By John Petersen
One of the first lessons investment professionals learn is that if an investment proposal sounds too good to be true, the proposal is probably materially false and misleading. On November 15th, the Electrification Coalition released its Fleet Electrification Roadmap and once again proved the wisdom of the "Too Good To Be True Rule." I know that lobbyists are supposed to take a policy position and make the best case they can; but when their case is based on deliberate distortions, somebody has to point out the differences between current realities and bafflegab.
In building the best policy case for the electrification of commercial fleets, the Roadmap used this gee-whiz graph of vehicle emissions by technology and fuel type. The source of the data was a 2007 study by the Electric Power Research Institute.
Click to enlarge
Unfortunately the 2007 EPRI data that served as a basis for graph is meaningless. The fundamental premise is flawed because the graph assumes well-to-wheel CO2 emissions of 450 grams per mile for a car with an internal combustion engine and 300 grams per mile for an HEV. Unfortunately both estimates overstate current realities by about 50%.
The internal combustion engine values may have been good a few years ago, but they're worthless in light of new CAFE standards that the NHTSB and EPA adopted in April. These standards require the new light duty vehicle fleet to meet or exceed the following increasingly stringent CO2 emissions standards.
|Model||CO2 Emissions||CO2 Emissions|
|2012||295 grams per mile||369 grams per mile|
|2013||286 grams per mile||358 grams per mile|
|2014||276 grams per mile||345 grams per mile|
|2015||263 grams per mile||329 grams per mile|
|2016||250 grams per mile||313 grams per mile|
Similarly, the HEV values may have been good a few years ago, but they are meaningless in light of the fact that the 2010 Toyota (NYSE:TM) Prius has pump-to-wheel CO2 emissions of 89 grams per kilometer, or 143 grams per mile, and well-to-wheel CO2 emissions of 179 grams per mile.
If you reduce the Roadmap's 450 gram per mile ICE estimate to comply with the regulatory mandate of 313 grams per mile by 2016, PHEVs lose much of their appeal. If you reduce the HEV estimate to the current 179 grams per mile performance of the Prius, the only plug-in that can honestly claim parity, much less superiority, is one that's equipped with a dedicated wind turbine.
I wholeheartedly support the Electrification Coalitions desire to "disseminate informed, detailed policy research and analysis," but think that they should consider adding "accurate, current and balanced" to the desiderata. If any of the CEOs that support the work of the Electrification Coalition published this kind of nonsense in their SEC reports, there'd be hell to pay.