The Facts Behind the Energy Independence and Security Act of 2007

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January 9, 2008

On December 19, 2007, the President signed a comprehensive and significant energy bill that will require a substantial rethinking of US vehicle fleet over the next decade. The goal of the legislation is to help reduce America's dependence on foreign oil by:

  • Increasing the supply of alternative fuel sources by setting a mandatory Renewable Fuel Standard requiring fuel producers to use at least 36 billion gallons of biofuel in 2022.
  • Reducing U.S. demand for oil by setting a national fuel economy standard of 35 miles per gallon by 2020 – which will increase fuel economy standards by 40 percent and save billions of gallons of fuel.
I have recently read through the Energy Independence and Security Act of 2007 and can say, this is not a simple congressional words on paper “miles per gallon” upgrade to the Corporate Average Fuel Economy (CAFE) standards created by the Energy Policy and Conservation Act (enacted after the energy crises created by the oil embargo of 1973). The new law is a momentous attempt to alter vehicle design and motive propulsion as we have known it for the past 100 years. This Act in practice will compel manufacturers to truly rethink the car such that oil will not be the primary source of power, if at all.

Over the years, the auto industry has been resistive to any significant upgrades to the CAFE requirements. Their arguments in the past have been, fuel economy does not sell, American’s want big vehicles, we sell what the public wants, etc.

With the new energy bill, both the American consumer and the automotive industry will have to accept transformational systemic changes in transportation as this sector reduces its dependence on oil and offers choices to power the fleet.

Ninety-six percent of the energy for vehicle transportation comes from oil (Figure 1). Currently, the rest is ethanol, or other biofuel. The focus of energy independence lies with the automobile and transportation because no other sector of the economy is as heavily dependent and consumes so much.

 

 Figure 1: US Vehicle Fuel Source

Let me compare the energy source for the power generating industry (Figure 2). Oil use produces only 2 percent of the electricity in the US. If the US is going to become less dependent on foreign oil, the first step is to reduce the public reliance on oil for their transportation needs. At this time the most viable solution and the most efficient is to put the car on the electrical power grid. This is what the Energy Independence and Security Act of 2007 intends to do over the coming decades.

 Figure 2: US Electricity Producty by Fuel Source

The Act will transfer over time the primary source of power for the automobile from gas/diesel derived from oil to coal, nuclear, hydroelectric, solar power generated by the power companies and when applicable for the application biofuels.

This far reaching law, will result in a fleet composed of electric, hybrid electric, plug-in hybrids and fuel cells vehicle. As the requirements are phased-in, the current credits manufacturers receive for vehicles designed to run on alternative fuels will expire and all vehicles that continue to use an internal combustion motor (primary or hybrid power) will be required to be capable of running on biofuels. The aim is, the public will have an energy choices to fuel their vehicle that are only currently available in limited numbers.

The new CAFE requirements will be based on a continuous scale and vehicle foot print. This means small cars will be required to achieve fuel economy well above the 35 mpg corporate average and is a similar strategy used for the current light truck standard regulation as of 2006. Also, if a car and truck have the same size foot print, both will be required to achieve the same fuel economy.

In the mean time the Secretary of Transportation was authorized to begin to increase the current CAFE requirement for cars and trucks and transition the industry starting in 2011 to 35 mpg by 2020. New fuel requirements begin sooner rather than later.

Ultimately commercial work medium and heavy-duty trucks will be required to improve their energy economy after the National Academy of Science completes their technology assessment report on improve fuel economy for these classes of vehicles. Currently, these types of vehicles are not regulated. A new category is defined for work trucks with a gross vehicle weight rating over 8,500 pounds.

The new law focused on the automobile industry because transportation consumes a significant majority of the oil imported into the country. Though, the environmental impact of putting the car on the power grid may be up for debate because the US is heavily reliant on coal as an energy source for electricity. Coal is well known for producing a significant amount of CO2 as a product of combustion. However, overtime I suspect this law is just the first step in creating a more environmentally friendly transportation infrastructure that is not reliant on oil.

Research grants into advanced technologies relevant to the law as well as for consumer information programs on alternative fueled vehicles are also allocated in the Act. Substantial money will be allocated for battery, fuel cell and hybrid research programs. There are also incentives for loan guarantees for investment into US production facilities. Many of these same programs also apply to research and investment into biofuels.

I do believe the automobile as we now know it will not exist in 15 - 20 years. It may perform the same task, but the underlying motive principle will be light-years more advanced than today.

This will require a tremendous advance in the application of new, novel and expensive powertrains. I do question how some companies will be able to afford to develop the technology necessary to meet this challenge. I even wonder if vehicles will become so expensive the vehicle market in the US will shrink, putting further pressure on smaller companies and niche brands.

In summary the V-8 and the V6 engine may soon be dead for passenger vehicles. Pickup trucks may be relegated back to their original intent as work trucks and not the life style vehicle they have become for many. The next generation of consumers may well be counting fuel cells stacks and not pistons as a measure of performance and efficiency.

After researching the new Energy Independence and Security Act of 2007, the car of tomorrow will soon be here today. This time the automakers have no choice. Make no mistake; the bill signed in December is comprehensive, significant and transformational. Energy independence will also take time and commitment. Referring to this law as a CAFE increase is an understatement.

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