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Industrial Transportation in Canada

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SD Business Case™

• Published SD Business Case™ Reports

ecoEfficiency in Commercial Buildings - 2007

Clean Conventional Fuel – Oil and Gas - 2006

Renewable Fuel – Hydrogen - 2006

Renewable Fuel – Biofuels - 2006

Renewable Electricity Generation - 2005

For full reports see www.sdtc.ca (Knowledge Centre)

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Introduction

• This SD Business CaseTM focuses on impacts of resource utilization

caused by the movement of goods and freight in the Industrial

Transportation sector, and provides a vision for the future of this sector

in Canada.

• It aims to identify direct and enabling technologies that can help create

more sustainable operations within and across all freight transportation

sub-sectors.

• It also identifies specific national policy strategy priorities that will help

the timely diffusion of these technologies into the Canadian market.

• It includes five industrial freight transportation sub-sectors:1. Rail

2. Marine

3. Off-Road

4. On-Road Heavy Trucking

5. Intermodal

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Why Industrial Transportation

• Canada GHG emissions ~750 Mt CO2e per year

• Currently, transportation activity contributes approximately 37 per cent to Canada’s total energy-related GHG emissions inventory

42.2%

45.7%

2.1%

9.8%

0.1%

Personal Vehicles

Industrial Freight

Buses and Public Transit

Passenger Air

Passenger Rail

Roughly half of Transportation emissions (approximately 96 MtCO2e per year) are attributed to freight transportation...

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Energy Use by Mode

16%

54%

8%

11%

11%

Medium Trucks

Heavy Trucks

Rail

Marine

Off-Road

…and over half of those emissions are attributed to trucking.

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Country

Industrial Transportation Emissions Intensity

(t CO2e/capita)

Canada (2006) 2.8

United States (2005) 2.0

Australia (2006) 1.5

European Union –

27 Countries (2005)

1.0

Canada

(SDTC Vision for 2030)

2.1

Canada Compared to Rest of World

On a per capita basis, the vision results in a transportation emissions-intensity still higher than that of the freight industry

in other major developed countries

•GHG intensity is tied

to fuel consumption

and fuel represents up

to 25% of the

operating costs for

Canadian freight

movers.

•Since freight

movement affects the

entire value chain,

being less fuel

efficient may

compromise Canadian

economic efficiency

relative to other

jurisdictions.

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Unique Canadian Context

• Canada ─ geographically dispersed centres of commerceand primary resource industries across a vast country

• Consequently movement of freight in Canada is an energy-intensive business

• Industrial transportation currently comprises approximately 19.4 per cent of Canada’s total GHG emissions, and is among the fastest-growing sources of emissions in the country.

• From 2002 - 2006, GHG emissions increased 12.6 per cent in the sector, with Class 6-8 trucking subsector comprising the majority of the increase.

• Situation has been exacerbated by a decoupling of air contaminant emissions from energy use (fuel efficiency has generally gone down to meet CAC emission standards from EPA)

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Industrial Freight is Worth Billions

• Approximately $650B (2006) worth of goods are shipped each year in

Canada.

• The industry employs about 500,000 people, and contributes about $46B

(or 4.3%) to Canada’s value-added GDP.

Contribution to

Total GDP ($M

2002)

Contribution to

Total GDP

(%)

Contribution to

Sector (%)

Rail 6,046 0.6 14.0

Marine 1,501 0.1 2.3

On-Road Trucking 15,050 1.4 32.6

Off-Road & Other 13,096 1.2 27.9

Air & Other Modes 10,081 0.9 20.9

Total 45,774 4.3 100.0

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Energy Use is Increasing

• Industrial freight transportation is an energy-intensive business

• Fuel combustion is the primary form of energy use in the transportation

sector: in 2006, it accounted for ~30% of all secondary energy use in

Canada (2,492 PJ).

• Industrial transportation accounted for 12% (1,019 PJ) of the total

secondary use.

• Industrial transportation energy

consumption increased by close to

60% between 1990 and 2006.

• On-road heavy trucking energy

consumption increased by more

than 140% over that period, while

Rail and Marine energy use

increased by about 7% each.

0

100

200

300

400

500

600

700

800

900

1,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Peta

jou

les (

PJ)

Heavy Trucks Medium Trucks Rail

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General Description

• e.

Industrial Transportation

Sector

Off-RoadSub-Sector

Application Area

Vehicle

On-Road Trucking

Marine Rail Intermodal

Local Long Haul

Classes 6 & 7 Class 8

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SDTC STARTM Process

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On-Road Trucking Vision

0

10

20

30

40

50

60

70

80

90

100

GH

G E

mis

sio

ns

(Mt

CO

2e

/yr)

Vision - Class 8 Business as Usual - Class 8

Vision - Class 6,7 and 8 Business as Usual - Class 6,7 and 8

By 2030, the Canadian on-road trucking industry will:

1. Reduce energy intensity by 40% in Class 8 and 80% in Classes 6&7

2. Reduce absolute energy consumption by 50% from projected levels by the year 2030, and its

3. Reduce GHG emissions by a corresponding 50%

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Key Drivers & Influences

•U.S regulatory decisions, such as EPA standards on CAC emissions or the more stringent NOx standards coming in 2010, can limit Canadian truckers’ ability to compete.

Emissions Compliance

•Inconsistencies in regional standards for size and weight of on-road vehicles (some provincial size restrictions, restrict use of equipment that can reduce fuel consumption) limit efficient freight movement

Regional Standards

•Pace of fleet renewal limited by access to available credit and the higher costs of new more efficient vehicles(e.g. hybrid, advanced emission control equipment).

Fleet Renewal

•Expected mandating of biodiesel for on-road vehicles raises issue of whether engine manufacturers will uphold warranties.

Equipment Warranties

•More than half are for-hire or owner-operators: this can make communication and adoption of new processes or technologies more difficult over broader range of participants.

Industry Makeup

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Technical Needs

Power Plant

• Advanced Diesel Engine Design: Optimized diesel engine technologies that can help

increase performance across varying loads and decrease engine wear and idling

(e.g. cylinder deactivation)

• Alternative Primary and Auxiliary Drive Systems: Alternative drive systems that

improve performance during transitional loads and regular operation (e.g. hybrid

systems, fuel cells etc.) and that replace use of auxiliary diesel units to supply

energy to non-drive train related loads (e.g. hotel systems, refrigeration etc.)

Energy Type and Energy Storage

• Existing and Alternative Fuels and Blends (biofuel, hydrogen, natural gas)

• Charge Depleting Energy Storage (batteries)

• Temporary Energy Storage (ultracapacitors and accumulators)

Vehicle Design

• Integrated Aerodynamics: Focused and optimized integration of current technologies

to improve performance and reduce fuel consumption (esp. long haul vehicles).

• Light-weighting: Lower-cost advanced materials to reduce tare weight and reduce

emissions in long haul applications.

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Technical Needs

Logistics

• Load Optimization Systems: Help eliminate empty backhauling through logistics

and advanced real-time pooling/aggregating technologies and mixed shipment

systems and design of universal containers that can allow for greater load pooling

and sharing.

• Information Sharing and Integration Systems: Shared information among trucking

companies to optimize vehicle use and increase overall productivity and

profitability

Pre- and Post-Conversion Systems

• Advanced After-treatment Systems: To ease compliance with regulatory changes

and encourage technology uptake;

• Advanced Diesel Engine Controls: Help avoid the high cost of after-treatment

systems;

• Real-time Emissions Monitoring: To enable improvements in monitoring and

vehicle operation as well as the opportunity for emission pricing and trading

Drive Train

• Continuously Variable Transmission (CVT)

• Electric drive trains

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Non-Technical Needs

1. Monetization of Emissions Reductions: There is a need to have a

common, integrated and country-wide approach to monetize GHG reductions,

either through tax incentives or the creation of emission offsets.

2. Fuel Economy Standards: Firm regulation and standards on fuel use and

fuel quality could increase the rate of technology uptake.

3. Incentive programs: Appropriate and timely incentive mechanisms could

help de-risk early adoption of technologies, and minimize pre-regulation

purchases (i.e. “stockpiling”).

4. Product Labeling: Common labeling protocol to help make more informed

purchasing decisions.

5. Consistent Vehicle Weights and Dimensions Regulations: Could promote

efficiency gains, but needs to be consistent with US rules

6. Data Acquisition Protocol: Allows for more comprehensive monitoring and

analysis which, in turn, can support the development of better logistics

7. Operator Training: More effective training in monitoring equipment

performance, vehicle maintenance, progressive gear shifting, trip planning,

etc.,

Implementation Timeline

• These technologies will contribute to emissions reductions in the sub-sector based on relative potential efficiency gains and the time they enter the market. The time to impact for each technology group is based on the priority ranking. For some, reductions will be achieved in a step-wise manner as certain technologies are implemented progressively over time.

Technology Uptake Timeline for Class 8 Vehicles

20

25

30

35

40

45

50

55

60

65

70

2000 2005 2010 2015 2020 2025 2030 2035

Mt C

O2e

BAU

Vision

Energy Type and Energy Storage

Pre- and Post- Conversion Treatment Systems

Power Plant

Drive Train

Logistics

Vehicle Design

Implementation Timeline

Technology Uptake Timeline for Class 6 & 7 Vehicles

0

5

10

15

20

25

2000 2005 2010 2015 2020 2025 2030 2035

Mt C

O2e

BAU

Vision

Energy Type and Energy Storage

Pre- and Post- Conversion Treatment Systems

Power Plant

Drive Train

Logistics

Vehicle Design

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SDTC Business Case™ Vision Summary

Industrial Transportation Vision compared to BAU scenario

48.8% emission

reduction over

BAU is possible

Projecting current BAU trends to 2030, sector GHG emissions will exceed 159 Mt CO2e

2020

Conclusion

• The vision can be achieved through the development

of new technologies, the adoption of advanced policies

and regulations, and the emergence of more

sophisticated risk management techniques for

investors.

SDTC estimate: About $1.5B is needed to fully commercialize the new

technologies in its portfolio of high assay projects. A government

instrument of about $500 M would be needed to help de-risk project

development and demonstration.

• Deeper cuts can only be realized through a comprehensive restructuring

of the Canadian industrial transportation sector and the enabling of a

shift in modes through intermodal infrastructure enhancements.

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Westport Innovations Inc.

Consortium members:

Westport Research Inc.Enbridge Gas Distribution Inc.Challanger Motor Freight Inc.

Demonstration of Use of Liquefied Natural Gas (LNG) and Westport Fuel Injector Technology in Heavy Duty Trucks (Completed)

Westport Research Inc. demonstrated a novel fuel injector technology which will prove the economic viability of operating heavy-duty (Class 8) trucks in a line-haul application using liquefied natural gas as the primary fuel instead of pure diesel. By using LNG, truck operators will be able to meet the upcoming low-emissions standards without incurring significant post-treatment costs.

Sunwell Technologies Inc.

Consortium members:

Alterna Energy Inc.Natural Resources Canada – CANMET Energy Technology CentreAll Wood Fibre Ltd.

Deepchill Thermo Battery Refrigerated Transportation System

Presently, all perishable products are transported by refrigerated containers, trucks and railroad cars cooled with expensive, highly inefficient portable diesel refrigeration units. They are then stored in refrigerated warehouses and stores cooled by mechanical refrigeration systems that require a continual power supply and circulation of hazardous gases. Sunwell is developing a new Thermo Battery system for transportation applications to work in conjunction with its existing commercial Deepchill technology that will greatly reduce the cost and environmental footprint of industrial refrigeration. Thermo Batteries are versatile rechargeable panels containing ice slurry which can be used to meet the entire refrigeration needs of grocers and food distributors from warehouse storage, to transportation for distribution, to store shelf cooling. The project aims to develop and demonstrate the Deepchill-Thermo Battery systems for the transportation refrigeration of perishable products in truck containers, rail containers and trolleys. The Thermo Batteries will allow the elimination of diesel gensets, dedicated fuel tanks and cooling coils filled with environmentally hazardous gases from the existing refrigerated transport fleet.

Développement Effenco inc.

Consortium members:

Développement Effenco inc.Gaudreau Environnement inc.Waste Management Quebec Inc.Private refuse truck fleet operatorsTransport CanadaAgence de l'efficacité énergétique du QuébecCentre de l'entrepreneurship technologique de l'école de technologie supérieure

Hybrid Refuse Truck

Développement Effenco and its partners will complete the development and demonstration of a new hybrid hydraulic regenerative braking system dedicated to refuse trucks. Using a hydraulic pump, the system regenerates kinetic energy while the truck is braking. The energy is stored in a hydraulic accumulator to be reused later in the hydraulic operations of the vehicle. This system is more cost effective than hybrid electric solutions, and the project aims to reduce fuel consumption by 20% and improve brake lifespan by a factor of three. The demonstration will validate these performance targets by collecting data from five different trucks operating on waste collection routes.

Electrovaya Corp.

Consortium members:

Electrovaya Corp.Unicell Ltd.SouthWestern Energy Inc.Halton Hills Hydro Inc.Purolator Courier Ltd.

Lithium Ion Superpolymer® Battery for Application in Zero-Emissions Commercial Fleet Vehicles

Electrovaya Corp. is demonstrating its patented Lithium Ion SuperPolymer® battery system for zero-emission battery-operated electric vehicles in commercial fleet operations. Electrovaya’s award-winning battery technology delivers the highest energy density of any battery technology on the market today, enabling electric and hybrid-electric vehicles to operate cleanly over a long range.

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Trucking and the Economy

• On-road heavy trucking contributed more than $14.2B to Canada’s economy in

2005.

• Almost 60% of Canada’s international trade is conducted through on-road freight

transportation, representing about $335B of trade with the U.S.

• International freight movement increased 188% between 1995 and 2005.

• Most of the domestic transport (65%) is within individual provinces and only 35%

is between provinces.

• Domestic trade revenues doubled between 1995-2005.

• Roads are publically owned, and each year Canadians invest about $18B to repair

and replace aging infrastructure (approximately 6% of the funding comes from the

federal government).

Heavy trucking is the largest contributor to the Canadian economy of all five freight transport sub-sectors under consideration.