies Say,” June 2, 2010.19961997199819992000200120022003200420052006200720082009costs are estimated to be $60 per barrel. 54 Promisingbasins off the coast of Brazil, the West Coast of Africa, andthe Former Soviet Union are equally complex and costly.With these factors in mind, a strong case can be made thathigh oil prices are here to stay.In fact, oil prices and supply-demand dynamics thathave occurred in the global oil market throughout 2010have served to reinforce this case. With global oil demandstill recovering from the shock of the financial crisis,notional OPEC spare capacity is currently 5.1 million barrelsper day, a level last witnessed throughout 2001 and2002, when oil prices averaged $20 to $30 per barrel. 55Current commercial inventories are also at generouslevels. U.S. commercial crude oil stocks were 358 millionbarrels as of late September 2010, more than 15 percentabove recent averages for September. 56 Gasoline and dieselstocks are similarly bloated, and the story is roughlythe same throughout the world. The world is awash inoil and global demand is only now returning to pre-crisislevels. And yet, crude oil prices have averaged more than$75 per barrel throughout 2010, a level that would haveseemed exorbitant as recently as 2003.54 DOE, EIA, “Performance Profiles of Major Energy Producers 2008,” at24 (December 2009).55 DOE, EIA, Short Term Energy Outlook, Custom Table Builder, availableonline at http://www.eia.doe.gov/emeu/steo/pub/cf_query/index.cfm,last accessed October 29, 2010.56 DOE, EIA, Weekly Petroleum Status Report (October 6), availableat http://www.eia.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/historical/2010/2010_10_06/wpsr_2010_10_06.html, last accessed October 29, 2010.20102011Electrification of transportation remains the most promisingnear-term opportunity for fundamentally reducing U.S.dependence on petroleum. Traditional gasoline electrichybrid electric vehicles (HEVs) offering gasoline efficiencyimprovements of 25 to 50 percent—or more— for amidsize car have been available for a decade and the technologyis generally mature. 57 More recently, there havebeen significant advancements in the technology neededto produce vehicles that can charge onboard batterieswith electricity from the grid, offering a fundamentalbreak from petroleum consumption in transportation.Though important challenges remain, the globalautomotive industry has invested heavily in a numberof grid-powered vehicle platforms that allow for variousranges of autonomous driving powered solely by electricity.In general, grid-enabled vehicles can be either pureelectric vehicles (EVs) or plug-in hybrid electric vehicles(PHEVs). Both EVs and PHEVs store energy from the gridin on-board batteries. Energy from the battery powers a57 The Honda Insight was introduced in the U.S. in 1999 followed by theToyota Prius in 2000. Fuel efficiency improvement figures can varywidely based on the method of comparison. According to DOE’s 2010Fuel Economy Guide (http://www.fueleconomy.gov/feg/FEG2010.pdf ), a Ford Fusion FWD Ice vehicle rates at 22/31 mpg city/hwy. TheFusion Hybrid FWD rates at 41/36. Using a weighted harmonic mean,the efficiency improvement in combined mpg would be 49 percent. Incomparison, the Toyota Prius rates at 51/48 mpg.FIGURE P14Electrification Architecture48% Coal22% Natural Gas20% Nuclear9% RenewablesElectric Gridhighly-efficient electric motor that propels the vehicle.EVs substitute an electric drivetrain for all conventionaldrivetrain components. PHEVs retain the use of a downsizedinternal combustion engine that supplements batterypower.To be sure, continued improvements in the internalcombustion engine—along with the targeted uptake ofother alternative fuel vehicletechnologies — can andshould play a role in effortsto improve U.S. energy security.However, grid-enabledvehicles offer an entirelynew prospect: a transportationsystem delinked fromoil. Convergence betweenthe power and transportsectors could fundamentallyalter the U.S. energysecurity equation. Vehiclespowered by electricity fromthe grid consume no petroleum while they are operatingon energy discharged from the battery. The benefits ofsuch a propulsion system are enhanced by key featuresof the electric power sector as well as the vehicle technologyitself.ResidentialHomeElectrification oftransportation remainsthe most promisingnear-term opportunityfor fundamentallyreducing America'sdependence on oil.·············· Power Generation ······················· Transmission & Distribution ···························· Vehicle Charging ······················Workplace30 MI90% of U.S. vehicle tripsare less than 30 miles.RetailLocations

32 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 33FIGURE P15Vehicle ConfigurationsToday's familiar hybrid-electric vehicles offer improved efficiency over traditional internalcombustion engine automobiles. However, by incorporating a larger battery and drawing electricpower from the grid, plug-in hybrids and pure electric vehicles offer a step change improvementin energy security.INTERNAL COMBUSTION ENGINE VEHICLE HYBRID-ELECTRIC VEHICLE (HEV) PLUG-IN HYBRID ELECTRIC VEHICLE (PHEV) ELECTRIC VEHICLE (EV)Engine Transaxle Fuel SystemTransaxleElectric MotorBattery TransaxleElectric Motor Battery TransaxleBatteryEngineFuel SystemEngineFuel SystemElectric MotorGeneratorCharger Plug & Charger Plug & ChargerKEY FEATURESTraditional IC engine vehicles store liquid fuel—typically gasoline or diesel—onboard in a fuel tank. Fuel is combusted in the engine, which deliversmechanical energy to the axle to propel the vehicle. The high energy densityof gasoline and the ability to store significant volumes of fuel onboardallow IC engine vehicles to travel several hundred miles without refueling.Today's internal combustion engines, however, are highly inefficient. ICengine automobiles turn less than 20 percent of the energy in gasoline intopower that propels the vehicle. The rest of the energy is lost to engine anddriveline inefficiencies and idling.KEY FEATURESHEVs retain the use of an IC engine, and therefore require a liquid fuel tank.Additional energy is stored in a battery, from which electricity flows to anelectric motor. The motor transforms electrical energy into mechanicalenergy, which provides some measure of torque to the wheels. In a typicalparallel hybrid system, both the engine and the motor provide torque to thewheels. In a series hybrid system, only the electric motor provides torqueto the wheels, and the battery is charged via an onboard generator. Powersplit systems utilize two electric motors and an IC engine. Both the engineand the larger electric motor can provide torque to the wheels—jointly orindependently.KEY FEATURESLike traditional hybrids, PHEVs retain the use of an internal combustionengine and fuel tank while adding a battery and electric motor. However,PHEVs utilize much larger batteries, which can be charged and rechargedby plugging into the electric grid. PHEV batteries are capable of poweringthe vehicle purely on electricity at normal speeds over significant distances(approximately 40 miles) without any assistance from the IC engine. Whenthe battery is depleted, PHEVs use the IC engine as a generator to power theelectric motor and extend their range by several hundred miles. PHEVs canbe configured as a series hybrid system or a power split system.KEY FEATURESEVs do not incorporate an IC engine or conventional fuel system. Electricvehicles rely on one or more electric motors that receive power from anonboard battery to provide the vehicle's propulsion and operation of itsaccessories. EV batteries, which are typically larger than batteries in HEVsor PHEVs to support vehicle range, are charged by plugging the car into adevice (electric vehicle service equipment) that receives electrical powerfrom the grid.HYBRID ELECTRIC VEHICLE SYSTEMSPLUG-IN HYBRID ELECTRIC VEHICLE SYSTEMSMILD HYBRID (PARALLEL SYSTEM)• Still relies heavily on IC engine• Efficiency gains of 15 to 20 percent• Battery provides additional power during acceleration;powers the A/C and other systems during idling• Regenerative braking charges batteryFULL HYBRID (POWER-SPLIT SYSTEM)• Still relies on IC engine, but less than mild hybrid• Efficiency gains of 25 to 40 percent• Larger battery provides enough power for autonomousdriving at low speeds• Smaller motor acts as generator to charge the batteryPHEV (SERIES HYBRID SYSTEM)• Only electric motor provides torque to wheels• IC engine serves only to augment the battery after depletion• Uses no gasoline while battery is sufficiently charged• Charges battery through grid connection andregenerative brakingPHEV (POWER-SPLIT SYSTEM)• Both the motor and IC engine can provide torque tothe wheels• IC engine provides torque when required (blended mode)• Charges battery through grid connection andregenerative braking

34 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 35The Advantages of Electric DriveFIGURE P17Vehicle Emissions by Technology and FuelElectric drive technology offers a significant improvementin efficiency within a given vehicle class when comparedto a comparable traditional internal combustionengine vehicle. In large part, this is due to the high efficiencyof electric motors, which can convert as much as80 to 90 percent of the energy content of electricity intomechanical energy. This efficiency contributes to severalsignificant benefits for the vehicle operator.Reduced Fuel Costs: Electric drive offers significantreductions in fuel costs on a per-mile basis. Withgasoline at $3.00 per gallon, a relatively efficient internalcombustion engine vehicle rated at 30 miles per gallonhas an average fuel cost of 10 cents per mile. A mid-sizedsport utility vehicle getting 20 miles per gallon has anaverage fuel cost of 15 cents per mile, and a medium-dutyurban delivery vehicle getting 10 miles per gallon has anaverage fuel cost of 30 cents per mile. Comparatively, alight-duty battery electric vehicle or a PHEV in chargedepletingmode would have fuel costs of just 2.5 cents permile, assuming electricity priced at 10 cents per kilowatthour (kWh) and an electric motor efficiency of 4 miles perkWh. At 2.0 miles per kWh, the fuel cost for a mediumdutyPHEV or EV truck would be 5 cents per mile.Efficient Use of Energy: Low fuel costs for EVs andPHEVs are partially a function of the low price of electricityon an energy-equivalent basis. They are also a functionof the efficiency of electric motors. However, all electricdrive technologies also make efficient use of energy fromthe point of combustion. For EVs and PHEVs, assessingthat efficiency requires moving up the energy system tothe point where fuel is combusted in a power plant. Usingthis measure, the efficiency advantage of electric drive isFIGURE P16Relative Efficiency of Sample Light-Duty Vehicle Technologies0.5 Miles traveled per 1,000 BTU0.40.30.20.10.0EVFull Hybridreadily apparent. A traditional ICE vehicle getting 30 mpgcan travel less than one-fourth of a mile on the energycontained in 1,000 Btu of gasoline. An electric vehicle orPHEV in charge-depleting mode can travel nearly doublethat distance on 1,000 Btu of natural gas used to generateelectricity, even accounting for line losses in transmittingthe electricity from the power plant.Reduced Emissions: Electric drive technology canprovide significant reductions in CO 2 emissions comparedto conventional vehicles powered by fossil fuels. Today’sfull hybrids offer as much as a 30 percent improvement inemissions when compared to similarly sized conventionalgasoline vehicles. Questions have been raised about theemissions profile of PHEVs and EVs, because approximately48 percent of current U.S. electricity generationis derived from coal-fired power plants. 58 Together withnatural gas, fossil fuels account for as much as 70 percentof U.S. power generation. 59However, the emissions benefits of electric drivevehicles are still significant. A number of well-to-wheelsanalyses have quantified emissions benefits of electricdrive technology in recent years. One study from theNatural Resources Defense Council and the Electric PowerResearch Institute found that a PHEV-20 powered by electricityfrom the grid offered significant emissions benefits,even if 100 percent of the electricity used to power thevehicle was generated at a relatively inefficient coal plant. 6058 DOE, AER 2009, Table 8.2a.59 Id.60 Electric Power Research Institute (EPRI), Natural Resources DefenseCouncil & Charles Clark Group, Environmental Assessment of Plug-In HybridElectric Vehicles: Volume 1: Nationwide Greenhouse Gas Emissions (2007).Natural Gas VehicleTraditional ICEFuel Cost per Mile ($) 0.120.100.080.060.040.020.00Gasoline Well-to-TankGasoline Tank-to-WheelsPHEV - RenewablesSource: Electric Power Research Institute; Natural Resources Defense CouncilAnd in fact, despite the prominent role that coal-firedelectricity generation plays in the U.S. power portfolio,the notion of a PHEV or EV powered 100 percent by coalis somewhat misleading. This is because vehicles plugginginto the grid will be powered by the lowest-cost source ofdispatchable power generation at a given point in time.More often than not, the marginal fuel is unlikely to becoal, as coal typically serves as a source of baseload power,and ramping coal generation requires some measure ofplanning. Instead, the marginal fuel powering PHEVsand EVs is likely to be natural gas in much of the UnitedStates. 61 Natural gas is low cost and easily dispatchable.As a fuel, natural gas contains about 30 percent lessCO 2 than oil and 45 percent less than coal on an energyequivalent basis. 62 Moreover, the platform in whichthe fuel is consumed impacts emissions significantly.On average, the fleet of U.S. coal power plants currentlyhas a 32 percent efficiency rating. 63 In contrast, the currentnatural gas-fueled power fleet reaches roughly43 percent, and it has been improving substantially ascombined cycle gas plants are deployed in greater numbers.64 Current-generation combined cycle plants reachefficiency levels of 60 percent, 65 which, when combined61 Oak Ridge National Laboratory (ORNL), Potential Impacts of Plug-inHybrid Electric Vehicles on Regional Power Generation (2008), availableat http://apps.ornl.gov/~pts/prod/pubs/ldoc7922_regional_phev_analysis.pdf.62 DOE, EIA, Natural Gas Issues and Trends, at 58 (Table 2) (1999).63 János M.Beér, “Higher Efficiency Power Generation Reduces Emissions:National Coal Council Issue Paper, at 2 (2009).64 DOE, EIA, Electric Power Annual 2009 (EPA 2009), Average OperatingHeat Rate for Selected Energy Sources, available at http://www.eia.doe.gov/cneaf/electricity/epa/epat5p3.html.65 GE Energy, “Gas Turbine and Combined Cycle Products,” at 4, available atwww.gepower.com/prod_serv/products/gas_turbines_cc/en/downloads/gasturbine_cc_products.pdf, last accessed on August 28, 2009.PHEV - 2010 Old CCElectricity Well-to-Wheels0 100 200 300 400HEVPHEV- 2010 Old GTPHEV - 2010 Old CoalConventional VehicleGrams of CO 2 per Milewith the lower carbon profile of gas, results in an emissionsreduction of about 70 percent per unit of electricitygenerated versus the existing coal fleet. 66One recent study from the Oak Ridge NationalLaboratory simulated the impact of significant adoption ofPHEVs throughout the United States. 67 The study assumedthat more than 19 million PHEVs would be on the road by2020, and it plotted penetration across different NationalElectricity Reliability Council (NERC) regions. Aggregatedacross all NERC regions, the study found that natural gas generationprovided for the bulk of added electricity generationneeded to power PHEVs in a variety of charging scenarios.Most recently, Argonne National Laboratory simulatedthe well-to-wheels emissions profile of a number ofPHEVs with varying battery sizes in different regions ofthe United States. 68 The analysis found that a PHEV-40in charge-depleting (CD) mode had significantly lowerCO 2 emissions than a conventional gasoline vehicle ineach region analyzed, and in most cases the PHEV-40 inCD mode outperformed a traditional HEV. In Illinois, acoal-dominated region, the PHEV still offered an emissionimprovement over a conventional gasoline vehicle, whileHEVs performed the best out of the technologies evaluated.(The drive cycle used in the Argonne analysis resulted in a 51percent utility factor for a PHEV-40, which is conservative).Energy Security: Electric drive systems representa substantial improvement from an energy security66 Authors’ calculations assuming natural gas contains 45 percent lesscarbon than coal, and comparing a combined cycle gas turbine (60percent efficiency) to the existing coal fleet (32 percent efficiency).67 ORNL, Potential Impacts of Plug-in Hybrid Electric Vehicles on RegionalPower Generation (2008).68 Argonne National Laboratory, Well to Wheels Analysis of Energy Use andGreenhouse Gas Emissions in Plug-in Hybrid Electric Vehicles (2010).Notes: 1. EV efficiecny assumes electricity generated from natural gas at the U.S. national average heat rate of 8,305 Btu/kWh; 10 percent line loss; and motor efficiency of 4.0 mi/kWh2. Full hybird mpg assumed at 50 3. ICE mpg assumed at 30 4. NGV mpg-e assumed at 28 5. Gaoline assumed at $3/gal; CNG at $1.50 GGE; electricity at $0.10/kWh.

36 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 37FIGURE P18Well-to-Wheels Emissions: PHEV-40 in CD ModeFIGURE P19Well-to-Wheels Petroleum UseThe Benefits of Electricity450 Grams of CO 2 per Mile400350300250200150100500NY - ISOILConventional GasolineHEVWECCCAPTW (On-Board)WTP (Electric)WTP = Well-to-Pump; PTW = Pump-to-Wheels; CD = Charge Depleting; CS = Charge SustainingFIGURE P20Oil Intensity of the U.S. Economy (Real $2005)1.2 Barrels of Oil / $1,000 of GDP1.00.80.60.40.2019651970197519804,500 BTU per Mile4,0003,5003,0002,5002,0001,5001,0005000PTW(On-Board)PHEV-10 CDPHEV-10 CSConventional GasolineHEVPHEV-40 CDSources: Figure P18, P19 — Argonne National Laboratory; Figure P20 — U.S. Bureau of Economic Analysis; BP, plc., Statistical Review of World Energy 2010standpoint. Electric vehicles—and series plug-in hybridelectric vehicles operating in charge-depleting mode—essentially use zero petroleum to propel the vehicle. Insome configurations, PHEVs with smaller batteries maystill use some petroleum, but the total amount can benearly 50 percent lower than from an HEV. 69 Meaningfulpenetration of EVs and PHEVs, along with traditionalHEVs and more efficient ICE vehicles, would radicallyimprove U.S. energy security by minimizing the role thatpetroleum plays in the national economy.Between 1975 and 1985, the United States sharplyreduced the amount of petroleum that went into producingeach dollar of gross domestic product. 70 The practicalelimination of oil from the electric power sector and69 Id.70 BP plc, Statistical Review of World Energy 2010, at 11; U.S. Bureau ofEconomic Analysis; and SAFE analysis.1985199019952000WTP (On-Board)PHEV-40 CS2005the implementation of the first national fuel economystandards led to oil intensity reductions averaging 2.5percent per year. Beginning in 1985, however, the rateof reductions in oil intensity slowed dramatically. Acrash in oil prices strongly contributed to changingconsumer demand in vehicle performance and fuel efficiencymetrics. Over the following decades, reductionsin oil intensity averaged less than 1 percent annually, asimprovements in fuel-economy standards stalled and theautomotive industry invested research and developmentdollars in increasing horsepower instead of the advancementof new, efficient technologies.The arrival of electric-drive vehicles in the marketsignals the beginning of a fundamental shift in U.S. energysecurity dynamics. With oil demand growth in emergingmarket economies providing steady support for higher oilprices, consumers may be much more willing to invest inefficiency if the product options are compelling.2010Grid-enabled electric drive technologies—PHEVs andEVs—will benefit from important characteristics of theU.S. electric grid. Vehicle miles powered by electricity willoffer improved energy security, reduced fuel costs, andreduced CO 2 emissions largely because the power sectoroffers material improvements in those categories comparedto petroleum.Electricity is Diverse and Domestic: Electricityis generated from a diverse portfolio of largely domesticfuels, including coal, uranium, natural gas, flowing water,wind, geothermal heat, the sun, landfill gas, and others.Among those fuels, the role of petroleum is negligible. Infact, just 1 percent of power generated in the United Statesin 2009 was derived from petroleum. 71An electricity-powered transportation system, therefore,is one in which an interruption of the supply of onefuel can be made up for by others, even in the short term,at least to the extent that there is spare capacity in generatorsfueled by other fuels, which is generally the case. Thisability to use different fuels as a source of power wouldincrease flexibility in the transport sector. As nationalgoals and resources change over time, the United Statescould shift transportation fuels without overhauling itstransportation infrastructure.In addition to this diversity of supply, the fuels usedto generate electricity are generally sourced domestically.All renewable energy is generated using domesticresources. The United States is a net exporter of coal.In 2009, only 12 percent of natural gas demand wasmet by imports, and approximately 90 percent of thoseimports were from North American sources (Canada andMexico). 72 The United States does import a substantialportion of the uranium that fuels civilian nuclear powerreactors. Forty-two percent of those imports, however, arefrom Canada and Australia. 73Electricity Prices are Stable and RelativelyInexpensive: Electricity prices are significantly lessvolatile than oil or gasoline prices. Over the past 25 years,electricity prices have risen steadily but slowly. Since1983, the average nominal retail price of electricity deliveredin the United States has risen by an average of lessthan 2 percent per year in nominal terms and has actually71 DOE, AER, Table 8.2a.72 DOE, AER, Table 6.3.73 DOE, EIA, 2008 Uranium Marketing Annual Report (UMAR 2009) p. 1(2009).FIGURE P21Retail Electricity & Gasoline Prices$30 per Million BTU (Nominal)25201510501960Average RetailElectricity19681976Source: DOE, AER 2010; EC AnalysisAverage RetailGasoline2000fallen in real terms. 74 Moreover, nominal prices have risenby more than 5 percent year-over-year only three times inthat time period. 75 This price stability, which is in sharpcontrast to the price of oil or gasoline, exists for at leasttwo reasons.First, the retail price of electricity reflects a widerange of costs, only a small portion of which arise fromthe underlying cost of the fuel. The remaining costs arelargely fixed. 76 In most instances, the cost of fuel representsa smaller percentage of the overall cost of deliveredelectricity than the cost of crude oil represents as apercentage of the cost of retail gasoline. 77 For instance,although fossil fuel prices rose 21 percent between 2004and 2006 (as measured on a cents-per-Btu basis), andthe price of uranium delivered in 2006 rose 48 percentover the cost of uranium delivered in 2004, the nationalaverage retail price of all electricity sales increased only17 percent. 78 This cost structure promotes price stabilitywith respect to the final retail price of electricity.Second, although real-time electricity prices arevolatile (sometimes highly volatile on an hour-to-hour or74 DOE, AER 2009, Table 8.10.75 Id.76 DOE, EIA, “Energy in Brief-What Everyone Should Know: How is myElectricity Generated, Delivered, and Priced?” available at http://tonto.eia.doe.gov/energyexplained/index.cfm?page=electricity_in_the_united_states.77 DOE, EIA, “Gasoline Explained: Factors Gasoline Prices” available athttp://tonto.eia.doe.gov/energyexplained/index.cfm?page=gasoline_factors_affecting_prices.78 DOE, EPA 2007, Table 4.5; DOE, UMAR 2009, Table S.1.b; DOE, AER2008, Table 8.10.198419922008

38 primer: electrification of the transportation sectorspecial sectionspecial section fleet electrification roadmap 39FIGURE P22Nymex Settlement Price$7.00 per Million BTU6.005.004.003.002.001.000Jan. '09Natural GasMay '09FIGURE P23U.S. Proved Reserves, Dry Natural Gas250 Trillion Cubic Feet2001501005001990199119921993199419951996FIGURE P24U.S. Coal Power Plant Capacity (GWh)3503002502001501005001997341 115Total FleetNo EmissionsControlSep. '09Source: Figure P22 — DOE, EIA; EC Analysis; Figure P23 — DOE, EIA; Figure P24 — Credit Suisse1998Central Appalachian Coal19992000200165Only SCRJan. '10200220032004May '102005 200658Only FGD20072008Sep. '10Shale GasCoalbedMethaneConventional103Both FGDand SCRday-to-day basis), they are nevertheless relatively stableover the medium and long term. Therefore, in settingretail rates, utilities or power marketers use formulasthat will allow them to recover their costs, including theoccasionally high real-time prices for electricity, butwhich effectively isolate the retail consumer from thehour-to-hour and day-to-day volatility of the real-timepower markets. By isolating the consumer from the pricevolatility of the underlying fuel costs, electric utilitieswould be providing to drivers of GEVs stability that oilcompanies cannot provide to consumers of gasoline.The Electric Power Sector has Substantial SpareCapacity: Because large-scale storage of electricity hashistorically been impractical, the U.S. electric powersector is effectively designed as an ‘on-demand system.’In practical terms, this has meant that the system is constructedto be able to meet peak demand from existinggeneration sources at any time. However, throughoutmost of a 24-hour day—particularly at night—consumersrequire significantly less electricity than the system iscapable of delivering. Therefore, the U.S. electric powersector has substantial spare capacity that could be used topower electric vehicles without constructing additionalpower generation facilities, assuming charging patternswere appropriately managed.The Network of Infrastructure Already Exists:Unlike many proposed alternatives to petroleum-basedfuels, the nation already has a ubiquitous network ofelectricity infrastructure. No doubt, electrification willrequire additional functionality and increased investmentin grid reliability, but the power sector’s infrastructuralbackbone—generation, transmission, and distribution—isalready in place.The Grid will Get Cleaner, not Dirtier: Changesto the composition of U.S. power generation sources arelikely to further enhance the emissions benefits of pluggingvehicles into the grid. For decades, natural gas baseloadpower generation was disadvantaged by the high costof the fuel. Natural gas prices regularly exceeded thoseof coal, and were also far more volatile. Despite the factthat capital costs for natural gas generation were generallywell below those associated with building a new coalplant, many operators opted for coal-fired generation,preferring a stable fuel price that was a relatively smallcomponent of overall plant expenditures.However, the U.S. upstream natural gas industry hasexperienced a revolution in recent years. The technologyto successfully exploit unconventional gas reservoirs—shale, tight sands, and coal bed methane—has unlocked avast new domestic resource. Shale resources in particularhave been a fundamental driver in expanding U.S. naturalgas reserve estimates. Proved reserves have increasedby 37 percent since 2000, from 177 trillion cubic feet(tcf ) to 244 tcf. 79 Yet, proved reserves present only partof the picture. The Colorado School of Mines PotentialGas Committee estimates that potential U.S. gas reservescould now be closer to 2,000 tcf, resulting in a theoreticalreserves-to-production ratio of nearly 100 years attoday’s consumption levels.The cost structure for natural gas production fromonshore unconventional resources is also shifting theenergy landscape. A number of recent analyses suggestthat a significant portion of U.S. resources can be producedfor less than $6.00 per million Btu. 80 This structuralshift in production costs—along with significantlyreduced industrial demand for natural gas during therecession—has placed substantial downward pressureon natural gas prices. As a result, natural gas prices haveapproached parity with coal prices a number of timessince 2009, making the fuel more attractive for utilities.In fact, natural gas traded at a discount to coal in someregions in 2009 and early 2010. 81The availability of abundant domestic gas resourcesis likely to provide momentum for a shift to gas-firedpower over the coming years. This shift to a lowercarbonfuel in plants that achieve higher efficiency rateswill result in a reduced carbon profile for the U.S. powersector, a trend that benefits electric drive technology.Moreover, even in the absence of a nationwide price oncarbon, new regulatory requirements may accelerate theretirement of a portion of the U.S. coal fleet.In July 2010, the Environmental Protection Agencyproposed new air quality rules designed to reduce emissionsof sulfur dioxide and nitrogen oxides from coalfiredpower plants. The proposed rules would requirethe deployment of best available control technologies,including selective catalytic reduction (SCR) and flue gasdesulphurization (FGD) units at coal-fired plants.Currently, only 103 gigawatt hours (gWh) of U.S. coalfiredelectricity generation contains both SCR and FGDunits. Though EPA’s rules are not finalized as of October2010, trends in air quality management suggest a very realpossibility that a substantial portion of the U.S. coal fleetwill be turning over during the coming years, increasingthe likelihood that EVs and PHEVs will be powered byfuel sources other than coal—most commonly natural gas.79 BP, plc, Statistical Review of World Energy 2010, at 22.80 Credit Suisse, The Impact of Shale Gas, at 36, (September 24, 2010).81 Id., at 33.

40 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 41A Growth Sector for JobsFIGURE P25U.S. Unemployment RateEighteen months after the official end of the 2007-2009recession, the U.S. employment outlook remains troubling.Current figures place the official U.S. unemployment rateat 9.6 percent, and expectations are that the jobless ratewill average 9.6 percent in 2011, well above normal levels. 82In short, while the Great Recession officially ended in2009, many Americans are still waiting to feel the recovery.Though nearly all sectors of the economy have yetto resume hiring in earnest, manufacturing employmenthas been hit particularly hard. Since the recession beganin December 2007, the United States has shed nearly 2.1million manufacturing jobs, and total manufacturingemployment now stands at just 11.7 million workers—a 32percent decline from January of 2001. 83 And while only 1in 10 Americans are currently employed in manufacturing,the erosion of the domestic industrial base has clearlystunted efforts to stimulate aggregate job creation. 84The past several years also witnessed an inflectionpoint in the global industrial landscape: 2009 marked thefirst year in which U.S. manufacturing capacity trailedChinese capacity in its share of the world total. 85 Theascendency of Chinese manufacturing can be attributed toa myriad of industries and factors, but it has in part beendriven by the rise of the Chinese motor vehicle industry.Chinese production of motor vehicles first surpassed U.S.output in 2008, and the gap increased by a wide marginin 2009. 86 Total Chinese vehicle production reached 13.7million units last year—an increase of nearly six-fold fromthe beginning of the decade, and more than double the U.S.total of 5.7 million domestically-made units. 87In the United States, the twin shocks of rapidly escalatinggasoline prices between 2007 and 2008 and thesevere recession that followed through 2009 exacted asignificant toll on the auto industry. Total auto sales averaged16.1 million annualized units in 2007. 88 As oil pricessteadily rose throughout 2008, sales plummeted, falling20 percent off their 2007 mark. 89 The recession and82 International Monetary Fund, World Economic Outlook 2010, Table 2.2, at 70.83 U.S. Department of Labor, Bureau of Labor Statistics, U.S. EmploymentSituation, Table B-1 (October 6, 2010), available at http://www.bls.gov/news.release/empsit.toc.htm.84 Id.85 United Nations, Industrial Statistics, available at http://unstats.un.org/unsd/industry/default.asp.86 Ward's Automotive Group, Ward's Motor Vehicle Facts and Figures 2010.87 Id.88 Motor Intelligence, available at http://www.motorintelligence.com/.89 Id.financial crisis pushed auto sales to a low of just 9.2 millionannualized units in September 2009, and by August2010 sales had rebounded to just 11.3 million annualizedunits. 90 As a result of reduced sales and declining domesticoutput, the number of U.S. workers building vehicles andtheir components has dropped dramatically. Between2000 and 2009, total American workers employed inmotor vehicle and auto parts production fell by more than50 percent, from 1.13 million to approximately 560,000. 91Electrification of transportation offers a rare opportunityto counter these dynamics. Early investment inadvanced battery manufacturing has put the UnitedStates on competitive global footing for the jobs andother economic benefits that could be associated withthis industry. Dozens of plants building advanced batteriesand power electronics throughout the rust belt arealready employing thousands of American workers, and athriving domestic market for electric drive vehicles coulddramatically expand this number. 92The United States will face strong competitionfor dominance over this sector and its associated benefits.The Chinese government has recently committed$15 billion to an alliance of state-run companies leadingresearch and development and standardization efforts. 93China has also announced ambitious plans to deployEVs in up to 20 pilot cities in which strong incentivesfor vehicles and infrastructure will be funded by localgovernments as well as the national government. 94Throughout Europe, high retail fuel prices and stringenttailpipe emissions standards are driving sharp increases invehicle efficiency, and electric drive is among a handful oftechnologies that can meet new and forthcoming standards.Much of the technology that will power electric drivevehicles—from HEV to PHEV and EV—was invented anddeveloped in the United States, and significant governmentinvestment is being allocated to support the industry. A comprehensiveapproach to supporting early demand for gridenabledvehicles will help capitalize on these investments.90 Id.91 DOE, ORNL, TEDB 2009, Table 10.18.92 Thomas Grillo, “A123 opens Michigan plant,” Boston Herald, September24, 2010; Sebastian Blanco, “EnerDel shows off battery productionfacility, plans for $237 million expansion,” Autoblog, January 22, 2010;Carl Apple, “How do I Land a Battery Plant Job?” February 24, 2010.93 David Barboza, “China to Invest Billions in Electric and Hybrid Cars,”New York Times, August 19, 2010.94 Owen Fletcher, “China Ministry: Government Has Consensus ToPromote Electric Cars,” Dow Jones Newswire, October 28, 2010.10%86420198019821984198619881990FIGURE P26Share of Global Manufacturing Output30%2520151050198019841988FIGURE P27U.S. Vehicle Manufacturing Employment1,200 Thousand Workers1,0008006004002000199019921994199619981992United States2000Source: Figure P25 — International Monetary Fund, World Economic Outlook 2010; Figure P26 — United Nations Statistics; Figure P27 — DOE, ORNL, TEDB Ed. 291992199420021996China200419981996200620002002200820002004200620042008Parts - OtherMotor Vehicle - OtherProduction Workers - Parts20102008Production Workers - Motor Vehicles

42 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 43Market OutlookFIGURE P29Median Forecast, U.S. PHEV and EV Sales Share (2020)As a result of a number of economic and technologicalfactors, the outlook for the North American electric drivevehicle industry remains somewhat unclear. U.S. fuelprices are relatively low by international standards, andthe boom-and-bust cycle of oil prices has tended to makemost consumers unwilling to invest in the higher upfrontcost of more efficient vehicles. Lawmakers have alsostruggled to implement a comprehensive demand-sidepolicy aimed at facilitating development of the regulatoryand infrastructural network needed to maximize the benefitsof EVs and PHEVs.At the same time, a number of major global automakersare investing significant capital in the developmentof plug-in electric drivetrains. In addition tovehicles expected in U.S. markets in 2010 and 2011—primarilythe Nissan Leaf and Chevy Volt—Volkswagen,BMW, Mitsubishi, Toyota, Honda, Ford, Chrysler, andothers have announced significant programs to developand market EVs and PHEVs. In some instances, thesecommitments are a response to increasingly stringentregulatory requirements instituted by governments. Butthe pace at which major OEMs are investing in GEVs isnonetheless impressive.Still, a number of technological and economic challengesremain to be addressed before electric drive technologiescan achieve mainstream potential. Many of themost significant challenges relate to battery technology.The industry continues to work toward material reductionsin battery price along with improved performanceFIGURE P28Total Monthly Annualized Auto and Light Truck Sales25 SAAR in Millions2015105metrics in some cases. However, battery prices are stilltoo high for most typical consumers to consider purchasingelectric drive vehicles. Innovative business modelsare emerging to deal with the high cost of capital associatedwith batteries, but many of these will ultimatelydepend of the residual value of the battery, which is yetundetermined.Other challenges could impact the availability ofcharging infrastructure, both at home and in public. A reliablebusiness model has yet to be demonstrated aroundpublic charging infrastructure, and the cost of installingthe appropriate equipment in consumers’ homes couldvary substantially based on the level of sophisticationrequired. How consumers use and charge plug-in vehicleswill also have a direct impact on the electric grid: smartcharging will make grid-enabled vehicles an asset to thegrid; unmanaged charging could make them a liability—particularly at the distribution level in some areas. A clearpath to a widely deployed charging management systemhas not yet been outlined.All of these factors will affect consumer acceptanceof grid-enabled vehicles. As of October 2010, the firstwave of offerings for both the Nissan Leaf and the ChevyVolt appear to be heavily subscribed. Nissan has reportedlyreceived commitments for all of the fully-electricLeafs it plans to ship in 2010 and 2011. 95 GM recently95 Consumer Reports, “Electric Nissan Leaf sold out with pre-orders,” May26, 2010.12%1086420EIASource: EC AnalysisDeloitteGlobal InsightEV/PHEV % of NewVehicle Salesincreased its planned production of Chevy Volt vehiclesto as much as 15,000 units in 2011, with a possibilityof increased volumes in 2012 as well. 96 Despite theseencouraging announcements, the long-term impact ofelectrification after these initial vehicles hit the roadremains an open question. Traditional hybrids provide acase in point: in 2010, more than 10 years after the firstgasoline electric hybrids were introduced in the UnitedStates, there are approximately 1.5 million HEVs on theroad out of a total of 230 million light-duty vehicles. 97Annual hybrid sales typically account for less than 3percent of new auto sales, and they make up less than 1percent of the U.S. light-duty parc. 98Simply stated, there are a wide range of viewsregarding the commercial viability of plug-in hybrid andbattery electric vehicles, in the United States and globally.A sampling of forecasts from government agencies,financial institutions, consultancies, and auto industryanalysts reveals estimates ranging from essentially nouptake of PHEVs and EVs to as much as 12 percent of newauto sales by 2020. The variation in these forecasts canlargely be attributed to different assumptions about fuelprices, the pace of battery cost reduction, infrastructuredeployment, and government policy.This uncertainty has led some in the battery industryto caution of an imbalance between investments inbattery supply and investments in supporting vehicleadoption. Forecasts vary, but some estimates project aBCGRoland BergerBloomberg New Energy FinancePRTMDeutsche Bankpossible 62 percent shortfall in U.S. demand for advancedlarge-format batteries when compared to projectedcapacity. However, the nature and pace of these eventswill be critical for determining the viability of the batteryindustry. If demand fails to materialize early on, muchof the investment in battery capacity will be cancelled orpostponed, significantly setting back the industry in theUnited States compared to its competitors abroad.01999 2000Source: Motor Intelligence200120022003200420052006200720082009201096 David Shepardson, “GM Exec Predicts 60,000 Volt Models Built in 2012,”Detroit News, October 15, 2010.97 DOE, AEO 2010, online supplemental Table 58.98 Id., Tables 57 and 58.

44 primer: electrification of the transportation sectorspecial sectionspecial sectionfleet electrification roadmap 45Expanding the Demand SideIn order to capture the most significant economic, energysecurity and environmental benefits of electric drivetechnology, policymakers and auto industry participantshave tended to focus their attention on light-duty vehicles.Based on the size and importance of the market, thisis clearly justified. The light-duty segment alone makesup approximately 40 percent of total U.S. oil consumptionand more than 60 percent of oil demand in the transportationsector. 99 The high volume of annual light-dutyvehicle sales—which even in severe recessionary conditionsexceeded 10 million units per year—also means thateven a relatively low sales penetration rate can result insignificant uptake of a technology in absolute terms.However, in order to support development of theelectric drive vehicle industry and to help drive downindustry costs for consumers, alternative vehicle marketscould be important in the near-term. The early developmentof the electric drive vehicle and battery industrieswould benefit from a diverse customer base that can helpdrive critical volumes, particularly in the period between2010 and 2015, when charging infrastructure and consumeracceptance issues will slow development of the99 DOE, AEO 2010, Table A-7.personal-use passenger market. Specifically, commercialand government fleet applications stand out as highlyviable market segments based on the operational needs ofthe vehicles and the economic factors that drive vehicleacquisition processes.Based on total cost of ownership modeling conductedfor this report, commercial and governmentfleets could contribute substantial volume commitmentsin the early development phases of the GEV market. Theeconomic attractiveness of electric drive vehicles in certainapplications—coupled with operational enhancementsand targeted use of public policy levers—coulddrive grid-enabled vehicle penetration in U.S. commercialand government fleets to as much as 7 percent of newacquisitions by 2015. In aggregate, the market for EVsand PHEVs in fleet applications could lead to cumulativeunit commitments of more than 200,000 EVs and PHEVsbetween 2011 and 2015.It is important to place these figures in context.Adoption of electric drive vehicles by fleet operatorsshould not be considered as a stand-alone approach toincreasing energy security through reduced petroleumconsumption. Ultimately, the fleet market is not significantenough to drive substantial reductions in nationalA New York Times Dodge Sprinter plug-in hybrid electric vehicle (PHEV), which will be used for newspaper delivery, is seen April 11, 2007 in New YorkCity. The vehicle is the first medium-duty plug-in hybrid vehicle on the East Coast and can operate up to 20 miles in zero-emission electric mode or as ahybrid with a diesel.FIGURE P30U.S. Oil Demand By SectorTransportationLight Truck Auto Heavy Duty Aviation MaritimeMedium DutyMilitaryBusRailOtheroil use. However, based on currently announced NorthAmerican production capacity, fleet operators couldrepresent the equivalent of up to 30 percent of total GEVcomponent capacity in 2015.In the process, fleet operatorswould help expedite thedevelopment of scale efficienciesin the early GEV industry.Moreover, the tendencyof fleet vehicles to be highermileage translates into higherpotential petroleum savingson a per-vehicle basis, maximizingthe efficiency of early,temporary federal incentives.These figures could representsubstantial, realizablevolumes during the early development of the U.S. largeformatlithium-ion battery industry. Fleet customerswould provide a stable customer base and much-neededcertainty for manufacturers of batteries, battery componentsand other specialized PHEV and EV parts,including electric motors. Ultimately, the long-termpredictability of large fleet commitments could help todrive cost reductions in PHEVs and EVs that would benefitthe broader consumer market. In the process, fleetelectrification would produce additional benefits.First, fleet customers would contribute to drivingearly volumes in charging infrastructure. Whilecentrally-parked fleets will benefit from single pointinstallation and the ability to charge multiple vehiclesper charger, fleet customers will nearly always prefer toinstall Level II (220v) or Level III (440v) chargers at adepot and perhaps along frequently-traveled routes aswell. Electrified fleets would also help utilities to considerthe impact of PHEVs and EVs on the grid and beginresponding to emerging issues.Finally, fleets would help put EVs and PHEVs onthe road where consumers can see them, increasingNon-TransportationIndustrialCommercialResidentialElectric PowerBased on total cost of ownershipmodeling conducted for his report,commercial and governmentfleets could contribute substantialvolume commitments in the earlydevelopment phases of theGEV market.familiarity with—and perhaps acceptance of—this new,disruptive technology. In some applications, such as utilityand telecommunications service vehicles or urbandelivery trucks, the benefitsof consumer interactionwill be limited tosimply observing PHEVsand EVs in operation. Butin other cases, such asrental cars and taxis, electrifiedfleets will actuallyprovide consumers withan opportunity to interactwith electric drive vehiclesfirst-hand, building confidencethrough experience.All of these benefitswould support the long-term development of the electricdrive industry—the most cost effective and technologicallymature option for addressing America’s dangerousdependence on oil.

EXPANDEDPART ONEThe Casefor FleetsOVERVIEWVEHICLETECHRECHARGINGINFRASTRUCTUREPOWER& ELECTRICCONSUMERMARKETCONCLUSION PROBLEM SOLUTION ECOSYSTEM TARGET SOLAR WIND NUCLEAR NATURAL PHASE 1 PHASE 2 NATIONAL PUBLIC DEMONSTRATION BATTERY COST OF CONCLUSION COAL GROCERYMARKETGASIMPERATIVE POLICY PROJECT & VEHICLE OWNERSHIPSTOREVISIONECONON EXPANDED1 2ECOSYSTEM TARGET SOLAR WIND NUCLEAR NATURALGASEXPANDEDPHASE 1 PHASE 2 NATIONALIMPERATIVEPUBLICPOLICYDEMONSTRATIONPROJECTBATTERY& VEHICLECOST OFOWNERSHIPCONCLUSION COAL GROCERYSTOREMARKETVISIONECONOMICS CASE STUDIES A-D CAR FLEET BUS FLEET ENV. POLICY BUSINESSOPPORTUNITIESBUSINESSOPPORTUNITIESMILES TRAVELEDET SOLAR WIND NUCLEAR NATURALGASPHASE 1 PHASE 2 NATIONALIMPERATIVEPUBLICPOLICYDEMONSTRATIONPROJECTBATTERY& VEHICLECOST OFOWNERSHIPCONCLUSION COAL GROCERYSTOREMARKETVISIONECONOMICS CASE STUDIES A-D CAR FLEET BUS FLEET ENV. POLICY BUSINESSOPPORTUNITIESBUSINESSOPPORTUNITIESMILES TRAVELED1 2EXPANDED1 2EXPANDED1.1 OVERVIEWEXPANDED1.2 FLEET DEMOGRAPHICS1.3 ADVANTAGES OF FLEETSEXPANDEDPUBLIC LEVEL II GEV CHARGER The charging needs of fleetvehicles may be different than those for personal use consumers.

48 part one: the case for fleetsfleet electrification roadmap 49ABSTRACTFor electrification to meaningfully impact U.S. energy andnational security, grid-enabled vehicles will ultimately needto succeed in the personal-use passenger vehicle market.However, during the early development of the electric vehicleindustry, while battery and vehicle costs remain high, othermarket segments could prove critical for driving demand.In particular, commercial and government fleets couldrepresent major early adopters of grid-enabled vehicles.The lower fuel and maintenance costs associated withgrid-enabled vehicles—particularly EVs—could provide morenear-term economic value for fleet operators than typicalconsumers, particularly in higher mileage applications.Moreover, the key challenges facing widespread consumeradoption, including access to infrastructure, range anxiety,and the higher upfront costs of the vehicles themselves—might be more easily managed by fleet owners. Finally,the implementation of corporate sustainability initiativesin a number of American businesses could provide addedmomentum for the purchase of highly efficient electric drivevehicles in fleet applications.CHAPTER 1.1OverviewThere were more than 16 million public and private fleet vehicles on the road inthe United States in 2009. 1 While the size of individual fleets varies significantly,the top 50 fleet operators together manage more than half a million vehicles. 2Fleet vehicles perform a variety of missions for federal,state, and local government, and for companies thatare familiar to nearly all Americans. They are postaldelivery vehicles, utility and telecom service trucks,pharmaceutical sales vehicles, urban delivery vans,and more.Different fleet operators take different approaches tothe way they acquire, operate, and manage their vehicles.Miles driven per day, refueling options, and the amountof time vehicles spend parked or idling can vary significantlyby operator and industry. Fleet operators also takedifferent approaches to balancing the tradeoffs betweenoutright ownership and leasing depending on financingstrategies and cost considerations. In 2009, 80 percent ofthe fleet cars and class 1-5 trucks on the road in the UnitedStates were privately owned; 20 percent were leased. 3The top 10 fleet leasing companies own and operate nearly3 million vehicles in total. 4The concentration of buying power associated withfleet operators and fleet management companies representsa significant opportunity to assist the early developmentof the electric drive vehicle industry. Moreover, fleetstend to possess a handful of important characteristics thatmay make their operators more likely than typical consumersto take on the potential risks of electric drive vehicles.The most significant challenges facing consumeradoption of electric vehicles today are the high upfrontcost of the vehicles themselves—a cost driven largely bybatteries—and the absence of publicly available refuelinginfrastructure. Fleet operators represent a customer segmentthat may be able to move past both challenges morequickly than typical consumers.1 PRTM analysis; This figure is derived from a composite of datasources, including R.L. Polk, Automotive Fleet, U.S. General ServicesAdministration, GE Capital, Utilimarc, and others.2 Bobit Publishing Company, 2010 Automotive Fleet Factbook (AFB),available at http://www.automotive-fleet.com/Statistics/3 Id. at 9.4 Id. at 44.By serving as a first market for electric drive technologies,fleet operators could generate a number ofspillover benefits for the broader consumer market, easingadoption on a wider scale. Fleet operators representa potential catalyst for the industry-wide economies ofscale that will benefit the consumer electric drive marketwith lower prices. If plug-in vehicle adoption amongfleet operators reached even 4 percent of new acquisitionsby 2015, the fleet industry could generate demandfor as much as 3,000 MWh of battery capacity. Increasedvolumes from fleet orders will also reduce the costs ofelectric powertrain components.A similar impact could be realized in charging infrastructure.While fleet operators will benefit from singlepoint installation, the need to charge multiple vehiclessimultaneously in some instances could necessitate largecharging unit purchase orders, helping to accelerate thedevelopment of critical installation experience and drivingearly volume production of charge units.Finally, fleet operators could improve consumers’ perceptionof electric-drive vehicles by increasing their publicexposure and facilitating interaction with a new technology.Urban parcel deliveryvehicles display some ofthe most familiar brands3 Millionin corporate America, andthey are a common sighton city roads and highwaysacross the United Number of vehicles owned and managedStates. Typical consumers by the top 10 fleet leasing companies.interact with utility andtelecommunications service vehicles in their neighborhoodsevery day. Rental cars, taxi cabs and transit vehiclesoffer even greater exposure. By demonstrating the safety,reliability, and real world benefits of electric drive technologies,fleet operators can dramatically enhance consumers'perceptions of HEVs, PHEVs, and EVs.

50 part one: the case for fleets fleet demographicsfleet electrification roadmap 51CHAPTER 1.2Fleet DemographicsFIGURE 1AVehicle Class by WeightEXAMPLE GROUP CLASS COMMON EXAMPLES GROSS VEHICLE WEIGHTVehicle fleets are utilized by an extremely diverse set of industries and governmentagencies for an equally diverse set of purposes. Individual fleet sizes vary from lessthan five vehicles to as large as tens-of-thousands of vehicles.Auto Class 1Ford FocusNissan Altima< 6,000 lbsFleet vehicles operate in nearly all sectors of the economyand are important for a number of industry sectors.In 2009, corporate and commercial fleets in the privatesector accounted the majority of fleet vehicles in operation(VIO), with a combined 74 percent market share(8.8 million and 3.2 million, respectively). Public sectorfleets at the federal, state and local level accounted forthe balance, with approximately 4.4 million VIO.In terms of industry representation, short-haul deliveryvehicles account for the largest share of U.S. fleet vehiclesin operation, with 28 percent of the total market share.State and local government fleets are the second largestindustry segment, representing nearly one-fourth of U.S.fleet vehicles in operation and the overwhelming majorityof public sector vehicles. Passenger transportationapplications such as rental cars, taxi fleets, school buses,and transit buses also account for a substantial share (16percent of the total).Fleet vehicles include the full spectrum of automotivesizes and weights, from passenger automobiles andlight-duty trucks to medium- and heavy-duty trucks. 5, 6In 2009, there were approximately 4.8 million automobilesand 4.3 million class 1-2 light trucks in operationin fleet applications. Class 3 through 6 mediumdutytrucks in operation totaled 2.6 million. Class 7and 8 heavy-duty trucks in fleets totaled 3.9 million.Transit and school buses accounted for an additional0.8 million fleet vehicles in operation. (See Figure 1Afor a breakdown of vehicle class by weight.)5 The legal definitions that distinguish passenger cars from light-weightlight duty trucks can be found at 49 CFR 523 (2010).6 Gross vehicle weight is defined as maximum allowable total mass of aroad vehicle or trailer when loaded. Trucks are segmented from class1 through 8 and delineated strictly by gross vehicle weight. The truckclassification system is based on the U.S. Department of Transportationclassification system.Light-Duty TrucksMedium-Duty TrucksClass 1Class 2Class 3Class 4Ford RangerGMC CanyonDodge RamFord F-150Ford F-350GMC Sierra 3500Ford F-450GMC Sierra 4500< 6,000 lbs6,001–10,000 lbs10,001–14,000 lbs14,001–16,000 lbsWhat Constitutes A Fleet?Class 5Ford F-550GMC Sierra 550016,001–19,500 lbsFor the purposes of this report, a fleet is defined as five or more vehicles under central commercial or government ownership.Data has been aggregated from a number of sources, including the U.S. Department of Energy, Oak Ridge National Laboratory,R.L. Polk and Co., and industry publications such as Automotive Fleet. Data was also acquired from industry associations, fleetoperators, vehicle OEMs, and other primary sources.It is important to note that there are a variety of interpretations and definitions of fleets, and these impact the way that data isaggregated by different sources. Aggregating historical data series is particularly difficult as a result of changing definitions overtime. The Department of Energy Annual Energy Outlook reports sales, stock, and energy consumption data for light-duty vehicles(cars and SUVs) in fleets of 10 or more only. In their annual Transportation Energy Data Book, Oak Ridge National Laboratorydefines fleets as having 15 or more vehicles in operation or purchasing five or more vehicles annually. This definition also servesas the reporting criteria for prominent industry trade publications, including Automotive Fleet.At least two important fleet demographics are not covered by these definitions, and they are not directly addressed by thisanalysis. First, smaller fleets of less than five vehicles, which may include as few as one or two vehicles in operation, are notincluded. Second, less structured arrangements that may have some fleet characteristics, but are not typically defined as fleets,are not included. An example would be an employer providing drivers with fuel reimbursement accounts.Heavy-Duty TrucksClass 6Ford F-650GMC TopkickInternational Durastar19,501–26,000 lbsClass 7 International Transstar 26,001-33,000 lbsClass 8 Tractor Trailor > 33,000 lbs

52 part one: the case for fleets fleet demographicsfleet electrification roadmap 53FIGURE 1BVehicles In Operation by Sector & ApplicationTotal fleet vehicles in operation totaled 16.3 million in 2009. The private sectoraccounted for nearly three-fourths of the total. Within the public sector, state andlocal government agencies accounted for 85 percent of the government total.27% Public SectorFIGURE 1CVehicles In Operation by Application & ClassNOTE: Vehicle Applications are listed in order of market share; vehicle class domains vary in scale and are measured in thousands.Short-Haul Delivery / 4.5 MillionAutoClass 1-2Class 3Class 4Class 5Class 6Class 7Class 80 500 1000 1500 2000 2500Long-Haul Delivery / 2.1 Million0 300 600 900 1200 1500Sales & Service / 1.7 Million0 100 200 300 400 500 600 700 800Public Sector4.4 Million VehiclesShort-haul delivery vehicles made up one of thelargest fleet segments in the United States in 2009,totaling 4.5 million vehicles in operation across allvehicle classes. The size of the short-haul deliveryasset class is heavily skewed toward lighter trucksand cargo vans. Nearly 50 percent of vehicles inoperation are class 1 and 2 trucks.There were more than 2 million long-haul freightvehicles in fleet applications in operation in theUnited States in 2009. The size of the asset class isgenerally class 6 and higher, and class 8 vehiclesaccount for more than half of the total. Class 8vehicles include combination tractor trailers as wellas other applications.Sales and service vehicles totaled 1.7 million in 2009.The size of the asset class is somewhat skewedtoward the lighter end of the spectrum, with nearly1 million autos and class 1-3 trucks in operation.Typical sales and service vehicles range fromlight-duty passenger car fleets in the pharmaceuticalindustry up to class 8 refuse removal trucks.28% Short-HaulDelivery4% Federal13% Long-HaulDelivery23% State & Local16.3 MillionFleet Vehicles In OperationIn the United States (2009)Private Sector11.9 MILLION VEHICLES73% Private SectorSales & 11%ServiceOther 3%Utility & Telecom 3%Fleets 5-14 6%Rental 10%1% TaxiAutoClass 1-2Class 3Class 4Class 5Class 6Class 7Class 8AutoClass1-3Class4-5Class6-8Rental / 1.6 Million0 10 20 30 40 50 60 70 80There were approximately 1.6 million rental fleetvehicles in operation in 2009. The majority—76percent— were automobiles. The rest were a mixof class 1-5 trucks. Originally more focused onlonger trips like vacations, the rental industryhas expanded to meet the needs of predominantlyurban consumers who do not ownvehicles but may need to use one on occasion.Car sharing services are a good example of onesuch new model.FederalUnspecified mix of Class 1-5 TrucksLaw EnforcementState0 300 600 900 1200 1500Utility & Telecom / 500,0000 20 40 60 80 100There were nearly half a million vehicles inoperation in utility and telecom fleets in 2009.The size of the asset class is somewhat evenlydistributed across vehicle classes, though thelight and heavy ends of the spectrum are mostprominent. Typical utility and telecom vehiclesrange from light-duty cars and trucks used forreading meters and making routine customervisits to heavier trucks used to maintain andrepair damaged infrastructure.State & Local / 3.7 MillionState and local governments maintain 3.7million fleet vehicles in operation,including law enforcement vehicles. Morethan two-thirds of state and localgovernment vehicles are autos or class1-2 light-duty trucks. More than 10percent are transit and other busesoperated by municipal and regionaltransit authorities.Other / 450,000Other vehicles include privately owned andoperated school buses among other vehicles. In2009, there were approximately 450,000 privatelyowned and operated heavy-duty school buses inthe United States.Fleets 5 - 14 / 960,000Class one automobiles in fleets with between 5and 14 vehicles totaled 960,000 across multipleindustries in 2009. More detailed data is generallynot available.Taxi / 150,000There were more than 150,000 vehicles operatingas part of taxi fleets in the United States in 2009.Essentially 100 percent of these vehicles arepassenger automobiles and minivans or SUVs,though cars account for the majority.Federal Vehicles / 650,000There were approximately 650,000 federal fleetvehicles in operation in 2009, operated by nearly40 civilian agencies and the Department of Defense.Civilian agencies accounted for 36.9 percent of thetotal, military agencies for 29.9 percent, and the U.S.Postal Service alone accounted for the balance—33.2percent. Postal light-duty trucks of less than 8,500pounds GVW accounted for 29.8 percent of all federalfleet vehicles. Nearly two-thirds of the federal fleet isclass 1-3 trucks.

54 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 55CHAPTER 1.3Advantages of Fleet OperatorsCommercial and government fleets possess a number of key advantagesthat could enable them to be early adopters of grid-enabled vehicles. Theseadvantages include the way fleet managers make vehicle acquisition decisionsas well as certain unique operational traits of fleets.As policymakers and industry participants consideroptions for accelerating the development and deploymentof grid-enabled vehicles, it will be important to targeta broad market. While high levels of adoption amongpersonal-use passenger vehicles is the key to meaningfullyimproving American energy security, commercial andgovernment fleet vehicles can help drive early volumeramp-up in battery manufacturing and vehicle componentsupply chains. These scale effects could ultimately benefitthe broader consumer market through reduced costs.For a number of reasons, grid-enabled vehiclesshould be an attractive option for fleet owners in the verynear-term. Perhaps most important, the decision-makingprocess for purchasing a vehicle is significantly differentfor most fleet operators than it is for typical consumers.While consumers often focus on vehicle aesthetics, performance,and style, most fleet operators focus heavilyon the life-cycle economics of an acquisition. The loweroperating and maintenance costs of PHEVs and EVsshould provide clear value to fleet owners, particularly inhigher mileage applications and in cases where upfrontcosts can be offset through battery right-sizing, extendedownership periods, light-weight vehicle components, andinnovative business models.Fleet owners may also be more prepared to address theinfrastructure challenges that industry observers assume willpresent obstacles to consumers. For fleets that centrally park,single-point installation and the ability to charge multiplevehicles per charger will provide economies of scale. Highlypredictable routing will minimize the need for public charging.Total Cost of Ownership Approach to AcquisitionWhen asked, fleet managers rank total cost of vehicle ownership as the most significant factordriving acquisition decisions. 7 Consumers, on the other hand, may purchase for a variety ofreasons, including aesthetics and style, in addition to cost. If electric drive technologies can beproven to reduce total vehicle ownership costs while also allowing vehicle drivers to successfullyaccomplish their primary objectives, fleet managers may be willing to adopt electric drivevehicles sooner than typical consumers.Route PredictabilityThe most cost-intensive component in current-generation electric drive vehicles is the battery.Assuming a battery cost of $600 per kWh (industry-wide 2010 average 8 ), battery packs for lightdutyelectric drive vehicles can range from $1,200 to nearly $20,000 depending on drivetrain configuration.In heavy truck applications, pure EV batteries can cost as much as $48,000. However,in cases where fleet vehicles have highly predictable routes with little variation from day to day,batteries can be right-sized to minimize excess capacity, reducing upfront investment in unneededenergy storage.0%100%High Vehicle Utilization RatesFleet vehicles typically have higher utilization rates than consumer vehicles. Given the significantlylower fuel and maintenance costs associated with electric drive technologies, increasedutilization spreads high battery costs across a higher volume of lower-cost miles, increasing thereturn on investment. The result may be that fleet operators can more quickly recoup the higherupfront costs of electric drive vehicles.Use of Central Parking FacilitiesFleets that make use of central parking depots may be able to avoid dependence on public charginginfrastructure for EVs and PHEVs. This could be particularly true in cases where daily miles traveledare low. In contrast, the successful deployment of grid-enabled electric drive passenger vehicles inthe consumer market may require a substantial investment in public (shared) charging infrastructure,regardless of whether this infrastructure is highly utilized or not.Importance of Maintenance and Service CostsThe maintenance and service costs for certain electric drive vehicles may be far lower over thelife of the vehicle than the costs associated with internal combustion engine vehicles. Due to thesimplicity of their design, EVs are expected to have the lowest routine maintenance and servicecosts of any electric drive technology, though PHEVs and HEVs will also offer savings. Particularlyin fleet applications that operate vehicles for longer periods of time or into high mileage ranges,electric drive vehicles may represent a substantial cost offset.Lower Electricity RatesThe electricity rates paid by commercial and industrial consumers—those most likely to make useof fleet vehicles and central refueling—are often significantly less than those paid by residentialconsumers. The fuel cost per mile traveled is one of the key economic factors differentiating pluginelectric drive vehicles from other technologies, and commercial and industrial rate payers arelikely to benefit even more than typical consumers due to lower rates.Alternative Business ModelsFleet managers may benefit from alternative business models that can help facilitate adoption ofelectric drive technology. From a financing perspective, commercial leasing operations in the UnitedStates adhere to different norms than the passenger vehicle market, and the risks associated withbattery residuals may be different. Fleets may also have access to a broader set of highly routinizeddrivers. For example, rental car companies could target EVs toward urban customer segments withthe driving characteristics required to make EV adoption a success.Corporate Sustainability InitiativesIn addition to the economic and operational advantages of fleets and fleet operators, commercialand government enterprises may consider electric drive vehicles in the context of corporate sustainabilityinitiatives. The reduced emissions of electric drive vehicles may help companies meet carbonmitigation goals, and a number of corporate and government enterprises have also committed tousing less petroleum. Electric drive vehicles can facilitate progress toward these goals.7 EC, PRTM interviews.8 PRTM analysis.

56 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 57Total Cost of Ownership Approach to AcquisitionCompared to typical consumers in the passenger vehiclemarket, fleet operators may be more likely to take a totalcost of ownership (TCO) view when evaluating variousvehicle technologies. If electric drive technologies meetthe mission needs of a given fleet and can reliably demonstratea return on investment compared to an internalcombustion engine vehicle, fleet operators with an eye onthe bottom line should be willing to invest in efficiency.Comparatively, individual passenger vehicle consumersmay evaluate a vehicle purchase based on much lesstangible vehicle characteristics, including personal taste,aesthetics, and performance features that they rarelyfully utilize, such as 4-wheel drive.When asked, fleet owners rank total cost of vehicleownership as the most significant factor driving acquisitiondecisions. In one recent survey of fleet ownersacross multiple fleet segments, 63 percent of respondentsindicated that cost of ownership across the service life ofthe vehicle is the normal way that they compare vehicleswith respect to cost when making purchasing or leasingdecisions. 9 Just 18 percent of respondents indicatedthat the basic purchase price was the main factor. 10Within total cost, the survey found that fleet operatorsrank acquisition cost as their first priority most often,9 Frost and Sullivan, “Strategic Analysis of the North American andEuropean Electric Truck, Van and Bus Markets” (2010).10 Id.fuel economy or fuel costs as their second priority, andother operating costs as their third priority. 11Understanding TCOA vehicle’s total cost of ownership represents the sum ofthe capital and operating costs associated with ownership.In other words, TCO equals the fully-burdened costof purchasing, refueling, and maintaining a vehicle overthe entire ownership period. For gasoline- and dieselpoweredvehicles, TCO components would include thepurchase price, the cost of fuel, routine maintenancecosts (oil changes, engine upkeep, etc), and any more significantrepair costs (engine replacement, etc.) incurredby the owner.For electric-drive technologies, the TCO equation isslightly more expansive. A typical EV owner would incuran initial capital outlay, plus electricity costs, maintenancecosts, and the cost of purchasing charging infrastructure.EV owners might also expect to incur costsassociated with the IT backbone that that will manage theinterface between vehicles and utilities. This cost couldbe incorporated into the price of electricity or it couldappear as a user fee for access to a charging network.Two additional factors impact the TCO of both traditionalgasoline vehicles and electric-drive vehicles:11 Id.Residual Value and TCOMany owners do not maintain possession of a vehicle forits entire useful life. Many times, an owner will seek to sellor trade in a vehicle well before it reaches its full operationalcapacity. The residual value of a vehicle can have asignificant impact on the total cost of ownership. Today,the used car market for internal combustion enginevehicles is well-defined and mature. Consumers can easilyobtain the blue book value of a vehicle, which can serveas a minimum baseline. The condition of the vehicle andthe demand in a given market for certain features (horsepower,hauling capacity, efficiency, etc.) can raise or lowerthe residual value of an ICE vehicle.The picture for electric drive technologies is somewhatdifferent. In particular, the residual value of PHEVsand EVs is clouded by the lack of certainty regarding batteryperformance after large-format lithium-ion batteriesexceed their usefulness in automotive applications.Given the current costs for both EV and PHEV batteries,the absence of an assumed residual value will substantiallydecrease the economic proposition of the vehicle.Conversely, the possibility of a meaningful value assignedto a used large-format automotive battery could sharplyincrease its economic attractiveness.Ownership Structure and TCOA second variable factor that impacts total cost of ownershipis the manner in which a vehicle is financed. In thesimplest case, a vehicle could be paid for in its entiretyupfront with cash. In this instance, the vehicle wouldhave no additional costs related to capital financing overits lifetime. More commonly, vehicles may be purchasedthrough some combination of a down payment and a loan;or a vehicle may be leased, also requiring upfront capital.Each of these ownership models present the customerwith a different value proposition. Cash ownership or ahigh down payment and a loan will minimize the financingcosts incurred over the ownership period. Vehicle leasingminimizes the amount of upfront capital associated withvehicle ownership. In exchange, the customer agrees to payfinance charges on top of monthly payments that include adepreciation cost for the capital value of the battery.There are two common arrangements for vehicleownership in fleets. The first is direct company or institutionalownership. In this case, a given organizationmay choose to purchase, service, and maintain its fleetvehicles on its own. This is the most common form offleet vehicle ownership. As of January 2010, 80 percent ofthe cars and class 1-5 trucks in fleets of 15 or more werecompany/institutionally owned in the United States. 12The most common alternative to outright ownership issome form of vehicle leasing. As of January 2010, approximately20 percent of the cars and class 1-5 trucks in fleetsof 15 or more were leased or managed by a third party. 13The 10 largest fleet lessors managed nearly 3 million carsand trucks in U.S. fleets in 2009. 1412 Bobit Publishing Company, AFB 2010, at 9.13 Id.14 Id. at 44FIGURE 1DIllustrative Total Cost of Ownership: Traditional OwnershipFIGURE 1EIllustrative Total Cost of Ownership: Closed-end LeaseCapital Cost Operating CostsCapital Cost Total CostCapital CostOperating CostsTotal CostInitial Capital-Vehicle-Battery-PowertrainEnergy Costs- Gas/Diesel- ElectricityMaintenance Costs- Maintenance- RepairsInfrastructureAllocation- Chargers- InstallationInfrastructureIT Access- IT BackboneResidual Value- Vehicle- BatteryTCODown Payment- Vehicle- Powertrain- BatteryLease Payments- Depreciation- Finance FeesEnergy Costs- Gas/Diesel- ElectricityMaintence Costs- Maintenance- RepairsInfrastructureAllocation- Chargers- InstallationInfrastructureIT Access- IT BackboneTCO

58 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 59Route PredictabilityFIGURE 1GBattery Cost as a Percent of Vehicle PriceThe lithium-ion batteries that will power the first generationof EVs and PHEVs to enter the marketplacemay be over-sized for the needs of typical consumersin the passenger market. For example, an electricvehicle with a charge-depleting range of 100 miles farexceeds the average daily miles traveled of individualU.S. drivers in any region. At 36.9 miles, average dailydriving distance is highest for rural drivers, but stilllow enough to comfortably operate in charge-depletingmode of a PHEV-40 and simply charge at home at night. 15Of course, such statistics do not account for multipledrivers in a household operating a vehicle each day, buteven then, average daily mileage totals are well below100 miles. 16Figure 1F presents the average daily miles drivenper vehicle in households ranging from those thatown a single vehicle up to those that own six. Evenaccounting for multiple drivers, the vast majority ofvehicles travel less than 30 miles per day on average. 17And yet, the first commercially available EVs and PHEVswill provide consumers with charge-depleting driveranges that essentially start at 40 miles (though therange may be somewhat lower depending on the routetraveled and ambient air temperature). Allowing for thefact that opportunities to charge these vehicles may be15 DOE, ORNL, TEDB 2009, Figure 8.5.16 Id. Table 8.14.17 Id.FIGURE 1FDaily Miles Traveled for Each Vehicle in a Household80 Average Daily Miles Driven706050403020100Single Vehicle HHTwo-Vehicle HHSource: DOE, ORNL, Transportation Energy Data BookThree-Vehicle HHavailable in public, the degree of over-specification iseven starker: more than 90 percent of individual tripsare less than 30 miles. 18Part of the rationale for extra battery capacity isthat consumers will be uncomfortable with the limitedelectric drive range of PHEVs and EVs compared to theirpetroleum-fired vehicles. As a result, they may hesitate topurchase PHEVs and EVs in the absence of an abundanceof excess range—so-called range anxiety. Much moreimportant is the fact that averages often cloak significantvariances, and that individual drivers may often chooseto travel distances in excess of the charge-depleting rangeof their PHEV or EV. In essence, today’s EVs and PHEVsare being designed to provide for consumers’ longestexpected trips, even if those trips rarely occur. Ultimately,this is clearly necessary; consumers do not purchase vehiclesbased on ‘average’ needs.However, the need to oversize batteries for the consumermarket is a key driver of vehicle cost. At today’sindustry average prices, a 24 kilowatt hour (kWh) batteryproviding 100 miles of range could add as much as$14,400 to the cost of a vehicle for the battery alone—33percent of the total vehicle cost 19 (See Figure 1G). Thispremium will reduce the economic attractiveness of thefirst generation of EVs and PHEVs for many consumers.Even though the operating and fuel costs of a GEV may be18 DOE, ORNL, TEDB 2009, Table 8.3.19 PRTM analysis.Four-Vehicle HHFive-Vehicle HHSix-Vehicle HHVehicle 1Vehicle 2Vehicle 3Vehicle 4Vehicle 5Vehicle 6DRIVETRAIN CLASS KWH $/KWH BATTERY COST VEHICLE COST BATTERY % OF VEHICLE COSTHEV Auto 1.5 1,200 $1,800 $30,000 6PHEV Auto 12 660 $7,920 $36,000 22EV Auto 24 600 $14,400 $41,000 35PHEV Class 4-5 29 792 $22,900 $67,000 34EV Class 4-5 65 720 $46,800 $92,000 51Source: Interviews, Published Vehicle Specs, PRTM Estimatesmuch lower over the life of the vehicle, the upfront capitalcosts associated with today’s batteries are essentiallyprohibitive in the absence of government subsidies, withpayback periods that can exceed 10 years. This dynamiccould be particularly problematic in heavier applicationsthat would require larger batteries for electric drivetechnologies.In contrast, fleets may have the ability to ‘right-size’batteries for a given mission, thereby reducing upfrontvehicle costs. This ability stems from the fact that thepredictability of routes traveled by fleet vehicles is particularlyhigh in some industries and within certain companiesand government institutions. In applications suchas an urban product delivery fleet with a finite customerbase, individual vehicle travel patterns can be highlyroutinized. For example, a bakery delivery truck drivermight have a specified set of daily customers. The routestraveled are well known in advance and recur each day.Transit and school buses are another example of fleetswith highly routinized travel patterns. In other applications,such as a commercial parcel delivery fleet, theroutes may not be perfectly predictable, but an individualdriver may have a handful of large, consistent deliveries(commercial office buildings, for example) plus someadditional less predictable stops within an establishedservice territory. This high degree of daily mileage predictabilityshould also contribute to battery right-sizing.Because the first generation of lithium-ion batterieswill represent such a large portion of overallvehicle cost, significant savings in this area could havea meaningful impact on vehicle economics and possiblyon fleet purchase decisions. For example, optimizingthe battery in a class 5 truck EV to provide 50 miles ofrange instead of 100 miles of range would reduce totalupfront vehicle costs by nearly 20 percent. This kindof optimization might not be attractive to customersin the personal-use passenger vehicle space who willalways want to be prepared for longer (infrequent)trips, but for fleets with high route predictability, optimizationrepresents an opportunity to substantiallyreduce upfront costs and improve total cost economicsfor grid-enabled vehicles.One important question regarding battery rightsizingis the degree to which battery manufacturers canbe flexible in designing batteries customized for variousmileage ranges. In fact, a number of battery OEMs reportthat this kind of flexibility is relatively straightforward.Once battery cells are manufactured and installed intomodule units, packs of varying sizes can be assembled.Of course, larger purchase orders would likely make theeconomics of right-sizing batteries more compelling forbattery makers.Ultimately, route predictability may be among themore important characteristics that could facilitateuptake of grid-enabled vehicles in fleet applications. Inaddition to reducing upfront costs, high levels of routepredictability would reduce fleet operators' dependenceon public charging infrastructure by allowing gridenabledvehicles to be matched with the behaviors thatare most conducive to their use. Whereas a consumermight average 30 miles driven per day, variance fromthis average could necessitate significant investment inpublic charging infrastructure, cause range anxiety, orrelegate early EVs and PHEVs to secondary-use status.As a consumer’s second automobile, the utilization ratesof these EVs and PHEVs may be low, and payback periodsmay therefore be long.In contrast, a fleet operator with a high degree ofroute predictability can employ GEVs in relatively highutilization applications with minimal risk. To the extentthat public charging is required at all, investment can behighly targeted and focused.

60 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 61High Vehicle Utilization RatesA vehicle’s utilization rate is essentially the number ofmiles traveled over a given period of time, though thereare important exceptions. For example, utility and telecomservice vehicles may run the engine and consumefuel in order to perform certain auxiliary functions. Thesefunctions may make such vehicles strong candidates forelectrification. Still, the most straightforward measure ofvehicle utilization is annual miles traveled.In general, commercial and corporate fleet vehicles tendto have higher annual miles traveled than passenger vehicles inthe consumer market. Recently released survey data suggeststhat household vehicles travel between 7,300 and 12,800 milesper year, depending on the age of the vehicles themselves. 20In contrast, the average annual miles traveled forsimilarly-sized vehicles in a corporate fleet applicationare typically much higher. Data taken from a 2008 surveyof business fleet operators suggests that average annualmiles traveled can range as high as 28,020 miles for certainlight-truck applications. 21 The average was closer to23,000 miles for passenger cars.Ultimately, however, high utilization rates presentboth opportunities and challenges for electric drive technology.High utilization provides the most direct metric20 DOE, ORNL, TEDB 2009, Table 8.9.21 Bobit Publishing Company, AFB 2009.FIGURE 1HAverage Annual Miles of Travelfor Household Vehicles by AgeVEHICLE AGE ANNUAL MILES TRAVELED (2009)Less than 1 Year 12,800for accelerating the efficiency payback on an electric drivevehicle with a high upfront capital premium and lowoperating costs compared to an ICE vehicle. At the sametime, vehicles with extremely high utilization rates maynot be able to rest for the several hours needed to chargedepleted batteries. Perhaps of greater importance, batteryelectric vehicles with extremely high utilization ratescould require charging multiple times throughout theday, and therefore need access to multiple charge points.In the case of a business fleet vehicle with 28,000 miles ofannual travel, daily miles traveled could easily exceed 100if weekend travel is fully excluded. This could necessitatean alternative charging technology, such as battery swappingor fast charging, or it could make these fleets morelikely to adopt an HEV/PHEV versus an EV.Taxis are good examples of high utilization fleets. Incertain environments—particularly dense urban areas andcities with a high taxi registration fee—individual taxis areon the road between 16 and 24 hours per day. 22 The typicaltaxi in New York City logs as much as 100,000 miles per year. 23As a result, taxis would be unlikely adopters of pure batteryelectric vehicles in the absence of a specialized chargingsolution, such as fast charging or battery swapping.Better Place, an end-to-end provider of vehicle infrastructurenetwork solutions, is currently piloting a small fleetof taxis using swappable batteries in Tokyo, and recentlyexpanded the project to San Francisco. 2422 Hai Yang, et al., “A macroscopic taxi model for passenger demand, taxiutilization and level of services,” Transportation, 27: 317–340 (2000).23 John Voelcker, “Cities Want High-Mileage Hybrid Taxis; Judge Says It'sIllegal,” Green Car Reports.com, July 29, 2010.24 Jim Motavalli, “Better Place’s Tokyo Battery Swap: A Test to Show theWorld,” BNET, April 27, 2010.0%100%Some rental and car share companies also targetextremely high utilization rates. In the case of car sharing,it is typically optimal to minimize vehicle downtimethroughout the day, which would allow only for a shortcharge period overnight. Daytime car sharing customersmay not mind a quick stop at the gas station, but theywill be unwilling to charge a vehicle for the several hoursrequired by Level II electric vehicle supply equipment(EVSE). Here again, access to fast charge or battery swapwould be needed. In addition, car sharing companiesreport that they would need the ability to remotely monitorbattery state of charge in order to consider EVs andPHEVs, a capability not yet embraced by vehicle OEMs. 25Vehicle Replacement CycleVehicle utilization and other factors ultimately feed intothe rate at which a fleet replaces its vehicles. In general,fleets that have high utilization rates tend to have higherreplacement cycles, though there are important exceptions.For example, a company or institution that owns itsfleet vehicles may choose to hold on to them for the full lifeof the vehicle, 10 years or more, regardless of utilization.This could be advantageous if the vehicle is highly specializedand unlikely to be prominent in the marketplace.Nonetheless, highly utilized vehicles tend to approachservice milestones more quickly and operators often preferto sell these vehicles before incurring those costs.Fleet survey data suggests that average months inservice for light-duty vehicles in a corporate fleet applicationare far below the norms for consumer vehicles ( justas utilization rates are far higher). In 2008, the medianconsumer vehicle lifespan was 9.4 years for an automobileand 7.5 years for a light truck. 26 In contrast, compact cars25 EC, PRTM interviews.26 DOE, ORNL, TEDB 2008, Table 3.9.averaged three years in service in business fleet applicationswhile intermediate cars averaged 2.4 years. 27 Lighttrucks averaged slightly higher at 4.25 years. 28Conditions in the broader economy can have asignificant impact on the average age of fleet vehicles.During the 2007-2009 recession, the average endingmonths in service of fleet vehicles in operation increasedby as much as 10 percent in certain asset classes. 29Operators that owned their vehicles strenuously avoidedcapital expenditures that could be postponed throughincreased maintenance. With vehicle resale values at lowlevels, operators in commercial lease agreements simplyheld onto vehicles for longer periods.One potential benefit of a shorter replacement cycleis the ability of fleet managers to maintain access to up-todatetechnology. In the passenger market, consumers thathold onto vehicles for an average of seven to 10 years couldend up driving vehicles based on obsolete battery technology.This is exacerbated by the length of vehicle warranties,which are currently centered on eight to 10 years and 100,000miles or more. 30 Some OEMs may establish business modelsthat allow for battery upgrades over time, but this has notoccurred yet. In the fleet market, an operator cycling throughvehicles every four years will likely have rolling access to thebest batteries.Rental companies are an example of a fleet industrysegment that tends to have high turnover rates, making ita potentially attractive option for accelerating the deploymentof electric drive technologies. Because the averagerental fleet acquires new vehicles as often as every six to 10months, the opportunity may exist to establish a pipelineof frequent orders for electric drive vehicles.27 DOE, ORNL, TEDB 2009, Table 7.2.28 Id.29 GE Capital, Fleet Services.30 Scott Doggett, “Nissan Leaf Battery Warranty Same as Chevy Volt's - 8Years or 100,000 Miles,” Edmunds.com, July 27, 2010.1 Year 13,8002 Years 13,5003 Years 12,500FIGURE 1IAverage Annual Miles of Travelfor Business Fleet VehiclesFIGURE 1JAverage Cycle, Fleet Cars and Light Trucks50 Months in ServiceFIGURE 1KAverage Ending Months in Service, Business Fleet Vehicles4 Years 11,8005 Years 11,7006 Years 11,300BUSINESS FLEET VEHICLES ANNUAL MILES TRAVELED (2008)Compact Cars 23,148484645.64646.845.2VEHICLE TYPEAVERAGE MONTHS IN SERVICECompact Cars 367 Years 11,0008 Years 10,300Intermediate Cars 23,412Light Trucks 28,0204442.6Intermediate Cars 29Light Trucks 519 Years 9,900Minivans 27,85242Minivans 3610 Years and Older 7,300Average of All Household Vehicles 10,100SUVs 22,968Full-Size Vans 25,21240Q1 2009Q2 2009Q3 2009Q4 2009Q1 2010SUVs 29Full-Size Vans 56Source: DEO, ORNL, Transportation Energy Data BookSource: Bobit Publishing Company

62 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 63Use of Central Parking FacilitiesSome fleets may also benefit from the ability to bypassa handful of the more challenging issues surroundinginfrastructure for grid-enabled vehicles. PHEVs and EVscharge their batteries by connecting to the electricity grid.The type of connection and the infrastructure requiredto support it can vary significantly, directly impactingcharge times, cost, and convenience. Moreover, a significantamount of uncertainty still exists regarding certainkey issues, including the amount and type of charginginfrastructure needed; the business model that will supportthe construction of charging infrastructure; and thecritical functions that will need to be embedded in chargepoints in order to harmonize the interaction of plug-invehicles with the electric power sector.Private Charging InfrastructureThe vast majority of EV and PHEV consumers in thepassenger market will charge their vehicles at a dedicatedparking space overnight. In many cases, this willoccur in a private garage or carport, to which more thanhalf of city-dwellers and two-thirds of other U.S. drivershave access. 31 Some additional portion of private consumersmay have access to permitted street parking or31 DOE, ORNL, TEDB 2009, Table 8.17.FIGURE 1LCharging Infrastructure: Terms of Servicesome other dedicated location on a routine basis, thoughuncertainties exist in this area.For many drivers, the workplace will also representan opportunity to access a dedicated charge spot. In somecases, this will be a Level II charging unit installed in acorporate parking lot. An alternative scenario could bea rented parking spot in a public parking garage, familiarto most urban commuters. Recent analysis suggests thatas much as 90 percent of PHEV and EV driver chargingneeds can be met by providing a dedicated chargingopportunity at home and the workplace. 32 For homesthat lack a dedicated parking space, the market has yet todetermine how best to ensure access to overnight EVSE.Important challenges will need to be addressedbefore home and workplace charging become prevalent,however. While drivers could in theory opt to chargetheir vehicles using the standard NEMA-approved 110outlets found throughout the United States, most EVdrivers will opt for the convenience of a Level II charger,which can reduce the charge time for a fully depleted EVbattery to between three and seven hours, compared to32 California Energy Commission, 2010-2011 Investment Plan for theAlternative and Renewable Fuel and Vehicle Technology Program, at 39,(August 2010), available at http://www.energy.ca.gov/2010publications/CEC-600-2010-001/CEC-600-2010-001-CMF.PDFCHARGER APPLICATIONS OUTLET STYLE VOLTAGE AMPERAGE COST EV CHARGE TIME PHEV CHARGE TIMELevel OneLevel TwoPrivatePrivate / PublicStandardU.S. OutletDryer orLarge ApplianceLevel Three Private / Commercial IndustrialP110v 12A —220-240v 12-30A $2K-$4K440v$15K-$50K15-18 Hours 6-12 Hours3-7 Hours 1-3 hrs20 to 30 Min.Not ApplicableFIGURE 1MExpected Payback Period on Public Level II Charges100%8060402006 Year Minimum Payback PeriodOperating at peak utilization of 100%, thepayback period for a charger would be 6 years.0 5 1020 30 40 50 Yearsas long as 18 hours for a Level I charge. In addition, therate of charging will be constrained by the capacity ofthe onboard vehicle charger, which is 3.3 kW for mostlight-duty GEVs today. A Level II charger at 15A wouldrecharge a fully-depleted EV utilizing a 3.3 kW chargerin six to seven hours.Home installation of Level II charging will presentdrivers with an additional cost that will extend the paybackperiod for EVs and PHEVs. Current cost estimatesfor Level II charging units range from $500 to $2,000for the hardware alone. 33 The units currently qualify fora 50 percent tax credit that is scheduled to expire at theend of 2010 (as of publication, the credit has yet to beextended). Installation costs can add several thousanddollars to the cost of a Level II EVSE, and can be particularlyexpensive if panel upgrades or other electricalrewiring is required to support the 220v connection. 34These are costs that must be borne by the consumer, andthey can decrease the value proposition of purchasing anEV or PHEV in certain cases.Public ChargingFor most passenger market consumers, access to someamount of public charging infrastructure will be neededin the early stages of plug-in electric drive vehicle adoption.Significant uncertainty exists regarding the quantityand type of chargers needed, however. Some electricvehicle advocates have argued for deployment of a densenetwork of Level II chargers throughout urban areas inorder to alleviate range anxiety, particularly for EV drivers.Others have suggested that the cost of deploying a33 Jim Motavalli, “Home Charging for Electric Vehicle: Costs Will Vary,”New York Times, March 16, 2010.34 Id.10 Year Expected Charger LifeAn average utilization rate above 60% should reduce thecharger’s payback period below the 10 year expected life.wide network of Level II charging would be prohibitive,and that the need for pubic charging infrastructure isminimal assuming drivers have access to home and/orworkplace charging as well as targeted opportunities touse fast charging technology.Plug-in hybrid electric vehicles or extended-rangeelectric vehicles add an additional layer of complexityto the infrastructure argument. In theory, such vehicleswill require the absolute minimum amount of charginginfrastructure—a home or workplace charger—becauseeven in the event that the battery reaches a zero state ofcharge, the gasoline-powered engine provides the driverwith practically unlimited range.Nonetheless, nearly all drivers of grid-enabled electricvehicles—both EVs and PHEVs—will benefit fromaccess to public charging. For drivers of all-electricvehicles, public charging will represent a practical necessityfor trips that extend beyond the range of the battery,which could include a series of errands over the course ofa busy Saturday. For PHEV drivers, there is likely to be astrong desire to maximize the number of electric milestraveled compared gasoline miles. If for no other reason,this will be because electricity-powered miles will be significantlyless expensive than gasoline-fueled miles.Business Models and System-wide CostsPerhaps the most significant challenges facing the deploymentof public charging infrastructure will be businessmodel and cost. Specifically, a profitable business modelfor public charging infrastructure has not been reliablydemonstrated, and the ability of charger owners to recoupinvestment costs will depend on not only utilization, butwhether they are able to collect a premium for charging.At odds with this, the consumer must recover the cost of

64 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 65FIGURE 1NPrimary Fueling Option by Fleet SizeImportance of Maintenance and Service Costs100%90807060504030201001 - 5Source: DOE, ORNL, Transportation Energy Data Book6 - 1011 - 20an expensive battery by defraying it over time with comparativelycheap electricity. This essentially places anupper limit on what consumers will be willing to pay forpublic charging.A single EVSE charging at 3.3 kW per hour could intheory provide nearly 80 kWh of electricity per day (or29,200 kWh per year) to a plug-in electric vehicle. Giventhat most chargers will not be used continuously, however,the true amount is likely to be considerably lower.Retail electricity prices in the United States vary substantiallyby region, but the national average is approximately10 cents per kWh (as of June 2010). If operators were tocharge a premium of 20 percent, they would receive revenues(less overhead) of just $289 per year. For averageinstalled costs of $3,500, the payback period would be sixyears—but this assumes continuous (and unrealistic) useof the charge point. With utilization still at a generous 50percent, plus the addition of operating costs, the paybackperiod for public Level II chargers extends well beyondthe expected 10-year life of the charger.Fleet Charging BehaviorThe issues affecting deployment of private and publiccharging infrastructure in the consumer market may beof significantly less concern for a number of fleet applications,allowing them to more confidently move forwardin adopting grid-enabled vehicle technology. In part, thisis because a substantial portion of fleet vehicles are centrallyparked, centrally refueled, or both. The ability toaccess a central hub could allow for single-point installationof multiple charge points serving multiple vehicles,providing clear efficiencies in electrical equipment21 - 5051 or moreOther’s FacilityOwn FacilityTruck StopGas Stationupgrades. In conjunction with predictable routing orpredictable daily miles traveled, centralized parkingcould allow PHEVs and EVs operating in fleets to maximizeelectric miles traveled without the need to dependon public charging infrastructure.According to data accumulated by the U.S.Department of Commerce, 43.9 percent of trucksin fleets of six or more refuel at their own facility. 35The practice of central refueling tends to be most commonin larger fleets, with nearly 50 percent of fleets sized11 to 50 refueling at their own facility. 36Predictable routing—or at least a consistent serviceterritory—could also play an important role in minimizinginfrastructure requirements for fleets. In fleetapplications where daily miles traveled are consistentlylow, range anxiety will be an issue of minor importance,and the need for public chargers will be minimal to nonexistent.In applications where miles traveled are higher,but routing is predictable, siting public chargers shouldbe straightforward.Refueling behavior is likely to be one of the moreimportant operational characteristics for determiningthe viability of plug-in electric drive vehicles in fleetapplications. The issue is less of an operational constraintfor PHEVs, though an accessible infrastructure couldenable a higher fraction of charge-depleting miles versuscharge-sustaining miles. For EVs, refueling behavior willbe of critical importance, while it matters least for HEVs.35 U.S. Department of Commerce, Bureau of the Census, 2002 VehicleInventory and Use Survey.36 Id.Maintenance and service costs represent a significant portionof the operating budget of most fleet managers today.ICE vehicles require a number of regularly scheduled servicesas well as maintenance and replacement costs at keymileage milestones. Regularly scheduled service eventscould include oil changes and other fluid service, such astransmission and brake fluid. As vehicle age increases interms of miles, repair and replacement costs rise for itemssuch as transmissions, brake pads, engine components,and ultimately the engine itself.While all of this is no doubt true for vehicles ownedby typical consumers, fleet operators are likely to be moreacutely aware of the costs over time. As internal combustionengine vehicles reach certain mileage tipping points,maintenance service can rise to as much as 20 to 30 percentFIGURE 10Maintenance and Service Costs as a Share of Operating Cost – ICE Vehicles35%302520151050FIGURE 1PMaintenance Cost – EV vs. ICE Vehicles$0.14 per Mile0.120.100.080.060.040.020Compact CarsYear 148,001–80,000 mi24,001–48,000 miYear 2< 24,000 miEV Class 3 TruckIntermediate CarsPetrol Class 3 TruckYear 3of annual operating costs in certain vehicle applications. 37For fleet managers, this is a significant expense. In fact,fleet operators tend to sell vehicles in advance of certainmileage milestones or in advance of warranty expirationin order to avoid incurring the maintenance costs—thoughthe cost may ultimately be paid in reduced residual value.The maintenance and repair costs of electric drive vehiclesare likely to be significantly less than those associated withtraditional internal combustion engine vehicles. This is a resultof the fact that electric drive systems tend to have fewer movingparts and wear items than internal combustion engines.The maintenance savings are most significant for EVs, whichare based on the simplest design. PHEVs that tend to operatein charge-depleting mode can also have sharply reduced maintenancecosts. The benefit is least significant for HEVs.37 EC calculations based on Automotive Fleet data.Year 4Full Size VanYear 5Year 6Light-TruckYear 7Source: Figure 1O—DOE, ORNL, Transportation Energy Data Book; Figure 1P—EC Analysis

66 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 67Lower Electricity RatesAlternative Business ModelsThe low—and stable—cost of electricity compared to therelatively high cost of gasoline is a primary driver of theeconomic benefits of grid-enabled vehicles. Highly efficientelectric motors coupled with low electricity pricesresult in EVand PHEV41%fuel costsCommercial electricity ratesthat are aswere 41 percent less thanlittle as 25residential rates in 2009.percent thecost associatedwith a highly efficient internal combustion enginevehicle. And while all consumers will benefit from thisdynamic, the typical fleet operator may have an additionaladvantage.The average retail electricity price paid by all U.S.consumers was 9 cents per kWh in 2009 (real $2005). 38However, there is substantial price variation across differentend-use sectors of the economy. Residential consumerscurrently pay the highest rates, averaging 10.5 centsper kWh in 2009. 39 In contrast, commercial and industrialusers pay the lowest rates, averaging 9.3 and 6.2 cents perkWh, respectively. 40 For commercial and corporate fleetoperators, the likelihood that they will have access tothese lower rates significantly improves the economicsof PHEV and EV ownership for a given vehicle size.38 DOE, AER 2009, Table 8.10.39 Id.40 Id.FIGURE 1QAverage Retail Prices of ElectrictyIn terms of total cost economics for grid-enabledvehicles, electricity prices can have an importantimpact—though ultimately gasoline prices, vehicle utilizationrates, and battery costs are likely to have a moresignificant impact. Still, in a light-duty automobile fleetapplication traveling 17,500 miles per year, the differencebetween residential and industrial electricity pricesequate to an approximate one year improvement in thepayback period of an EV compared to a 30 mpg ICE vehiclewith gasoline at $3.00 per gallon.An additional factor assisting fleet operators may beutilities' desire to manage the relatively large loads thatwill be associated with clustered charging. In the case of afleet of EVs or PHEVs charging at a central depot, simultaneouscharging of numerous vehicles could create a reliabilityissue for the local distribution network. Therefore,utilities may provide strong financial incentives for fleetoperators to charge during off-peak hours.In pilot programs today, PHEV and EV driversaccessing residential electricity to charge their vehiclesreceive rate discounts of 50 percent or more during offpeakhours. While similar programs for commercial andindustrial rate-payers are not yet widespread, it will bejust as important—if not more so—to incentivize fleetGEV customers to charge off peak. In part, this goal canbe met through the establishment of comparatively highpeak power rates. (Utilities will also likely work closelywith large fleets to install charge management functionalitythat can be employed if needed.) Off-peak discountsmay simply provide an additional price incentive.The norms surrounding vehicle financing and acquisitionin the commercial fleet industry are significantlydifferent than those in the passenger vehicle market.This is particularly true for light-duty vehicles, but alsoapplies to a significant portion of medium-duty trucks.The most important difference is the dominance ofopen-ended leasing in the commercial space, a practicethat has important implications for capital managementas well as battery residual value risk.In a conventional lease agreement, an upfront downpayment is accompanied by fixed monthly paymentsover a predetermined time period, number of miles, orboth. At the end of the lease period, the lessee returns thevehicle to the lessor, who is then responsible for sellingor releasing the used vehicle. In other words, the lessorholds the risk of recovering some amount of residualvalue from the vehicle. In fleet applications, this type of‘closed-end’ leasing is not the norm, however, accountingfor less than 10 percent of commercial lease transactionsin automobiles and class 1-5 trucks. 41In the United States, the standard commerciallease agreement is a terminal rental adjustment clause(TRAC) lease, or open-ended lease model. In this model,the term of the lease is left open-ended and to the customer’sdiscretion. Generally a one-year minimumapplies with monthly renewals thereafter. However,when the customer is prepared to end the lease, theyassume responsibility for the vehicle’s resale value. If thevehicle sells for an amount that is greater than the balanceof the undepreciated lease value, the lessee earnsa return. If the vehicle sells for less than the undepreciatedlease value, the lessee must pay the difference. Thisapproach gives the vehicle operator a strong incentive to41 GE Capital, Fleet Services.keep the vehicle in good condition in order to maximizeits value in the used vehicle market.Figure 1R demonstrates the net result of TRACrelease for an individual vehicle in three cases. If the netproceeds (upon asset sale) exceed book value, the lessee(or fleet operator, in this case) receives the excess backas a refund of previously paid rentals. If the net proceedsare less than book value, the difference is paid as additionalrentals.Under current lease accounting guidelines, a TRAClease may be treated as an operating or capital lease.Moreover, there are generally no excess-mileage or wearand-tearrestrictions (vs. traditional “closed end” leasingmodels). In effect, the TRAC lease provides similar flexibilityto ownership, but allows the fleet operator to balancethe increased capital cost with lower operating coststo best realize the total life-cycle cost savings.Other Emerging ModelsDue to their larger purchasing power, access to capital,and ability to structure financial packages with otherparticipants in the electric drive vehicle industry, fleetoperators may also benefit from the ability to leverage anumber of emerging alternative business models in theelectric vehicle industry. These models may impact theway fleet operators own and finance batteries and infrastructureas well as their ability to match EV capabilitieswith appropriate drive patterns.Paying by the MileThe low cost and relative stability of electricity pricesprovide drivers of EVs and PHEVs with a fairly highdegree of certainty regarding fuel cost over time. This isin stark contrast to vehicles fueled by petroleum, whichare subject to the high volatility of gasoline and diesel$0.14 Real $2005 per kWh0.120.100.80.60.4ResidentialCommercialAll SectorsIndustrialFIGURE 1RSample TRAC Lease OutcomesGAIN ON SALE LOSS ON SALE BREAK EVEN ON SALECapital Cost $22,000 $22,000 $22,000Amortization Term 60 Months 60 Months 60 Months0.2Leased Months 48 Months 48 Months 48 Months019801984198819921996200020042008Book Value $4,400 $4,400 $4,400Resale Value $5,200 $3,800 $4,400Source: DOE, EIACustomer Impact $800 -$600 $0

68 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 69FIGURE 1SChange in Energy Prices (2000–2010)54321Index: Jan. 2000=1020002001Source: DOE, EIA; EC Analysis200220032004prices. In the case of commercial and industrial enterprisesthat run fleets as part of core business functions,this volatility can cause significant budgeting and costmanagement challenges.This volatility is often difficult to plan for; it is theresult of complex dynamics in the upstream global oilmarket and downstream refining industry, as well asfederal, state, and local tax policy. Recent history providesa case in point. After steadily rising between 2003and 2007—and ultimately surging to record highs inmid-2008—crude oil and refined product prices crashedin late 2008 and early 2009. 42 Today, while crude oilprices have regained significant strength to averagebetween $75 and $85 per barrel, gasoline and dieselprices are somewhat below what might be expected.This is largely the result of weak domestic demand inthe United States. 43In cases where EVs or PHEVs would meet theirmission requirements, fleet operators may be willingto hedge against petroleum fuel price volatility thoughelectrification. One way to do this would be to packagethe high cost of batteries with the low cost of electricityin a service contract similar to cellular phone packagesoffered by telecommunications companies today.Instead of purchasing a monthly “minutes” package,a fleet operator could purchase a monthly “miles”42 DOE, EIA, Petroleum Navigator, available at http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=M.43 Moming Zhou, “Crude Oil Drops on Weak Demand, Rising GasolineInventories,” Bloomberg , September 28, 2010.2005200620082009Crude Oil WTIRetail Gasoline–US City AverageRetail Diesel–All TypesRetail Electricity–All Sectorspackage. The cost per mile could include the value of thebattery, charging equipment, and electricity.In the United States today, the cost of such a packagemight be very near to the cost of gasoline per mile—perhaps even slightly more. However, an operator thatlocked into such a contract would be able to confidentlyplan for fleet operational costs over time. In fact, forfleet applications that have a high degree of confidencein the number of miles traveled per vehicle per day, thismodel could provide near certainty in budgeting operationalcosts. In an era of highly volatile gasoline anddiesel prices, that is likely to be an extremely valuablebenefit of electrification.Infrastructure BundlingJust as the high capital cost of batteries can be offsetthrough vehicle leasing, there should be nothing to preventthe cost of infrastructure from being financed overtime. This is certainly true in the passenger vehicle market,where a number of providers have announced plansto provide access to home and/or other charging facilitiesfor a monthly fee. However, infrastructure financingcould have important ramifications for fleet operatorsthat may need to purchase a significant number of chargersto support multiple vehicles.One option for infrastructure financing may be toinclude it as part of energy efficient building retrofits. Anumber of market participants have emerged in recentyears offering to finance the upfront costs of improvingbuilding energy efficiency in exchange for a portion of the2010associated cost savings over time. When implementedsuccessfully, the result is a more efficient building thatgenerates lower heating, ventilation, and air-conditioningbills—all while guaranteeing a revenue stream tothe service provider. Efficiency improvements may alsoallow commercial facilities to qualify for higher environmentalcertifications in programs like the Leadership inEnergy and Environmental Design (LEED) program.The inclusion of vehicle charging units in buildingretrofits could be a low capital cost, low-risk opportunityfor commercial and industrial entities to supporttheir use of EVs and PHEVs. However, other possibilitiesexist for financing fleet infrastructure at commercial andindustrial locations. In particular, local utilities may seevehicle charging as an opportunity to sell more power,and therefore may develop business models aroundproviding fleet operators with access to chargers for amonthly fee.ConversionsFor some fleet operators that are able to hold onto vehiclesfor an extended period of time, drivetrain conversionsmay provide a relatively lower cost option for utilizingPHEV or EV technology. A conversion simply replacesthe existing ICE powertrain with a new EV or PHEVpowertrain; the rest of the vehicle is retained. Therefore,conversions are likely to be most appropriate for heavilydepreciated assets.PHEV or EV conversions could fit within the operationalnorm for some companies today. For example, incertain service applications, calendar lifespan of a typicalvehicle can be in excess of eight to 10 years. In instanceswhere these vehicles also log high miles—waste removaltrucks, for example—fleet operators today sometimes optfor a drivetrain replacement rather than incurring thecost of purchasing a new vehicle.A number of companies today are marketing PHEVor EV drivetrains as standalone products for both consumerand commercial conversions. While the consumermarket may have potential, the value that many driversplace on vehicle appearance and age may limit the size ofthe overall conversion market. However, in fleet applicationsthat derive utility from maximizing the operationallifespan of a vehicle, PHEV and EV powertrain conversionscould represent a significant cost savings. Themarginal cost of an electric drivetrain compared to anICE drivetrain is likely to be less than the marginal costof replacing a complete ICE vehicle with an electric drivevehicle. Yet the fuel savings-potential of GEV conversionis essentially the same as a new asset. Fleet operatorswho opt for conversions will have a smaller upfrontinvestment to pay back, but will benefit from the sameoperational cost savings as operators who purchase theirvehicles new.

70 part one: the case for fleets advantages of fleet operatorsfleet electrification roadmap 71Corporate Sustainability InitiativesCorporate sustainability initiatives aim to incorporate amore proactive stance on social and community issuesinto an organization's core business functions. In additionto improving brand identity with customers andbusiness partners, investments in sustainability programshave also been found to boost employee satisfaction,retention and loyalty. 44While in the past, corporate sustainability was oftenviewed with skepticism as an attempt by firms to provetheir “green credentials,” it is now becoming an increasinglyimportant part of corporate strategy. In additionto improving brand value, sustainability initiatives canreduce costs and drive improved financial performance.As a result, corporations and governments are investingsubstantial sums in sustainability initiatives. In 2010,the U.S. sustainable business market is estimated to beworth $27.6 billion. 45 Over the 2009 to 2014 period, thevalue of this market is forecast to experience a 19 percentcompound annual growth rate to $65.9 billion. 46For a number of firms and government agencies,adopting HEVs, PHEVs or EVs is fast becoming a crucialcomponent of both cost saving and sustainability strategies.Coca Cola for example, considered the world’smost valuable brand at over $70 billion, had deployedmore than 300 diesel-electric hybrid trucks by the end44 See for example, The Center for Creative Leadership, “Can ‘Doing Good’Make a Difference in Job Retention and Turnover?” 2010 News Release,June 2010.45 Verdantix, “US Sustainable Business Spending 2009-14,” October 14, 2010.46 Id.Ford Motor Company’s Transit Connect Electric vehicle in Chicago, Illinois.of 2009 as part of its efforts to use more fuel-efficientmodes of delivery. 47 Others major firms, includingUPS and FedEx, have all begun using standard HEVsfor delivery purposes in recent years. 48,49 EnterpriseRent-A-Car is set to add 500 Nissan Leafs to its rentalfleet. Hertz is planning to roll out a similar GEV rentaland car-sharing program in 2011. 50 In addition, somefirms and government agencies are already moving toincorporate EVs and PHEVs into their vehicle fleet.In September 2010, the Pepsi Co. subsidiary Frito-Layannounced that it would introduce 21 Smith ElectricNewton delivery trucks this year to be followed byan additional 150 Smith EVs in 2011. 51 These trucks,traveling up to 100 miles on a single charge, will servethe metropolitan areas of New York, NY; Columbus,OH; and Fort Worth TX. The vehicles will be centrallyrecharged at distribution centers. 52 General Electric Co.recently announced the largest purchase of any majorcorporation—25,000 grid-enabled vehicles that will beintegrated into their sales fleet over the next five years,accounting for approximately 50 percent of their totalfleet of sales vehicles. 53 The first vehicles purchased byGE will include 12,000 Chevy Volt PHEVs.In part, corporate goals related to petroleum reductionand greenhouse gas abatement are playing a role inthe early decision-making process of these fleet owners.However, the shift from petroleum-powered vehiclesto electricity-powered vehicles also offers an improvementin a company’s operating model, brand-imaging,and bottom line financial performance in many cases.In addition, GEV sustainability initiatives reduce a company’sexposure to volatile fuel prices. Unlike internalsustainability initiatives, which firms must promotewith expensive marketing campaigns, GEVs are theirown uniquely visible advertisements—a persistent and47 The Coca Cola Company, “Refuel,” http://www.thecoca-colacompany.com/citizenship/fleet_transportation.html, last accessed November 9, 2010.48 FedEx, “Alternative Energy, Cleaner Vehicles,” http://about.fedex.designcdt.com/corporate_responsibility/the_environment/alternative_energy/cleaner_vehicles, last accessed November 9, 2010.49 UPS, “Alternative Fuels Drive UPS to Innovative Solutions,” http://pressroom.ups.com/Fact+Sheets/Alternative+Fuels+Drive+UPS+to+Innovative+Solutions, last accessed November 9, 2010.50 Hertz Corporation, “Hertz Commits to Electric Vehicle MobilityPlatform,” Press Release, September 21, 2010.51 Frito-Lay, “Frito-Lay Starts ‘Charge’ on Largest Fleet of All-ElectricTrucks in North America,” Press Release, September 8, 2010.52 Id.53 Reuters, "GE to buy 25,000 electric cars by 2015," November 11, 2010.FIGURE 1TGEVs in Operation in Private SectorFleets, Global (End 2010)2520151050PG&ESource: EC Analysis113 VehiclesFrito-Layconvincing demonstration of their commitment to sustainablebusiness practices—that serve a critical operatingfunction. The benefit they bring to the companybrand image is almost certainly positive.In addition to taking advantage of lower operatingand maintenance costs and strengthening brandimage as technologically advanced, environmentallyconsciousfirms, these moves have the added benefit ofspilling over into the consumer realm (and aiding thetransition to GEVs more broadly) by enabling driversto test and experience the technology before buying orleasing a vehicle of their own.It is important to note that today’s sustainability initiativesare about much more than brand enhancementand corporate “greenwashing.” The decision-making processthat companies are using to evaluate EV and PHEVpurchases offers perspective on their goals. For example,Johnson Controls Building Efficiency reports havingutilized a three-step process to determine the “sweetspot” for electrification in its fleet of 5,300 service vans.The process was designed to match the proper vehicle,battery and drivetrain technology to the correspondingpayload requirements, drive cycles, and driver profiles,resulting in reduced lifecycle operating costs. By evaluatingmission needs, drive patterns, and working closelywith actual drivers, the company was able to identify asignificant portion of its fleet that has the potential to beelectric—as many as 370 vehicles. 5454 EC, PRTM interviews.FedExUPSAT&TFIGURE 1UCommitted GEV Purchases in Private SectorFleets, Global (2011 - 2015)10008006004002000GeneralElectric25,000 VehiclesHertz EnterpriseBestBuyPG&E Frito-LayStaples Johnson XcelControls EnergyFedExFinally, state and local governments have alsorecently signaled their commitment to incorporatingelectric drive technologies in fleet applications. InNovember 2010, Better Place announced a partnershipwith the San Francisco Metropolitan TransportationCommission and the Bay Area Air Quality ManagementDistrict that will result in the deployment of more than60 EV taxis to the region. The vehicles will be supportedby four battery swap stations. 55 Numerous citiesthroughout the nation have also begun rolling out hybridtransit buses in fleets, and the federal government hasmandated PHEV purchases by agencies when the technologyis cost-effective.55 Jim Motavalli, “Better Place rolls out Bay Area Battery Swapping EVTaxi Fleet,” BNET, November 1, 2010.AT&T

PART TWOFleetChallenges2.1 OVERVIEW2.2 FLEET CHALLENGESSCHOOL BUSES Regular routes, frequent stops, and ampledowntime for charging between pickups and dropoffs help vehicleslike these achieve substantial savings from plug-in technology.

74 part two: fleet challengesfleet electrification roadmap 75ABSTRACTWhile commercial and government fleets do possess anumber of important advantages that could facilitatetheir adoption of grid-enabled vehicles, they will alsoface challenges. Some of the fundamental cost andtechnology issues affecting personal-use consumerswill also be problematic for fleets. Today’s high lithiumionbattery costs will limit the attractiveness of GEVs insome instances. High costs for drivetrain components andthe need to invest in infrastructure will also impact theeconomics of GEVs.Vehicle leasing and fleet owners’ access to capital mayallow them to address these issues more easily than thetypical consumer, but GEVs will also require many fleetowners to be flexible and adapt to new business andacquisition practices. In addition, vehicle electrificationmay present a set of unique challenges for fleet operators,requiring a combination of careful planning and targetedpublic policy support.CHAPTER 2.1OverviewNumerous advantages of commercial and government fleet owners should help tofacilitate their adoption of grid-enabled vehicles. However, a number of challengeswill require public policy support in the near term.The original Electrification Roadmap identified four keychallenges that could impact adoption of plug-in hybridand electric vehicles among consumers in the personaluseautomotive market. These challenges included:1. The high cost of the vehicles themselves,driven largely by the batteries;2. the lack of available public charginginfrastructure;3. the need to enable successful vehicleutilityinterface; and4. a lack of mainstream consumer acceptanceof grid-enabled vehicles.As outlined in Part One of the Fleet ElectrificationRoadmap, commercial and government fleet operatorsshould be well-prepared to address a number ofthese challenges. By matching the proper vehicle, batteryand drivetrain technology to required payloadrequirements, drive cycles, and usage profiles, fleetoperators can minimize upfront investment costs.Total investment in public and private charging infrastructurecan also be efficient and optimized. Perhapsmost importantly, grid-enabled vehicles could appealto a significant number of fleet operators more quicklythan they will appeal to mainstream consumers in thepersonal-use auto market. In that case, fleet operatorswould account for significant early demand volumes inthe development of the large-format battery industryin addition to catalyzing the ramp-up of electric drivetraincomponent supply chains.Nonetheless, the basic structure of challengesinhibiting mainstream consumer adoption can be usedto identify potential challenges and problem areas thatmay need to be addressed in order to help facilitate commercialand government fleet adoption of GEVs. The highcosts of battery and vehicle drivetrain components are anobvious example. High costs for lithium-ion batteries willimpact the economics of GEVs for fleets just as they willfor consumers. In fact, because many of the electric drivetrainsupply chains for medium- and heavy-duty trucksare particularly immature today, the first GEVs comingto market in these segments carry a price premium wellabove what would be expected based on a “should cost”analysis of analogous light-duty components.While the need for public charging infrastructure isless of an issue for many fleets, it could be important forsome applications. In particular, fleets that tend to havehigh daily miles traveled and high utilization rates—suchas taxis or long-haul delivery vehicles—could be highlydependent on public charging infrastructure. In fact, theextremely high utilization rates of taxis could necessitateaccess to fast charging or battery swapping as a means tomaintain high levels of operation. And while this may beappealing from a technical standpoint, the cost of suchsystems could be an issue. Moreover, integrating thecharging of fleet vehicle batteries with the electric powersector could actually be more—not less—challenging thanintegrating typical consumer vehicles in some cases.In addition to these challenges, commercial and governmentfleet operators will have to manage a set of fiscal,budgetary, and operational challenges that in some casesare analogous to typical consumers but can also be quitedifferent. Federal government agencies, for example, areultimately highly constrained in managing their budgets,and the focus tends to be on near-term cost reductionsas opposed to long-term savings (though emissions andfuel-efficiency mandates are increasingly altering thisdynamic). In the private sector, fleet operators do tend tofocus on lifecycle vehicle costs, though they also carefullymanage the tradeoffs between investing capital in newvehicles versus other productive uses.

76 part two: fleet challenges fleet challengesfleet electrification roadmap 77CHAPTER 2.2Fleet ChallengesIn addition to the higher upfront costs, GEVs may present challenges to fleetoperators. Balancing increased capital spending with operational savings willrequire institutional flexibility. Meanwhile, addressing battery residual risk andthe impact of clustered charging could require public policy innovation.For commercial and government fleet operators seekingto incorporate EVs or PHEVs into their fleets, technologycost will be the most significant consideration. Thebatteries and charging infrastructure associated withgrid-enabled vehicles will result in increased capital costsversus a comparable internal combustion engine vehicle.While it is true that the reduced fuel and operating costsof EVs and PHEVs can generate tangible economic benefitsfor fleet operators, the return on investment associatedwith grid-enabled vehicles will be evaluated againstother productive uses of capital in most public and privateinstitutions. For the vast majority of U.S. fleet vehiclesthat are traditionally purchased and operated, corporatecompetition for capital—or agency-wide competition inthe public sector—may be a key factor constraining theuptake of GEVs.Fleet operators’ ability to lease vehicles that meettheir mission needs could alleviate capital cost issues bytreating vehicle acquisition expense more like an operatingcost. However, the open-ended lease agreementscommonly used in the United States will present fleetoperators with the bulk of the risk associated with batteryresidual value. As long as there is a lack of experience surroundingthe residual value of large-format automotivebatteries, resale values of PHEVs and EVs will be unclear.This dynamic could act to offset the capital managementbenefits associated with leasing.Finally, fleet operators’ confidence in the mission-fitof GEVs will also impact the rate of adoption. If commercialand government entities are not confident in the reliabilityof the vehicles themselves, they will be unwilling touse them. External economic factors also play a role—lowfossil fuel prices will reduce the pressure on operators tominimize cost through investments in efficiency.While these challenges will impact the demandfor PHEVs and EVs among fleet operators, the vehiclesthemselves will pose challenges to the utility grid oncethey are in service. Most importantly, clustered chargingof fleet GEVs may require upgrades to the utility distributionsystem.0Capital Expenditures vs. Operating ExpenseThere is typically intense competition for capital within a given company or institution. Thehigh capital cost requirements of today’s electric drive vehicles, particularly in applicationsheavier than a passenger automobile, will prove challenging for many fleet operators. Evenextremely large businesses may be unwilling to tie up capital to support substantial volumesof electric drive vehicles. Alternative ownership models, such as vehicle leasing, provide a keysolution to this problem, but battery residuals represent uncertainty for customers.Battery Residual ValueToday, estimating the residual value of used large-format automotive batteries is an educatedguess at best. In large part, this is simply an issue of experience. Sufficient empirical data cannotand will not be collected until the first several hundred or several thousand PHEV and EVbatteries reach the end of their useful life in a real world automotive application. Early test datasuggests that lithium-ion batteries may still possess 70 to 80 percent of their ability to storeenergy when they are no longer fit for automotive use. But this needs to be borne out by practicalexperience.Fleet Infrastructure IssuesEven for fleets that centrally park, the cost of installing charging infrastructure may be significant.With Level II charger costs averaging $2,000 per unit, the cost of installing enough chargersto support a fleet of several dozen EVs or PHEVs could be challenging. Level III charging mayoffer faster charge times and reduced unit requirements, but costs are still too high.Utility Impact of Dense Charge NetworksBringing a small fleet of EVs or PHEVs into a small charging space will bring an unusually highburden to those areas and may require upgrades to the local utility distribution network. Inparticular, transformers serving charging facilities may be insufficiently robust to support thesimultaneous charging of multiple vehicles. Utilities will need access to information and regulatorysupport to deal with these and other issues.Technology CostsBattery costs associated with the first commercially available electric drive vehicles will resultin a substantial overall cost premium. Current battery technology is descending the cost curveas volumes increase, but some fleet applications may find it difficult to realize a return oninvestment in a reasonable time period. Ultimately, fleet operators may be more willing thanpersonal-use consumers to consider multi-year paybacks, but they will still want to see returnsrelatively quickly. At the same time, high mileage fleets may feel that charging operationsimpede fleet mission.Market PerceptionPerhaps the most critical challenge affecting fleet adoption of electric drive technology will befleet adopters’ impressions about the technology and its ability to meet their operational needs.Even when a compelling economic case exists, fleet operators will need to be confident that thevehicles can accomplish the mission.

78 part two: fleet challenges fleet challengesfleet electrification roadmap 79Technology CostsElectric drive technology—HEV, PHEV, and EV—willlikely carry a significant upfront cost premium overinternal combustion engine vehicles across all vehiclesizes. While fleet operators may be willing to evaluatethe costs and savings of operating electric drive vehiclesover the entire life of the asset, it is nonetheless importantto understand the key drivers of technology costs.If targeted to the right fleet applications, the cost premiumfor electric drive vehicles can be quickly recoveredthrough operational savings. Alternative business modelsmay also play a role. In general, batteries are the key costdriver for electric drive technologies, though powertraincomponents and infrastructure are important as well.BatteriesBattery costs vary by chemistry and by the type of drivetrainfor which they are optimized. Lithium-ion batteriesoptimized for light-duty HEV applications currentlycarry an average cost of $1,500 per kWh. 1 The cost isslightly higher for HEV batteries optimized for heavierapplications. These batteries are designed to providesignificant power support to the internal combustionengine during certain driving functions like acceleration.Because HEV batteries tend to be smaller relative to thebatteries needed by PHEVs and EVs, they carry a lowercost in absolute terms.Lithium-ion batteries for PHEVs and EVs currentlyaverage $600 per kWh. These batteries must be optimizedto carry a large amount of energy to power autonomousdriving during charge-depleting mode. The amount ofenergy required for PHEV applications is somewhat lessthan for EVs, so these batteries must also balance powerand energy. The result is that PHEV batteries can be moreexpensive than EV batteries on a per kWh basis. Both EVand PHEV batteries represent large shares of total vehicle1 EC, PRTM interviews.FIGURE 2ABattery Cost by Size and Type ($/kWh)cost. For example, a 16 kWh PHEV battery can equate to29 percent of final vehicle cost, while a 24 kWh EV batterycan equate to as much as 33 percent of final vehicle cost. 2In heavier applications, this share can increase as the costof battery management components also increases.Battery LifeBattery life can be measured in terms of calendar life,but cycle life is the most commonly cited metric. Cyclingrefers to the process of discharging and recharging batteries.The cycling of lithium-ion batteries is most detrimentalto their health when they are deeply discharged; that is,when their energy is so completely depleted the remainingstate of charge of the battery is very low. Alternatively,battery health is also severely damaged when the batteryis held at a very high state of charge for long periods oftime. At a practical level, the deleterious effects of deepcycling and overcharging result in a rapid reduction ofusable battery capacity. In an electric vehicle, this wouldeffectively shorten the range of the car and ultimately cutshort the calendar life of the battery. The first generationof large-format lithium-ion batteries is targeting a cyclelife of 1,500 to 3,000 cycles. 3 At the most basic level, a batterywith a 3,000 cycle life would last the average driverabout eight years if it were fully cycled once each day.A more tangible metric for many drivers may be themileage life of their battery. Battery mileage life will varydepending on the cycle history of the battery, the way thevehicle is driven, and the drivetrain configuration. HEVbatteries, for example, will have mileage lives as high as250,000 miles or more, because they are cycled extremelynarrowly. Alternatively, EV batteries are targeting 150,000miles over the life of the battery.2 PRTM analysis.3 John Axsen et al, Batteries for Plug-in Hybrid Electric Vehicles, Goals andState of the Technology circa 2008, at 7, (2008).BATTERY TYPE BATTERY SIZE 2010 2015 2020Li-Ion HEV 8 kWh $2,000 $1,625 $1,250Li-Ion EV 25 kWh $600 $488 $325Cost DriversTo date, a lack of scale has been the most significant factorbehind high battery costs. As much as 70 percent of thecost of lithium-ion cells is related to raw materials, andcells account for 80 percent of pack costs. 4 Small improvementsin cell production costs, while difficult, can thereforehave a significant impact on pack costs. According toresearch conducted by the Department of Energy, a plantthat is capacitized to produce 10,000 battery packs peryear as opposed to 100,000 will have battery costs that are4 PRTM analysis.Nameplate or Usable Energy?approximately 60 percent to 80 percent higher. 5 In a May2009 Department of Energy review, research was presentedthat indicated using current materials and currentprocessing technology, scaling up to 500,000 units peryear would drive the cost of PHEV packs down to $363per kWh. 6 Additionally, the research indicated other possiblemanufacturing developments that could push thatprice down farther.5 Paul A. Nelson, Danilo J. Santini, and James Barnes, “FactorsDetermining the Manufacturing Costs of Lithium-Ion Batteries forPHEVs,” (May 2009).6 Barnett, Brian, et. al., “PHEV Battery Cost Assessment,” Tiax LLC,(May19, 2009), Presented at the May 2009 DOE Merit Review.When describing the cost and performance metrics of today’s large-format automotive batteries, it is important to distinguishbetween ‘nameplate’ and “usable energy.’ Nameplate figures assign a value—for example, cost or capacity—to the entire battery packand divide that figure by the maximum number of kilowatt hours of battery capacity. The nameplate cost of a battery reflects thetotal cost of the battery divided by the total number of kilowatt hours (kWh) of capacity. Therefore, a pack that costs $12,000 and has24 kWh of capacity would have nameplate battery costs of $500 per kWh.However, in practice the nameplate energy capacity of today’s batteries is not typically fully utilized. Most battery suppliers arebuilding in a reserve margin at the low- and high-end of the battery’s state of charge to avoid overheating and excessive discharge.In some cases, this reserve portion can represent up to 50 percent of a battery's nameplate capacity. In other words, a 24 kWhbattery with a 50 percent state of charge reserve margin only has 12kWh of usable energy. In this case, the $12,000 battery wouldhave usable energy costs of $1,000 per kWh.In general, nameplate capacity is the more commonly used metric by industry. Therefore, whenever battery costs are quoted in thisreport, figures reference nameplate capacity.FIGURE 2BBattery Charge for Assorted Vehicle Types100%806040200UNCHARGEABLE CAPACITYEVPHEVHEVINSUFFICIENT CHARGEDISTANCE TRAVELEDUSABLE ENERGYNAMEPLATE CAPACITY

80 part two: fleet challenges fleet challengesfleet electrification roadmap 81FIGURE 2CTypical Battery Charge Patterns by Primary xEV TypeFIGURE 2DBattery Cost Reduction ProfileEVCharged But Not UsedUsed Frequently in Charge SustainingCharged and Used (Charge Depleting)Uncharged Capacity$1,200 per kWh1,000800STAGE 1Limited CapacityLimited SuppliersPilot VolumesSTAGE 2Over-capacitySlow Volume Ramp-upNew Market EntrantsTechnical AdvancesSTAGE 3Sustainable Industrial VolumesConsolidated CompetitorsOperational ImprovementsContinued Technical AdvancesPHEV600400Used Sometimes in Charge Sustaining200HEV00 20 40 60 80 1002008200920102011201220132014201520162017201820192020Source: DOE, NREL; PRTM AnalysisSource: PRTM AnalysisAnother issue related to cost and performance is batteryutilization. In particular, some current PHEV batteriesutilize a 50 percent state-of-charge window. Thatis, a PHEV-40 battery today is designed to require only 8kWh of its 16 kWh capacity in order to travel 40 miles incharge-depleting mode. This practice comes at significantcost, driving current battery prices higher than technicalrequirements. In first-generation applications, PHEVmanufacturers made the strategic decision to add extracapacity in order to ensure end-of-life performance metricsand meet battery warranty requirements. However,advancements already achieved have reduced the needto over-specify PHEV batteries and expanded the stateof-chargewindow, thereby reducing costs for the nextgeneration of assembled battery packs.Industry DynamicsWhile battery costs are still high, general industry trendssuggest important progress is being made. Over the lastseveral years, there have been significant reductionsin large-format lithium-ion battery prices. As recentlyas 2008, EV battery prices were often quoted at $800 -$1,000 per kWh. During this early market phase, installedcapacity was limited as was the number of suppliersin the market. It is also important to note that supplychain structures contained clear cost inefficiencies. Forexample, the lithium-ion cells for the first commerciallyavailable Chevy Volt PHEVs are being manufacturedby LG Chem in South Korea. 7 They are then shipped to7 Soyoung Kim, “LG Chem to supply GM Volt batteries,” Reuters, October22, 2008.GM’s plant in Brownstown, Michigan, and installed intothe final battery packs. The structure and distributionof the lithium-ion cell industry necessitated GM’s earlyapproach. However, the company has announced plansto source a portion of Volt cells from LG Chem subsidiaryCompact Power beginning in 2012. The Compact Powerfacility is located in Holland Michigan. 8The U.S. battery industry is currently entering asecond phase. Unit prices have already come down to$600-$750 per kWh. 9 The next five years are likely to becharacterized by a highly competitive market stemmingfrom the entrance of multiple battery OEMs with excesscapacity. Competition for limited unit demand will resultin lower battery prices. After 2015, there may be a consolidationof battery suppliers. At the same time, unitdemand will ramp up to sustainable levels, generatingcost and price benefits from volume-related cost reductionsas well as from standardized manufacturing practicesand optimized supply chains.Component CostThe advanced components required in electric drivetrainsalso contribute to higher vehicle costs. Onboardchargers, power inverters, and electric motors all representsignificant portions of an electric drive vehicle’supfront costs. While relatively small with respect tobattery costs, electric drive system components carryhigher costs than their ICE counterparts, accounting8 Sam Abuelsamid, “LG Chem to build lithium ion cell factory in Holland,MI,” Autoblog.com, March 14, 2010.9 EC, PRTM interviews.for approximately one third of the total EV drivetraincost. For GEVs to reach cost parity with ICE vehicles, thecost of electric drive components will need to be reducedthrough innovation and volume production.The lack of a mature, high-volume market for electricdrivetrain components is a significant cost driver.The manufacturing processes and design technologiesfor these components are largely tailored to low-volumeindustrial applications, which results in processes andtechnologies optimized around lower engineering andmanufacturing investment rather than lower variablecost. As these components are commercialized in highervolume automotive applications, there will be significantadvances in the state of the art for component packagingand assembly.Such advancements can be seen by comparing the2004 Prius and 2007 Camry hybrid traction drive system.The inverter in the 2007 Camry is approximately30 percent smaller and 15 percent lighter while supplyinga motor with a 40 percent higher power rating. 10 Asproduction scale increases across the industry, designand manufacturing improvements will continue to drivecomparable improvements.Equally important to component cost and performanceimprovements will be an automotive-capable supplybase. In many cases, the supply chains around electricdrivetrain components are immature for the needs ofGEVs. The state of the current supply chain has beenidentified by some vehicle OEMs as a constraint to GEV10 ORLN, Evaluation of the 2007 Toyota Camry Hybrid Synergy DriveSystem, (2008).market growth. 11 For example, integration of motors andgear boxes will likely be a source of cost and size reductions.However, doing so will ultimately require a realignmentof the supply chain. Today, capability to designand manufacture integrated assemblies does not existwithin many of the traditional gear box and high powermotor suppliers. Partnerships to address this need arebeginning to emerge, such as the strategic relationshipbetween Borg Warner and UQM to develop integratedtraction drive solutions. 12 As the market continues todevelop, further strategic and equity partnerships arelikely to emerge.Charging InfrastructureIn general, charging infrastructure costs vary by the typeof technology and location in which they are installed.For the majority of fleet applications, Level I charging(110v) will be insufficient for PHEV and EV charging.The exception would be low mileage, low utilization fleetvehicles that tend to sit idle for longer periods, perhapscertain executive and federal government fleet vehicles.But these are not driving characteristics that will typicallysupport adoption of grid-enabled vehicles—at leastfrom a purely economic perspective.More commonly, fleets that have access to centralparking facilities and that have at least one somewhatlengthy opportunity to charge per day (overnight, forexample) will opt for Level II charging (220v). Level II11 EC, PRTM interviews.12 UQM Technologies, "UQM Technologies and Borg Warner Collaborateon Electric Powertrain Systems, available at http://www.uqm.com/news_article.php?aid=120.

82 part two: fleet challenges fleet challengesfleet electrification roadmap 83FIGURE 2EEV Battery Charge TimesCapital Expenditures vs. Operating Expense0VEHICLE BATTERY CAPACITY CHARGING METHOD CHARGING POWER FULL RECHARGE TIMELevel 1 1.7 kW 14.1 hrsPassenger CarClass 5 TruckClass 7 Truck24 kWh65 kWh80 kWhchargers—often referred to as electric vehicle supplyequipment—currently available in the market can bepurchased for approximately $2,000 per unit (hardwareonly), though the cost varies widely depending on theOEM and the charger’s software capacities. 13 Softwareand installation costs can add as much as several thousanddollars to the cost of a Level II charger for use in afleet depot. 14 Units installed in public will carry higherinstallation costs. In the most common configurations,each unit is capable of charging one to two vehicles at atime. 15 Figure 2E contains the associated charge times fora number of battery sizes in multiple configurations.Scaling infrastructure cost estimates based on thenumber of PHEVs or EVs owned provides useful contextfor considering the impact of charger cost on the total costof ownership for GEVs in fleet applications. Assuming aone-time installation cost for Level II chargers of $2,000,and that local electricity grid hardware and softwareupgrades represent an additional $10,000 to $15,000borne by the fleet operator, the cost to establish a centralcharging network for 10 EVs would be more than $30,000.This is a significant capital outlay that may impact thebroader decision-making process for fleet operatorsseeking to adopt grid-enabled vehicles.Level 2 3.3 kW 7.3 hrsLevel 3 50 kW 0.5 hrsLevel 1 1.7 kW 38.2 hrsLevel 2 6.6 kW 9.8 hrsLevel 3 50 kW 1.3 hrsLevel 1 1.7 kW 47.1 hrsLevel 2 12 kW 6.7 hrsLevel 3 50 kW 1.6 hrsFast ChargingLevel III charging, or DC to DC fast charging, can reducecharge times for grid-enabled vehicles to a very manageable20 to 30 minutes for a fully depleted passengervehicle battery. 16 The earliest Level III chargers to enterthe market have been designed with 50 kW of capacity,allowing them to provide 24 kWh of power in slightly lessthan 30 minutes, all thing being equal (in practice, today’slithium-ion batteries charge more rapidly at the lowerend of the state-of-charge window, with charge timesslowing as the battery’s SOC increases). 17Costs for Level III chargers have fallen by approximately25 percent over the past 12 months, but at roughly$37,500 per unit, they are still significantly more expensivethan Level II chargers. 18 In addition, the impact ofLevel III charging on automotive batteries is still beingevaluated by battery makers. The amount of heat generatedby fast charging could have deleterious effects onbattery life. 19 However, as of Q4 2010, there is very littleavailable data on the effect of DC to DC fast charging onbattery life. The benefit of the technology seems apparentfrom the driver’s perspective, but its impact on the batteryand the grid is still largely untested. In fact, a numberof major battery makers and vehicle OEMs do not factorfast charging into their business or technology plans. 20Fleet operators must constantly balance the need foraccess to capital with the need for new vehicles. In largecompanies, fleet managers must also compete with othercorporate divisions for scarce capital that must be directedtoward its most productive uses. The form of vehicle ownershipa company or institution chooses plays a significantrole in balancing these demands. Approximately 80 percentof fleet automobiles and class 1-5 trucks in operation—8.7million cars and trucks—were owned outrightby their operators as of January 1, 2010. 21 In this ownershipmodel, the capital costs of electric drive vehicles willpresent a substantial challenge in most companies andinstitutions. The remainder of cars and class 1-5 trucks inoperation were leased. 22Both ownership and leasing have advantages anddisadvantages. Company/institutional ownership canallow a fleet operator the flexibility to acquire vehiclesspecialized for its needs, particularly in the case thatthe fleet operator is large enough to make high volumeacquisitions. Some fleet operators also prefer to maintainvehicles in house with internal maintenance staff. On theother hand, outright ownership can tie up a significantamount of capital for a fleet owner. For example, a class5 utility service EV might cost as much as an additional$25,000 to $30,000 in 2015. Capital that is put towardasset acquisition in this model is unavailable for otherproductive uses.21 Bobit Publishing Company, AFB 2010.22 Id.Vehicle leasing removes the capital burden of the outrightownership model, allowing fleet operators to treatvehicle acquisition as an operational expense. Lessors thatinclude maintenance and other services in the lease price canhelp reduce labor costs for large fleet operators, and lessorsmay also be able to secure significant volume purchasing discountsfrom vehicle OEMs, lowering costs for their lessees. 23The costs and benefits of the different ownershipmodels could ultimately have an impact on the likelihoodof a fleet operator to adopt electric drive technologies.For example, the high capital cost requirements oftoday’s HEVs, PHEVs, and EVs, particularly in applicationsheavier than a passenger automobile, might not besuitable for outright ownership. Even extremely largebusinesses may be unwilling to expand capital budgetsto support substantial volumes of PHEV or EV purchasing.Individual fleet operators may also find it difficultand costly to train or hire in-house staff to maintain andservice electric drive vehicles, although the maintenancerequirements of electric drive vehicles are substantiallyless than those of ICE vehicles. 24Given higher upfront (capital) costs and lowerongoing operating expenses associated with fleet electrification,a shift towards financing/leasing (methodsof spreading the high capital expenditures over the lifeof the asset) will likely become more important for fleetoperators seeking to leverage this technology.23 EC, PRTM interviews.24 EC, PRTM interviews.FIGURE 2FSample Cashflow Impact of Vehicle Leasing vs. Ownership (CapEx vs. OpEx)$50,00040,00030,00020,000LeaseOwn10,000013 Jim Motavalli, “Home Charging for Electric Vehicle: Costs Will Vary,”New York Times, March 16, 2010.14 Id.15 See, e.g., Eric Loveday, “Siemens launches lineup of residential,commercial charging stations,” Autoblog, October 25, 2010.16 EC, PRTM interviews.17 EC, PRTM interviews.18 EC, PRTM interviews.19 EC, PRTM interviews.20 EC, PRTM interviews.-10,000-20,000Year 0Source: PRTM AnalysisYear 1Year 2Year 3Year 4Battery ReplacementYear 5Year 6

84 part two: fleet challenges fleet challengesfleet electrification roadmap 85Battery Residual ValueFIGURE 2HAuctionNet ® Hybrid v. Non-Hybrid TrendsResale value often plays an important part in the overallfinancial value of a vehicle. Depending on who owns thevehicle and the type of ownership transaction, resalevalue can have a significant impact on financial risk aswell. In both the commercial and passenger markets,entities that purchase and own a vehicle assume the fullrisk associated with resale value. If the vehicle is kept ingood condition, a high resale value can offset the totalcost of ownership significantly. If market resale value islow, or the vehicle is in poor condition, an owner mightchoose to hold onto the asset for a longer period of time,up to the full useful life of the technology.In the personal-use market, a consumer who optsfor a closed-ended lease will typically assume less riskassociated with resale value—the risk sits largely withthe lessor. The assumed resale value of a vehicle—determined by market trends and changes in demandfor different vehicle sizes and types—can have significantimpact on the total estimated value of the vehicleand therefore on monthly lease payment amounts. Ina sense, lessors try to transfer some of the resale riskback to the consumer.From a business model perspective, commercialleasing benefits significantly from the widespread useof open-ended leasing, or TRAC leasing. TRAC leasinghas a resale risk profile that is most similar to ownership(with the added benefit of not tying up capital in vehicleacquisition). At the end of the lease period, the lessee isresponsible for the net gain or loss on the resale of anFIGURE 2GBattery Lifecycle Performance and Value100% 90%806040200Source: PRTM AnalysisFinancialDepreciationindividual vehicle. As a result, commercial leasing entitiesshould be much more willing to consider leasingelectric drive vehicles, including PHEVs and EVs.However, because there is little experience with theresale value of grid-enabled vehicles, there may initiallybe a high degree of risk associated with resale valueregardless of ownership model. Commercial entitiesthat choose outright ownership—applicable to the vastmajority of fleet vehicles in the United States—could behesitant to purchase vehicles that have very high upfrontcosts and no proven resale market value. While the riskthreshold is much lower for commercial fleet lessees dueto reduced capital requirements, these customers maystill be hesitant to be responsible for an unknown resalevalue. The issue may be less of a challenge in fleets thathold onto vehicles for longer periods of time and do nottypically expect high resale value.The primary driver of uncertainty regarding theresale value of grid-enabled vehicles is the battery.A lack of practical experience in the long-term cycleperformance of large-format batteries makes it difficultto make assumptions about the ability of EVs andPHEVs to continue to perform at desired levels past acertain point. This uncertainty could be exacerbatedby a lack of transparency surrounding battery health,but most OEMs are including advanced software andother telematics that will allow for an accurate readoutof battery health when PHEVs and EVs are readyfor resale.2 4 6 8 101214161,0001,5002,0002,500 ~4,00075%TechnicalPerformance/HealthActual Residual ValueComparable NewBattery PriceYearsCycles50% Change (1/2007 = 0)403020100-10-20-301/073/075/077/079/07Source: NADA Used Car Guide, AuctionNet11/0711/08Ultimately, the resale value for these vehicles canonly be determined through market experience. Thetraditional hybrid vehicle market does offer some casefor optimism, however. Particularly during periods ofhigher fuel prices, HEVs have performed extremely wellat auction. During mid-2008, as retail fuel prices passed$4.00 per gallon, Toyota and Honda hybrid modelssaw increases in month-over-month resale value thatexceeded the increase in comparable fuel efficient ICEmodels. 25 (See Figure 2H).Obviously, the unique market conditions thatexisted in 2007 and 2008 should not necessarily beinterpreted too broadly. By the end of 2009 and into late2010, hybrid models performed worse than their peersat auction, as fuel prices have returned to much moremanageable levels. 26 One conclusion from this is thatmacroeconomic conditions can drive demand for specificvehicle technologies, and vary over time. However,the data also suggests that there is nothing inherentlyunattractive about electric drive vehicles in secondarymarkets. In fact, in the right market conditions, andwhen performance has been demonstrated, electricdrive vehicles outperform comparable ICE models.Secondary Battery MarketThe resale value of PHEVs and EVs could be significantlyenhanced by considering the residual value of thebattery itself after it has degraded beyond its usefulness1/083/085/087/089/0825 National Automobile Dealers Association, Used Car Guide IndustryUpdate, October 2010, available at http://www.nada.com/b2b/moreinfo/Guidelines_201010.pdf .26 Id.1/093/095/097/099/0911/091/103/105/107/10Honda Civic GasToyota Corolla GasHonda Civic HybridToyota Priusfor automotive applications. Possible second life applicationsinclude: backup power for homes, offices, andcell-phone towers; storage for intermittent renewableelectricity supplies; secondary vehicle markets; or separatedcomponents. The residual value of the battery willbe determined by the net residual capacity (the sum ofeach remaining cycle’s capacity) multiplied by the valueof that capacity. Residual value will likely exceed standardfinancial depreciated value but fall below the costof comparable new battery (See Figure 2G).Today, estimating the residual value of used largeformatautomotive batteries is an educated guess atbest. In large part, this is simply an issue of experience.Sufficient empirical data cannot and will not be collecteduntil the first several hundred or several thousandPHEV and EV batteries reach the end of their useful lifein a real world automotive application. Early test datasuggests that lithium-ion batteries may still possess 70to 80 percent of their potential cycle life at the pointwhere they are no longer fit for automotive use. 27 Butthis needs to be borne out by practical experience.One report produced by researchers at SandiaNational Laboratories identified as many as eight possibleoptions, including: transmission support; arearegulation and spinning reserve; load leveling/energyarbitrage/transmission deferral; renewables firming,power reliability and peak shaving; light commercialload following; distributed node telecommunicationsbackup power; and residential load-following. 28 The27 PRTM analysis.28 Sandia National Laboratories, “Technical and Economic Feasibility ofApplying Used EV Batteries in Stationary Applications,” (2003).

86 part two: fleet challenges fleet challengesfleet electrification roadmap 87analysis found that four of these applications may beeconomically and technically feasible today. 2970-80%Early test data suggests that lithium-ionbatteries may still have 70 to 80 percentof their potential cycle life remaining atthe point where they are no longer fit forautomotive use.One secondary application is currently being demonstratedat the University of Delaware’s Mid-AtlanticGrid Interactive Car Consortium (MAGICC). At theuniversity, a plug-in electric vehicle has been respondingin real-time to the PJM regulationsignal since October2007 (PJM Interconnection isa regional transmission organization).It has provided bothregulation services and importantdata about vehicle-to-gridapplications. As a follow up,PJM and the University ofDelaware will be aggregatingthree 18 kWh vehicles with a 1MW stationary battery trailerto participate in the PJM market for regulation, earningeach vehicle between $7 and $10 for the 18-20 hours theyare plugged in and contributing to the regulation storageneeds of the grid. This demonstration also has directapplication to second-life use as stationary sources ofancillary services to the grid.It is important to note that used batteries will faceentrneched competition in many potential second lifeapplications. For example, early attention for secondarybattery applications has tended to focus on the electricpower sector, either for residential back-up storage orfor firming up intemrittent renewables. Yet, today, mostgrid stabilization is achieved through spinning reservesof natural gas, a relatively inexpensive fuel that is quitefamiliar to most grid operators. In residential applications,back-up power is most commonly achieved usingnatural gas, diesel, or propane generators.Finally, a lack of transparency could significantlyimpact the market’s ability to price used lithium-ionbatteries. Individual consumers will use their vehiclesdifferently. The frequency at which batteries arecharged, the depth to which they are discharged, andthe number of quick charge occurrences will all impacttheir ability to perform after they are removed from avehicle. To address this issue, a number of battery suppliersand automakers are incorporating diagnostic andtelematic systems in vehicle batteries. Ultimately, thepossibility exists to assign each battery a performancerating so that markets can appropriately value itsremaining capacity.Despite the challenges, most experts and industryparticipants agree that used batteries will have somevalue beyond scrappage. General Motors recently estimatedthat the typical 16 kWh Chevy Volt battery packwill have “50 to 70 percent of its life left” after the expirationof GM’s 8-year, 100,000 mile lithium-ion batterypack warranty.” 30 GM has also formed a partnership withABB Group, the world’s largest provider of electricalpower grid systems, to explore the options for used largeformatautomotive batteries. 31In September 2010, Nissan Motor Corp. andSumitomo Corp. of Japan announced the establishmentof a joint venture to commercialize used automotivelithium-ion batteries. 32 Nissan has characterized theventure, called the 4R Energy Corp., as an opportunity tohelp reduce the upfront cost of lithium-ion battery packsthat power the all-electric Leaf.Fleet Infrastructure IssuesWhile fleets that have access to central parking facilitiesmay find that single-point installation leads to efficiencies,infrastructure will still represent a substantialcomponent of total cost in many cases. Charger costswill depend on the driving characteristics of a given fleet.Predictability of routes, miles driven (or hours of operationfor some fleets), and charge times will affect the type,number, mix, and location of chargers—and therefore thecost burden of charging infrastructure.For example, a fleet that drives consistently between70 and 100 miles daily, operates no more than 12 hours pervehicle per day, and parks most of its vehicles in a centraldepot would be able to charge its fleet with Level II chargersat a ratio of about one vehicle per charger. This is basedon the assumption that a battery charge for an EV willprovide 100 miles of charge-depleting range per day andtherefore would not require more than one Level II chargeper day at roughly four to six hours. This vehicle would fallinto quadrant 1 of Figure 2I. Fleet vehicles that spend thenight parked at the driver’s home, such as many sales fleetsor local law enforcement vehicles, would require a homeLevel II charger plus some charging capacity in the depot.Fleets with vehicles that drive distances in excess ofEV battery capacity or fleets that drive unpredictable distanceswill require some additional chargers in the fieldalong highly transited roadways or at particular client orsupplier locations. This would be true in general for mostPHEVs as well, as the key cost metric to be maximizedwill be miles driven on electricity. These fleets may possiblyalso require some fast charging capabilities and fallinto quadrants 2 and 3 of Figure 2I. Fleets in quadrant4 that drive more miles and have less predictable routeswill incur higher infrastructure costs in the form of morechargers in the field and would likely be in need of significantLevel III capacity for EV adoption. In practice, suchfleets might choose HEV or PHEV technology instead.An additional factor to consider is the amount oftime spent parked in a charging location. For instance, afleet with short driving distance and predictable routesas the example for quadrant 1 above, may actually requirea quadrant 4 charging infrastructure if it runs more thanone shift on a vehicle per day. There may not be enoughtime spent parked to achieve sufficient charge with aLevel II charger.Finally, commercial and government fleet facilitiesmay require both external and internal electricalupgrades to support charging infrastructure. Externalutility service transformers are typically sized based onthe type of building and the square footage. Upgradingthese transformers—and the service wires and maindisconnect size—to support special needs such as GEVcharging will result in increased costs for fleet operators.Such upgrades can also require more expensive conductors,electrical panel boards, and service wires.Upsizing the internal transformers within a largecommercial or government building, such as those thatmight serve charging stations, may require upsizing conduits(which are often encased in concrete or difficult toaccess), increasing conductor sizes, and installing largerpanel boards. It is important to note that these upgradesare easier to accomplish during initial building design asopposed to retrofit.FIGURE 2IDirectional Indicator of Charging Infrastructure Costs29 Id.30 Saqib Rahim, “General Motors Seeks Second Life for Volt Battery,”Scientific American, September 22, 2010.31 Paul Eisenstein, “Automakers mull your EV battery’s life,” MSNBC.com,September 29, 2010.32 Chang-Ran Kim, “Nissan, Sumitomo in JV to Re-use, Recycle Batteries,”Reuters, September 15, 2010Low Mileage & Battery Capacity1LOWEST COSTDepot, Home ChargerLevel II Charging Capacity3MEDIUM COSTSome Chargers in the FieldPossible Level III Capacity RequiredPredictable Operation2MEDIUM COSTSome Chargers in the FieldPossible Level III Capacity Required4HIGHEST COSTMost Chargers in the FieldLevel III Capacity LikelyUnpredictable OperationHigh Mileage & Battery Capacity

88 part two: fleet challenges fleet challenges fleet electrification roadmap 89Utility Impact of Dense Charge NetworksThe power draw of plugging in a PHEV or EV at any givenpoint in time can be the equivalent of adding at leastone new house to the grid. In certain fleet applications,larger battery and onboard charger specifications maysignificantly increase this load. Moreover, in fleet applicationsthat utilize centralized refueling configurations,the impact on the local distribution system is likely to beparticularly acute. The fact that most drivers, includingfleet operators, operate their vehicles almost exclusivelyduring the day minimizes the effects on the power generationand delivery system, because the vehicles will becharged off-peak, when there is surplus power availableon the grid. However, bringing a fleet of EVs in a smallcharging space will bring an unusually high burden tothose areas, and may require upgrades to the local distributionnetwork. In particular, transformers servingcharging facilities may be insufficiently robust to supportthe simultaneous charging of multiple vehicles. Utilitieswill need access to information and regulatory support todeal with these and other issues.GenerationSince electricity cannot be stored, the electricity grid isconstructed to meet demand during periods of highestload – typically hot summer days. In fact, to meet reliabilityrequirements, regulators have driven utilitiesto overbuild their systems with a 12-20 percent reservemargin beyond forecasted peak capacity. In addition,FIGURE 2JStylized Load Shape for 1 Day During Peak SeasonPeaking Plantsutility power requirements generally follow a patternof high demand during the mid-day hours and very lowdemand in the evening. Thus, the system usually operateswith significant spare generating capacity—particularlyat night— that can be utilized for charging plug-in electricvehicles. This feature of the power sector, which representsa low-cost way to deliver fuel to electric vehicles,has generated significant optimism among electrificationadvocates. In 2007, the Pacific Northwest NationalLaboratory (PNNL) released a study demonstrating morethan 160 million PHEVs could be powered in the UnitedStates without building a single new power plant. 33This scenario is unlikely to occur on its own, however.Most such analyses assume that a very high portion ofvehicle charging occurs off-peak. In fact, the PNNL studyassumes perfect off-peak charging. For fleet operatorsthat park vehicles overnight at home or a central depot,off-peak charging may be somewhat straightforward,though demand for charging in the early evening rightafter business hours could potentially be higher. This isespecially likely to be true if the cost of charging an EVor PHEV is the same at 6:00pm and 6:00am. Time-of-usepricing mechanisms could allow utilities to employ pricesignals to change behavior.33 Kintner-Meyer, Michael et al, “Impacts Assessment of Plug-In HybridVehicles on Electric Utilities and Regional U.S. Power Grids Part 1:Technical Analysis,” Pacific Northwest National Laboratory, January 2007.Peak Day Load ShapeTotal Installed CapacityAnalyzing GEV Impact On Power GenerationIn 2008, Oak Ridge National Laboratory released a comprehensive simulation analysis of PHEVcharging and its impact on power generation. The analysis was segmented by North AmericanElectricity Reliability Council (NERC) regions. The analysis assumed that 19.6 million PHEVs wouldbe on the road in the U.S. by 2020, and modeled the effect of multiple charging scenarios indifferent NERC regions. Charging was varied by strength of charge and also time: early eveningor night charging.Figure 2K presents the results of peak day charging by PHEVs in the East Central Area ReliabilityCoordination Agreement (ECAR) region. In this case, unconstrained early evening charging byPHEVs using a 6 kW charger surpassed the typical peak load. The implication is that in thisinstance, the utility would, in fact, need to add new generation capacity to support PHEVcharging. And while this analysis probably represents a kind of worst case scenario—6 kWvehicle chargers are not the norm for light-duty vehicles today—it highlights the need for carefulplanning in managing the interface between utilities and plug-in electric vehicles. Ultimately,utilities will need levers, including price signals and smart grid technology, to carefully deal withEV and PHEV customers in both fleet and personal-use applications.FIGURE 2KPeak Day PHEV Charging in ECAR, 2020130 GW1201101009080707/250:007/254:007/258:00Source: Oak Ridge National Laboratories7/2512:007/2516:007/2520:007/260:007/264:007/268:007/2612:007/2616:007/2620:007/270:00Base1.4 kW Night2 kW Night6 kW Night1.4 kW Evening2 kW Evening6 kW EveningValley FillingSeasonal AverageLoad ShapeFossil Generation2am4am6am8am10amRenewables & HydroNuclear12pm 2pm4pm6pm8pm10pm12amSource: Pacific Northwest National Labratory

90 part two: fleet challenges fleet challengesfleet electrification roadmap 91FIGURE 2LPG&E Pilot GEV Rate PlanFIGURE 2MNeighborhood Transformer Loading12 am7 am2 pm5 pm9 pmMondayTuesday Wednesday Thursday Friday Saturday SundayOFF PEAKSummer: 5.0–5.0¢/kWhWinter: 5.8-6.4¢/kWhPARTIAL PEAKSummer & Winter: 10.4–10.0¢/kWhPEAK (SUMMER ONLY)28.4–28.0¢/kWhPARTIAL PEAK100% of Transformers80604020Over 120%Rated100%–120% Rated0–100% Rated12 amSummer: May 1–October 31 // Winter: November 1–April 30PARTIAL PEAKOFF PEAK025kVA37kVA50kVA75kVA100kVATransformer TypeSource: PG&ESource: Arindam Maitra, EPRI, Effects of Electrification on the Electricity Grid, 2009There is already precedent for this approach emergingin the consumer space. In a pilot program accessibleto all consumers, Detroit Edison (DTE Energy)recently announced a time-of-use GEV rate plan thatsets off-peak electricity rates at 7.6 cents per kWh. 34DTE defines off-peak as between 11:00pm and 9:00amMonday through Friday, and anytime on weekends. Theon-peak rate for EV and PHEV charging is set at 18.2cents per kWh. By comparison, the standard residentialrate in DTE’s service territory is 12.3 cents per kWh. (Therate plan was approved by the Michigan Public ServicesCommission in August 2010.) Ultimately, off-peak ratesmay be both economically advantageous and convenientto access for fleets that park overnight.Pacific Gas and Electric has also introduced a tieredrate plan for GEVs. The “Experimental Time-of-UseLow Emission Vehicle rate” is mandatory for drivers ofgrid-enabled vehicles who are on a residential electricityrate and plan to charge at home. PG&E’s rate plan is alsodesigned to deal with issues unique to its service territory.During the summer, when air conditioning loads canoccupy a significant share of neighborhood transformercapacity, peak vehicle charging rates are 28 cents perkWh. 35 Off-peak rates for vehicle charging are as low as 5.0cents per kWh.34 DTE Energy, Plug-in Electric Vehicle Rates, available at http://www.dteenergy.com/residentialCustomers/productsPrograms/electricVehicles/pevRates.html, last accessed November 1, 2010.35 PG&E, Electric Vehicle Charging Rate and Economics, available athttp://www.pge.com/myhome/environment/pge/electricvehicles/fuelrates/index.shtml, last accessed November 1, 2010.DistributionIn the near term, particularly when considering fleetapplications, power generation issues are not likely tobe an urgent problem. More significant power generationchallenges could be associated with deployment ofmillions of EVs and PHEVs, but this will take time. (Ofcourse, it will be critical to have necessary smart grid andother load management technologies in place in advanceto avoid the most damaging aspects of unmitigated chargingby a large number of grid-enabled vehicles).However, preparing the local distribution infrastructurefor fleet plug-in electric vehicle charging may presenta much more immediate and pressing challenge. WhileGEVs are plugged in and charging, they represent a significantpower draw. A Level II charger operating at 220 voltson a 15 amp circuit is expected to draw 3.3 kilowatts ofpower, a load that is similar to the average load in a typicalU.S. home. In larger vehicle applications, the power drawcan increase substantially. Medium-duty plug-in electrictrucks may require chargers in excess of 8 kW. For heavydutyGEVs, the charger could easily exceed 10 kW. In orderto support the reliability of the electrical grid, utilities willhave to take steps to ensure that they can deliver powerover the last few feet of power lines from the transformerto a fleet depot or other charging facility (including residentialgarages in the case of fleet vehicles that returnhome each night with employees in sales or local governmententities). In the case of several fleet vehicles parkedat a central depot, the issue will be most acute.One recent analysis from the Electric Power ResearchInstitute (EPRI) examined the impact of PHEV chargingon neighborhood transformers of varying capacity. 36 TheEPRI analysis concluded that plugging in just three PHEVsto charge at 240 volts overloaded 114 of 314 transformersexamined during peak hours and 68 of 314 transformersduring off-peak hours. Smaller transformers showed thehighest level of vulnerability. The analysis reported thatplugging in a single PHEV to charge at 240V would havecaused 68 percent of the 25kVA transformers examined toexceed their emergency rating. Pure electric vehicles, withtheir bigger batteries, may present an even more significantissue, and clustered charging—such as that likely to beassociated with fleet depots—will require careful planning.Most utility managers are confident that these issuescan easily be addressed. 37 Commercial and industrial entitiesmay be better equipped to communicate with utilitiesthan typical residential customers. Moreover, the likelyimpact of transformer overloads in many cases is simplyan increased depreciation of the useful life of the transformer.Nonetheless, system-wide costs can be minimizedover time if the strain placed on transformers is reduced.Once again, technology that enables managed (staggered)charging of vehicles during off-peak hours can help moderatethe impact on the grid and maximize system efficiency.Preparing City GovernmentsAs PHEVs and EVs are integrated into fleet and utilityinfrastructure, local building codes and regulatory36 Arindam Maitra, “Effects of transportation electrification on theelectricity grid,” EPRI (2009).37 Issues with neighborhood level transformers are likely to be lesspronounced in areas with large air conditioning loads, especially ifvehicles are charged at night when air conditioning loads typicallylighten relative to late afternoon loads.statutes will be an added obstacle in many cases. Operatorsthat choose to adopt PHEVs, EVs, and their requisitecharging infrastructure will find themselves navigatinga myriad of processes to acquire the necessary permitsfor successful installation. It would be typical to expectthe process of installing a charging station to begin withthe request for a permit from the local city government.Local research, which could include inspection of a homeor depot’s electric connection and wiring, might also berequired. Once installed, inspection by a local regulatorcould be required before use of the charger.In the current environment, fleet operators will findthat the process of ensuring regulatory compliance differssignificantly in various operating locations. In fact,large fleets that operate in multiple regions throughoutthe nation can expect contradictory regulations acrossregions. Developing a comprehensive set of streamlinedbest practices for infrastructure permitting and inspectionwill help to make this process more uniform for boththe end user and resource-constrained local governments.(These guidelines could be extended to includepublic charging infrastructure; however, the guidelineswould need to be more of a general nature as these installationsmay be much less uniform.)Ultimately, fleet operators that want to deploy EVsand PHEVs will need to work collaboratively with theirlocal utilities as well as state and local government officesin order to ensure regulatory compliance. In many cases,this could be relatively straightforward as larger commercialand industrial enterprises may have a high level ofcommunication with utility and government officials.

92 part two: fleet challenges fleet challengesfleet electrification roadmap 93Market PerceptionDespite the potential economic benefits of electricdrive technologies, the most important factor determiningtheir uptake in fleet applications may be theway the vehicles are perceived by fleet managers. Whiletotal cost of ownership is consistently ranked as themost important factor during vehicle acquisition—anotion that should benefit electric drive vehicles—other factors clearly play an important role. Moreover,an analysis of total cost of ownership requires certainassumptions that will vary by operator, includingassessments of future fuel and battery costs, technologicaladvancement, and macroeconomic conditions.Each of these factors can dramatically impact the totalcost of ownership, and yet each is somewhat uncertain,requiring fleet managers to make informed guesses thatare ultimately subjective.Assessing Operational Cost SavingsFuel price volatility continues to rank among the mostsignificant factors hindering adoption of the full range ofalternatives to petroleum. Sales of gasoline hybrid electricvehicles in the consumer market provide a case inpoint. The strongest period of growth in year-over-yearhybrid sales occurred between 2004 and 2007, a periodduring which the average price of unleaded regular gasolinein the United States increased by nearly 50 percent,from $1.88 to $2.80/gallon. 3838 DOE, AER 2009, Table 5.24.FIGURE 2NOil Prices and HEV Sales, U.S. (Historical)400 Thousand HEV Units35030025020015010050019992000Source: DOE, EERE2001200220032004Annual US HybridVehicle Sales2005Average Crude Oil Prices(2008 Dollars)200620072008$/Barrel 1202009100806040200In 2008, even as gasoline prices soared, recessionaryconditions drove sales of all vehicles downward. Yethybrids outperformed the broader auto market, withyear-over-year sales falling by just 11 percent compared to18 percent for autos more broadly. 39 Even in 2009, as oilprices fell, hybrid sales proved somewhat resilient, fallingby just 7 percent compared to 22 percent for the broaderauto market. 40But a different story has emerged in 2010. Withgasoline prices now steady at $2.70 per gallon, hybridsales have continued to fall, while broader auto sales haverebounded. Through the first three quarters of the year,aggregate hybrids sales are down by 10 percent comparedto 2009, while broader auto sales have rebounded and areset to increase by nearly 10 percent. 41 More importantly,the personal-use auto sales mix is increasingly shiftingback to heavier classes: sales of midsize and large SUVsare up 33.3 and 13.7 percent in 2010 compared to thefirst three quarters of 2009. 42 The market has adjustedto gasoline prices above $2.50/gallon and is seeminglyunconvinced that the high prices of 2008 will return.While commercial fleet operators continue todownsize vehicles where possible, most fleet managers39 EC analysis based on data from DOE, EERE; Motor Intelligence.40 Id.41 Hybrid cars.com, “September 2010 Dashboard: Hybrid Sales Slide, WhileClean Diesel Continues Growth,” October 5, 2010.42 WSJ Online, Auto Markets Data Center, http://online.wsj.com/mdc/public/page/2_3022-autosales.html.FIGURE 2OVehicle Mileage at Auction100 Thousand90807060504020002001Source: Manheim Consulting2002200320042005MinivansSUVsIntermediateCarsCompactCarsdo not explicitly engage in fuel price hedging, and theydo not view electric drive vehicles as a way to offset thehigher—and potentially volatile—costs of petroleum fuel.Assessments about future petroleum prices are simplytoo complex and lacking in transparency.Maintenance CostsIt is also not entirely clear that fleet managers will bewilling to factor maintenance savings associated withelectric drive vehicles into their acquisition strategies.Vehicle OEMs report that while these savings are realand significant, fleet managers will be unlikely to factorthem into their decision process. 43 There may be severalreasons for this.First, some fleet vehicles are relinquished ahead ofcritical maintenance milestones. For example, the averagemileage of compact cars entering auction after fleetuse ranged from 40,000 to 65,000 miles between 2000and 2005. 44 At the same time, the maintenance costsas a share of operating costs for these vehicles tend tosharply increase after 50,000 miles. In other words,just as maintenance costs begin to rise, fleet managerstypically remarket the vehicles. Of course, a portion ofthe postponed maintenance needs may be factored into the resale value of the vehicle as a lower price, butthe urgency of upcoming repairs may be difficult formarket participants to accurately assess. Nonetheless, afleet operator in this instance might be less attracted tothe relatively lower maintenance costs of electric drivevehicles, at least until the resale value of EVs and PHEVsis much clearer than is currently the case.Second, fleet managers who service their vehiclesvia internal maintenance staff may be concerned thatadditional training of existing workers—or hiring of new,specialized workers—will be required to support electricdrive vehicles. The transaction costs associated with suchan upgrade may present fleet managers with an additionaland unwanted burden.Expected ValueA final point on cost perception is the rate at which fleetmanagers expect to recoup investments in efficiency.While some fleet managers may be more willing to focuson the bottom line and accept longer paybacks thantypical consumers, competition for scarce capital placesa practical limit on this approach. According to recentsurvey data, the average fleet operator would expect to43 EC, PRTM interviews.44 Bobit Publishing Company, AFB 2010.recoup an EV investment within approximately fouryears. 45 As the survey notes, “any payback time that is longerthan 4 years may require a lower discount rate thanmany fleet managers would be willing to use.” 46Corporate environmental and social responsibilityinitiatives may expand this period, but the numberof vehicles that will be purchased based on such metricsalone seems likely to be low. Fleet operators mustultimately be presented with a compelling economicproposition in order to seriously consider investing in analternative technology.Shifting Institutional NormsIncorporating EVs and PHEVs into a fleet can raiseimportant hurdles in terms of organizational processesfor both public and private sector institutions. EVs andPHEVs will require changes to acquisitions as well asoperational processes that are engrained in most institutions.In many cases, uptake of these technologies willbe hindered by unwillingness to increase flexibility andadjust common current practices.In terms of acquisitions strategy, a number of fleetoperators report that their institution’s capital budgetfor acquiring vehicles is managed separately from theoperational budget. 47 Moreover, in some cases, these budgetsare actually managed by different corporate businessunits. 48 This presents an obvious difficulty: electricdrive technology will significantly stress the acquisitionmanager’s budget while he reaps none of the benefits oflower operating costs over time. In cases where vehiclesare leased, this issue may be less of an obstacle. But forthe 80 percent of fleet vehicles that are purchased andowned in the traditional model, organizational changewill be needed.45 Frost and Sullivan, “Strategic Analysis of the North American andEuropean Electric Truck, Van and Bus Markets” (2010).46 Id.47 EC, PRTM interviews.48 EC, PRTM interviews.

ECOSYSTEM TARGET SOLAR WIND NUCLEAR NATURAL PHASE 1 PHASE 2 NATIONALET SOLAR WIND NUCLEAR NATURAL PHASE 1 PHASE 2 NATIONAL PUBLICGASIMPERATIVEGASIMPERATIVE POLICYPUBLIC DEMONSTRATIONDEMONSTRATION BATTERYPOLICY PROJECTPROJECT & VEHICLEBATTERYCOST OF& VEHICLEOWNERSHIPCOST OF CONCLUSION COAL GROCERYCONCLUSION COAL GROCERYOWNERSHIPSTORESTOREMARKETMARKETVISIONVISIONECONOMICS CASE STUDIES A-D CAR FLEET BUS FLEET ENV. POLICY BUSINESS BUSINESSECONOMICS CASE STUDIES A-D CAR FLEET BUS FLEET ENV. POLICY BUSINESS BUSINESSOPPORTUNITIES OPPORTUNITIESOPPORTUNITIES OPPORTUNITIESMILES TRAVELEDMILES TRAVELEDRNATURALGASPHASE 1 PHASE 2 NATIONALIMPERATIVEPART THREEPUBLICPOLICYDEMONSTRATION BATTERY1 2PROJECT & VEHICLE1 2COST OFOWNERSHIPCONCLUSION COAL GROCERYSTOREMARKETVISIONECONOMICS CASE STUDIES A-D CAR FLEET BUS FLEET ENV. POLICY BUSINESSOPPORTUNITIESBUSINESSOPPORTUNITIESMILES TRAVELEDIdentifying Fleet1 2OpportunitiesMARKETVISIONECONOMICS CASE STUDIES A-D CAR FLEET BUS FLEET ENV. POLICY BUSINESSOPPORTUNITIESBUSINESSOPPORTUNITIESMILES TRAVELED3.1 OVERVIEW3.2 MODELING ASSUMPTIONS3.3 KEY FINDINGS3.4 CASE STUDIES3.5 FLEET ADOPTION OF GEVS IN 2015FLEET ELECTRIFICATION Florida Power and Light Company'shybrid bucket truck and electric plug-in car are shown at the groundbreaking ceremony for FPL's Martin Next Generation Solar EnergyCenter in Indiantown, Florida.

96 part three: identifying fleet opportunitiesfleet electrification roadmap 97ABSTRACTPart One of this Roadmap outlined how and why commercialand government fleet owners could represent an importantearly market segment for grid-enabled vehicles. Part Twodiscussed several challenges that may need to be addressedthrough policy support and adjustments to the operationalnorms of fleet operators. Part Three presents the results oftotal cost modeling conducted for fleets in various industriesand sectors of the U.S. economy. The analysis was performedfor HEVs, PHEV-40s, and EV-100s.The analysis finds that grid-enabled vehicles can providesignificant economic benefits to fleet operators. Thesebenefits will be maximized if GEVs are targeted to fleetapplications whose operational attributes facilitate themost efficient allocation of battery capacity and charginginfrastructure. Optimizing investment in upfront costs allowsfleet operators to benefit from the reduced operating costsof plug-in hybrid electric vehicles and electric vehicles inthe near-term without sacrificing mission in most cases.Targeted policy support has an additional positive impact.CHAPTER 3.1OverviewThe Fleet Electrification Roadmap utilizes total lifecycle cost modeling to comparethe economic competitiveness of various drivetrain configurations across fleetsegments. Comparisons were facilitated through the use of segment clusters thataggregate vehicles across industries with similar attributes.In order to better understand the business, economic,and cost-saving opportunities presented by electrificationof vehicle fleets, an economic model was developedfor the Fleet Electrification Roadmap. The model comparesthe total cost of ownership of sample vehiclesby class and industry for a given acquisition year.Technologies considered were ICE, HEV, PHEV-40, andEV-100. The purpose of constructing the model was toidentify those fleet segments that will realize positiveeconomic returns through use of electric drive vehiclesin the near term, making them likely adopters of electricdrive technology. Combined with an assessment ofthe relative ease or difficulty of switching to EVs andPHEVs for a given industry, total cost modeling was alsoused to create scenarios for future vehicle technologypenetration rates.FIGURE 3AVIO by Industry (2009)4% Federal28% Short-HaulDeliveryState & Local 23%Fleets 5–14 6%1% Taxi3% Other3% Utility& TelecomTo conduct the modeling analysis, vehicle segmentswith similar physical and operational attributes across thevarious industries were first identified. Establishing thesesegment clusters helped to create a manageable data setof vehicles grouped together according to a standardizedset of shared attributes. The key physical attribute used inthis analysis was DOT vehicle size/weight classification.The primary operational attributes used included:››fuel efficiency;››average miles traveled per day;››average utilization rate;››average number of stops per day;››average length of stops/idles;››level of route predictability; and››refueling behaviorFIGURE 3BVIO by Class (2009)Auto 29%Class 1-2Class 3Class 4Class 51%2%9%26%Rental 10%Class 64%Delivery13% Long-HaulSales & 11%ServiceClass 7Class 8Buses5%8%16%Source: PRTM Analysis

98 part three: identifying fleet opportunities overviewfleet electrification roadmap 99FIGURE 3CVehicle Segments for TCO AnalysisCarCommercial VehicleA-BC-DE-F1234567802 1Rental — 1.2MGov. Cars — 1.7MLow Mileage,Medium PredictableRouting, LongerPark TimesLight Gov. — 1.7M4A Low Mileage,Medium Predictable4B Routing,Longer Park Times6Source: PRTM AnalysisCASE STUDYMedium Utility, Gov — 0.3MLow Mileage, Med. PredictableRouting, Longer Park Times208Sales, Service, Utility Cars — 0.7MMedium Mileage,Medium PredictableRouting, LongerPark TimesCASE STUDY3A3BLight Sales, Service, Utility, Short-Haul Delivery — 2.6MMedium Mileage,Predictable Routing,Longer Park Times405Heavy Utility, Gov. — 0.5MLow Mileage,Medium Predictable Routing,Longer Park TimesCASE STUDYMedium Short-Haul Delivery, Sales, Service— 0.8M Medium Mileage, PredictableRouting, Longer Park TimesCASE STUDY60780Taxi — 0.2M10 Medium Mileage, 9 High Mileage,UnpredictableUnpredictable Routing,Routing, MediumShort Park TimesPark TimesHeavy Short-Haul Delivery — 1.4MMedium Mileage,Predictable Routing,Longer Park TimesIn addition to facilitating the creation of somewhathomogenous vehicle segments, operational characteristicswere also used as modeling inputs. For example,average daily miles traveled tend to be roughly similarwithin each segment while also providing a key metric formodeling the value of fuel savings over time. In general,higher mileage segments will benefit from the reducedoperating costs of electric drive vehicles. Refuelingbehavior has a similar impact: vehicle segments identifiedin this analysis tend to have roughly similar refuelingneeds, which serve as the key driver of infrastructurecosts for EVs and PHEVs.Wherever possible, operational data used in thisanalysis was based on real-world data acquired fromindustry publications, data aggregators, and interviewswith actual fleet operators. The segments identified forthis analysis are presented in Figure 3C, which sorts themby vehicle weight and average miles traveled per day.In additional to the operational attributes of individualvehicle fleets, the total cost modeling was basedon a number of market- and industry-wide costs anddynamics. These include: Upfront Vehicle Cost,Infrastructure Cost (charging), Petroleum Prices,Electricity Prices, Maintenance Cost, Vehicle andBattery Residual Value, and others.10012014011Heavy, Long-Haul Delivery, Sales,Service — 2.5MHigh Mileage,Medium Predictable Routing,Medium Park Times160 Average Miles per Day 200+Chapter 3.2 reviews the key modeling assumptionsin detail. Chapter 3.3 presents the central summary-levelfindings of the modeling exercise across all segments.Chapter 3.4 contains four detailed case studies of TCOoutputs for segments 1, 3a, 4a, and 5. Chapter 3.5 presentsan analysis of the adoption potential of commercial andgovernment fleet operators in the period 2010 to 2015.As a final note, this analysis does not consider theapplicability or cost-effectiveness of other alternativefuel technologies in any fleet segment. However, somebasic observations can be inferred from the fleet segmentationanalysis and the operational attributes of certainfleet segments.In particular, the uptake of electric drive technology—certainlyPHEVs and EVs—will be extremely limitedin some segments, such as long-haul delivery (segment11). The utilization rates of these vehicles coupled withthe type of routes traveled (relatively high percentageof highway miles) makes them unlikely near-term candidatesfor electrification. Other liquid fuel alternatives,such as biofuels derived from algae, might be potentialoptions. Based on cost and technology, natural gas mayalso be a candidate to replace petroleum in long-hauldelivery fleets.CHAPTER 3.2Modeling AssumptionsIn order to isolate the effects of fleet optimization and public policy, multiplescenarios were analyzed. Standard assumptions regarding the pace of technologicalchange in the auto industry as well as mainstream assessments of energy priceswere also incorporated.The model used for this analysis is a total cost of ownershipmodel. As discussed in Part One of this Roadmap,total cost of ownership is a quantifiable and objectivemeasure that constitutes one of the principal purchasingcriteria for fleet operators. Fleet operators trackand maintain historic operating cost data, which providesa rich data set for use in comparing operationaland other norms. In general, fleet operators are betterequipped to consider the total economic implicationsof transitioning to electric drive vehicles than individualconsumers.One of the challenges of comparing internal combustionengine vehicles to their electric alternatives isthat there is a fundamental shift in costs from operatingexpenses (in the form of higher fuel and maintenancecost) to capital expenses (in the form of a more expensivepowertrain). The result is that various costs are experiencedat different points in the lifecycle of ICE vehiclesFIGURE 3DCost Elementsversus electric drive vehicles. Therefore, this analysiscompares the net present value of all of the costs incurredduring the ownership lifecycle of a given vehicle. Theitems considered in the total cost of ownership calculationare made up of: Upfront (Capital) Costs to purchasethe vehicle, battery, and charging infrastructure;Operating Costs that include fuel and/or energy, maintenance,repair and financing costs; and Residual Valueof the vehicle (and battery where applicable).Upfront (Capital) CostsUpfront costs—or capital costs—include the cost of purchasingor leasing a vehicle. For grid-enabled vehicles,upfront costs also include the cost of purchasing or leasingthe charging infrastructure required to support thevehicle. Finally, upfront costs are offset by the remarketedvalue of the vehicle and/or the residual value ofthe battery.CATEGORY COST ELEMENTS ICE HEV PHEV-40 EVCapitalOpexVehicle (Powertrain exluding Battery)BatteryCharger (Includes Installation and Software)Residual Value Known Some Data UntestedFuel/ElectricityMaintenance/Repairs (Includes Oil, Tires, (-) Warranty)Note: High GVWR Class vehicles have reported significant increases in maintenance costs in early productionversions of xEVs due to both the nascent state of technology and the learning curves for repair technicians.Source: PRTM AnalysisLowMedHigh

100 part three: identifying fleet opportunities modeling assumptionsfleet electrification roadmap 101Base ICE VehiclesUpfront costs for the vehicles considered in this analysisvary by powertrain. In order to arrive at an estimate ofvehicle capital cost, a sample internal combustion enginevehicle available in the market today was selected foreach vehicle class. In general, the sample vehicles wereamong the top five models purchased by fleet operatorsin each class. For each sample vehicle, the individualdrivetrain components were then assigned a cost valuebased on current market dynamics. ICE powertraincomponents include the engine, transmission, exhaust,fuel, and powertrain electronics. The base vehicle cost foreach class then is calculated as the vehicle’s manufacturersuggested retail price (MSRP) minus all of the ICE powertraincomponents.The cost of ICE drivetrain components used in thisanalysis increases at a 10-year compound average annualgrowth rate (CAGR) of 3.7 percent while electric drivetraincomponents actually decrease at a 4.7 percent CAGR.Even though auto manufacturers are continuously reducingtheir direct materials, meeting increasingly stringentfuel-economy and emissions standards will likely continueto support rising ICE component costs.Electric Drive VehiclesThe upfront cost of the various electric drive technologiesincludes additional components, such as some form ofbattery and electric motor. Depending on the drivetrainconfiguration—HEV, PHEV, or EV—the size of the batteryand motor differ significantly. At the same time, each ofthe electric drive platforms benefits from downsizing oreliminating traditional ICE powertrain components tovarying degrees. For example, a PHEV may use a smallerengine in combination with a battery and electric motor,whereas an EV does not include an engine, fuel tank, ormany other ICE components at all. In terms of cost, electricpowertrain components tend to be more expensivethan their ICE equivalents. Electric components includean electric motor, inverter, on-board charger, singlespeedtransmission, and powertrain electronics.Increasing volumes of electric drive vehicles willdrive costs of electric components down—at least over thetimeframe considered in this analysis. That is, economiesof scale achieved in the early stages of PHEV and EV productionwill be significant factors, and falling costs will be adirect result of starting from a small unit volume base. Thisanalysis assumes the cost profiles displayed in Figure 3G.Charging InfrastructureThe charging infrastructure associated with grid-enabledvehicles can represent a significant portion of the upfrontcosts. On a per-vehicle basis, charger costs will often bemuch less than the combined cost of the necessary electricdrivetrain components; however a fleet operator seeking toelectrify multiple vehicles may need to invest in multiplechargers. Moreover, certain fleet applications will requiremultiple chargers per vehicle—some at the depot and somein public—or may require use of fast chargers.This analysis considers five possible infrastructureconfigurations as detailed in Figure 3F. Individual configurationsare essentially a function of the operational needsof the vehicles themselves, and each configuration is characterizedby a different ratio of charging in public versus atthe depot. Each fleet application considered in the analysiswas assigned a specific infrastructure configuration, and acost was assigned based on the cost of the associated chargers,their installation, and any additional IT capabilitiesrequired to manage and optimize vehicle charging.Operating CostsOperating costs are those costs associated with fueling andmaintaining a given vehicle over its useful life. Operatingcosts may vary significantly based on the cost of fuel (gasoline,diesel, or electricity), the efficiency with which theenergy is used, and the way the vehicle is operated.Energy PricesEnergy prices for this analysis were taken from the U.S.Department of Energy’s Annual Energy Outlook 2010. Fortraditional internal combustion engine vehicles, HEVs,and PHEVs in charge-sustaining mode, the relevantenergy prices are either gasoline or diesel fuel (dependingon vehicle class). For EVs and PHEVs in charge-depletingmode, the relevant energy price is electricity. DependingFIGURE 3FCharging Configurationson the applicable fleet industry segment, vehicles maybe charged at residential, commercial, or industrial electricityrates. As discussed in Part One of this Roadmap,commercial and industrial consumers benefit from significantlyreduced electricity prices.FIGURE 3GEvolution of Vehicle ComponentsSINGLE DEPOT REGULAR DELIVERY MULTIPLE SITES COMPANY CAR COMMUTER SALES FORCE160%14012010080604020020102011Source: PRTM Analysis20122013ICE Components20142015xEV Components20162017201820192020+3.7 %10 Year CAGR-4.7 %10 Year CAGRFIGURE 3EKey Components In ScopeBase VehicleBase VehicleCapital CostICE PowertrainComponentsxEV PowertrainComponents» Reference vehicle MSRP minus ICE powertrain components» Factory invoice factor» Fleet volume discounts» Battery ($/kWh, CD range efficiency)» Single speed transmission costs» Electric motor costs» Other xEV components (inverter, charger, powertrain electronics)» Engine» Transmission» Other ICE components (exhaust, fuel, powertrain electronics systems)» Mandated fuel efficiency improvementsDescriptionKey ChallengesCharacterized By» Single home lot for allfleet vehicles» Fleet has short, regular,and defined routeseliminating need forextraneous charging» Fleet has regular,defined routes» Fleet has specific dwellpoints ideal for topping off» Range anxiety » Changes in route structure» Intermittent events» Single large bank of chargestations at central depot» Primary bank of chargestations at central depot» Extended infrastructureof public & fast chargingstations» Fleet has multiplelocations with nocentral depot» Charger utilizationvs. investment» Multiple public chargersper location» Fleet has primary daytimelocation» Fleet is parked overnightat home» Investment in at-willemployees‘ residence» Charger utilization vs.investment» Primary bank of chargestations at primarydaytime lot» Individual home chargersat private residences» Fleet has multiplelocations with no centraldepot» Fleet is parked overnightat home» Complexity» Investment in at-willemployees‘ residence» Multiple public chargersper location» Individual home chargersat private residences» Sporadic fast chargingSource: PRTM AnalysisCentral Charger Depot Bank Public Charger Fast Charger Home Charger Service Area Charge-Depleting Range

102 part three: identifying fleet opportunities modeling assumptionsfleet electrification roadmap 103FIGURE 3HRetail Fossil Fuel Prices (2010-2020)FIGURE 3IRetail Electricity Prices (2010-2020)FIGURE 3JPHEV Charge-Depleting Range Utility Factor (%)$4.50 Nominal Fuel Price per Gallon4.00$0.140.12Nominal Price per kWhResidentialPHEV CD Utility Range Factor100%Gov. CarsLight Gov.MediumUtility, Gov.3.50Gas3.00Diesel0.100.080.060.04CommercialIndustrial806040Sales,ServiceUtility CarsLight Sales,Service, Utility,Short HaulMediumShort Haul,Sales/ServiceHeavyShort HaulHeavyUtility, Gov.TaxiRental Fleet,Car Sharing2.500.02202.00201020112012201320142015201620172018201920200201020112012201320142015201620172018201920200Source: DOE, EIA, AEO 2010Source: PRTM AnalysisIt is important to note that DOE scenarios do notaccount for the considerable price volatility of retailpetroleum fuels. National average gasoline and dieselprices today are at $2.77 and $3.07 per gallon respectively.As recently as 2008, they were each as muchas 30 to 50 percent more expensive. 1,2 Given currentglobal oil market dynamics, it would be reasonable toexpect the fuel component of the ICE vehicle equationto fluctuate considerably more than DOE’s scenariosindicate—though that has not been incorporated intothe reference case in this analysis. Still, the businessbenefit from electric vehicles will depend considerablyon how quickly and how much the price of these fuelsincreases. (For an analysis of the sensitivity of ownershipcost to fuel fluctuations, see Chapter 3.3.)The principal costs associated with electricityprices involve generation and transmission assets, notfuel, so electricity prices do not fluctuate considerablyover the forecast period. Efforts to regulate greenhousegas emissions from the electric power sector could representone potential upside risk to long-term electricityprices. However, these price increases are likely tobe phased in slowly, and most of the current proposalsbeing considered by Congress would not significantlyimpact electricity prices before 2020. 31 DOE, EIA, Petroleum Navigator, Weekly Retail Gasoline and DieselPrices (October 25, 2010)2 DOE, AER 2009, Table 5.243 See, e.g., DOE, EIA, Energy Market and Economic Impacts of H.R. 2454,the American Clean Energy and Security Act of 2009, available online athttp://www.eia.doe.gov/oiaf/1605/climate.htmlEnergy Consumption RatesThe efficiency with which a given vehicle consumesenergy has a significant impact on its lifecycle operationalcosts. For internal combustion engine vehicles—as wellas HEVs and PHEVs in charge-sustaining mode—energyefficiency is measured in terms of miles traveled pergallon of fuel consumed (mpg). For EVs and PHEVs incharge-depleting mode, energy efficiency is measured interms of miles traveled per kWh consumed (mi/kWh).Wherever possible, the energy consumption ratesfor internal combustion engine vehicles in this analysiswere calculated using observed fuel efficiency ratesas opposed to the sticker rate or fuel-economy ratingassociated with EPA driving cycles. These fuel consumptionrates were acquired using real world data providedby fleet operators, industry publications, automotiveintelligence companies, and other sources. In the caseof select segments with high idling applications, an additionalengine idling efficiency loss factor of a maximumof 10 percent was applied. HEVs were assumed to providefuel efficiency gains estimated at 30 percent over ICEfuel efficiency ratings.For EVs and PHEVs in charge-depleting mode, thereis not yet a rich data set that allows for use of real worlddata. Over the period 2010 to 2020, this analysis wasbased on the charge-depleting efficiency levels displayedin Figure 3K.FIGURE 3KElectric Motor EfficiencyCD RANGE EFFICIENCYMI/KWHPassenger Car 4.0Class 1-2 3.1Class 3 2.0Class 4-5 1.5Class 6-7 1.2Source: PRTM AnalysisFor EVs, mi/kWh applies to all miles traveled. Thatis, an EV can only travel in charge-depleting mode. ForPHEVs, however, some portion of miles traveled will bepowered by electricity and some will be fueled by petroleumfuels. Each mode has a different efficiency profileas well as exposure to different prices. Therefore, thisanalysis assumed the PHEV utility factors displayed inFigure 3J, which vary by vehicle weight class. A utility factoris simply the percent of total miles traveled that arepowered by electricity (charge-depleting miles dividedby total miles). PHEV utility factors have a significantimpact on total cost and will vary depending on usage patternsand access to charging opportunities.Maintenance and RepairsMaintenance and repair expenses for internal combustionengine vehicles can include motor oil, tires, scheduledmaintenance, and warranty recovery (a negative expense).The proportion of each cost changes over time. Motoroil, tire replacement and other scheduled maintenanceexpenses remain relatively steady during the life of thevehicle. However, other repairs related to wear and tearand component replacement may increase over the lifeof the vehicle. Oil and tire costs are projected to growslightly due to engine and chassis wear. Repair costs areprojected to grow over the first 10 years of vehicle life byan annual rate of 22 percent. The bulk of that cost is loggedin the later years, after significant mileage milestones areeclipsed. In general, medium- and heavy-duty trucks costmore per mile to maintain than autos and class 1-2 trucks.Electric powertrains bring a reduction in scheduledmaintenance and repairs compared to traditional ICEvehicles. Internal combustion engines are comprisedof thousands of moving parts that degrade over time.Electric motors are much simpler and will not require thesame amount of maintenance and repair. Maintenanceand repair savings from electrification were calculatedby estimating ICE maintenance and repair costs and thenapplying a savings factor that varies based on drivetrainconfiguration. Figure 3M displays the maintenance discountfactors associated with HEV, PHEV and EV drivetrains.(Note: EVs offer the most significant maintenancesavings, as the design is the most technically simple.The savings associated with HEVs can vary somewhatdepending on duty cycle. Data used in this report is basedon industry expectations.)

104 part three: identifying fleet opportunities modeling assumptionsfleet electrification roadmap 105FIGURE 3LMaintenance and Repair Costs - ICE VehiclesFIGURE 3NVehicle Depreciation Schedule$0.70 Per Mile100% of Original Value0.600.50Class 6-7 (2)9080700.400.30Class 4-5 (2)6050400.200.100Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10Class 3 (1)Class 1-2 (1)Auto (1)30201001 2345678910 YearsAnnual MilesTraveled inIncrementsof 5,000(5K-100K)Source: (1) Auto Fleet, GE Capital, Utilimarc, and PRTM Analysis (2) Utilimarc and PRTM AnalysisSource: PRTM AnalysisOwnership ModelWhile different vehicle ownership models can have asignificant impact on a given institution’s ability to adoptelectric drive vehicles, the benefits of alternative financingmethods do not factor into the TCO calculation. 4 Leasing avehicle may minimize upfront capital costs associated withvehicle acquisition, but the lifecycle total cost of ownershipon a per mile basis should be equal to or more than the TCOfor a vehicle that is owned outright. Therefore, a simplifyingassumption that a company’s capital costs equal financingcosts is made in the model. A financing rate of 6 percentis the assumed cost of capital in the model.Residual ValueFleet owners in different industry segments—and acrossdifferent companies within an industry segment—hold4 In a number of states, sales taxes can be paid prorated per year of usage,deferring tax obligations. However, this as well as any additional interesttax shields are not considered by the model.FIGURE 3M% Improvement over ICE Maintenance & Repair Costson to their vehicles for varying lengths of time. The lengthof time that vehicles are owned and the ending mileagelargely determine the remaining value of the vehicle. Inessence, this residual value is a negative cost or a creditfor the capital that is not consumed during the operationof the vehicle. For fleet operators that tend to hold on totheir vehicles for shorter timeframes, the residual valueof their assets is a larger, more significant component ofthe total cost of ownership. For ICE vehicles, this residualvalue is easily attainable, as there are a number of wellestablishedprecedents and a liquid and efficient marketto price them. Fleet owners can analyze the trade-offsbetween selling their vehicles at their current residualvalue against maintaining them for longer periods basedon expected maintenance costs, prices of new vehicles,availability of capital, vehicle demand, and softer factorssuch as image and brand.Electric drive vehicles—particularly EVs andPHEVs—pose a new challenge because their residualvalue is not well known. For this reason, this analysisCOST COMPONENT HEV PHEV-40 EV-100Oil 5% 50% 100%Scheduled Maintenance 3% 10% 20%Repairs 4% 15% 30%Source: GE Capital data and PRTM estimatestreats the residual value calculation for the vehicle andthe battery separately.Vehicle Depreciation RatesThe rate of depreciation is the decline in value associatedwith an asset over a given period of time. It is important torealize that the depreciated financial value of an asset atany point in time may be significantly different than theremaining technical capacity. For example, the assessedmarket value of an internal combustion engine vehicleafter 10 years and 100,000 miles may be a small fraction ofthe initial purchase price despite the fact that the vehiclemay have the technical capacity to operate for another100,000 miles.The standard depreciation curve for an internalcombustion engine vehicle is therefore characterized bya steep decline in the initial period after ownership withthe rate of decline slowing over time. The starting pointfor the depreciation curve may vary based on the cumulativenumber of miles traveled by the vehicle. Figure 3Mpresents a standard set of depreciation curves for an ICEvehicle used in this analysis. The depreciation curvesinclude a time and distance factor to account for differentusage scenarios.This analysis assumes a depreciation curve for electricdrive vehicles—excluding the battery—in the sameway that a traditional ICE vehicle’s depreciation valuesmight be calculated. If a separate depreciation schedulewere calculated for electric drive vehicles, one mightexpect electric drive components to generate a higherresidual value than their ICE counterparts, as they willtend to incur lower maintenance and repair expensesand, in all likelihood, an increased asset life. However,there is simply not enough market experience dealingwith remarketed electric drive vehicles to confidentlyplot a separate deprecation schedule for these vehicles.The residual value of electric drive vehicles is generallyuncertain today.Battery DepreciationThe principal driving factor behind uncertainty in electricdrive residual value is the battery. Electric drivebatteries—particularly for PHEVs and EVs—constitute asignificant proportion of the vehicle’s upfront cost, so thetotal cost of ownership calculation is highly sensitive tothe residual value of the battery. Ideally, this value wouldbe determined by the number of cycles left in the batteryat the end of the vehicle’s useful life. However, significantuncertainties remain (as discussed in Part Two).The residual value of used PHEV and EV batterieswill be determined by the net residual capacity (the sumof each remaining cycle’s capacity) multiplied by thevalue of that capacity. For the purposes of this analysis,it was conservatively assumed that GEV batteries declinein value in a fashion similar to vehicles themselves (i.e.the curve shape in Figure 3M.) Residual value exceedsthe financial depreciated value but falls below the cost ofcomparable new battery. For cases in which ownership ofthe vehicle outlasts the useful battery life, it is assumedthat a replacement battery with a lower useful life wouldbe purchased at a discounted price to the original battery.

106 part three: identifying fleet opportunities key findingsfleet electrification roadmap 107CHAPTER 3.3Key FindingsBased on expected trends in battery and electric drive component costs as wellas mainstream expectations regarding energy costs, electric drive vehicles shouldprove highly attractive to fleet operators in the coming years.Electric drive vehicles are cost competitive in a number offleet applications today—even when assuming no accessto government subsidies and no change in purchasing orusage patterns (the base case). In fact, traditional HEVsare a cost-effective replacement for ICE vehicles by 2012in most of the segments where driving distance exceeds20,000 miles per year. This is a result of the relativelysmall incremental investment for an HEV compared toan ICE vehicle. GEVs begin to emerge as the most costeffective solution between 2015 and 2018 as battery costsbegin to fall below $400/kWh. Base case competitivenesstimelines are presented in Figure 3O.It is important to note that the deployment ofHEVs can be beneficial for PHEVs and EVs, assumingthat HEV batteries migrate toward lithium-ion andother battery chemistries that are utilized in gridenabledvehicles. By driving volume in the manufactureof battery cells and other components, HEVs canhelp facilitate the reduction in costs that will makeEVs and PHEVs a compelling option. Ultimately,however, PHEVs and EVs clearly represent the mostcompelling opportunity to reduce petroleum consumptionin the transportation sector.The cost effectiveness timeline for each of theelectric drive vehicle technologies is improved byoptimizing operations and vehicle characteristicsfor a number of fleet applications. In particular, twooptions stand out: optimizing the GEV ownershipduration to coincide with the battery life; and rightsizingEV batteries to meet the needs of low mileagefleet applications.These two actions would advance the time requiredfor PHEVs and EVs to become the most cost effectivesolutions by approximately one year in a number of segments.Figure 3P presents the competitiveness timelinesfor the optimized case.While not considered here, it is important to notethat other methods of optimization could improve EVand PHEV competitiveness timeframes. For example,some OEMs are designing more efficient vehicles that canmaximize efficiency in a given class. Light-weight vehiclematerials combined with improved aerodynamics canincrease the number of miles traveled per kWh of batterycapacity, further facilitating rightsizing. Such innovativedesign approaches would significantly improve the valueproposition of EVs and PHEVs.Finally, when current and potential future GEVgovernment incentives are considered, the cross-overpoint for GEV cost parity is reached within the nexttwo to three years in all of the commercial segments.The incentives assumed for this analysis include $7,500federal tax credits applied for GEV passenger car andclass 1-2 trucks; $15,000 tax credits applied to class 3medium-duty trucks; $20,000 tax credits applied toclass 4-5 medium-duty trucks; and $25,000 tax creditsapplied to class 6-7 heavy-duty trucks. The full creditsare available through 2015, after which they are rampeddown annually until they reach zero in 2020.In all cases, this analysis implies a progressionin cost competitiveness from ICE, through HEV, toPHEV-40 and EV-100. Fleet owner behavior and publicpolicy can have a dramatic impact on the rate of thatprogression, but rising fuel costs coupled with fallingelectric drive component costs suggest that PHEVsand EVs will increase in competitiveness over time innearly all fleet segments.FIGURE 3OLowest TCO Drivetrain Technology by Year and Segment – Case (No Policy Incentives)CLASSPassengerClass 1-2Class 3Class 4-5Class 6-7FIGURE 3PLowest TCO Drivetrain Technology by Year and Segment – Operations OptimizedCLASSPassengerClass 1-2Class 3Class 4-5Class 6-7SEG. NAME MI/YR 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020+129103A4A3B4B5678Source: PRTM AnalysisSales, Service, UtilityGovernmentTaxiRental / Car SharingSales, Service, Utility, Short HaulLight GovernmentSales, Service, Utility, Short HaulLight GovernmentMedium Short HaulMedium Utility, GovernmentHeavy Short HaulHeavy Utility, Government22K9K36K31K19K6K23K6K31K8K26K18KICE HEV PHEV 40 / EV 100FIGURE 3QLowest TCO Drivetrain Technology by Year and Segment — Operations Optimized + Government IncentivesCLASSPassengerClass 1-2Class 3Class 4-5Class 6-7SEG. NAME MI/YR 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020+129103A4A3B4B5678SEG. NAME MI/YR 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020+129103A4A3B4B5678Sales, Service, UtilityGovernmentTaxiRental / Car SharingSales, Service, Utility, Short HaulLight GovernmentSales, Service, Utility, Short HaulLight GovernmentMedium Short HaulMedium Utility, GovernmentHeavy Short HaulHeavy Utility, GovernmentSales, Service, UtilityGovernmentTaxiRental / Car SharingSales, Service, Utility, Short HaulLight GovernmentSales, Service, Utility, Short HaulLight GovernmentMedium Short HaulMedium Utility, GovernmentHeavy Short HaulHeavy Utility, Government22K9K36K31K19K6K23K6K31K8K26K18K22K9K36K31K19K6K23K6K31K8K26K18KICE HEV PHEV 40 / EV 100ICE HEV PHEV 40 / EV 100

108 part three: identifying fleet opportunities key findings fleet electrification roadmap 109Critical Sensitivities Impacting TCOThere are a number of non-policy related economic andbehavioral factors that will influence the ultimate cost ofownership of electric drive vehicles. In particular, however,three factors stand out: battery cost, gasoline price,and annual driving distance.Because battery cost represents such a significantportion of vehicle cost, this analysis implies that an EVpurchased in 2015 will have approximately 30 percentin total ownership cost savings with respect to an ICEvehicle if the battery cost is reduced by just 10 percentversus the base case.Gasoline (or diesel) expense constitutes more thantwo-thirds of the average operating cost for nearly anygiven fleet. A 10 percent increase in petroleum fuel price(while holding electricity prices constant) results in anapproximate 30 percent reduction in EV ownership costswith respect to ICE total ownership costs. All of the electricdrive technologies are more competitive in a higherfuel-price environment.Annual driving distance becomes a key factor due to thesignificantly higher initial investment required by electricdrive compared to ICE vehicles. Without sufficient annualdriving distance, the future energy cost and maintenancecost savings are insufficient to offset the initial investment.Combined Impact of Battery Cost and Gasoline PriceOf the three key factors that have the greatest impact onthe business case, battery cost and fuel expense are bothout of the control of operators and will have a significantimpact upon whether GEVs are financially attractive tothe operators. To assess this, two additional scenariosaround the base scenario were considered: a PessimisticCase (2020 Battery Cost +15 %, 2010-2020 Fuel Cost-15% ) and an Optimistic Case ( 2020 Battery Cost -15%,2010-2020 Fuel Cost +15 percent). As shown in the threescenarios, a shift from the Pessimistic Scenario to theOptimistic Scenario drives a four year shift in the point atwhich GEVs become the lowest cost vehicle to own.Annual Driving Distance “Sweet Spot”In general, the higher the annual driving distances, thelower the TCO for an electric drive vehicle with respect toan ICE for a vehicle purchased in 2018. This is due to therealization of faster energy and maintenance cost savings,resulting in an acceptable payback period. An example ofthis for segment 1 (sales, service, and utility automobiles)is shown in Figure 3R. In this segment, an annual drivingdistance of 6,000 miles per year results in a $0.08 per mileownership cost gap for an EV with respect to an ICE for avehicle purchased in 2018. For an application where theannual driving distance exceeds 15,000 miles per year,the EV ownership costs reach parity with an ICE over thestandard ownership period for the segment of six years.While the ownership costs decrease as annual mileageis increased from low to moderate levels, there are alsooperating limitations that will begin to increase ownershipcosts as mileage increases. For example, fleet applicationswhere the driving distance exceeds 100 miles perday will require a significant amount of daytime charging.This adds both increased energy costs incurred for peakelectricity rates as well as infrastructure costs.Due to infrastructure and vehicle cost differencesbetween the different segments, the optimal driving distancewill vary by segment. At the same time, the optimaldistance will decrease by year as technology costs fall.FIGURE 3SBase Scenario – Sales, Service, Utility Cars$0.38 Per Mile0.360.340.320.300.280.260.242010ICE2012201420162018202020222024202620282030HEVEVTCO AdvantageFIGURE 3TPessimistic Scenario – Sales, Service, Utility Cars$0.38 Per Mile0.360.340.320.300.280.260.242010201220142016ICE PHEV 40 EV2018202020222024202620282030TCO AdvantageICEHEVPHEV 40EVICEHEVPHEV 40EVFIGURE 3RTotal Cost of Ownership Delta for EV vs. ICE Segment 1 – Sales, Service, Utility (Base Case)FIGURE 3UOptimistic Scenario – Sales, Service, Utility Cars$0.38 Per Mile$0.09 Per Mile0.36ICE0.080.070.060.340.32HEV0.050.040.030.300.28PHEV 400.02“Sweet Spot” Annual Mileage0.010-0.01Annual Miles Driven0 10,000 20,000 30,000 40,000 50,0000.260.242010 2012 2014 2016ICE PHEV 40 EV201820202022202420262028 2030TCO AdvantageEVSource: PRTM AnalysisSource: PRTM Analysis

110 part three: identifying fleet opportunities key findingsfleet electrification roadmap 111Focus on Battery Right-SizingDue to the high cost of batteries relative to other electric drivetrain costs, battery cost optimization will receive attention frommanufacturers and fleet operators alike. Significant effort is already being dedicated to reducing the material, manufacturing, andlogistics costs of large-format batteries. In addition to these technological improvements, however, practical steps can be taken byindustry participants to minimize cost.Operators of fleet segments that do not fully utilize the maximum available capacity of EV and PHEV batteries will likely work withbattery manufacturers to optimize battery size for their required driving range. For example, in a low mileage segment such as segment2 (government cars), the daily driving range is less than 40 miles, but available EVs are likely to provide 100-mile range capability. The 60percent unused battery capacity becomes too expensive to offset through electricity cost savings until battery costs drop below $300/kWh. However, if this segment were given the option of purchasing an EV with a 60-mile driving range, the vehicle cost savings wouldexceed $4,000 in 2015. As a result, an EV could reach ownership cost parity with an ICE or HEV three years sooner than in the base case.Offering fleet specific configurations is commonly done today and would be a key enabler for making the economics of EVs and PHEVswork for different fleet segments sooner.CHAPTER 3.4Case StudiesThe following case studies consider vehicle TCO in two cases: a base case andoptimization + policy case. Both cases are based on mainstream, consensusindustry cost data outlined in Chapter 3.2 and energy prices from the referencecase in the Department of Energy’s Annual Energy Outlook 2010. The key scenarioattributes are as follows:FIGURE 3VGovernment Car TCO Before Right-Sizing$0.60 Per Mile0.580.5624 kWh Battery100 Mile CD RangeBase CaseThe base case assumes that operators purchase vehicles being offered in the market today atcurrent specifications. An operator makes no behavioral changes to reduce cost. Public policyis not considered in the base case. Operators do not benefit from existing or future subsidies.0.540.520.500.480.460.440.420.40201020122014ICE HEV EV2016201820202022TCO Advantage:2024202620282030TCO AdvantageICEHEVPHEV 40EVOptimized + Policy CaseThe optimized + policy case assumes that fleet operators can purchase vehicles that fit theirneeds and that they will use them in the manner that most efficiently lowers cost. Battery rightsizingand extended ownership periods are examples of optimized use. The optimized + policycase also incorporates existing federal government tax incentives for light-duty vehicles andassumes additional subsidies not currently in law for medium- and heavy-duty trucks.FIGURE 3WGovernment Car TCO After Right-Sizing$0.60 Per Mile0.580.560.540.520.500.480.460.440.420.4014 kWh Battery60 Mile CD Range2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030ICE EV TCO AdvantageICEHEVPHEV 40EVSource: PRTM Analysis

112 part three: identifying fleet opportunities case studiesfleet electrification roadmap 113CASE STUDY / SEGMENT 1Sales, Service, Utility CarsSegment 1 vehicles—sales, service, and utility automobiles—are typically operated bysingle drivers such as sales people, service employees, and utility employees. Theiraverage daily driving distance is approximately 71 miles and, while they don’t havefixed routes, they do tend to stay within a consistent proximity to their base. Unlikesegments in which the vehicles are in operation for most of the day, this segmenttends to have longer periods of time when the vehicles are parked (during salesmeetings, service calls, and overnight, for example).VEHICLE CHARACTERISTICSTotal Cost of Ownership (Base Case)Due to the relatively high mileage of the segment, a positivepayback on the greater initial investment of an electricdrive vehicle is achieved earlier than fleet segmentsthat have lower annual mileage. As is shown in Figure3W, the HEV is the first electric drive vehicle to achieveTCO parity with an ICE vehicle, doing so in approximately2011.As battery and other electric drivetrain componentcosts come down, the price of these vehicles is expectedto decrease significantly. In the case of an EV, expectedFIGURE 3X2010-2020 xEV Total Cost of Ownership — Base Case$0.38 Per Mile0.36cost reductions will result in the vehicle price decreasingfrom approximately $41,000 today to approximately$33,000 in 2020 (excluding any federal or local incentives).At the same time, the technology required for anICE to meet emissions and fuel economy requirementswill add approximately $2,000 to the base vehicle configurationby 2020 due to the addition of advanced enginetechnologies such as boosting, direct injection, electricvalve actuation, and advanced transmissions.Internal combustion engine vehicle cost increasesbetween 2010 and 2020 will more than offset the4-Door, 5-Passenger CarTypical Trunk Space:16 cu. ft.0.340.32Gross Vehicle Weight:Up to 6,000 lbs.0.300.28ICEHEVPHEV 40EV0.26Typical Dimensions:70" x 190" x 55" (WxLxH)Typical Passenger Volume:100 ft 30.24201020122014ICE HEV TCO Advantage EV201620182020OPERATIONAL SPECIFICATIONS71 miAverage DistanceSegment TravelsEach DayAt 71 miles, the average daily distance traveled forthis segment is conducive to EV-100 use. It is also highenough to drive a relatively fast payback on upfront costs.For a PHEV-40, the assumed utility factor is 51 percent.INFRASTRUCTURE TOPOLOGYService AreaChargeDepletingRange6 yearsAverageOwnershipDurationAt approximately six years, the average ownershipduration for this segment would likely require batteryreplacement for PHEVs and EVs. The timing of batteryreplacement can significantly impact TCO.$3,800InfrastructureCost PerVehicleIn 2010, charging infrastructure cost per segment1 vehicle is $3,800 assuming workplace, home, andsome public charging for EV-100. By 2020, the cost isexpected to fall to $2,400.Home Charging + RoamingSince these vehicles are often assigned to employees and can be used forpersonal driving in addition to work-related trips, they typically are takenhome by employees at night and are not returned to a central depot. Asa result, the charging infrastructure needed to support this segment is adistributed network, including infrastructure at the employees‘ homes aswell as some public infrastructure to support occassional trips in excessof the average.Central Charger Depot BankFast ChargerHome ChargerPublic ChargerVehicle SpecificationsICE 2010 2020Base Drivetrain 3.0L SI / 6 Spd. Auto 3.0L SI / 6 Spd. AutoBase Engine Cost $1,450 $1,300Base Transmission Cost $1,200 $1,100Exhaust System Cost $600 $575Fuel System Cost $100 $90Mandated Fuel Efficiency Improvements$25 $50($/% of MPG increase)Fuel Economy 23 MPG 32 MPGPHEV-40 2010 2020Electric Range 40 mi 40 miBattery Cost $660 $358Battery Size 12 kWh 12 kWhPHEV-40 Battery Life 150,000 150,000Electric Motor Cost $990 $540Inverter Cost $1,620 $900Charger Size 3.3 kW 3.3 kWOn-Board Charger Cost $580 $390Source: PRTM AnalysisHEV 2010 2020Battery Cost $1,200 $650Battery Size 1.5 kWh 1.5 kWhHEV Battery Life 200,000 mi 200,000 miElectric Motor Cost $770 $420Inverter Cost $1,260 $700EV-100 2010 2020Battery Cost $600 /kWh $325 /kWhBattery Size 24 kWh 24 kWhEV Battery Life 125,000mi 125,000CD Range Efficiency 4.0 mi/kWh 4.6 mi/kWhElectric Motor Cost $990 $540Inverter Cost $1,620 $900Charger Size 5 kW 5 kWOn-Board Charger Cost $875 $6001-Spd Transmission $400 $380

114 part three: identifying fleet opportunities case studiesfleet electrification roadmap 115FIGURE 3Y2010-2020 xEV Total Cost of Ownership — Optimized with Incentives$0.24 Per Mile0.230.220.210.200.190.180.170.160.15201020122014HEV PHEV 40 EV TCO Advantage201620182020ICEPHEV 40HEVEVCASE STUDY / SEGMENT 3ALight Sales, Service, Utility, Short HaulSegment 3a vehicles—light sales, service, utility, and short-haul trucks—are typicallypooled vehicles operated by sales people, service employees, utility employees, andshort-haul delivery company employees. Their average daily driving distance is 75miles and they tend to stay within a consistent distance from the depot at whichthey are left overnight. The consistency of the routes varies between applicationswithin segment 3a. It can be very consistent in segments such as short haul andhighly variable in segments such as utility.productivity-driven improvements expected over thesame period, resulting in an ICE vehicle price increasefrom $26,300 in 2010 to approximately $28,000 by 2020.At the same time, while the base ICE fuel economy islikely to increase by almost 40 percent by 2020, nominalfuel prices are expected to increase from $2.57 per gallonin 2010 to $4.08 per gallon in 2020. As a result, by approximately2016 the PHEV-40 reaches total cost parity withan ICE vehicle. By 2018, reduced electric drive componentcosts—which represent a much larger portion of thetotal vehicle cost in EV and PHEV-40 than in HEV—willresult in an overall TCO advantage for EV and PHEV-40when compared to an HEV.Operational VariablesWhile many of the factors influencing ownership costsare out of a fleet operator’s control, there are some factorsthat can be adjusted to optimize electric drive operatingcosts. One of the most significant factors is ownershipduration. For segment 1, vehicles are typically ownedfor as long as six years (though there are significantvariances within this average). This is largely driven bymaintenance and repair costs that begin to increase significantlyas vehicles approach 150,000 miles. As a result,six years/130,000 miles is the point that this segmenttypically replaces its vehicles.For an EV, the expected non-battery service andmaintenance costs are significantly lower than for an ICEvehicle due to reduced mechanical complexity. As a result,ownership cycles in excess of six years may be feasible forEVs in segment 1. However, the optimal ownership periodwill be closely related to the battery replacement timing.With the current assumption of an EV battery life set at125,000 miles, the replacement timing will be approximatelyevery five years for segment 1. Since the batterywill depreciate quickly in the first two to three years,the optimal point to transfer ownership of the vehicle isright before a replacement battery is required. The leastcost-effective point to transfer ownership is right after anew battery has been purchased (approximately six yearsin segment 1). Extending EV ownership in this segmentfrom six to nine years will decrease EV ownership costsby approximately $0.07 per mile—a cost that includesthe price to replace the battery in year five. The extendedownership period reduces the time that it takes for EVsto reach cost parity with ICE vehicles by approximatelyone year.Policy VariablesThe total cost of ownership in the base case does notinclude the current federal tax incentives of $7,500 pervehicle. When this is factored in, GEVs become financiallyattractive for segment 1 fleet operators almostimmediately. As shown in Figure 3Y, the total cost ofownership with government incentives along with theoperational optimizations described previously reachesparity with an HEV and PHEV-40 before 2012, and for anEV before 2015.VEHICLE CHARACTERISTICSClass 1-2 TruckTypical Dimensions:74" x 205" x 80" (WxLxH)OPERATIONAL SPECIFICATIONS75 miAt 75 miles, the average daily distance traveled by thissegment is conducive to EV-100 use. It is also high enoughto drive a relatively fast payback on upfront costs. Theassumed utility factor for PHEV-40s is 48 percent.INFRASTRUCTURE TOPOLOGYService AreaChargeDepletingRangeAverage DistanceSegment TravelsEach Day7 YearsAverageOwnershipDurationAt seven years, the average ownership durationfor this segment would likely necessitate batteryreplacement. The timing of battery replacement canhave a significant impact on TCO.$3,400Typical Cargo Volume:60 ft 3Gross Vehicle Weight:6,000–10,000 lbs.Extended Cab Capacity:5 PassengersInfrastructureCost PerVehicleThe 2010 charging infrastructure cost for segment3a vehicles is $3,400, assuming predominantly LevelII charging. By 2020, the cost is expected to fall to$2,400 per vehicle.Central DepotThe vehicles are returned to a central depot at the end of each daywhere they can be charged overnight. The vast majority of the chargingrequirements for these vehicles are likely to be supported by overnightLevel II charging. Daytime charging away from the depot is rarelyrequired as these vehicles will not typically travel further than the CDrange of an EV-100.Central Charger Depot BankFast ChargerHome ChargerPublic Charger

118 part three: identifying fleet opportunities case studiesfleet electrification roadmap 119CASE STUDY / SEGMENT 4ALight GovernmentSegment 4a vehicles—government light trucks—are typically pooled vehiclesoperated by federal, state, and local government employees. Their averagedaily driving pattern consists of a driving distance of 22 miles originating at agovernment depot and following a route that is typically highly predictable. Atypical application would be a pickup truck used by department of transportationemployees to travel between different road construction sites.Total Cost of Ownership (Base Case)The annual mileage of approximately 6,000 miles peryear for segment 4a requires significant reductions inGEV drivetrain costs to become cost effective comparedto ICE. In 2010, the incremental vehicle price for an EVis almost $18,000. Meanwhile, because of the low annualmileage, the discounted lifetime energy and maintenancecost savings for the EV are approximately $4,500. By2020, the net ownership cost of an EV is nearly on parwith the ICE ownership costs. This is largely driven bythe incremental EV purchase price decrease of approximately$11,000 and the EV energy and maintenance costFIGURE 3BB2010-2020 xEV Total Cost of Ownershipsavings increase to $5,800. It is not until 2022 that theoperating cost savings are sufficient to fully offset theincremental vehicle costs as well as the other infrastructurecosts incurred for an EV.Operational VariablesDespite the low annual mileage of this segment, it isunlikely that the typical ownership duration of 10 yearswill be extended for GEVs despite the fact that the electricdrivetrain will not be approaching its useful life. As aresult, this will not likely be an area requiring operationaloptimization as in the commercial segments. The areaVEHICLE CHARACTERISTICSClass 1-2 TruckTypical Dimensions:75" x 205" x 80" (WxLxH)OPERATIONAL SPECIFICATIONS22 miAverage DistanceSegment TravelsEach DayAt 22 miles, the average daily distance traveled forthis segment is technically conducive to EV-100 use;however reasonable payback periods would requirebattery right-sizing. The utility factor for PHEV-40s is100 percent.INFRASTRUCTURE TOPOLOGYService AreaChargeDepletingRange10 YearsAverageOwnershipDurationAt 10 years, the ownership duration of segment 4avehicles would not necessitate battery replacementbased on the daily miles traveled. Battery right-sizingcould change this, however.$3,400Typical Cargo Volume:60 ft 3Gross Vehicle Weight:6,000–10,000 lbs.Extended Cab Capacity:5 PassengersInfrastructureCost PerVehicleThe 2010 cost for charging infrastructure for segment4a is $3,400, assuming predominantly Level IIcharging. By 2020, the cost is expected to fall to$2,400 per vehicle.Central DepotSimilar to the commercial segment, these vehicles are returned to acentral depot where they can be charged overnight. The vast majority ofthe charging requirements for these vehicles are likely to be supportedby overnight charging. Daytime charging away from the depot is almostnever required as these vehicles will rarely travel further than the CDrange will support.Central Charger Depot BankFast ChargerHome ChargerPublic Charger$0.85 Per Mile0.800.750.700.650.600.550.500.45201020122014ICE HEV TCO AdvantageVehicle SpecificationsICE 2010 2020Base Drivetrain 4.3L Gas / 2WD Auto 4.3L Gas / 2WD AutoBase Engine Cost $2,030 $1,820Base Transmission Cost $1,800 $1,650Exhaust System Cost $840 $805Fuel System Cost $140 $126Mandated Fuel Efficiency Improvements$30 $60($/% of MPG increase)Fuel Economy 16 MPG 21 MPGPHEV-40 2010 2020Electric Range 40 mi 40 miBattery Cost $660 $358Battery Size 14.3 kWh 14.3 kWhPHEV Battery Life 150,000 150,000Electric Motor Cost $1,188 $648Inverter Cost $1,944 $1,080Charger Size 4 kW 4 kWOn-Board Charger Cost $693 $475201620182020EVPHEV 40ICEHEVHEV 2010 2020Battery Cost $1,200 $650Battery Size 1.8 kWh 1.8 kWhHEV Battery Life 200,000 mi 200,000 miElectric Motor Cost $924 $504Inverter Cost $1,512 $840EV-100 2010 2020Battery Cost $600 /kWh $325 /kWhBattery Size 29 kWh 29 kWhEV Battery Life 125,000 mi 125,000 miCD Range Efficiency 3.1 mi/kWh 3.5 mi/kWhElectric Motor Cost $1,188 $648Inverter Cost $1,944 $1,080Charger Size 6 kW 6 kWOn-Board Charger Cost $1,050 $7201-Spd Transmission $600 $570Source: PRTM Analysis

120 part three: identifying fleet opportunities case studiesfleet electrification roadmap 121FIGURE 3CC2010-2020 xEV Total Cost of Ownership Optimized for ApplicationCASE STUDY / SEGMENT 5$0.75 Per Mile0.70Medium Short Haul, Sales & Service0.650.600.550.500.45201020122014201620182020ICE EV TCO AdvantagePHEV 40ICEHEVEVSegment 5 vehicles—medium duty, short haul, sales and service trucks—are usedfor hauling heavier loads for a variety of applications. These are typically highermileage vehicles with driving distances averaging around 100 miles per day. Mostapplications will originate from a depot and will typically have at least eight hoursof non-operating time at the depot every day. A common application in segment 5is a delivery vehicle.VEHICLE CHARACTERISTICSthat requires optimization for cost effective operationin this segment is the battery capacity. Based on currentofferings, it is expected that the base vehicle willbe designed with a 100-mile charge-depleting range.However, in this segment, the typical driving distance isonly 22 miles per day. After applying a 66 percent marginto allow for charge depletion and driving distancevariability, the segment would still only require a batterylarge enough to provide a charge depletion range ofapproximately 36 miles.If a fleet specific offering were developed with a CDrange suited to a 40 mile range application, the batterycapacity would be reduced by 60 percent, which wouldresult in a battery cost reduction for EVs of approximately$10,000 in 2010, which would have a dramatic impacton the total cost of ownership. As shown in Figure 3CC,making this change would enable EVs to be the most costeffective drivetrain by 2015, a decrease of approximatelysix years from the base case. Such a change would alsosignificantly differentiate EV from the PHEV-40 sincethe EV has the same battery capacity without having tocarry the cost of the ICE powertrain.Policy VariablesNo monetary incentives are currently assumed for thissegment. However, policy recommendations containedin Part Four of this report would make incentives availableto federal, state, and local government agencies.Class 4-5 TruckTypical Dimensions:90" x 230" x 96" (WxLxH)OPERATIONAL SPECIFICATIONS100 miAt 100 miles, the average daily distance traveled forthis segment is conducive to EV-100 use. It is also highenough to drive a relatively fast payback on upfrontcosts. The utilization rate for PHEV-40s is 36 percent.INFRASTRUCTURE TOPOLOGYService AreaChargeDepletingRangeAverage DistanceSegment TravelsEach Day10 YearsAverageOwnershipDurationThe 10-year average ownership period of vehiclesin this segment would include at least one batteryreplacement based on daily miles traveled.$3,700Typical Cargo Volume:320 ft 3Gross Vehicle Weight:14,001–19,500 lbs.Standard Cab Capacity:3 PassengersInfrastructureCost PerVehicleThe 2010 infrastructure cost for segment 5 vehiclesis $3,700 assuming some access to public chargingis required. By 2020, the cost is expected to fall to$2,200 per vehicle.CENTRAL DEPOT + PUBLIC CHARGINGDue to the high mileage of many of the vehicles within the segment,there will be some daytime charging. Due to the high utilization of thesevehicles, fast charging will likely be needed to fill a portion of the daytimecharging needs. Additionally, there may be applications for which Level 2public charging is used during the day (where the vehicle is parked for asufficient amount of time to "top-off“).Central Charger Depot BankPublic ChargerFast ChargerHome Charger

122 part three: identifying fleet opportunities case studiesfleet electrification roadmap 123Total Cost of Ownership (Base Case)The high annual mileage of 30,000 miles per year ofthe medium duty, short haul, sales and service segmentresults in GEVs reaching ownership cost parity amongthe fastest of any of the fleet segments analyzed. Asshown in Figure 3DD, EVs achieve ownership cost paritywith ICEs by 2015 and with HEVs by 2016. More than theprevious three cases studied, batteries become the centralpart of the business case. In this segment, the 2010purchase price for an EV is approximately $47,000 higherthan the initial purchase price of the ICE. Over the 10year ownership period of the typical vehicle in this segment,the discounted energy savings of the EV purchasedin 2010 are approximately $45,000. Additionally, overthis same period, the discounted maintenance and repaircosts excluding battery replacement are $13,000 lowerfor an EV compared to an ICE vehicle. However, whenbattery replacement is included, an additional $49,000of discounted future battery replacement expenses needto be included for the two additional batteries requiredover the 10 year, 300,000 mile ownership period. At theend of this ownership period, the net present value of theFIGURE 3EE2010-2020 xEV Total Cost of Ownership Optimized with Incentives$0.60 Per Mile0.550.500.450.40ICEHEVPHEV 40EV0.35FIGURE 3DD2010-2020 xEV Total Cost of Ownership0.30ICE2010PHEV 4020122014EV201620182020TCO Advantage$0.65 Per Mile0.600.550.500.450.400.35201020122014201620182020ICE HEV EV TCO AdvantageVehicle SpecificationsICE 2010 2020Base Drivetrain 6.7L Diesel / Auto 6.7L Diesel / AutoBase Engine Cost $5,500 $5,225Base Transmission Cost $4,500 $4,275Exhaust System Cost $2,500 $2,375Fuel System Cost $2,000 $1,900Mandated Fuel Efficiency Improvements$43 $86($/% of MPG increase)Fuel Economy 10 MPG 13 MPGPHEV-40 2010 2020Electric Range 40 mi 40 miBattery Cost $660 $358Battery Size 12 kWh 12 kWhPHEV-40 Battery Life 150,000 mi 150,000 miElectric Motor Cost $3,713 $2,025Inverter Cost $6,075 $3,375Charger Size 6.6 kW 6.6 kWOn-Board Charger Cost $1,733 $1,584ICEHEVPHEV 40HEV 2010 2020Battery Cost 1,440 780Battery Size 5 kWh 5 kWhHEV Battery Life 200,000 mi 200,000 miElectric Motor Cost $2,888 $1,575Inverter Cost $4,725 $2,625EV-100 2010 2020Battery Cost $720 /kWh $390 /kWhBattery Size 65 kWh 65 kWhEV Battery Life 125,000 mi 125,000 miCD Range Efficiency 1.5 mi/kWh 1.8 mi/kWhElectric Motor Cost $3,713 $2,025Inverter Cost $6,075 $3,375Charger Size 10 kW 10 kWOnboard Charger Cost $2,625 $1,800Single Speed Transmission Cost $1,800 $1,710EVownership cost gap of an EV purchased in 2010 comparedto an ICE purchased at the same time is approximately$33,000.By 2015, when the EV reaches cost parity withan ICE, the purchase price difference decreases from$47,000 to $30,000. The reduction in battery costs, whichwas largely responsible for the initial vehicle cost reduction,also enables reduced replacement battery costs forvehicles purchased in 2015 (from $49,000 to $34,000).As in the other case examples, the rising fuel costs alsodrive a significantly larger energy cost savings for the EVpurchased in 2015 increasing from $45,000 to $50,000.Overall, in 2015, an ICE and EV have comparable ownershipcosts of approximately $156,000 over the ten yearownership period.Operational VariablesIn this segment, optimizing the ownership duration willhave a less prominent impact than in some of the othersegments. With the ownership period of segment 5 vehiclestypically around 10 years/300,000 miles, it is unlikelythat many fleet operators will want to extend the periodmuch further. However, if they did, the net impact wouldnot have a material impact on the purchase decision. Theownership costs for both ICE and EV would decrease acomparable amount.Policy VariablesAs with passenger cars, incentives could have a significantimpact upon the financial attractiveness and adoption ofGEVs. To assess the impact of potential monetary incentives,a scenario was created using a similar set of incentivesto those that were adopted for commercial hybrids.For segment 5, a $20,000 tax credit was applied to EV andPHEV-40. As shown in Figure 3DD, the impact of theseincentives was to make PHEV-40 cost competitive withICE and HEV by 2012 and to make EV the lowest costoption by approximately 2015.Source: PRTM Analysis

124 part three: identifying fleet opportunities fleet adoption of gevs in 2015fleet electrification roadmap 125CHAPTER 3.5Fleet Adoption of GEVs in 2015by 2015, it is likely that a much larger portion of fleetoperators will begin to transition their fleets to GEVs.In this scenario, fleet operators could begin to transitiontheir fleets as early as 2011 and by 2015, as much as6 to 7 percent of the targeted fleet segment sales couldbe plug-in vehicles. This would drive annual sales ofapproximately 130,000 units in 2015 and would resultin a 2015 parc of more than 200,000 GEVs.While competitiveness timeframes vary by drivetrain configuration and industrysegment, fleet customers in aggregate could contribute substantial sales volumesto the early GEV industry, helping to achieve economies of scale and drive downcosts for the broader consumer market.FIGURE 3FF2015 GEV Attractiveness – Base Case$25,000 GEV TCO Benefits vs. ICE/HEV20,000HIGH MED LOWTotal cost of ownership is likely to play the greatestrole in determining electric drive application in fleets.However, an additional critical factor is the difficultythat the operator faces in switching to new technology.Fleet operator switching difficulty will be of particularimportance for EVs. For segments such as taxis, theoperating difficulty will be great enough that it willbecome a significant deterrent to selecting EVs, despitea potential cost of ownership advantage. The key factorsthat will influence switching difficulty are drivingrange margin, infrastructure deployment and charging.Combining these criteria, switching difficulty canbe broadly categorized by three levels:Low: Minimal Impact to Fleet Operations (Norange issues, minimal infrastructure complexity)Med: Operating Changes Likely But ContainableHigh: Significant Differences to CurrentOperating Practices (e.g. taxi range limitations)Combining switching difficulty and the relative TCO, aperspective can be gained on the attractiveness of GEVsfor the different segments at a given point in time.Based on this, an assessment of the likely relative adoptionrates can be made for the different segments. Thesegments with the lowest switching difficulty and thehighest TCO benefit will be the segments most likelyto have the highest adoption rate. Conversely, the segmentswith the highest switching difficulty and the lowestTCO benefit will have the lowest adoption rate.Applying this framework to the base caseshows that the attractiveness of GEVs to most fleetoperators would be relatively low if no changes weremade to the operating model and without monetaryincentives. However, if the operations and vehiclesare optimized for fleet applications and an incentivestructure similar to the current passenger carstructure is put in place for all target fleet vehiclesegments, the attractiveness of GEVs increases significantly.In this scenario, the commercial segmentshave a TCO that is either neutral or significantlypositive. In addition, the switching difficulty isexpected to be reduced significantly in this scenariodue to improved access to infrastructure.The impact of this increase in adoption attractivenesswill be an increase in overall adoption rate.As with most new technologies, GEV adoption in fleetapplications is likely to follow an S-Curve adoptionpattern. Uptake is slow at first but reaches an inflectionpoint at which adoption begins to increase rapidlybefore reaching a natural steady state. Vehicletechnology adoption in fleets tends to be fairly slowwhen not driven by regulatory changes due to fleetfocus on minimizing operating costs and maximizingvehicle up-time. Given this, it is unlikely that anysignificant number of fleet operators would committo investing in GEV technology in 2015 if adoptionattractiveness is low. Very likely, demand would belimited to niche sub-segments and technical pilots,keeping sales for GEVs at approximately 1 to 2 percentof the targeted fleet segment annual sales in2015. In this scenario, annual GEV sales would likelybe less than 30,000 units in 2015 with a 2015 GEVparc of less than 50,000 vehicles.However, in the scenario where the adoption attractivenessbecomes medium or high for most segments15,00010,0005,0000-5,000-10,000Less Switch Difficulty$25,000 GEV TCO Benefits vs. ICE/HEV20,00015,00010,0005,0000-5,000-10,000S2-Gov. CarS4a-C1-2 Gov. TrkS4b-C3 Gov. TrkS7-C6-7 Short HaulS7-C6-7 Short HaulS8-C6-7 Gov. TrkS6-C4-5Gov. TrkFIGURE 3GG2015 GEV Attractiveness – Optimized + IncentivesLess Switch DifficultyS4a-C1-2 Gov. TrkS4b-C3 Gov. TrkS1-Sales, SvcS1-Sales, SvcS5-C4-5 Svc TrkS3b-C3 Sales, SvcS10-RentalS3a-C1-2 Sales TrkHIGH MED LOWS2-Gov. CarS5-C4-5 Svc TrkS8-C6-7Gov. TrkS6-C4-5Gov. TrkS10-RentalS3a-C1-2 Sales TrkS3b-C3 Sales, SvcS9-TaxiS9-TaxiGreater Switch DifficultyGreater Switch DifficultyNote: This analysis did not assume that purchase incentives would be available to government agencies. However, policy changes, such as making all tax credits transferable, would make itpossible for public sector entities to take advantage of incentives and could increase the uptake of GEVs above the levels envisioned by this report.Source: PRTM Analysis

PART FOURPolicyRecommendations4.1 FLEET MICROSYSTEMS4.2 OTHER POLICIESTHE UNITED STATES CAPITOL BUILDING By implementing arelatively modest set of policies, Congress has an opportunity toaddress our most urgent challenges and spur sustainable growth.

128 part four: policy recommendations electrification roadmap129ABSTRACTTargeted public policies could help to facilitate the adoptionof grid-enabled vehicles by commercial and government fleetoperators. Temporary point-of-sale purchase incentives canoffset the higher upfront cost of electric drive vehicles andcharging infrastructure. By making vehicle and infrastructuretax credits transferable, the private sector as well as federal,state and local public sector entities would benefit fromreduced costs. Finally, the federal government can providevaluable risk mitigation during the early development of thebattery industry by offering targeted support for the usedbattery market.The policy recommendations identified in this sectionare intended to support the early adoption of electricdrive vehicles in managed fleets. They are not, however,intended as a substitute for policies promoted by the originalElectrification Roadmap. Rather, commercial and governmentfleets can be viewed as extensions of the deployment communityconcept in which an efficiently designed network ofprivate and public charging infrastructure along with utilityintegration could enable significant penetration of gridenabledvehicles.CHAPTER 4.1Fleet MicrosystemsElectric drive vehicles should be an attractive investment for a number ofcommercial and government fleets in the near term. However, public policy canhelp to reduce risk, provide more business certainty, and ultimately increaseadoption sooner, benefiting the broader market.In many cases, fleets function as a microcosm of a transportationecosystem that could manage many—if notall—of the key elements of an electrification ecosystemor deployment community. For example, a fleet mightconsist of numerous vehicles that a business operates ina confined geographical space. This is certainly true formid-sized fleets that operate as part of geographicallyconstrained businesses such as utilities or city governmentfleets. For national fleets, such as parcel deliveryand telecommunications fleets, this is true for at leasta subset of their vehicles that serve individual regionsor urban areas. Because of their unique characteristics,operators of fleet vehicles might be able to more easilyovercome the challenges that other drivers would facein adopting GEVs. For instance, centrally refueled fleetsprovide refueling systems for their vehicles at a homebase or bases, making it easier and more cost-effective tocharge fleet GEVs.The various types of financial support that wouldbe available to consumers and infrastructure providersin deployment communities should be available to fleetoperators, who may serve as a kind of electrificationmicro-ecosystem—or fleet microsystem. Like electrificationecosystems, GEV fleet microsystems offer the opportunityto accelerate the adoption of grid-enabled vehiclesby promoting the scale and cost reductions in batteryand vehicle production that will accompany them. Whilefleets represent a smaller market than the general personaluse auto market, the obstacles to their adoption ofelectric drive technology are smaller in some cases andcan be addressed by the policy recommendations thatfollow. It is of particular importance to appreciate that inpromoting fleet GEVs now, we can accelerate the adoptionof GEVs in the general personal-use auto market.Policy RecommendationExpand the tax credits for light-dutygrid-enabled vehicles purchased indeployment communities to includeprivate sector fleets.Light-duty vehicles (cars and class 1 and 2 trucks) comprised55 percent of all U.S. fleet vehicles in operationin 2009. They therefore represent a substantial opportunityto deploy grid-enabled vehicles, achieve scale inthe battery industry, and reduce costs for all consumers.As explained above, deployment of these vehicles intothe broader consumer market faces several challengeswhich may be more easily overcome in the fleet market.However, the higher upfront costs and long payback periodsremain a critical issue to address in promoting lightdutyvehicles in fleets.To support the deployment of GEVs in fleets, thetemporary tax credits that Congress establishes forgrid-enabled vehicles purchased in deployment communities(assuming pending legislation passes) shouldbe made available to fleet operators nationwide whopurchase more than 10 GEVs per year. The creditsshould also be extended to fleets that include more than25 total GEVs that are centrally fueled or whose drivershave access to home and/or workplace charging equipment.(In the event that the federal tax credit availableto purchasers of grid-enabled vehicles in deploymentcommunities remains the same as the federal tax creditavailable throughout the nation, then the base federaltax credit for fleet GEVs should be increased by $2,500per vehicle.)

130 part four: policy recommendations fleet microsystemsfleet electrification roadmap 131Policy RecommendationCreate tax credits for medium- andheavy-duty grid-enabled vehiclesdeployed in fleets with greater than10 vehicles in operation.As of October 2010, no credit exists for the purchaseof a medium- or heavy-duty plug-in electric vehicleweighing more than 14,000 lbs. Current federal taxcredits for the purchase of hybrid electric vehiclesPublic Policy and the Tax Codeapply to light-duty vehicles placed into service afterDecember 31, 2005. 1 Consumers purchasing a light-dutyHEV through December 31, 2010, are eligible for a federalincome tax credit of up to $3,400. 2 Credit amountsbegin to phase out for a given manufacturer once it hassold more than 60,000 eligible vehicles, and the credit isscheduled to expire after 2010. 3 Some states offer additionalincentives to supplement the federal tax credits.1 DOE, Fuel Eocnomy.gov, Federal Tax Credits for Hybrids, availableonline at http://www.fueleconomy.gov/feg/tax_hybrid.shtml2 Id.3 Id.The Electrification Coalition is proposing a broad range of policies to promote the deploymentof HEVs, PHEVs and EVs into fleets. Several of those policies involve the creation of tax credits.Lawmakers’ use of the tax code to promote policy outcomes is not without controversy. Mostpointedly, several observers have suggested that such policies would be more appropriatelydesigned as grants or other programs subject to appropriations.However, while it may have been more practical to implement programs similar to thoseproposed by the Electrification Coalition through appropriated funds, that may not currently bethe case. Clearly, Congress and the president have the ability to change the law at any time. Yet,provisions in the tax code are generally regarded as more certain than other types of governmentincentives. That certainty facilitates adoption of the actions that the policies are intended topromote. Stated differently, tax credits are more likely to achieve their stated goal than programssupported by appropriated funds, the availability of which often fluctuates from year to year.Accordingly, the tax code has been used to support the energy industry in particular for decades.Tax incentives have long been available to the oil and gas industry, the renewable power industry,the appliance industry, and the automotive industry. In short, because businesses making longterm investments are often unwilling to make them in the absence of financial certainty, it hasbecome common practice to use the tax code to support the nation’s energy policy priorities. Useof the tax code also offers a transparent opportunity to ensure that tax expenditures in supportof different vehicle technologies are established based on a neutral metric.Finally, there is a clear and well developed means to deliver incentives offered through the taxcode to their intended beneficiaries. New programs supported by appropriated funds oftenrequire the development of a new infrastructure to distribute the available funds. That processcan be expensive, take substantial time, and still not achieve intended results. The Departmentof Energy’s loan guarantee program, for instance, is a well documented example of a programestablished to assist an industry that took years to get off of the ground and failed to deliver thebenefits Congress made available to the intended beneficiaries.More recently, federal credits for the purchase of aqualified plug-in vehicle (EV or PHEV) have been introducedfor consumers nationwide with a 200,000 vehicleper-manufacturer cap. 4 The maximum federal creditavailable is $7,500, and state credits range as high as$5,000 per vehicle. 5This focus on supporting the development of technologiesand products that meet the needs of mainstreamAmerican consumers is clearly essential. Policymakershave rightly targeted incentives to match the vehiclesegment that can ultimately make the most significantprogress toward meeting their goals: increased energysecurity, reduced CO 2 emissions in the transport sector,and a scalable industry that benefits the Americaneconomy and American workers. However, volume productionof advanced battery cells will generate cost savingsregardless of whether the final pack configuration isgeared for light-, medium-, or heavy-duty vehicles.Part Three of this Roadmap identified a number ofapplications in which heavier EV and PHEV trucks representan attractive option for commercial and governmentfleet operators. These trucks could sharply reducevehicle petroleum consumption as well as tailpipe emissionsof particulate matter compared to their ICE counterparts.Moreover, the benefit they provide to the nationmay be even greater. By drawing power from the electricalgrid, PHEVs and EVs further reduce the nation’s oilconsumption while improving the transportation sector’sCO 2 profile. At the same time, to the extent thatsuch vehicles require larger batteries to operate, theywill further assist the battery industry in increasing scalein cell manufacturing, bringing costs down for batteriesfor all vehicles.To accelerate the cost-effective integration ofmedium- and heavy-duty GEVs in commercial and governmentfleets, Congress should create a tax credit of upto $15,000 for fleet operators who purchase a qualifyinggrid-enabled class 3 truck. The maximum credit shouldbe increased to $20,000 for grid-enabled class 4-5 trucksand $25,000 for grid-enabled class 6-7 trucks.After 2015, the maximum credit value will no longerbe necessary. Therefore, to promote fiscal responsibility,the maximum credit should be available through 2015.Beginning in 2016, the value of the credits should declinein a linear fashion each year before reaching zero in 2020.4 ARRA, Section 11415 DOE, EERE, Alternative Fuels and Advanced Vehicles Data Center,available online at http://www.afdc.energy.gov/afdc/laws/law/CA/8161Policy RecommendationCreate clean renewable energy bondsfor fleet vehicle charging infrastructure,and make municipal and regional transitauthorities eligible for the bonds.Clean renewable energy bonds (CREBs) are bonds in whichinterest on the bonds is paid in the form of federal taxcredits by the United States government in lieu of interestpaid by the issuer. CREBs effectively allow the borrowerto access funds for qualifying projects without incurringany interest expense. The tax credit that is assigned to theholder of a CREB can be used to offset, on a dollar for dollarbasis, its owner’s tax liability. The value of the tax credit isthen treated as taxable income to the bondholder.Congress created CREBs in the Energy TaxIncentives Act of 2005. Eligible bond issuers include stateand local governments and electric cooperatives that areundertaking projects that generate clean power.The American Recovery and Reinvestment Actexpanded the original CREB program. The law authorizedan additional $2.4 billion of qualified energy conservationbonds and clarified that capital expendituresto implement green community programs includesgrants, loans and other repayment mechanisms toimplement such programs. Specifically, the law allowedstates to issue CREBs to finance retrofits of existing privatebuildings through loans and/or grants to individualhomeowners or businesses, or through other repaymentmechanisms.The eligible uses of CREBs should be expanded tosupport assistance provided by state or local governmentsfor vehicle charging infrastructure for fleet operators thatpurchase or have purchased at least 10 centrally-chargedgrid-enabled vehicles in one year or operate at least 25centrally-charged grid-enabled vehicles. This wouldprovide state and local governments with an opportunityto both attract GEV fleets to their communities as wellas support their development. In urban areas with highlevels of tailpipe particulate emissions, CREBs for fleetinfrastructure might also represent a cost-effective toolfor improving air quality. The expanded use of CREBsshould include the purchase and installation of charginginfrastructure only, not the creation of competitiveenergy companies.

132 part four: policy recommendations fleet microsystemsfleet electrification roadmap 133Policy RecommendationExtend the existing tax credit for electricvehicle charging infrastructure through2018 and expand the range of eligiblecosts to include upgrades performed bya utility to support fleet electrificationand to facility owners for electricalpower distribution equipment upgradesnecessary to operate and monitorcharging infrastructure.In some situations, utilities may have to upgrade equipmentin order to reliably serve large numbers of GEVscharging at fleet depots. Typical improvements wouldconsist of upgraded transformers and—in some circumstances—radialdistribution lines (the lines that exclusivelyconnect the utility customer to the grid). In thecontext of serving residential neighborhoods where personaluse vehicles would generally be charged overnight,utilities would generally absorb the cost of transformerupgrades and recover those costs over time in theirrate base. Where the upgrades are to commercial facilities,however, and serve predominantly or exclusivelya single customer, many utilities will charge the cost ofsuch upgrades directly to the customer. Moreover, commercialfacility owners may need to invest in upgradesto electrical power infrastructure not owned by the utility.Expenses related to components such as controls,panel boards, switches, transformers and safety switches,power management equipment, and software should beeligible for the credit.Existing law offers commercial customers a taxcredit of 50 percent up to $50,000 for the installationof charging equipment that enters into service beforethe end of 2010. Congress should extend the existingtax credit for the installation of charging infrastructurethrough 2018. Moreover, Congress should expand therange of eligible costs for operators of fleets that purchaseor have purchased at least 10 centrally-chargedgrid-enabled vehicles in one year or operate at least25 centrally-charged grid-enabled vehicles to includeupgrades performed by a utility and the facility ownerto support vehicle charging activities whose costs arecharged by the utility Finally, Congress should increasethe limit of the tax credit for fleet operators who areinstalling capacity to charge large numbers of GEVs subjectto the table below.10 – 25 vehicles..................................... $125,00026 –100 vehicles.................................. $300,000100 + vehicles....................................... $600,000Policy RecommendationAllow immediate expensing of GEVpurchases and supporting infrastructurefor operators of fleets that purchase orhave purchased at least 10 centrallychargedgrid-enabled vehicles in one yearor operate at least 25 centrally-chargedgrid-enabled vehicles.Immediate expensing (or accelerated depreciation)benefits companies by allowing them to retain the timevalue-of-moneyof their near-term tax obligations anddefer payment of taxes until later years when those cashflows are less valuable on a discounted basis. Thoughtof differently, the government effectively loans thecompany their tax liability for a few years. This policypossesses the unique fiscal benefit of capitalizing on thearbitrage between a company’s cost of capital (typically10-25 percent) and the federal government’s cost of capital(approximately 5 percent).This financial accounting dynamic increases the efficiencyof the policy as the company’s benefit outweighs thegovernment’s direct cost. For instance, an item purchasedby a company for $1,000 dollars today has a tax-adjustednet present cost of $680 if the asset is entirely expensed inyear one. If the item is depreciated over 10 years, however,the item’s purchase represents a tax-adjusted net presentcost of $785, a $105 premium over the immediate expensingscenario. From the government’s perspective, however,immediate expensing appears to cost $333 in less tax revenuesand the 10-year depreciation scenario costs $270, a$63 difference. In effect, the business receives a $105 subsidywhereas the government incurs a $63 cost. 6 For thepurposes of budget scoring, however, the Joint Tax Officedoes not typically discount future tax receipts, so thisdynamic is further enhanced; immediate expensing shouldscore at close to a zero cost to the government.6 Assumes a 10% cost of capital for business, a 5% cost of capital forgovernment and a 35% corporate tax rate.Policy RecommendationMake tax credits for the purchaseof qualifying grid-enabled vehiclesand related charging infrastructuretransferable.As in the original Electrification Roadmap, a number ofthe policies recommended here involve changes to thetax code, including credits. A tax credit is a sum that ataxpaying entity is allowed to deduct from the amountof taxes it owes the government. Unlike tax deductions,which generally reduce only taxable income, tax creditsreduce a taxpayer’s tax liability dollar for dollar. Stateddifferently, so long as a taxpayer has tax liability, a onedollar tax credit should be worth one dollar to a taxpayer.In the electric vehicle market, however, a large numberof market participants do not have tax liability that a taxcredit can offset. Some market participants are state orlocal governments or non-profits that are purchasingEVs and PHEVs or installing charging infrastructure.Other market participants are start-up companies thatare not yet profitable or individuals who do not havesufficient tax liability to take advantage of the creditsrelated to the purchase of vehicles or the installation ofcharging infrastructure.To resolve this situation, the tax credits availablefor the purchase of qualifying grid-enabled vehicles andrelated charging infrastructure should be transferable.Making credits transferable would allow the owner of acredit who does not have sufficient tax liability to monetizeit by reducing its tax payments to instead monetizeit by selling it to other taxpayers who have tax liability.While making the tax credits transferable introducessome complexity to the system and likely will generatesome opposition from those who are generally against theuse of the tax code to support electric drive vehicles, it isthe best way to ensure that the tax credits can have theirintended effect. If Congress passes tax credits that cannotbe used by the intended recipients, it is likely that the taxcredits will not have their intended effect.Policy RecommendationIncentivize the establishment of specialpurpose entities to facilitate bulkpurchasing of electric drive vehiclesby fleet operators.In many instances, fleet operators might have an opportunityto adopt special purpose PHEVs and EVs, such asdelivery trucks or utility bucket trucks, but are unableto find a manufacturer who can produce a small numberof vehicles at a reasonable price. At the same time, individualOEMs may be hesitant to commit to producingsubstantial volumes of larger EVs and PHEVs, becausethe customer base is highly fragmented and uncertain.However, the chassis and drivetrains used by multiplespecial purpose vehicles are often practically identical—only the vehicle exterior differs to any significant degree.In these cases, customers could potentially benefit fromaggregating bulk purchase orders for special purpose EVand PHEV drivetrains. Individual OEMs would also benefitfrom the certainty associated with larger orders. Topromote bulk purchasing orders that otherwise might notbe viable, Congress should incentivise the establishmentof special purpose entities to aggregate GEV orders fromdisparate purchasers.Vehicles purchased through such entities would beeligible for enhanced tax credits based on the size of thebulk order. The tax credits would be a function of, and inaddition to, any other tax credit available to GEVs. Fororders of at least 100 vehicles, the additional tax creditwould be equal to 20 percent of the value of the baselineGEV tax credit applicable to that vehicle. For orders ofat least 500 vehicles, the additional tax credit wouldbe equal to 30 percent, and for orders of at least 1,000vehicles, the additional tax credit would be equal to 40percent of the value of the baseline GEV tax credit applicableto those vehicles.

134 part four: policy recommendations other policiesfleet electrification roadmap 135CHAPTER 4.2Other PoliciesFleet microsystems represent an important opportunity to accelerate adoptionof GEVs among commercial and government fleet operators. Additional policiesbeneficial to the broader market could help to reduce the risk of batterypurchases and help accelerate technological development.Policy RecommendationReinstate and extend the tax credit formedium- and heavy-duty gasolinehybrid electric vehicles that utilizeadvanced batteries with energy andpower density equal to or greaterthan lithium-ion batteries.HEVs are well suited for use by fleets that engage in urbanstop and go driving, because such vehicles lose substantialenergy as heat in the braking process that can be captured,stored, and reused. Delivery vehicles, public transportvehicles and other heavy vehicles that drive regular urbanroutes are prime candidates for hybridization, and today’scosts for HEV in these sectors could provide near-termopportunities for adoption. Hybrid vehicles can not onlyachieve substantial saving of fuel, but also reduce tailpipeemissions of nitrous oxide, particulate matter, and carbondioxide, each an important benefit in their own right. Yet,from the Electrification Coalition’s perspective, what maybe most attractive about these vehicles is their abilityto expand the size of the market for lithium-ion batterycells, large-format batteries, and their component parts.FIGURE 4AExpired Credit for Demonstrated Fuel Economy GainsIncreased deployment of HEVs represents an opportunityfor increases in scale that can reduce costs for all largeformatautomotive-grade batteries.In 2005, Congress established a tax credit for thepurchase of medium- and heavy-duty hybrid electricvehicles. The tax credit was worth between 20 and 40percent of the incremental cost of a hybrid vehicle subjectto limits based on the vehicle’s efficiency. The tax creditexpired, however, at the end of 2009.In 2010, legislation was introduced that would extendand expand the tax credit, but it did not pass. The EC believesthat medium- and heavy- duty hybrid vehicles, many ofwhich serve in fleets, can substantially promote the deploymentof all GEVs by adding scale to battery production,thereby reducing battery costs for all vehicles. Therefore,the tax credit that expired at the end of 2009 should beextended and expanded generally consistent with the provisionsof S. 2854, introduced by Senators Herb Kohl (D-WI)and Orrin Hatch(R-UT), which would extend it through theend of 2014 and expand the size of the tax credit available tomedium- and heavy- duty hybrid trucks subject to the limitsstated in the table below. Consistent with its purpose of promotingscale production of batteries for use in all vehicles,availability of the credit should be limited to vehicles thatutilize advanced batteries with energy and power densityequal to or greater than lithium-ion batteries.VEHICLE WEIGHT MAX FOR 30% FE INCREASE MAX FOR 40% FE INCREASE MAX FOR 50% FE INCREASE8,501-14,000 lbs $1,500 $2,250 $3,00014,001–26,000 lbs $3,000 $4,500 $6,000FIGURE 4BProposed Maximum Credit Available for Demonstrated Fuel Economy GainsVEHICLE WEIGHT 20% GAIN 30% GAIN 40% GAIN 50% GAIN8,500-14,000 lbs n/a $3,000 $4,500 $6,00014,001–26,000 lbs n/a $3,000 $9,000 $12,00026,001–33,000 lbs n/a $12,000 $18,000 $24,000> 33,000 lbs $10,000 $20,000 $24,000 $24,000Policy RecommendationEstablish a program to guarantee theresidual value of the first generation oflarge-format automotive batteries putinto service between 2010 and 2013.The battery frequently is the most expensive componentin a PHEV or EV. Even when a battery is no longer capableof storing a sufficient charge to support the operation of avehicle with adequate power and range, it likely will stillhave ample life to serve in other capacities where energydensity and weight are not as important as in vehicles,such as firming up intermittent power, serving as a sourceof emergency backup power, or as a source of distributedgeneration. Therefore, a “used” vehicle battery will stillhave value that the consumer can capture at the timeof vehicle or battery disposal, and which can serve as anadditional incentive at the time of purchase.There is, however, a sequencing problem that makesit difficult to understand the value of the “used” battery,and which makes it likely to underestimate its value: amarket for secondary uses of automotive-grade batteriescannot develop until there are used batteries, butthere will not be a large supply of used batteries for severalyears. It is, therefore, difficult for the non-expert, inparticular, to estimate the residual value of the battery ina newly purchased vehicle. By immediately guaranteeingthe residual value of used batteries at between 60and 80 percent of their expected value, the governmentwould effectively be offering an incentive to purchasers ofPHEVs and EVs while likely costing the government littleif anything.The Department of Energy should establish a programthrough which purchasers of vehicles with largeformatautomotive-grade batteries will be guaranteeda minimum residual value of their battery for a definedperiod of time after the purchase of the vehicle that shallinclude the following provisions:1. The guarantee applies only to a battery purchasedin a new vehicle, and the battery mustremain in the vehicle until the sale that triggersthe guarantee, but is transferable to subsequentowners of the vehicle.2. The guarantee equals $50 per kWh of nameplatecapacity for a period of one year afterthe expiration of its warranty. The guaranteedeclines by 50 percent until the end of thesecond year after the expiration of its warranty,after which it is no longer available.3. For the guarantee to be available, the batterymust have been covered by a warranty for atleast two years and must be intact, but neednot be working. In other words, the guaranteewill not pay for damaged batteries, such asthose damaged in accidents.4. The guarantee will be available to certified purchasersof batteries. If the value of the batteryis less than the guaranteed minimum residualvalue, the Department of Energy will pay certifiedbattery purchasers the difference betweenthe guaranteed residual value and the marketprice the battery. That will allow the certifiedpurchaser to purchase the battery from a vehicle/batteryowner at the guaranteed minimumresidual value.5. Any entity may seek certification by theDepartment of Energy as a participant in theprogram.> 26,000 lbs $6,000 $9,000 $12,000

136 part four: policy recommendations other policiesfleet electrification roadmap 137Under this program, owners of vehicles with qualifyingbatteries will be able to sell a battery to a certifiedentity for a guaranteed minimum price. The entity willpay the price because the government will pay it thedifference between the minimum price and the marketprice. The certified entity will be responsible for demonstratingthe amount of the guarantee. In other words, itwill need to demonstrate the market price in order to beable to obtain the guarantee. This requirement is necessaryto ensure that the guarantee is only paying for thedifference between a real market price and the guarantee.In the absence of a party responsible for ensuringthe integrity of the transactions, parties could try to sellbatteries at below market prices solely to get the value ofthe guarantee.Reinsurance Risk MitigationTo promote the development of a private market toguarantee a minimum residual value of automotivegradebatteries, as an alternative or supplement to adirect government guarantee, the EC proposes theestablishment of a tax credit to offset 33 percent oflosses incurred by insurers or reinsurers who insure orreinsure the residual value of automotive-grade batteries.The tax credit would require that an insurer insurebatteries that were purchased in a new vehicle, andwhich remained in the vehicle until the sale that triggersthe guarantee, but is transferable to subsequent ownersof the vehicle. As with the proposal that the governmentFIGURE 4CU.S. DOE Spending on Energy Research and Development$8 Billions (2005$)765432101978198019821984198619881990199219941996guarantee batteries’ residual value, the insured batteryalso must be intact for the guarantee to be valid.By providing incentive to the market to guaranteethe residual value of used batteries at between 60 and80 percent of their expected value, the governmentwould effectively be offering an incentive to purchasersof PHEVs and EVs while likely costing the governmentlittle if anything.Policy RecommendationIncrease federal investment in advancedbattery research and development.The high cost of automotive-grade batteries is widelyconsidered to be the most significant obstacle tomore rapid GEV adoption. While it is anticipated thatlarge-scale manufacturing and learning will help bringthese costs down in the future, additional investmentin battery research and development (R&D) remainscrucial. Continued technological breakthroughs willhelp improve battery durability and reliability, ensurebattery safety, and extend battery life spans. Batterymakers also point to innovation as potentially moreimportant than scale in delivering sustainable costreductions. 7 Battery development will also improvethe potential for technological crossover as storage forwind and solar power generation and other secondaryuse applications.7 EC, PRTM interviews.2009 ARRA2011 RequestRE-ENERGYSEARPA-EElectricity T&DFossil, includingCCT DemoRenewablesHydrogenEfficiencyFusionFissionSource: Gallagher, K.S. and L.D. Anadon, "DOE Budget Authority for Energy Research, Development, and Demonstration Database," Energy Technology Innovation Policy, John F. Kennedy Schoolof Government, Harvard University, March 22, 2010.1998200020022004200620082010After the energy crisis of 1973, U.S. energy R&Dsoared from approximately $4 billion annually to $14billion, with public-sector investment peaking at justunder $8 billion and private sector investment toppingout at nearly $6 billion. By 2004, total fundinghad fallen closer to $5 billion. Despite a steady energyrelatedR&D spending increase in recent years, and atemporary spike facilitated by the American Recoveryand Reinvestment Act of 2009, overall levels of governmentspending are still much lower than they were 30years ago. (See Figure 4C)The existing group of lithium-ion battery chemistrieswill be used in the early suite of GEV offeringsto enter the market. Yet scientists are continuing toexplore the frontiers of materials science to developthe next generation of batteries, promising betterperformance, life, and cost. New chemistries thatincorporate high-capacity positive electrode materials,alloy electrodes, and electrolytes that are stableat five volts, are ultimately expected to outperformtoday’s available chemistries. The InternationalEnergy Agency specifically highlighted a need for continuedinnovative energy storage research support inits 2009 Electric and Plug-in Hybrid Electric VehiclesTechnology Roadmap and reiterated its importancein its 2010 report, Global Gaps in Clean Energy RD&D.Policy RecommendationEnsure that federal motor vehicleregulations do not unnecessarily prohibitthe development and deployment of costeffectivePHEVs in large trucks.Commercial vehicles are regulated as trucks when grossvehicle weight (GVW) exceeds 10,000 lbs. This distinctionhas important implications from a regulatory standpoint.Automobiles and class 1 and 2 truck emissions aremeasured by the composite of the tailpipe emissions.However, vehicles in excess of 10,000 GVW are covered byemissions and performance requirements. In other words,for trucks weighing more than 10,000 lbs., the engines areregulated independently and separately from the vehicle,unlike smaller vehicles where emissions are regulated atthe tailpipe. 1One component of emission requirementsis that engines must meet certain durability and performancemetrics. For example, heavy-duty vehicle enginesmust be warranted for 10 years and 185,000 miles.Currently, the downsized engines used in typical PHEVconfigurations would need to meet the same standardsas a traditional engine. Meeting this standard is bothcost-prohibitive and unnecessary. Downsized PHEVengines are not designed to serve as a stand-alone sourceof motive power, and the cost and inefficiency associatedwith such a design has driven industry to avoid thisapproach. Instead, current medium- and heavy-dutyhybrid vehicles in the market utilize a full-sized dieselengine in conjunction with a battery and motor, a configurationthat erodes the cost savings-potential of thePHEV design.The regulatory requirements for engine testingshould be modified to enable the use of smaller enginesin medium- and heavy-duty PHEVs. The benefits wouldbe substantial for vehicle cost and ultimately for fuelsavings given the overall fuel intensity of medium- andheavy-duty trucks today. As the modeling analysis inPart Three of this Roadmap shows, PHEVs will becomean economically viable alternative to ICE vehicles in anumber of truck applications over the medium term. Ifleft unaddressed, however, regulatory statutes will effectivelyrestrict adoption.Policy RecommendationEncourage federal government adoptionof electric drive vehicles.As the largest consumer in the nation, with a presencethat extends throughout the economy, the federalgovernment is well situated to help establish the marketfor GEVs. Executive Order No. 13423, issued by PresidentBush in 2007, directed agencies with 20 or more vehiclesto reduce their fleet fuel consumption by 2 percentagepoints annually from 2005 to 2015 (a 20 percent reduction).It also directed agencies to purchase PHEVs whencommercially available at a cost comparable to non-PHEVs. Executive Order No. 13514, issued by PresidentObama, imposes additional requirements on agenciesto reduce greenhouse gas emissions from the federalfleet by 2 percent annually until 2020 and extends therequirement in E.O. 13423 to reduce fuel consumptionby 2 percent annually through 2020 as well. It left thePHEV purchase requirement in E.O. 13423 intact.The federal government can play a critical role interms of driving scale throughout the GEV productionsupply chain. By placing large orders that will turn overregional federal fleets, the government can contribute

138 part four: policy recommendations other policiesfleet electrification roadmap 139to an accelerated pace of technological advancement inbattery production, driving down costs. Large fleet purchaseswill also give automotive and battery OEMs thelong-term stability needed to justify significant investmentsin labor and equipment.Despite the existence of executive orders that directagencies to purchase efficient and advanced vehicles,agencies often choose to meet the requirements in theleast expensive manner. Rather than forcing agenciesto pay the incremental costs of GEVs out of their ownbudgets, Congress should establish a program at theGeneral Services Administration that will pay the incrementalcosts of GEVs purchased or leased by federalagencies. Directly appropriating funds for that purposewould allow agencies to operate GEVs without takingscarce funds away from their core missions. Moreover,introducing this program and transparency to the adoptionof GEVs by federal agencies will allow Congress andthe public to better calibrate the rate at which GEVs areincorporated into the federal fleet.Post OfficeAs of 2009, the United States Postal Service (USPS) hadnearly 220,000 vehicles in operation. The vast majorityof the vehicles—nearly 195,000—were light trucks.According to a 2009 report by the USPS Office of theInspector General, the average daily mail-delivery drivingdistance is 18 miles, making many of these vehicleswell-suited for right-sized EV batteries or smaller PHEVbatteries. Moreover, the average age and usage patternsof vehicles currently in the postal fleet lead to extremelyhigh maintenance costs. Substituting EVs and PHEVswould result in sharply lower fuel costs in addition tooffsetting high maintenance costs.The key issue for the USPS has been funding theupfront investment needed to acquire EVs and PHEVs.As a semi-private institution, the post-office has limitedaccess to capital and may actually face additional, uniquefunding challenges. In 2009, the USPS faced a $7 billionfunding shortfall. Of course, reducing fuel and maintenancecosts could contribute to a stronger position overtime, but access to capital today is still a key issue.From an economic standpoint, the IG report foundthat value was achievable in the right circumstances.Specifically, the report found that if “the upfront capitalcost is overcome by participation in DOE-fundeddemonstration programs and V2G revenue is captured,the agency [breaks] even within the first 2 years thatEVs are in operation.” The report goes on to state that“Funding specifically targeting Postal Service maildelivery vehicles would likely be necessary to create aneconomic environment that provides incentives for thePostal Service to move into a leadership position with EVtechnology.”Given the size and purchasing power of the USPS,the federal government should offset the incrementalupfront cost of EV and PHEV purchases by the PostOffice for the period 2011-2014 through direct appropriationsto the USPS. At the end of this four-year period,the Inspector General should be required to produce ananalysis of the program and make recommendations onthe need for a possible second phase.Policy RecommendationClarify the tax code to ensure that Section30D GEV tax credits are available toconsumers who purchase a GEV (withouta battery) and lease the battery from thedealer or a third party at the time thevehicle is purchased.Section 30D of the U.S. tax code allow purchasers toreceive a tax credit of between $2,500 and $7,500 for aplug-in vehicle with a battery whose capacity exceeds 4kWh. The size of the tax credit is dependent on the size ofthe battery. As currently written, it appears that a vehiclemay not qualify for the credit if the battery is not purchasedwith the vehicle and the owner of the vehicle doesnot own the battery. Because consumers who lease a batterywill effectively pay for it even if they do not own it,Congress should clarify the tax code so that purchasersof GEVs who lease a battery (or the right to use a batteryowned by the lessor) at the time of purchase are eligiblefor the tax credit, so long as the battery is physicallyinstalled in the vehicle at the time of original purchase.

140 conclusionfleet electrification roadmap 141CONCLUSIONOil dependence ranks among the most pressing nationaland economic security threats confronting the UnitedStates today. The importance of oil to the U.S. economy hasnecessitated an assertive foreign policy that emphasizessecurity of supply in regions of the world rife with violenceand instability. The decline of conventional domesticpetroleum reserves has resulted in increased U.S. oilimports, expanding the trade deficit and hastening theexport of American wealth abroad. More importantly, thefundamental dynamics driving oil price volatility in recentyears are not expected to significantly alter over the longterm. Rapidly expanding oil demand in emerging markets,constrained growth in low-cost oil supplies, and thin sparecapacity margins will continue to make the market proneto price shocks in the years to come. Recent history hasrepeatedly demonstrated that oil price shocks frequentlyresult in recession, public debt expansion, and highunemployment for the United States.By replacing petroleum as the dominant transportationfuel, electrification of transportation representsan opportunity for the United States to fundamentallyalter the energy security dynamic. A transportation sectorlargely delinked from oil would isolate the UnitedStates from price volatility while increasing investmentin domestic energy resources and electrical infrastructure.Electricity is generated from a diverse mix of largelydomestic fuels, retail prices are extremely stable, and thenetwork of infrastructure largely already exists.An impressive array of automakers will introducethe first wave of grid-enabled vehicles to Americanconsumers in 2010 and 2011. These vehicles representimportant progress and the successful collaboration ofmultiple private and public sector entities. But to capitalizeon the full economic, employment, and securitypotential of electrification, penetration of these vehicleswill be required at a speed and level not currently projectedin typical forecasts. Therefore, more coordinationand focus will be required.The most important challenges constraining thegrowth of the market for grid-enabled vehicles will largelybe the cost and range associated with the first generationof large-format automotive batteries. Costs have alreadyfallen significantly in recent years as manufacturers movefrom pilot phase projects to market offerings. However,increased volume in battery manufacturing and electriccomponent supply chains will be required to drive costsdown to levels that are compelling for mainstream consumers.At the same time, technical advancement downthe learning curve can increase the performance of batteries,reducing weight and increasing range.While electrification of the light-duty, personal-usepassenger vehicle market is the most important longtermobjective for increased energy security, the earlydevelopment of the GEV industry will benefit from a morediverse market. Particularly during the period from 2011to 2015, commercial and government vehicle fleets couldrepresent a large share of the market for plug-in hybridand fully electric vehicles. In fact, recent announcementsby a host of commercial and government entities suggestthat this dynamic is already rapidly emerging.Commercial and government fleet operators shouldbe well-prepared to address a number of the early challengesconstraining adoption of grid-enabled vehicles.By matching the proper vehicle, battery and drivetraintechnology to required payload requirements, drivecycles, and usage profiles, fleet operators can minimizeupfront investment costs. Total investment in public andprivate charging infrastructure can also be efficient andoptimized. Perhaps most importantly, grid-enabled vehiclescould appeal to a significant number of fleet operatorsin a short timeframe. In that case, fleet operatorswould account for significant early demand volumes inthe development of the large-format battery industry inaddition to catalyzing the ramp-up of electric drivetraincomponent supply chains.Targeted, temporary public policy support can andshould play a role in supporting this process. Federal taxcredits exist for light-duty vehicles, but there are currentlyno purchase incentives in place to support adoptionof grid-enabled medium- and heavy-duty trucks.This should be rectified. Existing infrastructure taxcredits should be expanded and modified so that largerinstallations qualify for applicable benefits. All federaltax credits should be made transferable so that non-profitand public sector entities can access them and all qualifyingcredits benefit consumers closer to the point of sale.Finally, the federal government can assist in minimizingrisk by facilitating the development of a secondary marketfor large-format automotive batteries.The analysis conducted for this report suggeststhat even a subset of these policies would have a meaningfulimpact on vehicle penetration rates. Combinedwith efficient investment allocation by fleet operators,temporary public policy could drive more than 200,000grid-enabled vehicles into commercial and governmentfleet applications by 2015. Penetration rates of this magnitudeduring the early evolution of the GEV industrywould have a large impact on battery and electric drivetraincomponent costs, providing increased certainty forsuppliers and reduced costs. In turn, these developmentswould benefit the broader consumer market and help tospeed adoption.Combined with the recommendations outlined inthe original Electrification Roadmap, the Coalition haspresented a comprehensive framework for guaranteeingAmerican energy security and economic prosperity inthe future. America’s leaders understand what is at stakeand, as a result, electrification continues to garner strong,bipartisan support. Investments made by the public andprivate sectors over the coming years could move theUnited States onto more secure footing. And while additionalfederal outlays must be carefully weighed againstother options in today’s fiscal environment, the factremains that energy status quo is both costly and dangerous.Our leaders must view investments in electrificationagainst the alternative: a nation and an economy at risk.

142 appendix a top 50 commercial fleetsfleet electrification roadmap 143Top 50 Commercial FleetsRANK/COMPANY CONTACT OWNED LEASED/MANAGED CARS CLASS 1-2 CLASS 3-8 VANS SUVS XUV TOTAL123456789101112131415161718192021222324252627AT&TSt. Louis, MOUnited Parcel Service (UPS)Atlanta, GAVerizonIrving, TXComcast Corp.Philadelphia, PAFederal Express Corp.Memphis, TNPfizer, Inc.New York, NYCoca-Cola EnterprisesAtlanta, GAQwest CommunicationsGlendale, AZPepsiCo, Inc.Purchase, NYServiceMasterMemphis, TNTyco InternationalPrinceton, NJSiemens Shared Services, LLCIselin, NJSalvation ArmyAlexandria, VAState Farm Mutual AutoInsurance Co. Bloomington, ILOldcastle Materials GroupAtlanta, GACox EnterprisesAtlanta, GASears Holding Corp.Hoffman Estates, ILQuanta ServicesHouston, TXXerox Corp.Rochester, NYMerck & Co., Inc.Whitehouse Station, NJUnited Technologies Corp. (UTC)Hartford, CTSanofi-AventisBridgewater, NJGlaxoSmithKlineResearch Triangle Park, NCGenuine Parts CompanyAtlanta, GAChevronSan Ramon, CAAramark Services, Inc.Philadelphia, PAOtis ElevatorBloomfield, CTJeromeWebber100% 7,409 25,300 14,178 24,092 3,249 0 74,228Mike Hance 100% 0 4,615 66,165 1,853 0 0 72,633JayOlshefski5,920 20,224 23,035 15,509 64,688Bud Reuter 100% 562 13,509 3,252 22,360 475 0 40,158RussellMusgrove100% ARI 377 24,388 11,932 36,697Fred Turco Wheels 100% 30,000 500 500 500 31,500Ary KayRunyanRobinKnuckey100% 10,000 0 9,500 0 0 0 19,50090%Bank of America5%; GE Fleet 5%300 10,000 2,500 6,500 50 0 19,350Pete Silva 92% GE fleet 8% 756 13,609 3,647 209 766 0 18,987SteveGibsonKevinReynoldsJimMcCarthy32%1%Wheels 35%; PHH30%; GE Fleet 3%GE fleet 50%;Wheels 50%Wheels 87%;ARI 12%1,278 10,496 4,346 40 316 0 16,4762,278 3,932 6,819 2,250 304 14 15,5975,977 3,099 964 3,395 2,124 0 15,559Bob Jones 400 0 5,000 9,600 0 0 15,000DickMalcom94%Ron Piccolo 85%MarkLeuenbergerTiffanyMatthewsButchChristianPaulaMorriseyScott LauerPatrickMcGrathSuzenMoyeShirleyCollinsChris Lang 50%Chrysler financial4%; Toyota financial2%PHH; GE Fleet;DonlenARI; Ge fleet;Wheels10,952 126 38 3,216 38 6 14,3761,223 8,375 3,017 318 507 0 13,4401,352 4,285 1,592 4,502 1,399 0 13,130200 0 0 11,200 468 0 11,86815% 100 1,800 8,300 500 300 0 11,000GE fleet 100% 450 175 0 9,750 75 0 10,450PHH 97%;Wheels 3%8,558 92 31 1,056 20 233 9,9905% PHH 95% 2,650 2,425 765 3,276 760 0 9,876ARI, GE, PHH,Wheels9,600 0 0 0 0 0 9,600PHH 60%; ARi 40% 1,739 27 21 835 4607 1,976 9,205ARI; Donlen; MikeAlbert; Suntrust3,110 5,789 150 0 0 0 9,049Kat Travis 80% ARI; GE Fleet 3,000 5,000 0 500 500 0 9,000KevinFisherPhilSchreiberSource: Fleet Automotive, 2010 Automotive Fleet Factbook30%GE Fleet 40%;PHH 20%1,320 2,887 2,220 1,031 1,065 287 8,810PHH 100% 2,028 2,500 1,100 3,000 100 0 8,728RANK/COMPANY CONTACT OWNED LEASED/MANAGED CARS CLASS 1-2 CLASS 3-8 VANS SUVS XUV TOTALInterstate Brands Corp.28Steve Long 75% ARI; LeasePlan 400 7,600 238 400 0 0 8,638Kansas City, MO293031323334353637383940414243444344454647484950Hewlett-Packard Co.Anaheim, CAJohnson & JohnsonNew Brunswick, NKNovartis PharmaceuticalsEast Hanover, NJAsplundh Tree ExpertsWillow Grove, PAAmerican Electric PowerColumbus, OHChurch of Jesus Christ ofLatter Day SaintsSalt Lake City, UTDycom Industries, Inc.Palm Beach, FLAdvance Auto PartsRoanoke, VAUnited RentalsCharlotte, NCSimplex GrinnellBoca Raton, FLJohnson ControlsPlymouth, MIEcolab, Inc.St. Paul, MNFarmers Insurance GroupLos Angeles, CAUtiliX Corp.Kent, WAExxonMobil Corp.Fairfax, VAADT Security ServicesBoca Raton, FLExxonMobil Corp.Fairfax, VAADT Security ServicesBoca Raton, FLEmbarqOverland Park, KSRollins, Inc.Atlanta, GAPacific Gas & ElectricConcord, CAAbbottWaukegan, ILCrop Protection Services (CPS)Greeley, COAstraZeneca PharmaceuticalsWilmington, DEJeffreyHurrellLouiseDavis-LopezLillianPalmieriSteveToellerWayneFarleyMichaelSimms100% GE Fleet 3,176 18 0 3,778 1,628 0 8,60032% GE Fleet 68% 6,558 60 0 635 0 1,264 8,523LeasePlan 40%;PHH 60%4,309 0 0 1,428 2,625 0 8,362200 4,000 4,000 90 0 0 8,290377 3,993 2,419 989 290 0 8,068100% 6,048 1,387 0 422 36 122 8,015Lois Jacobs 8,000CarolDaviesCathyCrewsonJaniceBuxtonChristyCoyte3%ARI 75%; GE20%;First Fleet 5%ARI 59%; PHH14%;Penske 6%;Idealease 16%;Ryder 2%357 5,461 0 173 1,492 0 7,48331 4,816 2,308 159 99 6 7,419Wheels 100% 7,400LeasePlan90%; PHH 10%73 2,194 89 4,797 211 0 7,364Gayle Pratt LeasePlan 100% 1,522 2,482 12 3,030 264 0 7,310MarkWalters98% Donlen 2% 5,939 57 0 536 608 13 7,153Mike Barry 6 6,900 200 25 0 0 7,131JudyCornetBeckyCarrascoJudyCornetBeckyCarrasco100% 2,750 4,150 0 150 50 0 7,100100% 2,750 4,150 0 150 50 0 7,100Kim Povirk 15% GE fleet 85% 245 0 0 6,724 0 0 6,969PaulYoungpeter 1%Emkay .05%;Enterprise 0.5%;Suntrust 95%;Wheels 3%7,0007,000667 6,205 9 6 51 0 6,938Dave Meisel 82% 414 2,414 3,542 112 424 0 6,906DianeLopezChristineChmielPHH 100% 1,553 72 0 2,356 2,819 0 6,80012% 137 4,741 1,884 12 15 10 6,799Kim Jamme 100% Wheels 6,200 0 0 400 0 0 6,600

144 appendix b available vehicle matrixfleet electrification roadmap 145Available Vehicle Matrix — Passenger PortfolioMAKE MODEL TYPE DESCRIPTION/CLASS (IF APPLICABLE) BATTERY CAPACITY ELECTRIC MOTOR CAPACITY ELECTRIC DRIVING RANGE TOP SPEED PRICE TARGET INTROAudi e-tron EV 2 sports car based on the R8 42.4 kWh 230kW 154 mi 124mph - 1,000 car run with target intro 2012BAIC C60 EV 4-door sedan - - - - - 2011 ChinaBMW MegaCity EV 2-door coupe 35 kWh 112kW 100 mi 95 mph - 2013BYD Auto e6 EV 4 door crossover 48kWh 75kW 186 mi 87 mph - 2010 China 2010 Targeted US LaunchBYD Auto F3DM PHEV 4-door sedan 17 kWh - 60 mi - $22,000 2009 ChinaChery Automobile Co. S18 EV 4-door compact 20kWh 40kW 93 mi 75 mph $22,000 Nov 2010 ChinaCitroën C-ZERO EV 4-door compact 16 kWh 47 kW 130 km 81 mph 35,000 euros Q4 2010 EUCoda Automotive CODA Sedan EV 4-door, mid-size sedan 34kWh 100kW 90-120 mi 85 mph $45,000 California test fleet mid-2010, public delivery fall 2010DaimlerSmart ED (ElectricDrive)EV 2-door micro car 17kWh 30 kW 84 mi 62 mph - 2012Fiat 500EV EV Small car - - - - - 2012Fisker Karma PHEV Luxury 4-door 23kWh 300kW 50 mi 150 mph $88,000 2011Fisker Nina PHEV Family sedan 20kWh - - - Est. $40,000 2012Ford C-Max PHEV MPV - - - - - 2012 USFord Focus EV 4 door hatchback 23kWh 105kW 100 mi - - 2011 USGeneral Motors Chevrolet Volt PHEV 4-door hatchback 16kWh 111kW 40 mi 100 mph $40,000 Nov 2010 USGeneral Motors Opel Ampera PHEV 4-door hatchback 16kWh 111kW 40 mi 100 mph - 2011 EUHonda EV-N EV 2-door, 4-seater micro car - - - - - 2012Honda TBD PHEV Mid-size to large vehicle - - - - - 2012Hyundai Blue On EV 4-door hatchback 16 kWh 49 kW 87 mi 80 mph - Korea second half of 2010, 2012 GloballyLightning Car Company GT EV 2-door coupe - 300kW 150 mi 125 mph - 2012 UKLuxgen EV+ EV 7-passenger minivan - 180kW 200 mi (@ 25mph constant) 90mph - Late 2010 TaiwanMitsubishi iMiEV EV 4-door hatchback / sub-compact 16 kWh 47 kW 100 mi 81 mph Below $30,000 Private sales in Japan Apr 2010, US 2011Nissan LEAF EV 5-seater, 4-door hatchback / compact 24 kWh 80kW 100 mi > 90 mph $32,780 US & Asia in fleets & limited areas 2010, globally 2012Peugeot iOn EV 4-door hatchback sub-compact - 47 kW 93 mi - - End of 2010Renault Fluence ZE EV 4-door sedan 22 kWh 70kW 100 mi 81 mph"21,300 euros - 26,000 euros (excl.battery) separate battery leasefrom 79 euros per month"Renault Zoe ZE EV Compact coupe - 60kW 100 mi 135 kph - 2012 EuropeREVA NXG EVREVA NXR EVNamed for "NeXt Generation", two-seaterwith a targa roofNamed for "NeXt Reva", four-seat,three-door hatchback family carIsrael & Europe first half 2011- - 124 mi 81mph 23,000 euros 2013 Europe and IndiaLi-ion - 99 mi 65mph 14,995 euros 2012 Europe & IndiaSAIC Roewe 550 PHEV 4-door sedan Li-ion battery - - - - 2012 ChinaSAIC Roewe 750 EV 4-door sedan Li-ion battery - - - - 2012 ChinaTazzari Zero EV 2-seater - - 88mi - $31,000 Mid- 2010 USTesla Motors Roadster EV 2-seater 56 kWh 248 hp 220 mi 125 mph Base price $109,000 plus options Available nowTesla Motors Model S EV 4-door coupe, 7-seat42 kWh (standardconfig)-150 mi, 230 mi & 300 mi(based on battery option)130 mph $57,400 2012 USA & EUTh!nk City EV City car, 2+2 seating 22kWh - 112 mi 62 mph - "Available in Norway 2012 U.S."Toyota Prius Plug-in PHEV 4-door hatchback Li-ion batteries - 12.4-18.6 mi - -2010 to release 500 test fleet cars in Japan, EU & USA,Mass production 2012Volkswagen Golf Blue e-motion EV 4-door hatchback 26.5 kWh 85kW 93 mi. - - 500 vehicle test feet in 2011. Launch in 2013.Volkswagen E-Up! EV 2-door mini car - 60 kW 130km - - 2013Volvo C30 EV Two-door, four-seater 24 kWh - 94 mi 81mph - 2011Wheego LiFe EV Two-passenger mini car 30kWh 45kW 100 mi 65mph $32,995 Q4 2010 US

146 appendix b available vehicle matrixfleet electrification roadmap 147Available Vehicle Matrix — Commercial PortfolioMAKE MODEL TYPE DESCRIPTION/CLASS (IF APPLICABLE) BATTERY CAPACITY ELECTRIC MOTOR CAPACITY ELECTRIC DRIVING RANGE TOP SPEED PRICE TARGET INTROBoulder ElectricVehiclesBoulder ElectricVehiclesTruck EV Class 3 Delivery truck 80kWh 80kW 120 mi 65 mph - Q2 2010 USTruck & WUV EV Class 2 van 80 kWh 80kW 200mi 70 mph - Q2 2010 USBright Automotive Idea PHEV Class 1-2 van 13kWh n/a 38mi n/a n/a 2013-14 USDesignLine ECO-Smart I EV Bus (42 Passenger) 261.8kWh 240kW 120 mi. 76 kmph $600-700k more than traditional bus Available NowEVIMedium Duty (MD)Trucks& Walk-In (WI) VansEV Class 4, 5, 6 trucks 99 kWh Electric motor 150 kW scalable up to 90 mi. up to 60 mph $120K-$180K Available NowElectrorides ZeroTruck EV Class 4 truck 50 kWh 100 kW Up to 75 mi. 60 mph $130K Available NowFord Transit Connect EV Class 1 Van 28 kWh 98kW 80 mi. 75 mph n/a 2010IC Bus (Navistar) CE Series PHEV School Route Bus & Commercial BusLi-ion, liquid cooledbattery pack25-80kW Charge-depleting range 40 mi n/a $100K Available NowMercedes-Benz Vito E-CELL EV Van 36kWh 70kW 80 mi 50 mph - 2011Modec Box Van EV Class 3 Truck / Van 52-85kWh 70kW 60-100 mi (depending on battery type) 50 mph - Available Now - EuropeNavistar eStar EV Class 3 Truck / Van 80kWh 70kW 100mi 50mph $149,000 Available Now - USOptare Solo EV Bus EV Bus 80kWh 120kW 60 mi 56 mph - Accepting ordersProterra EcoRide BE35 EV Bus (51 passenger) 74kWh 150kW 50 mi 65 mph - Available NowRenault Kangoo ZE EV Compact commercial van 22 kWh 44kW 100 mi 130 kph (81 mph)20,000 euros (excluding battery)plus battery lease from 79 euros per monthSinautec Ultracap Hybrid Bus EV Bus - - 3.5mi 35mph - Available NowSmith Electric Vehicles Edison EV Class 2 Van or Bus 40kWh 90kW 100 mi 50 mph - Available NowSmith Electric Vehicles Newton EV Class 4-6 Truck 80kWh 120kW 100 mi 50 mph - Available NowEurope 2011

148 key to termsfleet electrification roadmap149Key to TermsACES 2009 American Clean Energy and Security Act of 2009.Advanced MeteringAdvanced TransmissionAmpereAdvanced electrical metering enables measuring and recording of usage data at regular short intervals andprovides this data to both consumers and energy companies.Electricity distribution that employs digital metering to improve provider communication and monitoringcapability as well as permit the efficient management of power flows, especially from variable renewable sources.A measure of electrical current which represents a flow of one coulomb of electricity per second.ARRA 2009 American Recovery and Reinvestment Act of 2009.Battery-Electric Vehicle (BEV)Blended ModeCarbon Dioxide EquivalentsCharge-Depleting (CD) ModeCharge-Sustaining ModeDirect-Injection TransmissionDrivetrainA type of electric vehicle (see below) that is propelled by an electric motor and uses the chemical energy storedin on-board batteries to power the motor.In a hybrid-electric vehicle, operating in blended mode uses both an electric motor and a gasoline engine operatingsimultaneously and in conjunction to power the vehicle’s drivetrain.The amount of carbon dioxide by weight emitted into the atmosphere that would produce the same estimatedradiative forcing as a given weight of another radiatively active gas.EVs and PHEVs operating in charge-depleting mode are drawing motive power and energy from the battery andreducing its state of charge. EVs always operate in charge-depleting mode.PHEVs in charge-sustaining mode are supplementing battery power with another source of energy, most commonlyfrom a gasoline-powered onboard generator. The battery's state of charge is not being reduced. HEVs essentiallyalways operate in charge-sustaining mode.A means of increasing power output and fuel efficiency in internal combustion engines. Gasoline is directlyinjected into the combustion cylinder, as opposed to fuel injection, when it is injected into the air intake.Also called the powertrain, the set of components for transmitting power to a vehicle’s wheels, including theengine, clutch, torque converter, transmission, driveshafts or axle shafts, U-joints, CV-joints, differential and axles.EISA 2007 Energy Independence and Security Act of 2007.Electric Drive Vehicle (xEV)Electric MotorElectric Vehicle (EV)Electric Vehicle Miles Traveled (EVMT)Electric MileElectric Vehicle Supply Equipment(EVSE)Extended-Range Electric Vehicle(E-REV)An inclusive term that refers to vehicles that incorporate some form of battery electric power in the drivetrain.Includes hybrid electric vehicles (HEVs); plug-in hybrid electric vehicles (PHEVs); Extended-range Electric Vehicles(EREVs); and electric vehicles (EVs).Transforms electrical energy into mechanical energy. In a grid-enabled vehicle, the electricity is supplied by the battery.A vehicle propelled 100 percent by an electric motor, which forms part of an electric drivetrain. The power comesin the form of current from an on-board storage battery, fuel cell, capacitor, photovoltaic array, or generator.The number of electric miles traveled nationally for a period of 1 year.For an electric vehicle, an electric mile is any mile in which the vehicle is propelled by an electric motor. ForPHEVs or E-REVs, an electric mile is the total miles traveled multiplied by the percent of total power provided byelectricity from the grid.The hardware of electric vehicle charging infrastructure, including public charging stations and wall- or polemountedhome vehicle chargers.Sometimes called series or serial plug-in hybrids. E-REVs are electric drivetrain vehicles that rely on an electricmotor to provide power to the drivetrain but which also include a gasoline internal combustion engine serving asan electrical generator to either provide electricity to the vehicle’s electric motor (supplementing the battery’sstored power) or to maintain the battery’s state of charge as it nears depletion. The gasoline engine is not usedto directly provide mechanical energy to the drivetrain.Internal Combustion Engine (ICE)IOCKilowatt (kW)Kilowatt-hour (kWh)LoadMild HybridNOCOriginal equipment manufacturer(OEM)Parallel HybridPeak Demand (or Load)Plug-In Hybrid Vehicle (PHEV)Power InverterPowertrainResidual Battery ValueSeries HybridSpare Oil Production CapacityTotal Cost of Ownership (TCO)TransformerTransmissionVehicle Miles Traveled (VMT)An engine that produces power by combining liquid fuel and air at high temperature and pressure in a combustionchamber, using the resulting gas expansion for mechanical energy. Conventional vehicle IC engines use twostrokeor four-stroke combustion cycles, which combust intermittently.An oil company that is fully or majority owned by private investors.A unit of power equivalent to 1,000 watts, 1,000 joules per second or about 1.34 horsepower.A unit of energy or work defined as the amount of energy released if work is done at a constant rate of 1 kW for 1 hour,equivalent to 3.6 megajoules. Commonly used to bill for the delivery of electricity.The amount of power (sometimes called demand) consumed by a utility system, individual customer, orelectric device.Hybrid systems that only stop the engine during idle (while still running heat, A/C etc.), and instantly start it whenthe vehicle is required to move, providing efficiency gains in the 5 to 10 percent range.An oil company that is fully or majority owned by a national government.A company that produces a product designed for the end user, whether a consumer or another manufacturingfirm. For example, an automotive OEM sells vehicles to consumers, typically through a dealer network; however abattery OEM may sell batteries only directly to automotive manufacturers.Hybrids that have an IC engine and electric motor that both provide torque to the wheels. In some cases, the ICengine is the predominant drive system with the electric motor operating to add extra power as required. Otherscan run with just the electric motor driving.The greatest electricity demand that occurs during a specified period of time.A form of HEV that generally has larger batteries, allowing it to derive more of its propulsion from electrical powerthan from the IC engine. PHEVs are, as a result, far more efficient in their use of energy than typical HEVs. Thesebatteries can be recharged by connecting a plug to an external electric power source.An electronic device that converts direct current (DC) into alternating current (AC) or AC into DC.See Drivetrain.The value of a battery established by the market after it has completed its primary purpose service life.A vehicle which has an IC engine and electric motor, but only the electric motor provides torque to the wheels.A series hybrid is therefore essentially an electric vehicle with a fossil fuel recharging system on board. Bothsources of power can be used if necessary.The amount of dormant oil production capacity which could theoretically be brought online within 30 days andwhich can be sustained for 90 days. Generally, only OPEC members maintain spare production capacity.A measure of the entire undiscounted cost associated with the purchase, maintenance, usage, and disposal of aproduct spread evenly over the expected service life.A device that transfers electrical energy from one circuit to another, converting electricity from one voltageto another, performing the step-down or step-up necessary to enable high voltage, low current transmission,minimizing losses over long distances.Interconnected group of lines and associated equipment for the movement or transfer of electric energy betweenpoints of supply and points at which it is transformed for delivery to customers or is delivered to other electric systems.The number of miles traveled nationally by vehicles for a period of one year.Full HybridGeneratorGrid-enabled Vehicle (GEV)Hybrids that provide enough power for limited levels of autonomous, battery-powered driving at slow speeds.Efficiency gains ranging from 25 to 40 percent.Converts mechanical energy from an engine into electrical energy.Electric or hybrid-electric vehicles that can be plugged directly into the electric grid to recharge onboard batteries.

150 acknowledgementsPartners & ConsultantsSecuring America’s Future Energy (SAFE) is a nonpartisan, not-for-profit organizationcommitted to reducing America’s dependence on oil and improving U.S. energy securityin order to bolster national security and strengthen the economy. SAFE has an actionorientedstrategy addressing politics and advocacy, business and technology, and mediaand public education.Since 1976, PRTM has created a competitive advantage for its clients by changing theway companies operate. The firm’s management consultants define the strategies andexecution required for transformational change, through operational experience acrossindustry value chains and extensive work within the public sector. PRTM has 19 officesworldwide and serves major industry and global public sectors.The Electrification Coalition would like to thank the entire team at GE Capital FleetServices and John E. Formisano and Associates for their invaluable contributions tothe Fleet Electrification Roadmap. We would also like to thank Utilimarc, R.L. Polkand Co., and Automotive Fleet for their assistance in assembling data for this report.

The Fleet Electrification Roadmap is a comprehensive analysis of thestate of transportation electrification in the United States and the nextsteps needed to deliver on the potential of grid-enabled vehicles. Thereport explores the opportunities and challenges facing electrificationof commercial and government fleets, identifies economically attractiveopportunities, and outlines a path to driving substantial fleet demand forgrid-enabled vehicles between 2010 and 2015.Electrification Coalition 1111 19th Street, NW Suite 406 Washington, DC 20036 TEL 202-461-2360 FAX 202-461-2379 ElectrificationCoalition.orgIn partnership with and in consultation with DESIGN BY MSDS | WWW.MS-DS.COM