Production Tax Credit for Wind Energy in the U. S.

Summary.  One way of reducing the rate of emission of carbon dioxide is to generate electric power from renewable sources, including wind energy.  In the U. S. renewable energy has been aided by a production tax credit since 1992, that Congress, in fits and starts, has repeatedly granted and taken away.  It is scheduled to expire again on Dec. 31, 2012.  In contrast, conventional fossil fuel energy sources have been steadily subsidized since the early 1900’s. 

Renewable energy, including wind energy, benefits the U. S. by relieving dependence on foreign energy sources, expanding economic activity, and lowering the annual rate of emission of carbon dioxide, the most prevalent greenhouse gas.  For these reasons the production tax credit should be renewed for an extended duration, in order to convey stability and predictability to the renewable energy industry.

 

Introduction.  The United States burns large amounts of fossil fuels in order to drive its economy, resulting in correspondingly large annual rates of emission of greenhouse gases such as carbon dioxide, CO₂.  CO₂ accumulates in the atmosphere because more is emitted than can be absorbed around the planet.  As a result long-term average global temperatures have been rising inexorably.  Increased temperatures are held responsible

for extreme weather events around the world, which lead to significant harms to our economic and societal wellbeing.

One way of reducing the rate of emission of CO₂ is to generate electric power from renewable sources.  Wind generation has been growing rapidly around the world, including the U. S., yet its share of energy production is still relatively small.  The U. S. enacted a Production Tax Credit (PTC) as part of the Energy Policy Act of 1992 in order to promote wind energy.  It subsidizes the sale of electricity produced by wind power.

The PTC has been allowed to expire and been reinstated repeatedly in recent years.  The current legislation granting the PTC expires Dec. 31, 2012.  However, Congress has not passed any new appropriations bills covering the current fiscal year that began Oct. 1, including the PTC.  Other significant fiscal difficulties arise in the U. S. by law on Jan. 1, 2013, so considering an extension of the PTC is greatly complicated by these additional crises.

The PTC subsidizes wind power generation by US$0.022 per kWh.  This adds up to about US$1 billion per year at the current level of wind generation (see below).  According to Vice Admiral (Ret.) Denny McGinn, the President and CEO of the American Council on Renewable Energy, the PTC has been a major factor in creating and expanding the wind energy industry in the U. S. since its inception.  Currently its extension is a topic of great controversy, mostly along party lines, in the Congress.  Those opposed generally are against promoting renewable energy and to expanding tax credits as a form of increased government spending.   Those supporting extension favor the PTC as a way of fostering expansion of the renewable energy industry.

Over the past decade the PTC has been allowed to expire, and then been reinstated, in repeated cycles, leading to an “off-again-on-again” pattern of funding.  This has led to insecurity and unpredictability facing investors and energy industrialists seeking to develop new wind energy facilities.  It should be noted that these entrepreneurs are part of the private market economy.  They need stability in their understanding of the financial environment surrounding their plans; it is difficult to plan for investment and construction of new wind facilities when the PTC is given and taken away in fits and starts. 

The correlation between breaks in appropriations for the PTC and the annual newly installed wind generation capacity is shown in the graphic below.

Annual installation of new wind generation capacity correlated with breaks in appropriation for the PTC.  The total affected wind generation capacity can be obtained by adding the heights of each bar.  The generation capacity for 2012 and 2013 are estimates based on the present status of the PTC.

Sources: American Wind Energy Association; U. S. Department of Energy, Energy Information Administration, as presented in The Guardian Oct. 17, 2012; http://www.guardian.co.uk/environment/blog/2012/oct/17/us-wind-power-mitt-romney-subsidy?newsfeed=true

 

The PTC lapsed in the years 2000, 2002 and 2004.  The effect of the lost support is evident in this graphic.  In each of those years the installation of new wind energy facilities fell by 73% or more (light green bars).  When reinstated, the PTC was implemented only for one- or two-year periods, rather than permanently or at least for an extended time.  In addition, the graphic shows a projected drop to no new wind capacity to be constructed in 2013, although it is likely that vestigial new construction will persist into 2013.  Adm. McGinn believes the wind industry would need a 3-5 year horizon for planning, and understands that PTC subsidies will not be, and indeed should not be, a permanent fixture in their industry.

 

Economic potential of the wind energy industry.  The expansion of the wind energy industry as a component of renewable energy has led to a work force estimated to have reached 85,000 jobs nationwide in 2008-9, according to the American Wind Energy Association (AWEA) as reported in the New York Times.   It has since fallen by 10,000 because of competition from China, and the growth of inexpensive natural gas.  In July, for example, the U. S. Commerce Department imposed tariffs on turbine towers originating in China, responding to a finding that the towers were priced in the U. S. at less than the cost of production in China.  In recent months, facing the unresolved expiration of the PTC, it is estimated that 1,700 layoffs have already occurred.  The American wind industry is composed of several hundred manufacturers, from multinational companies to small firms making specialty items needed in wind turbine installations.

 

According to AWEA 2.9% of the U. S. electricity demand was provided by wind energy in 2011. In Iowa and South Dakota, which have high potenetial wind energy resources, around 20% of the electricity demand is provided by wind. Nationally, the U.S. could provide 20%  of its electricity from wind power by 2030; this achievement is expected to provide 500,000 jobs to American workers.  In addition, currently 65% of the components in wind turbines are manufactured in the U. S., compared with only 25% before 2005; there are almost 500 companies distributed across 44 states engaged in manufacturing for the wind energy industry.  These data show that wind energy can make a significant impact on the American economy. 

 

Historical role of subsidies in the U. S. energy economy.  One group opposing extension of the PTC is the American Energy Alliance .  Its president, Thomas Pyle, concurred in calling the PTC a “boondoggle”, which it has been receiving for 20 years.  This opinion, however, is in flagrant disregard of the findings of recent studies of energy subsidies.  In the U. S., sources of energy have been recipients of federal subsidies since the 1800’s.  This includes the coal industry, the oil industry, and nuclear power.  Timelines for incentives from the federal government for energy sources over the past century are shown in the graphic below.  



Duration of U. S. government incentive support for fossil fuels, nuclear energy and renewable energy (includes wind, solar, hydropower, geothermal and biomass) from 1900.

Source: American Wind Energy Association using data from the U. S. Energy Information Agency, 2008.  http://awea.org/learnabout/publications/upload/Subsidies-Factsheet-May-2011.pdf

 

These subsidies have been especially instrumental during the early years in the development of each industry; yet after a century of growth in the oil and gas industry, it is still receiving federal subsidies (second gray bar; see the graphic above), and it benefits from a depletion tax credit as well (top gray bar).  The coal industry likewise has benefited from favorable tax treatment since about 1950 (third gray bar).  It is hard to argue that industries that are among the largest and most profitable in the American economy still require subsidies for their survival and growth.  Subsidies to the oil and gas industry are as much as 5 times larger than those for the entire renewable energy sector.  In 2007 the fossil fuel sector received US$ 5.450 billion in subsidies, whereas all renewable energy sources received only US$ 1.147 billion.

 

Analysis

 

Conventional energy sources, namely the various fossil fuels, continue to receive significant subsidies from the federal government, in spite of the fact that they are clearly mature industries.  The companies in question are massively large, and garner extremely large profits from their operations.  It is difficult to justify continuation of any subsidy or support in their favor.  The nuclear industry likewise continues to receive significant subsidy support after several decades of operation.  In this case, operations are usually regulated at the level of the states that the various nuclear-powered electric utilities serve.

 

Development of renewable energy is viewed as having several favorable effects on the American economy.  First, it would contribute to increasing the independence of the U. S. from relying on foreign sources of energy, and from having to use dollar resources to buy fossil fuels from abroad.  Second, it would relieve dependence on fossil fuels overall.  Third, development of all forms of renewable energy would contribute to the U. S. economy by providing new job opportunities in various skilled vocations, thus expanding our economic activity.  Fourth, expansion of renewable energy leads to economies of scale that would make electricity from these sources be fully competitive with conventional, fossil fuel-powered, electricity.  This effect is in fact already operating; wind energy generation is considered to be comparable in cost to conventional electricity.  Finally, widespread adoption of renewable energy would contribute to reducing the annual rate of emission of greenhouse gases.

 

For all these reasons it is important that the renewable energy production tax credit be reinstated for an extended period.  The historical persistence of subsidy support for the conventional fossil fuel industries provides an excellent precedent for the PTC.  Since fossil fuels have long been profoundly successful industries, their subsidies are no longer needed.  The PTC could readily be funded by reducing or eliminating these historical subsidies.  The availability of the PTC would promote expansion of renewable energy, with all its advantages.  Implementing the PTC for a multi-year interval would convey stability and predictability to entrepreneurs and industrialists who seek to develop renewable energy resources.  

 

© 2012 Henry Auer

The Case for a Carbon Tax

Summary.  Increased burning of fossil fuels, producing higher rates of emission of greenhouse gases, generates worsening patterns of extreme weather events that affect human wellbeing.  In response to this trend, policies are being proposed to abate emissions.  This post summarizes two recent newspaper articles proposing use of a carbon tax, or a more limited gasoline tax, for lowering emissions.  It is judged that a carbon tax is simpler and more effective than establishing a cap-and-trade regime for limiting emissions.

 

Introduction.  Humanity’s rate of use of fossil fuels for energy has grown to high levels in recent decades, and is projected to continue increasing for the indefinite future.  As a result, the annual rate of emission of carbon dioxide (CO₂), the main greenhouse gas, as well as other greenhouse gases such as methane, has likewise been increasing.  Most CO₂, once it enters the atmosphere, remains there indefinitely for a century or longer, for there is no naturally occurring mechanism that removes it. 

Climate scientists hold greenhouse gases responsible for the recent long-term increase in the world-wide average temperature.  In turn, the warmer planet harbors an increased potential for more, and more intense, extreme weather and climate events such as rainfall and resulting floods, heat waves and resulting droughts, and wildfires.  These events have catastrophic effects on human populations, and inflict serious economic harms.

These considerations lead climate scientists and economists to develop mitigating policies intended to slow the growth in the rate of emissions.  This would have the effect of lowering the rate of increase in the CO₂ content of the atmosphere.  It must be noted that, because CO₂ remains resident in the atmosphere for a century or longer, its atmospheric concentration cannot be reduced within reasonable time frames; even if emissions ceased entirely, the result would be merely to stabilize the CO₂ concentration at the new, higher level.  One policy intended to abate the rate of emission of CO₂ is to impose an economic hurdle to use of fossil fuels.  This post describes recent opinion articles proposing use of a carbon tax or a gas tax to accomplish this.

Two Economics Commentators have recently come out in support of a carbon tax.  Robert Frank, professor of economics at Cornell, commenting in the New York Times, advocates a carbon tax for the following reasons.  First, he summarized some of the adverse weather events in the U. S. mentioned above in the Introduction, emphasizing that climate scientists today believe that man-made greenhouse gases building up in the atmosphere contribute to the causes of these events.  Dr. Frank cites a global climate model study by Sokolov and coworkers that concludes that the global average temperature in 2045 has a median probability of increasing by 1.85ºC (3.3ºF), and by 5.1ºC (9.2ºF) by 2095, beyond the present level, which has itself already increased about 0.7ºC (1.3ºF) above the temperature that prevailed before humans began burning fossil fuels.  These predictions, based on Sokolov’s current more comprehensive model, are higher than earlier ones by his group and by others.

Dr. Frank then suggests gradually imposing a carbon tax in the U. S., citing an earlier recommendation by the U. N. Intergovernmental Panel on Climate Change for a tax of US$80/metric ton (1.1 U. S. tons) of emitted carbon, which works out to about 70 US cents per U. S. gallon of gasoline.  However, in view of the more dire temperature rise situation currently foreseen he also suggests a tax that could be as high as US$300/metric ton, translating to a rise in the price of gasoline of about US$3.00/U. S. gallon.  Many countries around the world already have taxes on fuel about this high, and, he notes, nations have adapted by developing more efficient cars.

Dr. Frank cites two beneficial economic effects of a carbon tax.  First, it would contribute to reducing the U. S. fiscal deficit, which is highly desirable.  In addition, phasing in the tax gradually only after the present economic distress in the U. S. had passed would provide a timed incentive to make energy use in all its aspects more efficient even before the tax took effect, thus contributing overall to a reduced rate of emitting greenhouse gases.  The U. S. could contribute to a worldwide increase in energy efficiency by imposing carbon-based tariffs on imports.  This, for example, would provide incentives for foreign emitters of large amounts of greenhouse gases to develop efficiencies in their own lands.

Dr. Frank concludes “If the recent meteorological chaos drives home the threat of climate change and prompts action, it may ultimately be a blessing in disguise.”

Eduardo Porter, an economics columnist with the New York Times supports a more limited carbon tax in the form of a gas tax.  Mr. Porter noted that President Obama’s administration has ruled that motor vehicle fleet average gas efficiency has to reach 54.5 miles per U. S. gallon by 2025, almost doubling the present efficiency.  (In a previous action his administration had set a standard of 36.6 miles per U. S. gallon by 2017.)  The administration foresees that by 2025 these standards should result in a reduction of fuel use by 12 billion gallons, with a concomitant lowering of greenhouse gas emissions when burned.

But Mr. Porter has several concerns with the use of vehicle efficiency standards to lower use of fossil fuels for transportation.  First, he states that the engineering, production and societal costs to attain such efficiency may be excessive, representing an ineffective use of productive resources.  This is so even accounting for the reduction in harms inflicted by lowered incidence of weather extremes, and better health such as lower incidence of asthma, according to economists.  Second, he warns that more efficient vehicles may have the “perverse incentive” of inducing drivers to travel more, not less, because the expense per distance traveled will be lower.  In other words, vehicle efficiency standards do not change behavior toward reducing use of fossil fuels.  Further, they only take effect as people move from older, less efficient cars to newer, efficient ones, a process that stretches out over the decade or more needed for the fleet standard to be put in place.

Instead, Mr. Porter favors a gas tax.  First, a gas tax directly affects drivers’ behavior right away, even with their existing vehicles.  They would travel less, and when they decide to buy new cars, they would opt for more efficient ones which in turn provides the incentive to manufacturers to optimize efficiency.  This effect has already been observed when gas prices rose in the past for brief episodes.  Second, any inequity in imposing a gas tax can be reversed by offering tax credits at income tax time, say, to people with lower incomes; behavior at the pump is affected by the price tag staring drivers in the face rather than by the distant, subconscious, expectation of a return of the tax at a later time.  Third, the gas tax spurs car makers to make the most efficient vehicles they think drivers would buy in response to the newly imposed gas tax.  Mr. Porter cites a currently circulating analysis by Prof. Christopher Knittel, an energy economist at the Massachusetts Institute of Technology, that found that if a gas tax had been imposed in the 1980’s, after the Arab oil embargo, gas mileage could have improved by 60% by now.  Instead, car makers have emphasized increasing size, weight and power. 

Tom Friedman, a foreign affairs columnist for the New York Times, has repeatedly called for a tax on carbon as the most direct way to lower consumption of fossil fuels, in order to minimize the growth of greenhouse gases in the atmosphere and to reduce U. S. importation of petroleum from abroad.  Others at the New York Times espousing a carbon tax, both conservatives and liberals, are David Brooks, Nicholas Kristof and Bob Herbert.

In 2011, Profs. Daniel Esty (Commissioner of Energy and Environmental Protection for the state of Connecticut) and Michael Porter published an op-ed article in the New York Times espousing a carbon tax.

Analysis

Cap-and-Trade Mechanisms to Lower CO₂ Emissions. Two principal economic mechanisms have been devised to lower the rate of emissions of greenhouse gases, including CO₂.  One is the cap-and-trade mechanism.  In this regime the government jurisdiction (region, nation or state) administratively establishes how many emission allowances, usually worth the right to emit 1 ton of CO₂, for example, that each fixed point source of emissions (e.g., a power plant) is allowed.  These are granted or sold to the source.  Accordingly, cap-and-trade requires initially establishing the emissions rate for each source, which relies on reporting from the sources without bias.  The total of all allowances constitutes the “cap”.  Allowances have value, because a source that succeeds in reducing its emission rate can “trade” them on an open market to other sources whose emission rate exceeds their allowances.  Cap-and-trade is intended to lower overall emission rates with time, as the administering government lowers the cap each year; this would result in increasing the price  of each allowance.  The result is to lower emissions, while reflecting the price of the allowances by an increased cost for generating power or using energy, which is passed on to consumers.

Thus cap-and-trade uses market forces to, on the one hand, induce conservation behavior by consumers, and on the other hand, to induce efficiencies in generation of energy.  A further complication, though, is the right usually built in to cap-and-trade regimes to “offset” excess demand for allowances by “importing” allowances from outside the territory of the regime; these also must be monitored effectively by those administering the regime.

Cap-and-trade, it can be seen carries several difficulties and inefficiencies.  Its administration is very complex: there is the need to allot allowances and lower them each year; market mechanisms must be established; and offsets must be monitored.  Additionally, the market for allowances establishes third-party traders having no interest in global warming, but only in trading an object (allowances) for profit among themselves, potentially leading to market abuses and speculation. 

The European Union established a cap-and-trade in the last decade, but it was initially judged a failure because it wound up issuing more allowances than necessary, leading to a collapse of the market.  On the other hand, the American regimes in California, and in the Northeast Regional Greenhouse Gas Initiative, are operating cap-and-trade regimes at various stages of progress.

A Carbon Tax or a Gas Tax.  The second principal mechanism for lowering emission rates is imposition of a tax on all forms CO₂ emissions, frequently including other greenhouse gases, or a more limited tax on gasoline only.  A carbon tax impacts all sources of energy and economic activity that depend on fossil fuels.  A gasoline tax is more restricted to limiting use of fossil fuels for personal and commercial transportation.

Administratively a carbon tax is far simpler than setting up a cap-and-trade regime.  It too is based on economic behavior, affecting the demand side of the market, as opposed to the supply side impacted by cap-and-trade.  Typically a carbon tax is imposed gradually, beginning at a low level and increasing annually to an economically meaningful level.  A political “sweetener” for a carbon tax could be a rebate to needy taxpayers to compensate for the increased year-long expense arising from the tax, as noted above. 

This writer believes that a carbon tax is preferable over a cap-and-trade regime for its simplicity, efficiency and effectiveness. 

Mr. Porter’s article above cites U. S. government studies on the overall “social cost of carbon”, per ton of CO₂ emitted.  This arises from harms due to extreme weather and climate events, and adverse effects on health and nutrition from global warming.  These calculations are subject to great uncertainties, but economists place the cost at between US$5 to 68, and increasing even more as time passes.  It thus behooves all societies, including our own, to take active measures to lower emissions, striving to attain zero emissions as soon as possible in order to minimize the harms from extreme events.

Gas taxes are very effective in affecting drivers’ travel habits.  The graphic below

Sources: New York Times presenting data from the U. S. Department of Energy and the World Bank; http://www.nytimes.com/interactive/2012/09/11/business/Fuel-Taxes-and-Consumption.html?ref=business

 

shows per capita use of fuel for driving in developed countries decreases as the size of the gas tax increases.  The U. S. has the lowest gas tax correlated with the highest amount of fuel used per capita. It is seen that most of the benefit appears to be attained at a tax level of about US$2.20 per gallon (although other factors not apparent from the graphic may also be in play.)  As an example, in Great Britain, according to Mr. Porter, the gas tax is about US$3.95 per U. S. gallon.  Ford, the American car maker, sells a model of its+ compact Focus there whose efficiency is 72 miles per U. S. gallon.  A Focus model sold in the U. S. gets only 33 miles per U. S. gallon.  Clearly, automakers currently have the technology and capability to mass produce fuel efficient cars.  While further research can be devoted to enhancing efficiency, this shows that the state of technology today is sufficient to garner significant improvements today.
 

Conclusion.  Frank and Porter have proposed imposing a carbon tax or a gasoline tax to abate further increases in the rate of emission of greenhouse gases.  A carbon tax is judged to be more straightforward, efficient and effective than implementing a cap-and-trade regime for reducing emissions.  No government bureaucracies need to be created, and the simplest of motives driving economic activity by individuals have an immediate effect on behavior.  Where deemed necessary, tax rebates could be devised to ease the tax burden on people with low incomes.  A carbon tax additionally would have positive effects on American society, for it would contribute to resolving our severe fiscal problems.  Policymakers should give serious consideration to this mechanism for abating greenhouse gas emissions.

© 2012 Henry Auer

Our Invisible Energy-Video

I've created a video entitled Our Invisible Energy, in the format of a pictorial tutorial, which expands on the ideas expressed in this post. 

The video makes the point that most of our uses of energy in our daily lives are second nature, so that we don't think much about them.  Nevertheless, the energy in question is mostly obtained from burning fossil fuels, thereby releasing the greenhouse gas carbon dioxide into the atmosphere.

Please have a look!

This video is the first in a series that also includes
          Light and Heat - The Greenhouse Effect and

          Fossil Fuels and Global Warming

 © 2012 Henry Auer

President Obama Considers Increasing the Fuel Economy Standard for Cars

Summary:  The New York Times reports that President Obama is considering an increase in the average fuel economy standard for passenger cars and light trucks, for the period to 2025.  The standard could be raised to 56.2 miles per gallon, which represents a considerable increase from the standard of 35.5 miles per gallon to be reached by 2016.  Currently only about 13% of the total energy content in gasoline fuel reaches the drive wheels to propel the car forward.  This post summarizes various improvements, some already operational, others at various stages of development, that could be implemented in future auto products to help reach a standard such as that being considered.  Auto makers argue that putting such changes in place would not be economical and/or would not be accepted by consumers.  In balance, we conclude that both economically and from a policy perspective, increased fuel economy in the cars of the future would be beneficial.

Introduction.  Warming of the average temperature of the world, as measured over much of the earth’s surface over the time frame of years, is currently occurring, due to the release of ever-increasing amounts of greenhouse gases into the atmosphere.  This conclusion is broadly accepted among the scientific community based on collective scientific studies by almost 2,000 climate scientists around the world (the United Nations Intergovernmental Panel on Climate Change) , and understood by much of the American public at large (see the previous post on this blog).  Most emissions of greenhouse gases arise from mankind’s burning of fossil fuels for energy.  The increase in greenhouse gas emissions began with the industrial revolution in the nineteenth century.

According to Wikipedia, the U. S. was responsible for almost 20% of the world’s CO₂ emissions in 2007, (using data collected by the Carbon Dioxide Information Analysis Center for the United Nations).  Yet, the U. S. has only 4.5% of the world’s population, showing that its energy consumption per capita is very high.  It had the seventh highest energy consumption per capita in the world as of 2005, after Canada and other nations with small population numbers.

The total amount of energy used in the U. S. in 2008 is given by major economic sector in the table below, in units of quadrillion (10¹⁵) Btu (British thermal units; the amount of energy needed to heat 1 pound of water by 1ºF, about 1,055 joules).

Sector	Quads	Pct (%)
Transportation	28.0	28
Residential	21.6	22
Commercial   Buildings	18.5	19
Industry	31.3	31
TOTAL	99.4	100

Source: Summary, Real Prospects for Energy Efficiency in the United States,

http://books.nap.edu/catalog/12621.html; citing U.S. Energy Information Agency Annual Energy Outlook 2008.

The table shows that of the total energy demand in the U. S. in 2008, 28% was devoted to transportation.  This category includes light cars and trucks, which serve individuals and families in their work and leisure lives, as well as heavy duty trucks and air travel.  As of 2003, excluding air travel, about 75% of vehicular transportation energy was consumed by cars and light trucks.

The U. S. Energy Information Agency (EIA) reports that CO₂ emissions from the transportation sector in 2008 broke down as shown below:

Fuel	2008 Million Metric Tons	2008 Percent
Gasoline	1,135	60%
Jet Fuel	226	12%
Diesel and related fuels	446	24%
Other	83	4%
TOTAL	1,889	100%

Source: EIA (http://www.eia.gov/oiaf/1605/ggrpt/carbon.html#transportation; Table 10).

Higher Fuel Efficiency Standards for Cars.  The New York Times has reported that the administration of President Obama is likely to propose a large increase in average fuel efficiency for cars and light trucks to be effective by 2025.  The proposal is being contested by the auto industry. 

Currently the U. S. has a regulation in place requiring that the average gas mileage for the cars that a manufacturer produces must reach 35.5 miles per gallon (6.62 L per 100 km) by 2016. 

The new standard for the period leading up to 2025 is likely to be 56.2 miles per gallon (4.18 L per 100km).   According to the newspaper report, the fuel consumption standard in effect in Europe will reach about 60 miles per gallon by 2020, almost 7% higher and 5 years earlier than the new, more stringent standard being discussed in the U. S. American automakers are concerned that reaching this goal will make cars very expensive, so that sales will suffer, and that extensive research will be necessary to devise new technologies that will permit meeting the objective.  They further claim that, in order to meet the new criterion, cars will have to be significantly smaller, a feature they fear will turn American car buyers away.

Sources of energy losses in gasoline-powered cars.  The graphic below shows the losses that occur in operating a gasoline-powered car, using an internal combustion engine.  Of 100% of the energy potentially available in the fuel, only about 13% reaches the drive wheels to propel the car, and another 2% is used to operate accessories in the engine, and air conditioning, for example.  At the fueleconomy.gov web site, clicking on any of the blue arrows explains the losses shown here. 

Source: http://www.fueleconomy.gov/feg/atv.shtml

Attaining the new, higher goal for fuel economy being considered by the U. S. government relies on minimizing these sources of energy loss, converting the lost energy into useful energy propelling the car along its way.

In this post, we restrict consideration of fuel economy to cars with internal combustion engines.

Capturing waste heat.  Clearly, the largest energy loss occurs in the engine, where the heat of burning the fuel is deliberately disposed of in the radiator or other engine cooling mechanism.  Additional heat from burning the fuel, not shown in the diagram above, occurs in the catalytic converter, where the product of incomplete engine combustion, carbon monoxide, is burned with more oxygen to make the final combustion product, carbon dioxide.  Because of the large amounts of lost energy involved, capturing even a portion of the waste heat of combustion could make a significant contribution to improving fuel economy.

One way of using the excess heat might be by developing heat-driven turbines, for example, that could either contribute directly to the drive train, or generate electricity for electric hybrid vehicle operation.  A second way of seeking to capture the heat is developing solid state thermoelectric converters that directly produce electricity using temperature differences between two points.  Research on new materials and processes for thermoelectric conversion potentially usable in cars is discussed here.    U. S. Patent 4,753,682 issued June 28, 1988 describes a thermoelectric apparatus for use in generating electric current from the excess engine heat of an internal combustion engine. This modality also could be used in electric hybrid operation.

Rolling resistance.  As they roll along the road, tires deform and then regenerate their cross section; this continuous process dissipates energy within the material of the tire which is lost as heat.  The heat of deformation reduces the efficiency of moving the vehicle.  This is shown as Rolling Resistance in the diagram above.  New synthetic rubber materials known as solution-polymerized styrene-butadiene rubber (S-SBR) have been developed which have improved rolling characteristics with less deformation loss, while retaining traction.  Several Japanese companies and a German company are setting up new plants to make S-SBR tire material in Asia as reported in the May 30, 2011 issue of Chemical and Engineering News, a publication of the American Chemical Society (unfortunately the link requires a subscriber login).

Energy Efficiency Opportunities in Gasoline-Powered Cars.  The U. S. National Academy of Engineering, a component of the National Academies, issued the report “Real Prospects for Energy Efficiency in the United States” in 2010.  A free summary may be obtained here.  Chapter 3 of the report deals with transportation.  It summarizes various technologies available or under development that would enhance the efficiency of operation of internal combustion engines.  In the near term these include variable valve timing, variable valve lift, cylinder deactivation, direct injection turbocharging with engine downsizing, reduction of friction and smart cooling systems.  In the time frame for the new fuel economy standards that are being considered, additional improvements include camless valve actuation, continuously variable valve lift, and homogeneous-charge compression ignition.  The report estimates that implementing such improvements would result in 10-15% improvement in fuel economy in the period to 2020, and an additional 15-20% by 2030.

Diesel engines, which rely on compression for ignition of the fuel, are already 20-25% more fuel-efficient than spark-ignited engines.  Additional improvements are also envisioned for these engines.

In the drive train, improvements in automatic transmission may increase efficiency by perhaps 6-9%.  Further improvements can be obtained by reducing vehicle weight.  The report states that reducing the weight by 10% can lead to a 5-7% increase in fuel economy when the weight reduction is accompanied by reducing the power of the engine accordingly.

Costs of Improving Fuel Economy.  The Energy Efficiency report estimates the additional costs that may be expected from incorporating fuel-economizing improvements such as discussed here.  In considering separately a gasoline-driven car, a diesel-driven car and a hybrid electric car, the additional cost in each category (in 2007 currency) varies between being cheaper by US$400 and being more expensive by US$2,000 in 2035.  This writer estimates that with the fuel economy of 56.2 miles per gallon that might be imposed, compared to the standard of 35.5 miles per gallon to be in effect by 2016, if one drives 15,000 miles per year, such an additional cost would be recovered in the savings from using less fuel in only a few years.

Conclusion.  The Obama administration is likely to propose increasing an average measure of fuel economy for passenger cars and light trucks, possibly to 56.2 miles per gallon, to be attained by 2025.  There are many benefits that would result from such a standard.  The U. S. imports much of the petroleum used to make the gasoline for our cars.  Much of this imported oil originates in parts of the world that are politically unstable and whose agreement with American interests may be questionable.  This makes us vulnerable to fuel disruptions, affecting costs and availability.  The disruption in supply from Libya earlier this year is an example.  It would be useful to be less reliant on foreign sources for oil, which is foreseen as a result of increasing our fuel economy standards.

The research, development and manufacture of cars incorporating new technologies such as mentioned here would be beneficial for America’s continued economic development.  The auto industry is a major component in this country’s manufacturing sector.  It is important to maintain and promote the employment of its workers.

Using less fuel for motor transport is effective to reduce the emission of greenhouse gases, thus lowering the rate of adding greenhouse gases to the atmosphere.  Even if production of all new items and equipment that emit greenhouse gases were to cease, emission of greenhouse gases from equipment already in use would continue for another 20-40 years until that equipment was taken out of service.   The atmosphere is like a bathtub containing greenhouse gases, whose faucet keeps pouring in more but whose drain is essentially plugged so that practically none can escape.  Under these circumstances, our atmospheric CO₂ bathtub fills up higher and higher.  The additional greenhouse gases result in an even higher average global temperature, with all its detrimental effects.  Therefore it is to our advantage to minimize the emission of greenhouse gases as much as possible.

The Energy Efficiency report shows that the cost of producing cars with the improvements giving greater fuel economy is absent or moderate.  The concern expressed by auto manufacturers that producing these cars would price them out of the market appears to be countered by this writer’s “back of the envelope” estimate that any increased cost would be recovered in at most a few years as a result of the use of less fuel.

The considerations discussed here show that President Obama’s intended increase in the average fuel economy of gas-powered cars for 2025 is largely attainable and overall would benefit American interests.

© 2011 Henry Auer