Jan 17, 2009 (From the CalCars-News archive)
In the midst of all the excitement about new plug-in vehicles at the Detroit Auto Show and a new administration in Washington, momentous developments are brewing in California that could seriously threaten the viability of the nascent industry that's converting hybrids to plug in. This long document includes some background followed by our draft testimony to be presented at the California Air Resource Board (ARB or CARB) next Thursday or Friday. If you want the quick version, halfway through you'll find our effort to link what's going on in Sacramento and in Washington by invoking the spirit of Abraham Lincoln. We'd appreciate comments or suggestions before we file our comments electronically on Monday and testify late in the week.
SUMMARY: The California Air Resources Board is moving ahead rapidly to regulate many aspects of conversions of hybrids to PHEVs. We appreciate the good intentions of the dedicated staff at CARB. But we believe the proposed rules will drastically slow or prevent further development in an industry that at this point needs encouragement more than restriction. The proposed regulations impose onerous requirements for testing procedures, emissions, warranties and related issues. It is not easy for an agency accustomed to working with large auto industry players to accommodate entrepreneurial startups often working on vehicles one at a time in search of innovative ways to reduce the emissions in existing vehicles -- but we think it's important to do this carefully and right.
No one has pointed out that the rules have implications not only for this nascent aftermarket conversion industry but also for companies planning to supply batteries for plug-ins, for those evaluating and testing the vehicles, and for the potential to convert non-hybrid internal combustion vehicles to plug-in. CalCars has hoped the affected companies would take the early lead in responding effectively to these regulations that place in jeopardy their future business prospects, but they have not had the time/resources etc. to do so (nor have we). Developments to date imply that they won't have the resources to comply with the proposed regulations.
The Board will consider the regulations for adoption at its January 22-23 meeting in Sacramento. We strongly urge all supporters of the continued development of plug-in vehicles to attend the hearing and testify in person as well as electronically. The meeting agenda at http://www.arb.ca.gov/board/ma/2009/ma012209.htm shows the topic is scheduled as the first item (8:30AM) Jan 23. But in the past, items have been moved forward at the last moment, causing people intending to testify at the stated time to miss their chance.
See the background materials below, our draft testimony, and the very comprehensive cover story on the East Bay Express, "Who's Killing the Plug-In Hybrid" by Robert Gammon, as well as some comments at http://www.eastbayexpress.com/news/who_s_killing_the_plug_in_hybrid_/Content?oid=903061 . To get a sense of the trends in this industry, also see the story the Wall Street Journal put on the front page of its business section on December 30, "Squeezing More Miles Out of that Hybrid" http://online.wsj.com/article/SB123059301640740831.html .
Below are some initial resources, followed by the draft of our planned testimony we will file electronically on Monday and deliver on Thursday or Friday.
The process has been going on for about a year. The first version of the rules were available at http://www.arb.ca.gov/msprog/zevprog/hevtest/hevtest.htm . Public comments from then are at a URL we have not found.
Last summer, CalCars Technical Lead Ron Gremban, following discussions with the individuals and companies involved in the EAA-PHEV (Electric Auto Association - Plug in Hybrid Electric Vehicle) project (the Open Source home of the do-it-yourself and engineering experimenters at http://www.eaa-phev.org and its discussions archived at http://autos.groups.yahoo.com/group/eaa-phev/) gave a formal reply strongly opposing many of the proposed regulations. You can see our overview of the business and technical issues surrounding regulation of aftermarket conversions, followed by Ron's formal reply, at 08/01/08: Response to CA Air Resources Board's Proposed PHEV/Conversion Regulations http://www.calcars.org/calcars-news/977.html
We introduced Ron's testimony, which included a proposal for graduated regulation based on the number of conversions a converter sells, by saying: "Let's be very careful of unintended consequences of too-early and too-specific restrictions, which could inhibit invention. Right now the auto industry is benefiting from new ideas that could help them make money producing clean cars. And conversions have already stimulated discussion about public and private incentives for these 'green-tuned' vehicles and for the even better mass-produced versions that will follow them. Let's take this step by step and not shut down the small innovators."
Following ARB staff revision of the proposals (which eliminated obviously impractical charging time and special charging plug requirements but retained or softened only slightly other onerous provisions -- for example, conversions now reset the vehicle mileage to zero for warranty purposes only if done to vehicles 6 or less years old) another comment period began December 8. The link is http://www.arb.ca.gov/regact/2008/phev09/phev09.htm . Most relevant are:
- Notice of Public Hearing, which explains the issue, the Board meeting to consider it, and how to submit testimony in person or electronically.
- Staff Report: Initial Statement of Reasons (ISOR)
- Appendix G: Proposed Language for Aftermarket Parts Certification of Off-Vehicle Charge Capable Hybrid-Electric Vehicles
- Appendix J: On Board Diagnostics (OBD) Considerations for Aftermarket PHEV Conversion Systems
See over a dozen comments received since Dec. 8 at http://www.arb.ca.gov/lispub/comm/bccommlog.php?listname=phev09 . Comments can be submitted electronically at http://www.arb.ca.gov/lispub/comm/bclist.php Written comments must be received by January 21. If you go to the hearing, bring at least 30 copies of printed testimony.
DRAFT CalCars Response to the California Air Resources Board's Proposed PHEV Conversion Regulations
[CalCars' representative will verbally present the first five paragraphs followed by the "Fourscore and seven months ago" section that follows immediately. We will submit the entire document electronically.]
SUMMARY: The California Cars Initiative (CalCars.org) has been promoting PHEVs for seven years. As a nonprofit technology and advocacy group, we worked to spark the interest in PHEVs. We gained attention through conversions -- our strategy to build public awareness and motivate carmakers to mass produce PHEVS. In 2004 we did the first retrofit in a Corte Madera residential garage, placing our designs into the public domain at PriusPlus.org. We built on the work done by Prof. Andy Frank and dedicated people in the auto and utilities industry and government to advance PHEV concepts. Our advocacy and technology efforts since then has helped bring us to the point where many carmakers are now planning to build PHEVs. From that perspective, WE NOW URGENTLY PROPOSE that the California Air Resources Board take one step backward and decide to slow down regulation of aftermarket conversions.
The industry is still so young and small that most innovation is still coming from self-funded, skilled, dedicated, engineers and entrepreneurs. These players and other affected parties have not yet had a chance to fully and productively present and discuss their concerns to CARB. Implementing the proposed rules will drastically slow growth of the conversion industry, and it could prevent further progress with components, software and usability. Only one or two companies may have the deep pockets to comply. Other operating companies and entering entrepreneurs will have difficulty gaining the financing and personnel to handle the up-front deep engineering and testing -- plus the warranties -- that CARB gets from auto manufacturers and may now expect from converters.
WE PROPOSE THAT BOARD MEMBERS AT THIS MEETING REQUIRE: that all the companies involved in conversions simply register with CARB, inventory their completed conversions, project their 2009 volume, and make themselves available for a more deliberative process. Failing that, we propose the staff devise a set of graduated rules, suggested in our extended testimony, to require increasing compliance only as manufacturers sells significant volumes of conversions.
Below we are present some detailed justifications, in addition to those we submitted August 1, for this urgent request, along with specific technical and business arguments. We have submitted this new testimony electronically. (We leave to others to re-address the specifics of the regulations about which we testified on August 1.)
Felix Kramer, CalCars' founder, says, "I recognize with much regret that this regulatory process has come so far without including some very important issues. I am sorry I could not be here in person. This week I will be in Washington DC. A key theme of this Presidential Inauguration is cooperative inclusion. The problems we have are so great that we can't solve them unless we work together. That theme reflects the timeless words of Abraham Lincoln's Second Inaugural, which concluded in part, "With malice toward none, with charity for all, let us strive on to finish the work we are in." I expect that we will have heard similar eloquence on January 20 that continues to evoke Lincoln's approach.
In that spirit, I am presenting for your consideration an update of another Lincoln speech that still inspires us all. In a spirit of humility, I attempt to look at the issues the Board faces today through the prism of almost 300 words written a century and a half ago:
A SACRAMENTO PLUG-IN ADDRESS
Four years and seven months ago, our colleagues brought forth in this state a new breakthrough, conceived in garages, and dedicated to the proposition that all travel should be low carbon. Now we are engaged in a great transition, testing whether our state, and any state so concerned and dedicated, can so evolve. We are met in a great capitol of that change. Here a powerful board is poised to make a final resting place for the dreams of those who have fully pledged their livelihoods to that cause.
It is in no way fitting or proper that you who sit in judgment should reach a final verdict today. And, in a larger sense, you can not undermine -- you can not regulate -- you can not fallow -- this ground. The brave pioneers, here and globally, who took the first steps, have set in motion a transformation, far beyond your power to approve or deny.
The world may little note, nor understand, what you decree here. But it will be shaped by what we do here. It is for us, the experimenters, rather, to rededicate ourselves to refine the unfinished solutions which we who first plugged in hybrids have thus far so seriously advanced. It is rather for you, the board, to reflect on the greater task remaining before us all -- that from these early steps we gain increased momentum for that cause for which we have given our full measure of imagination -- so that our past efforts shall not have been in vain, that you here highly resolve instead to encourage those pioneers, that this nation, in the name of science, shall have a new birth of freedom from oil -- and that innovation of the engineers, by the entrepreneurs, and for the people, shall not perish with the earth.
CALCARS' MORE DETAILED RATIONALE:
It's too early to impose specific regulations
The embryonic aftermarket conversion industry is mainly comprised of promising small startups. So far we see only one hardly-mature mid-sized company with deep enough pockets to have good prospects of complying with CARB's proposed regulations. These proposed rules would require potential conversion suppliers to complete all design, long-term emissions testing and verification, and CARB certifications up-front, as well as provide very extended warranties. These new regulations would require existing and yet-to-be-formed small companies to act as if they were large auto companies with substantial technical and financial resources and dramatically slower development cycles.
But today's conversions are the product of continuous design refinement and street testing. Many have been financed from a handful of sales by small companies with a few tens of thousands of dollars to work with at any time. The proposed rules will significantly raise the cost of entry, potentially excluding the very entrepreneurial engineers whose innovations established the market in the first place. Tellingly, today's highest-volume converter, Hymotion, was such a small business until it was acquired by battery maker A123 Systems.
Unfortunately, these companies have been too busy developing their technology and products and responding to public demand even to fully recognize, let alone adequately respond to, the developing governmental processes that could so significantly affect their work. Now we expect that too-early regulation will force some or all of these companies to close, halting their continued development work, losing jobs, promoting stagnation rather than innovation in the industry.
The contraction of these companies will affect their suppliers. Many have promising innovative products but lack the track record and resources to bid for, let alone get, auto manufacturer contracts. Small battery manufacturers, for whom testing and validating their products in real-world vehicles is the sine qua non of engineering and marketing success, will be most affected.
The consequences will not be restricted to California, since some of these companies have been establishing installers or franchisers in other locations in the US and globally. This is a broad industry -- but California is its nerve center, and whatever is decided here will have an impact everywhere. And finally: the result will be less opportunity to reduce CO2 by displacing gasoline with electricity.
Let's recognize how important conversions have been
A look back shows the unprecedented impact of the conversions from late 2004-2006: they demonstrated how close we were to real products from carmakers; they gave utilities and national labs, the California Energy Commission, CARB and the state's air quality districts testbeds upon which to evaluate the benefits and logistics of PHEVs. They prompted the President, the US Department of Energy, Senators, Representatives, Governors, Mayors, and others to endorse this solution as a way to solve key intersecting problems: energy security, CO2 emissions, the future product mix of the auto industry, and costs per mile. They gave elected officials, corporate executives, industry analysts, NGOs and ordinary drivers a preview of a plug-in future. They helped motivate battery developers to focus on the opportunities within the auto industry.
As the technology and solutions evolve, many of these constituencies will still be eager to see and derive PHEVs during the next two to five years until OEM-produced PHEVs are widely available from dealers. They will want PHEVs, as will thousands of citizen-drivers. Hundreds of citizen-drivers have visited our listings at "How To Get a PHEV" at http://www.calcars.org/howtoget.html and from there they (and hopefully in the future, thousands more) will find a company to convert their vehicles.
An unrecognized broader implication of the regulations
Regulation now could provide potentially dangerous precedent for regulation of conversions of non-hybrids to plug-in vehicles, both PHEVs and EVs. (See our descriptive page and links about this enormous market at http://www.calcars.org/ice-conversions/.) The very aftermarket conversion companies and their suppliers whose existences are threatened or prevented are precisely among the firms we expect to take the lead in ICE conversions, which we believe offer the opportunity to make significant near-term reductions in CO2 and petroleum dependency during the five to ten years before new plug-in vehicles achieve significant overwhelming market penetration. And CARB, more than almost anyone, knows we have no time to delay in replacing fossil fuels with low-carbon electricity.
We believe this opportunity has been under-appreciated, with some exceptions, such as former Intel CEO Andy Grove, singer Neil Young, and PHEV inventor Andy Frank, and that they affect the prospects of such far-flung companies as:
- Efficient Drivetrains Inc in California
- Electradrive in California
- EV Power Systems in North Carolina
- H-Line Conversions in Kansas
- Hybrid Electric Vehicle Technologies in Illinois
- Linc Volt in California
- Poulsen Hybrid in Connecticut
- Rapid Electric Vehicles in Vancouver
None of these companies are directly involved in or affected by the current regulatory process. But, importantly, they are interested parties, because the regulations the ARB adopts for aftermarket conversions of hybrids could become precedents for their (or other state/federal government agencies) imposing unrealistic or unduly burdensome limitations on conversions of ICE vehicles in the future.
Learning the lessons of unintended consequences
Though this issue begins on a far smaller scale, it reminds us of what happened when we moved to insufficiently considered massive support for biofuels, invoking cellulosic ethanol but giving us corn ethanol. What happened should at least cause us to move from a greenlight "go" to a yellow "caution--advance slowly."
Remember when the Energy Policy Act of 2005? It increased the amount of biofuel (usually ethanol) that must be mixed with gasoline sold in the United States to 4 billion gallons by 2006, 6.1 billion by 2009, 7.5 billion by 2012 -- and 30 billion gallons by 2020. The European Union followed with similar targets. We can only list the consequences that have been directly and indirectly linked with this decision, which include the belated recognition of the negative energy balance of corn ethanol and the overestimated near-term prospects for cellulosic ethanol; the lack of greenhouse gas benefits; the impact on corn, feed and human food prices; global deforestation and water impacts; the boom and bust in Midwestern farm states and the subsequent bankruptcy of ethanol companies; and periodic food riots in locations around the world. To its credit, Europe recognized the error and stepped back; we still struggle with bad legislation and inappropriate incentives.
The Staff and Executive Officer have prematurely concluded there are no negative impacts
The Staff Report: Initial Statement of Reasons for Proposed Rulemaking for Plug-In Hybrid-Electric Vehicles on page 28 says, "The proposed amendments to the Exhaust and Evaporative Test Procedures are not expected to have a noticeable impact on the status of California business creation, elimination, or expansion."
In the Notice of Public Hearing, we read, "The Executive Officer has made an initial determination that the proposed regulatory action would not have a significant statewide adverse economic impact directly affecting businesses, including the ability of California businesses to compete with businesses in other states, or on representative private persons. In accordance with Government Code section 11346.3, the Executive Officer has determined that the proposed regulatory action would not affect the creation or elimination of jobs within the State of California, the creation of new businesses or elimination of existing businesses within the State of California, or the expansion of businesses currently doing business within the State of California."
CalCars believes that although the companies involved have not yet made their case effectively, the difficulties these regulations cause will in fact have very significant impacts in these areas and in the development path for plug-in vehicles. We believe the Board needs to allow more time to explore these issues.
As a non-profit organization, CalCars has encouraged the aftermarket companies and their suppliers (especially battery manufacturers) to form a trade association. That way an organized constituency can quantify the value and jobs it provides, demonstrate that it is part of a supply chain that needs to be encouraged, and characterize the significant social and environmental benefits it delivers, and cooperatively to come up with workable solutions . We hope this will happen in the coming months.
We accept the magnanimous offer in the Notice of Public Hearing
There we find, "Before taking final action on the proposed regulatory action, the Board must determine that no reasonable alternative considered by the board or that has otherwise been identified and brought to the attention of the board would be more effective in carrying out the purpose for which the action is proposed or would be as effective and less burdensome to affected private persons than the proposed action." We appreciate the Board's recognition that there may be alternative solutions; we propose the Board consider those we present.
THEREFORE WE PROPOSE THAT BOARD MEMBERS AT THIS
MEETING REQUIRE: that all the companies involved in conversions simply register with CARB, inventory their completed conversions, project their 2009 volume, and make themselves available for a more deliberative process. . CARB can then engage in a dialogue with all the stakeholders, just as it has for many years with automakers, to ensure a process that makes sense to all and takes into consideration the very different state and form of the conversion industry and its players.
We appreciate your growing support for plug-in vehicle solutions, and hope that you can come up with a solution where all the players win. Now, one more point…
CalCars' fallback position: if CARB must regulate now…
We understand that CARB is concerned about the durability of warranties following conversions, either from vehicles requiring repairs that are not made, or conversions that are not engineered with sufficient rigor and testing. These are legitimate concerns, but so far we are talking about only several hundred conversions in the entire world. We support an approach that enables companies to improve their products and their support services. The benefits of encouraging this so-far-almost-exclusively-entrepreneurial conversion industry far exceed the risk.
However, if CARB does go ahead, we present an example of a graduated regulation scheme could continue to allow grass roots innovation by holding compliance costs to around $500 per already-sold conversion -- a high but not insurmountable hurdle:
- A company enters the conversion business by presenting CARB with an engineering proposal showing how it will avoid increased criteria pollutants; it then shows a running prototype. Each completed conversion is subject to an ordinary end-user smog test for that model of unconverted vehicle. Buyers sign a contract acknowledging the level of warranty accompanying the product, accepting a level of risk for an 'experimental' conversion, and perhaps committing to periodic smog tests that are not otherwise immediately required of SULEV vehicles for several years.
- After selling 10 conversions, the manufacturer explains how the now-current version(s) avoid mechanical, reliability, and emissions problems, and shows on paper how the system preserves known OEM OBD functionality.
- After selling 100 systems, one vehicle undergoes the most basic manufacturer emissions testing, and the conversion manufacturer shows how known OEM On-Board Diagnostic System (OBD) functionality is both preserved and enhanced with similar capabilities warning of conversion components needing service.
- After selling 1,000 systems, the company complies with CARB's whole set of production conversion rules
Note: such a proposal would require some cooperation with auto manufacturers, who would need to provide aftermarket conversion companies with some proprietary information, or the conversion companies would need to collaborate on building a database of discovered OBD functionality for multiple vehicle models, similar to the reverse -engineered Prius and Escape CAN bus information currently available at www.eaa-phev.org.