Governors' Climate Summit: Future of the Automobile Examined

Mary Nichols, Chair, California Air Resources Board: This is the first time that the U.S. EPA and the Department of Transportation are bringing together fuel economy and emissions into one rule-making. As a former EPA official I can't begin to describe the complexity of that undertaking, not only from a technical perspective, but dealing with all of the different regulatory requirements and cultures of those two administrations is a phenomenal undertaking...

...Earlier this month, an assortment of car companies, which included Daimler, Ford, GM, Honda, Toyota, Hyundai, and Nissan, issued a letter of understanding stating that several hundred thousand fuel-cell vehicles could be commercialized beginning in 2015. Is this a confirmation that the problems of the fuel cell vehicles have been solved and that they are going to be coming online in a roughly equivalent time frame?

Bharat Balasubramanian, Vice President, Product Innovations and Process Technologies, Daimler AG: There is a chicken and egg problem in the automobile and infrastructure industry. We decided to look at that with all the companies and with the utilities, and came to a memorandum of understanding to commit ourselves to producing a large numbers of fuel-cell cars, on the automotive side. On the infrastructure we also got commitments from the German government that they will put the proper hydrogen infrastructure in place. The challenges have been addressed. We have a road map that addresses the challenges by 2015 to get the cost down and increase the efficiency of the fuel cell and to make them commercially viable.

Edward Kjaer, Director, Electric Transportation, Southern California Edison: We have been involved in fuel cell research for quite some time. It is interesting because a fuel cell vehicle was developed as a million-dollar car. I remember when Honda came out with their first fuel cell vehicle quite a few years ago. They cost $1 million between the fuel cell stack, the systems that it took to operate them, and the very unique metals and materials that went into creating the fuel cell. It was quite exotic.

We have seen reductions not only in costs for fuel cell stacks by magnitudes, to the point where we believe that we can probably put a fuel cell vehicle on the road in 2015 at a premium of around $300,000. It has really come down that significantly. Other issues that were significant in fuel cell operation have been resolved. The durability of fuel cells has been resolved. We have fuel cells now that are running for 300,000-400,000 miles on benches that prove the durability of the system. Cold weather issues were always a problem with fuel cells because the emission from the vehicle is water vapor. The water vapor would freeze in cold weather. We have resolved that.

We had a range issue. We ran a fuel cell vehicle on an Alaskan highway. We brought it down 3,000 miles from Alaska to the American border. It was getting 300 to 400 miles per leg. The problem was that we had to run a hydrogen fuel tank out ahead of us because there is no infrastructure to support it.

That will remain the challenge as we go forward. The storage, creation, and the infrastructure of hydrogen are the issues I am sure that all of the manufactures researching fuel cells are aware of.

Mary Nichols, Chair, California Air Resources Board: Is this a struggle that requires we place all of our bets on one thing or are there enough resources in the world for a variety of these technologies to develop before we decide what the winners are? I hear you saying that we need to look at a variety of things even though the costs of transformation are clearly very high. There is a lot of noise out there too, in terms of the competition for different products and the different visions of what success might be.

He Kebin, dean of the Graduate School of Environmental Science and Engineering at Tsinghua University, China: ...From the perspective of China: bring in the technology that works. We don't have that much time for scientific experiment; regardless, don't ever stop investment because you might find something that changes the world again. The technology exists-it's about the business models and planning one step ahead of where hydrogen fuel cells are. I have nothing against it; it is just a question of how much time we have with the environment and the political situation.

Christopher Reynolds, Group Vice President and General Counsel of Toyota Motor Sales, Inc: We are in the battery business. We probably manufacture more large nickel metal hydride batteries for large-scale production than anybody does globally. We do all of our research and development in house. We don't buy technology from other companies. If you go over to our test facility, there are benches after benches, hundreds of yards long, testing batteries and this technology.

There are a number of things that are required from our standpoint to bring a battery or battery vehicle to market and we just won't compromise. For one thing, it has to have a life cycle of at least 150,000 miles on the battery. We can not guarantee that at this point in time. We are working very hard. Our research and development is $1 million an hour, 24/7. Believe me, a large percentage of it is going into battery research and advanced technologies.

We firmly believe that it is coming, we just don't see it there quite yet. It is not that we can't get a car to operate efficiently on a battery. Our concern is the one part of the equation that doesn't get discussed very often is the consumer. We fell into the hybrid technology-when the first Prius came out, it was a crapshoot. We really didn't have any idea as to how it was going to be received. It was ok for early adapters. Generation two became a lot more mainstream. It was a little bit larger. It performed better. It had very good characteristics. Generation three was even better.

If a consumer were to trade their current vehicle or anything else-a flat screen TV or their computer, I don't care what it is-if the new product cannot be an immediate substitute for what the customer has grown to expect out of the product that you are substituting it for, then you have a challenge. The technology that we are looking at today is $8,000 for 20 kilowatt hours. That is about $400 per kilowatt hour. I will buy all of those batteries that anyone can provide me right now. If you have a $400 kilowatt hour batter, come on up. I will take your business card right now. Our numbers are three or four times that, so maybe we are missing something.

Diarmuid O'Connell, Vice President of Business Development, Tesla: This is a global conversation so it's a little hard to figure out where to begin. I am a pragmatic person individually and when I was outside of the industry four years ago I was struck by some of the natural economics. On the one hand, the energy providers and the oil companies have a natural impulse and fiduciary responsibility to protect business. So too do the auto manufactures have the responsibility to their customers to provide the safest possible vehicle, even beyond regulatory aspects. At the end of the day, it is going to be the consumers who decide what works for them.

The real benefit of Tesla Motors, and some of the other small manufacturers, testing these technologies and putting them on the road, is that they tweak a competitive instinct in the broader economic context. That is the dynamic of our economy-creating a competitive impulse. The fact that Tesla Motors has garnered so much press has created a dynamic where the incumbent has to, in some way, answer. I don't know what the trajectory of investments is in respect to the millions of dollars per hour is, but I would hazard that the investment has increased over the course of the past three or four years.

It is the role of government not to choose winners, but to set a regulatory process that encourages the most intense competition possible. It is only through that way that consumers will have enough experiences with technology to get the near-term solution. Frankly-and this is the endpoint-it is a trajectory. I get extraordinarily frustrated with the question about, "Well, if all of these electric vehicles go on the road, isn't it going to take down the grid?" It won't. It's going to be incremental.

Mary Nichols, Chair, California Air Resources Board: We need to talk a little bit about charging. How do we do that?

Bharat Balasubramanian, Vice President, Product Innovations and Process Technologies, Daimler AG: Europe is very strong on making a standard and then making it a worldwide standard. The European automobile industry has given the supplies and infrastructure for keeping their cars connected...I am a bit worried that in the United States you are going to have a very primitive EV connector. If you have one plan for the coming years, you need to have a standardized connection and you need to have a smart interface between the connection, the user, and the grid.

Charging occurs in three primary locations: at home where the car sleeps (and there is a huge amount of extra resources at night, when the wind blows in California, for instance), at work, the car sleeps there a lot of times, and it also has to happen in commercial and retail and other places, which is a short term post...

...We also believe that you have to be able to switch out a battery so you can eliminate the anxiety of running out. You can solve it by having bigger and better batteries; you can solve it by having switchable batteries. As a service provider, we are not a technology company: we put out methods of charging, and switching, and software that communicates with the brakes to make sure that we aggregate and orchestrate so that is always charging. By switching the battery it addresses the cost of the computer. Research has shown-in Israel and Denmark-that instead of a contract with the gas station, which is variable and changes all the time, consumers would rather have a four-year contract with a service provider that gives me charge, switch, and the battery. I want a fixed plan. That means I can drive to San Francisco and back; I can do the things I want to as a consumer...

Mary Nichols, Chair, California Air Resources Board: What are the odds that the passenger vehicle fleet can be transformed from what it is today, which is nearly all conventional, with a sprinkling of alternative vehicles like electric or hydrogen fuel, by 2050? That means that, given turnover, every car being sold by 2020 or 2030 would have to be non-petroleum. Does anybody want to throw out a guess as to what our chances are?

Christopher Reynolds, Group Vice President and General Counsel of Toyota Motor Sales, Inc: From our standpoint, looking out to 2050, right now we see about 40 percent of the vehicle fleet being electric-plug-in hybrids, hydrogen vehicles, EVs. To answer the question, we are quite optimistic and positive about the future and developments around electric drive. We think it's an inevitable part of the future.

I will back up a second and bring in the last part of the conversation. When you think about California, one of the things I have to applaud California for is being willing to try things despite how damn frustrating that is. You've tried ethanol. You've tried CNG. You tried EV1s. You tried hydrogen. I think the message is that each of these solutions is extremely complicated. It's not just the technology or the vehicle, it is also the infrastructure, the supply team, the consumer, and the value proposition.

Despite all of the money Toyota spends on customer research it is difficult to predict how people will respond. A little bit of wisdom that we've come to over the years is reversing setbacks. That means we had thought, "Wow, we are so smart; we have this figured out." We went down a path and something we didn't anticipate ended up happening. Luckily we have had a back-up option and another back-up option. That is all we are asking: let's keep the options in play in case we need them because we are going to have to reverse setbacks.

The second thing I would say is that one of the roles of government is to set the standards for these new technologies, and set them consistently so it enables the market innovators to push the new technology. Set a level playing field and let the market move it forward.

Diarmuid O'Connell, Tesla Vice President of Business Development: Yes, the role of the government is to set standards, but standards can be used as much to erode progress as much as they can to set the stage. Minimum standards are our philosophy because the minimum standards will derive from the practicum of people using these methods. That is what I would encourage. Standards, yes, but standards that facilitate rather than inhibit.