USPTO - GHG challenges, opportunities - Steven Sherman, HATCI

This report (including any attachments) is a confidential and classified document. The publication or distribution of this report or

the information contained herein must not be disclosed without the written approval of the author.

Light-duty transportation GHG challenges and opportunities

07.13.2016

Hyundai-Kia America Technical Center, Inc. (HATCI)

Powertrain – Fuel Economy Development

Steven Sherman

This report (including any attachments) is a confidential and classified document. The publication or distribution of this report or the information contained herein must not be disclosed without the written approval of the author.

Introduction 1

Steven Sherman Fuel Economy Development Engineer @ Hyundai-Kia America Technical Center, Inc. (HATCI) University of Michigan Chemical Engineering, 2011 Energy Systems Engineering, 2012 Entrepreneurship, 2013 Mission: “Change the way people think about and use energy” 5 minute Ignite talk - bit.ly/terawattproblem

http://bit.ly/terawattproblem

http://bit.ly/terawattproblem


HATCI 2

As one of Hyundai Motor Group’s (HMG) ten centers focused on research and development (R&D), Hyundai America Technical Center, Inc. (HATCI) was established in 1986 in Ann Arbor, Michigan. HATCI is HMG’s design, technology and engineering headquarters for North America.


Purpose 3

Overview of one of the US’s most important energy and climate policies: Light-duty transportation greenhouse gas (GHG) emission regulations Why the policy is important to the US and represents a major turning point

in energy and climate policy

How the regulations are set up, including several flexibilities that more directly incentivize innovation, invention, and technology adoption

Brief recap of how vehicles consume energy and some technologies that can improve their efficiency

Standing of auto manufacturers through MY2014 and a breakdown of how they’ve been complying

Outlook of technologies to meet future regulations and the pace of improvement the industry must meet


Energy 4

Serious economic and social benefits to humankind


Energy 5

Serious economic, social, and environmental costs to humankind


Transportation 6

Undreamed of levels of mobility and freedom


Transportation 7

Some serious side effects

Safety: 1.2M roadway fatalities worldwide, ~33,000 in US each year

Energy: 95%+ dependent on oil

Environment: 1/3 of US GHG emissions

Congestion: Traffic delays costing $100B+ per year

Parking: Land use, delays, cost

Infrastructure: Aging and costly


Transportation Energy 8


Transportation Energy 9

CO2 ~99% Greenhouse Gas (GHG)


Transportation energy policy: two regulations, similar goals 10

Corporate Average Fuel Economy (CAFE) National Highway Traffic Safety Administration (NHTSA) Enacted in 1975 Goal: petroleum reduction

Greenhouse Gas (~99% CO2) (GHG) Environmental Protection Agency (EPA) Enacted in 2012 Goal: greenhouse gas reduction


GHG policy history 11

2007: Massachusetts v. Environmental Protection Agency – GHG in

“atmosphere may reasonably be anticipated both to endanger public health and to endanger public welfare.” Enforced by EPA under Clean Air Act


GHG policy history 12

2007: Massachusetts v. Environmental Protection Agency – GHG in

“atmosphere may reasonably be anticipated both to endanger public health and to endanger public welfare.” Enforced by EPA under Clean Air Act May 2009: Presidential directive to “harmonize” national CO2 and fuel economy standards. EPA and NHTSA have issued Notice of Proposed Rule Making (NPRM). The major stakeholders agreed to the plan. 2025 mandates for fleet average: Fuel economy = 54.5 MPG Emissions = 163 gCO2/mile To ease the burden and costs: Add credit flexibilities, harmonize (blend) agencies, mid-term review


CAFE regulation history 13

17.0

22.0

27.0

32.0

37.0

42.0

47.0

52.0

57.0

Co

rpo

rate

Avera

ge F

uel Eco

no

my [

MP

G]

History of CAFE and Projected Future Standards

Passenger Cars Light Trucks“54.5 MPG”

US Corporate Average Fuel Economy (CAFE) regulations scheduled to approximately double through 2025, offering major challenge to automotive OEMs. 2025 standard of 54.5 MPG, harmonized with GHG regulation of 163 gCO2/mile.


GHG regulation history 14

295

286

276

263

250 243

232

222

213

199

190

180

171 163

140

190

240

290

340

2010 2012 2014 2016 2018 2020 2022 2024 2026

GH

G s

tan

dard

s [g

CO

2/m

ile]

History of GHG and Projected Future Standards

Passenger Car Light Truck Fleet Combined

CAFE-harmonized GHG regulation established in 2012, enforced under Clean Air Act. Non-compliance of GHG regulation can result in significant fine (up to $37,500 per vehicle) and loss of compliance certificate for sales.


GHG rule structure 15



GHG credits must be considered at two levels: manufacturer balance [megagram] and vehicle standard [g/mile] Company compliance is based on the balance of total GHG credits (megagrams) which are generated from vehicle emissions below their standard (g/mile; function of footprint) and regulatory flexibilities Vehicle / Technology Credit = the credit value for a specific vehicle compared to the standard or credit generated through use of a flexibility (alternative fuel vehicles, air conditioning, off-cycle credit) [grams/mile] Production = the total number of passenger cars or light trucks produced with corresponding credit technology VLM = vehicle lifetime miles; cars = 195,264 miles, light trucks = 225,865 miles (EPA-defined)

𝑇𝑜𝑡𝑎𝑙 𝐶𝑟𝑒𝑑𝑖𝑡𝑠 𝑚𝑒𝑔𝑎𝑔𝑟𝑎𝑚𝑠 = 𝑉𝑒ℎ𝑖𝑐𝑙𝑒 𝑜𝑟 𝑇𝑒𝑐ℎ𝑛𝑜𝑙𝑜𝑔𝑦 𝐶𝑟𝑒𝑑𝑖𝑡 𝑥 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑥 𝑉𝐿𝑀 ÷ 1,000,000



GHG credits must be considered at two levels: manufacturer balance [megagram] and vehicle standard [g/mile] Company compliance is based on the balance of total GHG credits (megagrams) which are generated from vehicle emissions below their standard (g/mile; function of footprint) and regulatory flexibilities Vehicle / Technology Credit = the credit value for a specific vehicle compared to the standard or credit generated through use of a flexibility (alternative fuel vehicles, air conditioning, off-cycle credit) [grams/mile] Production = the total number of passenger cars or light trucks produced with corresponding credit technology VLM = vehicle lifetime miles; cars = 195,264 miles, light trucks = 225,865 miles (EPA-defined)

Example (Vehicle): MY2019 Truck has 2-cycle tailpipe emissions of 315 g/mile Target CO2 standard for MY2019 is 300 g/mile Assume production of 50,000 units

300 − 315 𝑔

𝑚𝑖𝑙𝑒 𝑥 50,000 𝑡𝑟𝑢𝑐𝑘 𝑥 225,865

𝑚𝑖𝑙𝑒𝑠

𝑡𝑟𝑢𝑐𝑘 ÷ 1,000,000 = −169,400 𝑚𝑒𝑔𝑎𝑔𝑟𝑎𝑚𝑠

Example (Technology): ISG (start-stop) is applied on next generation Car Engine idle start-stop has an off-cycle menu credit value of 2.5 g/mile Assume production of 100,000 units

2.5 𝑔

𝑚𝑖𝑙𝑒 𝑥 100,000 𝑐𝑎𝑟𝑠 𝑥 195,264

𝑚𝑖𝑙𝑒𝑠

𝑐𝑎𝑟 ÷ 1,000,000 = +48,816 𝑚𝑒𝑔𝑎𝑔𝑟𝑎𝑚𝑠

𝑇𝑜𝑡𝑎𝑙 𝐶𝑟𝑒𝑑𝑖𝑡𝑠 𝑚𝑒𝑔𝑎𝑔𝑟𝑎𝑚𝑠 = 𝑉𝑒ℎ𝑖𝑐𝑙𝑒 𝑜𝑟 𝑇𝑒𝑐ℎ𝑛𝑜𝑙𝑜𝑔𝑦 𝐶𝑟𝑒𝑑𝑖𝑡 𝑥 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑥 𝑉𝐿𝑀 ÷ 1,000,000



Number of flexibilities included in GHG regulation rulemaking: ① Footprint-based targets; separate car and truck standards; fleet averaging ② Banked early credits; alternative fuel vehicles; air-conditioning (direct, indirect); off-cycle ③ Credit trading between OEMs ④ Carry-forward of deficit

①

②

③

④


GHG rule structure – 2-cycle tailpipe 19

① Footprint-based (square footage of vehicle) targets determine standard [g/mile] Compliance value measured using 2-cycle (FTP, HWFET) testing. Compliance value of individual vehicle below standard (lower g/mile) generates credits; compliance value above standard (higher g/mile) generates deficit.

①



Footprint curves set emissions target standard for vehicle [g/mile]

FTP (City) and HWFET (Highway) test cycles are completed on chassis dynamometer to calculate fuel economy

Road load curves model force as a function of speed

Chassis dyno used to simulate drive cycles Emissions analyzed, fuel economy adjusted and calculated





2-cycle tailpipe standards are the core of GHG emission standards Engine Efficiency Improvements: Cylinder Deactivation – up to 5% Turbocharging – up to 8% Gasoline Direct Injection – 1% Variable Timing & Lift – 3-4%



2-cycle tailpipe standards are the core of GHG emission standards Transmission Efficiency Improvements: Additional Gears – 2-4% Continuously Variable Transmission (CVT) – 3-4% Dual-clutch Transmission – 3-4%



2-cycle tailpipe standards are the core of GHG emission standards Electrification: Idle Start-Stop – 2% Mild Hybrids – 3-6% Hybrids – 27-35%



2-cycle tailpipe standards are the core of GHG emission standards Other efficiency improvements: Reducing vehicle mass – 1-3% per 5% reduction in mass Improving aerodynamics – 2-4% Low rolling resistance tires – up to 4%


Technology adoption rates 26

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 5 10 15 20 25 30 35 40

Lig

ht

Du

ty T

ech

no

logy P

en

etr

ati

on

[%

]

Years after first significant use

Technology penetration rates since first year of use

Variable Valve Timing

Multi-Valve

Lockup

Front-Wheel Drive

Fuel Injection

Start-Stop

Gasoline Direct Injection

Cylinder Deactivation

Gasoline Hybrid

Turbocharging


Technology adoption rates 27

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0 2 4 6 8 10 12 14 16 18 20

Lig

ht

Du

ty T

ech

no

logy P

en

etr

ati

on

[%

]

Years after first significant use

Technology penetration rates since first year of use

Start-Stop

Gasoline Direct Injection

Cylinder Deactivation

Gasoline Hybrid

Turbocharging


GHG rule structure – credit flexibilities 28

② Additional credits can be generated through several flexibilities ⓐ Alternative fuel vehicles - Plug-in hybrid, battery electric, and fuel cell

vehicles assume 0 g/mile for grid electricity - CNG vehicle CO2 emissions reduced 85% - Flex-fuel vehicles weight alternative fuel

emissions down 85% - All alternative fuel incentives phase-out ⓑ Air conditioning - Direct – using lower GWP refrigerant and

improving leakage rate; SAE J2727 - Indirect – reducing A/C load on engine; AC17 ⓒ Off-cycle credits - Menu-based - 5-cycle testing - Public process

②


GHG rule structure – Alternative Fuel Vehicles 29

ⓐ Alternative fuel vehicles

- Plug-in hybrid, battery electric, and fuel cell vehicles assume 0 g/mile for grid electricity

- CNG vehicle CO2 emissions reduced 85%

- Flex-fuel vehicles (E85, biodiesel) weight alternative fuel emissions down 85%

- All alternative fuel incentives phase-out (FFV by MY16)


GHG rule structure – Air Conditioning (Direct, Leakage) 30

ⓑ Air conditioning - Direct – using lower GWP refrigerant and improving leakage rate

Global Warming Potential (GWP) example: 1g R11 (Trichlorofluoromethane) = 4750g CO2


GHG rule structure – Air Conditioning (Indirect, Efficiency) 31

ⓑ Air conditioning - Indirect – reducing A/C load on engine

Emissions are measured during the SC03 and HWFET phases.

A/C on, solar load on A/C off, solar load off EPA 74 Preconditioning and MAC Cycle – Solar OFF and AC OFF

Solar and AC off

Menu of technologies to improve A/C efficiency + new test to quantify performance of system at vehicle level


GHG rule structure – Off-cycle Credits 32

ⓒ Off-cycle credits - Menu-based - 5-cycle testing - Public process

Technology Note Adjustment for cars Adjustment for trucks

Waste heat recovery 100 watt recovery 0.7 0.7

High efficiency exterior lighting 100 watt savings 1.0 1.0

Solar panels Battery charging only 3.3 3.3

Active cabin ventilation and battery charging 2.5 2.5

Active aerodynamic improvements 3% aerodynamic drag or Cd reduction 0.6 1.0

Engine idle start-stop w/ heater circulation system 2.5 4.4

w/o heater circulation system 1.5 2.9

Active transmission warm-up 1.5 3.2

Active engine warm-up 1.5 3.2

Thermal control technologies Up to 3.0 Up to 4.3

Adjustments in units of [g/mile]

Limit of 10 g/mile for menu-based technologies

EPA-defined menu of technologies and their credit values




US06 (Aggressive)

SC03 (95F, A/C)

Cold FTP (20F)

FTP (City, cold start)

HWFET (Highway)




Discussion with and petition to EPA, including input from public comments, for technologies that have ‘real-world’ benefits either above

their menu values or that are not on the off-cycle menu



③ Credits may be traded (sold) among manufacturers with a great deal of flexibility. Pricing indirectly set by market transactions, not EPA; can also be approximated through CAFE fines ($55/MPG under standard). As standards become more stringent through 2025, credit value expected to double.

③

2005 2010 2015 2020 2025

20

25

30

35

40

45

50

55

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

20 25 30 35 40 45 50 55

Cre

dit

Valu

e [

$ /

MgC

O2]

CAFE Standard [MPG]

Value of CAFE / GHG Credits Based on "$55 per vehicle for every 1 MPG under CAFE standard"

penalty



36 MY14 Manufacturer GHG Performance CONFIDENTIAL

RESTRICTED 36

For MY14 (latest EPA Manufacturer Performance report), US fleet as a whole was GHG compliant (~40M positive credit balance)



37 MY14 Manufacturer GHG Performance CONFIDENTIAL

RESTRICTED 37

For MY14 (latest EPA Manufacturer Performance report), US fleet as a whole was GHG compliant (~40M positive credit balance)

However, majority of GHG credits have been generated from flexibilities

o FFV was majority (~30M) – phases out in MY16 o A/C leakage (~15M), A/C efficiency (~10M) played significant role o Off-cycle played small role in MY14 (~8M) o Total fleet not keeping pace with tailpipe (2-cycle) base standards; greater than 20M deficit in MY14

-30,000,000

-20,000,000

-10,000,000

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

2-cycle Tailpipe

[Mg]

FFV [Mg] A/C Leakage [Mg] A/C Efficiency

[Mg]

Off-cycle Credits

[Mg]

CH4, N20 Deficit

[Mg]

MY14 GHG [Mg]

To

tal G

HG

cre

dit

s [M

g]

MY14 GHG credits category breakdown

PT, mass reduction, aero, etc.

FFV – phase out in

MY16


81,2

71,8

23

39,2

33,0

10

30,3

80,0

22

27,5

09,0

54

19,7

27,3

64

17,8

10,7

33

13,7

59,5

76

10,2

36,7

11

9,8

19,0

76

7,1

60,0

86

1,5

32,5

64

1,3

33,2

67

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

Toyota Honda GM Ford Hyundai Nissan Fiat

Chrysler

Subaru Kia Mazda BMW Mitsubishi

GH

G c

redit

s carr

ied t

o M

Y15 [

Mg G

HG

]

OEM MY15 GHG standings (industry top half)

MY14 Manufacturer GHG Performance 38

OEM total credit balance carried forward to MY15. Top 7 OEMs (of 24 total) own 90% of balance Credits carry forward up to 5 years; deficit allowed for up to 3 years.


(2,000,000)

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Cre

dit

s gen

era

ted in

MY

14 [

Mg G

HG

]

OEM MY14 GHG credits generated



(40)

(30)

(20)

(10)

-

10

20

30

40

50

60

70

Cre

dit

s gen

era

ted in

MY

14 [

Mg G

HG

/ v

eh

icle

]

OEM MY14 credits generated per production volume



MY14 Manufacturer GHG Performance - breakdown 41

Passenger Cars (PC): 1. Japanese big 3 (Toyota, Nissan, Honda) have strong standing in MY14; not heavily dependent on flexibilities (some A/C, no FFV) 2. US big 3 (Ford, GM, FCA) and Volkswagen heavily dependent on FFV (phasing out MY16), negative 2-cycle tailpipe emissions balance 3. Other OEMs have relatively low absolute balance of GHG credits (surplus or deficit)

-6,000,000

-4,000,000

-2,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

To

tal G

HG

cre

dit

s [M

g]

MY14 Passenger Car GHG credit generation and breakdown

2-cycle Tailpipe [Mg] FFV [Mg] A/C Leakage [Mg] A/C Efficiency [Mg]

Off-cycle Credits [Mg] CH4, N20 Deficit [Mg] MY14 GHG [Mg]



Light Trucks (LT): 1. US big 3 (Ford, GM, FCA) heavily dependent on FFV (phasing out MY16), negative 2-cycle tailpipe emissions balance 2. Toyota also using FFV flexibility for LT compliance, negative 2-cycle tailpipe emissions balance 3. Subaru taking advantage of LT classification 4. Other OEMs have relatively low absolute balance of GHG credits (surplus or deficit)

-15,000,000

-10,000,000

-5,000,000

0

5,000,000

10,000,000

15,000,000

To

tal G

HG

cre

dit

s [M

g]

MY14 Light Truck GHG credit generation and breakdown





-20,000,000

-15,000,000

-10,000,000

-5,000,000

0

5,000,000

10,000,000

15,000,000

20,000,000

To

tal G

HG

cre

dit

s [M

g]

MY14 Fleet GHG credit generation and breakdown




2,7

21,3

11

2,3

34,2

34

2,1

93,4

50

2,0

94,7

42

1,4

46,1

65

1,3

25,6

34

590,6

10

548,3

61

536,3

87

465,8

96

379,3

26

370,4

38

296,1

59

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

MY12-14 OEM production (industry top half)

MY12 MY13 MY14 Cumulative Production [%]

MY14 Manufacturer GHG Performance - production 44

#8 #9

Production volume used to calculate credit balance [megagrams] from individual vehicle [g/mile]; production volume key metric for OEM business. MY14 fleet total production of 15,514,338 vehicles; top 9 OEMs capture 90% of market.


MY14 GHG credit flexibilities – Off-cycle credits 45

9.8%

0.0%

15.0%

2.1%

9.6%

50.7%

8.7%

14.2%

23.2%

5.5%

43.0%

0.0% 0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

MY14 GHG off-cycle credit menu technologies by production adoption

Significant adoption: Solar glass / glazing, high efficiency exterior lighting, active engine warmup, active transmission warmup, passive cabin ventilation

Some adoption: Grill shutters, active cabin ventilation, active seat ventilation, solar reflective surface coating, engine idle stop-start

Industry has not adopted 2 technologies to significant scale: ride height adjustment, solar panels


GHG Credit Transactions 46

GHG credit trading

OEM MY10 vintage MY11 vintage MY12 vintage MY13 vintage MY14 vintage

Total to date (MY10-13)

[Approximate Value $USD]

Credits Disbursed

(sold)

Honda (3,609,383) -- -- -- -- (3,609,383)

[+$144,375,000]

Nissan (200,000) (1,000,000) (250,000) -- -- (1,450,000)

[+$58,000,000]

Tesla (35,580) (14,192) (177,941) (1,048,689) (1,019,602) (2,269,004)

[+$90,760,000]

Toyota (2,507,000) -- -- -- -- (2,507,000)

[+$100,280,000]

Credits Acquired (bought)

Ferrari 265,000 -- -- -- -- 265,000

[-$10,600,000]

Fiat Chrysler 5,651,383 500,000 -- 1,048,689 1,019,602 8,219,674

[-$328,787,000]

Mercedes 435,580 514,192 427,941 -- -- 1,377,713

[-$55,110,000]

Japanese big 3 and Tesla have sold significant quantity, value of excess GHG credits generated Smaller volume, luxury / sport OEMs (Mercedes, Ferrari) purchasing credits to offset deficits FCA has purchased substantial amount of credits valued above $300M

Important: price of GHG credits driven by MARKET, not regulation; values shown above are only estimates.


GHG Credit Transactions 47

2005 2010 2015 2020 2025

20

25

30

35

40

45

50

55

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

20 25 30 35 40 45 50 55

Cre

dit

Valu

e [

$ /

MgC

O2]

CAFE Standard [MPG]

Value of CAFE / GHG Credits Based on "$55 per vehicle for every 1 MPG under CAFE standard" penalty


Future GHG projections 48

GHG standards present significant challenge to traditional internal combustion engine powertrain 3% of MY15 vehicles meet MY25 CO2 emissions targets; comprised solely of electrified powertrain (HEV, PHEV, BEV)

MY15 Vehicles that Meet Future CO2 Emissions Targets

ICE still has 10 years of research and development before 2025... How big are marginal benefits of 100+ years of R+D?


Future GHG projections 49

Assuming no technology adoptions and improvements, vehicle fleet to have negative GHG balance in MY19 With 2% improvement each year (historical 2004-2013, with $3-4/gallon gasoline), vehicle fleet negative GHG balance in MY21 4% improvement each year needed to maintain positive GHG balance to MY25

Fleet historic GHG reduction


Future GHG projections (CAFE perspective) 50

Looking at CAFE – 0.65 MPG/year fleet improvement for 7 years (2008~2015) 1.8 MPG/year needed for next 10 years – 280% faster rate of technology deployment, adoption than historically seen

2025

2025 CAFE = 54.5 MPG (43.6 adjusted)

Historic: 0.65 MPG/year

Future: 1.8 MPG/year

280% increase required for future fuel economy regulations


Conclusions 51

1. Energy and transportation have significant benefits and costs to society

2. Energy and transportation policy update (GHG) in 2012 marked beginning of serious drive for climate change mitigation, efficiency improvements

3. GHG rule framework driving innovation and invention, offering more direct incentives for technology adoption

4. Credit transaction flexibility places market-driven price on GHG/CO2 emissions

5. ICE being challenged through 2025; only vehicles that meet standard today have significant electrification (HEV+)

6. Most OEMs not keeping pace with core elements of GHG regulation to date – challenge and opportunity


Thank you 52


Thank you 53

“Fire made us human, fossil fuels made us modern, but now we need a new fire that makes us safe, secure, healthy and durable.” - Amory Lovins

Documents

USPTO - GHG challenges, opportunities - Steven Sherman, HATCI