Proposed Technical and Policy Analysis on Replacement Fuels and
Alternative Fuel Vehicles
[Federal Register: October 27, 1997 (Volume 62, Number 207)]
[Notices]
[Page 55622-55625]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc97-56]
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DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
[Docket No. EE-NOA-97-506]
Proposed Technical and Policy Analysis on Replacement Fuels and
Alternative Fuel Vehicles
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy (DOE).
ACTION: Notice of availability and request for comments.
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SUMMARY: The Department of Energy is today publishing this notice of
availability of a proposed analysis, as required by section 506 of the
Energy Policy Act of 1992, on issues relating to replacement fuels and
alternative fuel vehicles. The Department is requesting public comment
on the proposed analysis prior to submission of the final report to the
President and Congress. A short summary of the proposed analysis is
included in this notice.
DATES: Written comments (5 copies) must be received by the Department
by January 26, 1998.
ADDRESSES: Copies of the proposed Technical and Policy Analysis (which
is approximately 75 pages long, single-spaced) may be obtained from the
National Alternative Fuels Hotline, 9300 Lee Highway, Fairfax, Va.
22031-1207, (800) 423-1DOE, or electronically from the Office of Energy
Efficiency and Renewable Energy's Transportation Technologies website
at: http://www.ott.doe.gov, under the Rules and Legislation section
(http://www.ott.doe.gov/office.rules.html).
Written comments (5 copies) are to be submitted to the U.S.
Department of Energy, Office of Transportation Technologies, EE-34,
Docket No. EE-NOA-97-506, 1000 Independence, Avenue S.W., Washington,
D.C. 20585, telephone (202) 586-3012.
Commenters are requested to provide a supplemental electronic copy
of comments (1 copy), if possible, to facilitate the posting of
comments on the Department's website. These optional electronic
versions of comments should be stored in common text or word processor
formats, and saved on a pc-compatible 3.5'' diskette and mailed to the
address above; or emailed directly to afv-deployment @hq.doe.gov.
Electronic versions are considered supplemental only--the Department is
not able at this time to guarantee the inclusion in the docket of
comments provided only in electronic format.
FOR FURTHER INFORMATION CONTACT: Mr. Paul McArdle, Program Manager,
Office of Energy Efficiency and Renewable Energy (EE-34), U.S.
Department of Energy, 1000 Independence Avenue, S.W., Washington, DC
20585, email: afv-deployment@hq.doe.gov, or phone (202) 586-9171.
SUPPLEMENTARY INFORMATION:
I. Purpose
II. Summary of Findings of Technical and Policy Analysis
III. Availability of Proposed Technical and Policy Analysis
IV. Public Comment Procedures
I. Purpose
Section 506(c) requires DOE to seek and consider public comments on
the draft Technical and Policy Analysis on issues relating to
replacement fuels and alternative fuel vehicles prior to its final
transmission to the President and Congress. DOE may revise the Analysis
prior to such final submission in light of comments received. DOE is
also required by section 506(c) to preserve all comments received on
the Analysis for use in required rulemaking proceedings under section
507, including rulemaking to consider alternative fuel vehicle
acquisition requirements for private and municipal fleets. In addition,
DOE is in the process of devising a Replacement Fuel Supply and Demand
Program under section 502. Comments received on the proposed Technical
and Policy Analysis could be very useful in designing this program.
II. Summary of Findings of Technical and Policy Analysis
Energy Security Concerns
The geopolitical context surrounding energy security has changed
enormously since the oil shocks of the 1970s, with the end of the Cold
War, the Organization of Petroleum Exporting Countries (OPEC) in
disarray, and the cementing of U.S. security ties to the most important
oil exporting nations. Unfortunately, these developments have
engendered a complacency on the part of the American public not unlike
that which preceded previous oil shocks. Historically, periods of low
prices have been followed by steep price spikes, a pattern that could
well be repeated in coming years.
[[Page 55623]]
In contrast to the current geo-strategic environment, economic
realities and trends seem to be recreating many of the preconditions
for a potential oil shock in the U.S. sometime in the future. Economic
growth in the Pacific rim is giving rise to a growth in world oil
demand which could well lead to a short-supply situation within the
next five to ten years. The world's oil resources are as concentrated
as ever in the OPEC nations, notably in the Persian Gulf. DOE's Energy
Information Agency (EIA) projects that by 2010, OPEC's market share is
likely to reach the levels of the 1970s, as its share of world exports
grows from 41 percent in 1993 to 53 percent in 2010.
The costs to the U.S. economy from a future oil price shock could
be enormous. Based on analyses of previous oil shocks, a number of
recent studies have estimated the macroeconomic impacts as reducing
U.S. economic activity by an average of over 2 percent per year for
three to four years or more, which translates into GNP reductions in
the range of six hundred billion dollars over three years, up to
possibly $3 trillion over fifteen years if the lost economic growth
were not subsequently made up.
Unlike other energy using sectors, which have introduced substitute
fuels and fuel switching flexibility since the oil shocks of the 70s
and 80s, the transportation sector remains overwhelmingly dependent on
petroleum based fuels (approximately 97.5 percent of transportation
energy coming from petroleum) and on technologies that provide
virtually no flexibility. The transportation sector currently accounts
for approximately two-thirds of all U.S. petroleum use and roughly one-
fourth of total U.S. energy consumption.
Substitution of petroleum-based transportation fuels (gasoline and
diesel) by non-petroleum-based fuels (``replacement fuels,'' including
alternative fuels such as electricity, ethanol, hydrogen, liquefied
petroleum gas, methanol, and natural gas) could be a key means of
reducing the vulnerability of the U.S. transportation sector to
disruptions of petroleum supply. Centrally-fueled fleets are probably
critical to the transportation sector's transition to alternative fuels
and vehicles. Early introduction of alternative fuels in these fleets
is more feasible since they generally refuel at a central facility and
operate within a fuel tank's driving range of that central facility.
Accordingly, fleets feature prominently in Title V of EPACT, which aims
to displace substantial amounts of petroleum based motor fuel with
alternative fuels.
Since EPACT was enacted in 1992, transportation petroleum
consumption has risen from 10.3 million barrels per day to 10.7 million
barrels per day in 1994. EIA projects this consumption to rise to 14.0
million barrels per day by 2010. U.S. dependence on imported petroleum
has also grown since EPACT enactment. In 1992, 41 percent of total U.S.
petroleum consumption was derived from foreign sources. By 1994,
imports had increased to 45 percent. EIA projects U.S. petroleum import
dependence to reach approximately 54 percent of consumption by 2000 and
57 percent of petroleum consumption by 2005.
In that dependence of U.S. autos and trucks on imported oil was one
of the major driving forces behind Congressional passage of EPACT, the
imperatives are even stronger now than at the time of passage.
Progress Toward Achieving the Goals Described in Sec. 502(b)(2)
Section 502(b)(2) of EPACT suggests tentative goals of displacing
10 percent of transportation fuel with replacement fuels by the year
2000 and displacing 30 percent by the year 2010. DOE is making steady
progress in carrying out the provisions of EPACT Title V and related
programs, which should yield measurable results in alternative fuel and
AFV usage in the future. DOE supports and coordinates the Federal Fleet
Program for acquisition of alternative fuel vehicles (AFVs), which had
put over 25,000 AFVs into the federal fleet by the end of fiscal year
1996. DOE's Clean Cities Program promotes voluntary commitments and
coordinated action by the key groups within participating city regions
for installation of alternative fuel infrastructure and acquisition of
vehicles. As of August 1997, 54 cities and over a thousand stakeholder
organizations were participating. DOE is also carrying out the
rulemaking and analytical activities prescribed by EPACT Title V,
including its assessment of the technical and economic feasibility of
reaching the 10 percent and 30 percent goals. The Research, Development
and Demonstration program has been instrumental in fostering technology
development in its two spheres, Advanced Vehicle Propulsion
Technologies and Alternative Fuels Research and Demonstration. The
latter is now turning its focus to alternative fuels infrastructure
technology. DOE is also involved with the Environmental Protection
Agency (EPA) in Clean Air Act programs that promote use of advanced
technology vehicles, including alternative fuel vehicles, for use in
ozone non-attainment areas. Many of the programs authorized by EPACT
have not been in place long enough to allow a credible assessment of
program impacts. The statutory requirement for this Technical and
Policy Analysis actually precedes the start of implementation for some
of the EPACT programs.
Actual and Potential Role of Replacement Fuels and AFVs in Reducing Oil
Imports
While DOE modeling suggests that the potential use of replacement
fuels in the U.S. is very high, by 1996 the transportation sector has
barely scratched the surface of this potential. The actual use of
replacement fuels in 1996 in the U.S. is estimated by EIA to be about
4.6 billion gallons gasoline equivalent (or 3.1 percent of total
highway transportation fuel). Of this, 4.2 billion equivalent gallons
was oxygenates blended into gasoline (2.9 percent of highway fuel) and
323 million equivalent gallons was alternative fuel use by AFVs (0.2
percent of highway fuel). The preliminary partial results of DOE's
study of the feasibility of reaching the goals suggested by sec. 502(b)
indicate that the potential use of replacement fuels sustainable by the
market could be as high as 30 to 38 percent in 2010 under various
scenarios and could ultimately be nearly double that.
In order to reach such levels of alternative fuel use, however,
major transitional impediments would have to be overcome, including
changes in relative fuel/vehicle prices to consumers. For example, the
EPACT suggested goals of displacing 10 percent of transportation fuels
in the year 2000 and 30 percent in the year 2010 would require that AFV
sales--
<bullet> Grow to between 35 and 40 percent of total new light-duty
vehicle sales by 1999 to meet the 2000 goal; and
<bullet> Stay in the range of 30 to 38 percent to build an AFV
population sufficiently large to meet the 2010 goal.
Even to meet a 30 percent goal for year 2020, AFV growth would have
to--
<bullet> Double every year between 1995 and 2000, going from
approximately 30,000 to 500,000 sales per year;
<bullet> Increase by 50 percent per year to 4,000,000 in the period
from 2001 through 2005; and
<bullet> Remain at a constant 32 percent of total light-duty
vehicle (LDV) sales in the period of 2005 through 2010.
Under this scenario, the AFV population in 2020 (ten years later
than
[[Page 55624]]
the EPACT 30 percent goal) would be large enough so that 30 percent of
LDV motor fuel would be replacement fuel (alternative fuels plus
oxygenates used in conventional vehicle fuel). This alternative
scenario is believed to be more representative of new vehicle
technology market introduction generally, than the growth paths
necessary to meet the unmodified EPACT goals but would still be
enormously ambitious.
Analysis indicates that currently authorized Federal, state and
local AFV programs could displace approximately 220,000 barrels per day
of motor fuel or roughly 3 percent of the LDV transportation fuel use
projected by EIA for 2010, while replacement fuels in the form of
oxygenates could contribute an additional 4.8-6.7 percent of LDV motor
fuel during this period. The gap between these volumes and those
necessary to reach or approach the EPACT sec. 502(b)(2)(B) goal of 30
percent fuel displacement by 2010 would have to be met by AFV use by
motorists not covered by these programs, that is, largely by the
general public.
Examination of international policy experience shows EPACT fleet
programs to be a unique approach. Nonetheless, experience of other
countries' programs does provide the following lessons:
<bullet> Spillover into voluntary use of alternative fuels and AFVs
in non-mandated sectors is likely to be determined by the relative
economic costs and benefits during each stage of the transition,
including (at least for dedicated AFVs) some differential to compensate
for future uncertainty and for the operational disadvantages of
dedicated AFVs.
<bullet> Merely putting in place novel and limited infrastructure
networks is likely to be insufficient in generating high levels of
spillover to non-mandated motorists, even in conjunction with
cognizance of societal benefits and potential future widespread
availability.
Applying these lessons to the U.S. environment suggests that
changes in the overall economics, access and convenience factors (or
the perception of such imminent changes) will be necessary
preconditions for AFV penetration in the general public. Such changes
could occur in various ways, including policy induced changes, cyclical
price swings or market disruptions.
Experience of other countries also suggests that the political will
to support alternative fuel programs is greatest when oil prices are at
peak levels. When incentives are most critical to sustaining
alternative fuel momentum, at the low end of the oil price cycle,
governments have often been least committed.
Actual and Potential Availability of Replacement Fuels and AFVs
Alternative fuel vehicle technologies are available for the
principal alternative fuels believed most likely to play major parts in
any transition to substantial alternative fuel use. Alcohol, liquefied
petroleum gas (LPG), and natural gas vehicle technologies are
sufficiently developed for such vehicles to be introduced into the
market on large scales. Electric vehicle technology per se is also
close to market-ready, but battery cost and range probably limit
penetration to select market niches for the next five to ten years.
Hybrid electric, fuel cell and hydrogen vehicle technologies are in
various stages of development and could play significant roles in the
future.
A number of types of vehicles are currently available for purchase
from original equipment manufacturers (OEMs) by the public and fleets,
but not the whole range of vehicles for each of the alternative fuels.
<bullet> Passenger cars are available for use with 85 percent
alcohol/15 percent gasoline mixtures or any mixtures down to straight
gasoline, at the same price as the same conventional model.
<bullet> A minivan will soon be available for 85 percent ethanol
use.
<bullet> Pick-up trucks, vans and mini-vans are available from OEMs
for CNG use. A full sized sedan is available for dedicated CNG
operation and others may follow. Costs for dedicated CNG vehicles are
generally $3000-$5000 more than conventional models.
<bullet> CNG vehicles (bi-fuel and dedicated) may also be obtained
by conversions of conventional vehicles by many small conversion firms.
<bullet> Electric vehicles are now available, mostly sub-compact
and small pickup models.
Although alternative fuel refueling sites have been proliferating
in recent years, none of the alternative fuels are currently available
at retail for vehicle refueling in adequate networks to support
widespread use. Adequate refueling sites could be available as a
transition proceeds but would involve additional capital costs.
All of the major alternative fuels are available at national and
regional levels in volumes sufficient for transportation use at levels
significantly greater than the current levels. While this available
supply includes both domestic production and imports, domestic supply
will be adequate to serve AFV needs for coming years. If alternative
fuel use were to approach the levels suggested by the EPACT 30 percent
goal, market pressures could change the split between domestic and
import supply. Natural gas, ethanol and electricity have the greatest
potential for domestic production to meet large-scale transportation
use. LPG and methanol could be available in adequate quantities either
domestically or internationally.
Key Issues and Perspectives
While available evidence indicates that substantial spillover from
EPACT Title V programs into household AFV acquisitions is unlikely in
the absence of some economic incentive to households to make the shift,
such incentive might occur in any one of a number of ways. It would not
necessarily have to represent a government incentive program.
An oil price rise could well cause dramatic changes in relative
prices between gasoline and a number of alternative fuels, resulting in
natural fuel-switching if the conditions enabling motorists to switch
fuels are in place. Comparative historical movements in relative prices
for alternative fuels and their feedstocks show clear divergences in
price movements from crude oil and gasoline, particularly for
electricity, ethanol and methanol. There is probably no way of reliably
assessing the impact of a future oil price rise on the effectiveness of
EPACT programs until such an event occurs. On the other hand, it does
appear possible to infer from prior experience that a price spike is
unlikely to result in major fuel switching in the transportation sector
in the absence of certain preconditions relating to the availability of
AFVs and alternative fuel infrastructure, which EPACT Title V begins to
address. It should be noted that most of the fuel switching in Brazil
and the Netherlands, the two countries where AFV programs have been
most effective, occurred after an oil shock which had been preceded by
more modest programs promoting the alternative fuel to which the
country partly switched after the shock.
EPACT also provides incentives to restrain rising oil demand before
it leads to a run-up in oil prices of the nature of those discussed
above. EPACT programs could also reduce the likelihood or magnitude of
a future oil shock in another way. One potential benefit of developing
a fuel switching capability is the potential to alter the behavior of
primary fuel suppliers. If viable competing fuels are available, the
likelihood of a restriction of oil supplies could be diminished. EPACT
has the potential to shorten the time lag
[[Page 55625]]
between an oil price shock and the oil use reductions following it and
to magnify such reductions in the key transportation sector, where
reductions have been small compared to other sectors. The perceived
potential of the U.S. to introduce alternatives in the event of an oil
price increase, may dampen the price increase sought by oil-exporting
countries in the event of a supply disruption.<SUP>1</SUP>
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\1\ While the U.S. share of world oil imports and its importance
in the world oil market are likely to be less in the next century
than in the 1970s and 80s, U.S. leadership in alternative
transportation fuel policy and technology development could well
catalyze similar developments in other importing countries.
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It is also possible that a well designed EPACT-initiated process of
fuel switching could avoid or reduce the magnitude of problems such as
inflation, involved with the relatively abrupt technological
transitions in transportation that historically follow major oil shocks
and which have also characterized historical fuel switches. Alternative
fuel transportation systems could be more fully ripe for widespread
deployment and the American public more amenable to fuel switching as a
result of EPACT fleet programs and DOE RD&D programs.
Despite the many uncertainties, it preliminarily appears that the
programs authorized by Congress in EPACT will fall substantially short
of the year 2010 goal of 30 percent. DOE may need to modify that goal
under EPACT sec. 504, possibly by rolling back the target dates. EPACT
provides ample flexibility for DOE to so scale back the ambitious
statutory goals rather than to adopt draconian policies. At the same
time, DOE understands that many are concerned over what is perceived as
EPACT's excessive reliance on mandates rather than economic incentives.
III. Availability of Proposed Technical and Policy Analysis
The Technical and Policy Analysis required by EPACT Section 506 is
available in a draft report for pubic review and comment. Copies of the
draft analysis, written comments, and any other docket material
received may be read and copied at the DOE Freedom of Information
Reading Room, U.S. Department of Energy, Room 1E-190, 1000 Independence
Ave., S.W., Washington, D.C. 20585, telephone 202-586-6020 between the
hours of 8:30 a.m. and 4:00 p.m. Monday through Friday except Federal
holidays. The docket file material will be filed under ``EE-NOA-97-506
''. An electronic version of the proposed Technical and Policy Analysis
and electronically compatible portions of the docket material will be
available from the Office of Transportation Technologies's website at:
http://www.ott.doe.gov, under the Rules and Legislation section (http:/
/www.ott.doe.gov/office.rules.html). Additional copies of the proposed
Technical and Policy Analysis may be obtained from the National
Alternative Fuels Hotline and Data Center, P.O. Box 12316, Arlington,
Va. 22209, (800) 423-1DOE, (703) 528-3500 (local), Fax: (703) 528-1953.
IV. Public Comment Procedures
The Department of Energy encourages the maximum level of public
participation in review and comment of the proposed Technical and
Policy Analysis. The Department has established a comment period of 90
days following publication of this notice for persons to provide
comment. The public comment period closes on January 26, 1998.
All public comments and other docket material will be available for
review in the DOE Freedom of Information Reading Room at the address
shown at the beginning of this notice. The docket material will be
filed under ``EE-NOA-97-506.''
Interested persons are invited to participate in this proceeding by
submitting written data, views or arguments with respect to the
subjects set forth in this notice. Instructions for submitting written
comments are set forth at the beginning of this notice and below.
Written comments (5 copies) should be labeled both on the envelope
and on the documents, ``Section 506 Technical and Policy Analysis
(Docket No. EE-NOA-97-506),'' and must be received by the date
specified at the beginning of this notice. All comments and other
relevant information received by the date specified at the beginning of
this notice will be considered by DOE.
In addition, commenters are requested to provide a supplemental
electronic copy of comments (1 copy), if possible, to facilitate the
posting of comments on the Department's website. These optional
electronic versions of comments should be stored in common text or word
processor formats and saved on a pc-compatible 3.5'' diskette and
mailed to the address above; or emailed directly to afv-deployment
@hq.doe.gov. Electronic versions are considered supplemental only--the
Department is not able at this time to guarantee the inclusion in the
docket of comments provided only in electronic format.
Pursuant to the provisions of 10 CFR 1004.11, any person submitting
information or data that is believed to be confidential and exempt by
law from public disclosure should submit one complete copy of the
document and 3 copies, if possible, from which the information believed
to be confidential has been deleted. The Department will make its own
determination with regard to the confidential status of the information
or data and treat it according to its determination.
Issued in Washington, DC, on September 2, 1997.
Brian T. Castelli,
Chief of Staff, Energy Efficiency and Renewable Energy.
[FR Doc. 97-28401 Filed 10-24-97; 8:45 am]
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