Ricardo total cost of ownership-economics of emerging fleet technologies

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Presented by Mark Kuhn Principal at Ricardo Strategic Consulting at NAFA 2013

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Ricardo total cost of ownership-economics of emerging fleet technologies

  1. 1. www.ricardo.com© Ricardo plc 2013Total Cost of Ownership: Economics ofEmerging Fleet TechnologiesNAFA ConferenceApril 25, 2013Kenworth HEV Bucket TruckMark KuhnPrincipalRicardo Strategic ConsultingDieselNGEVDiesel HEVNG HEV
  2. 2. © Ricardo plc 2013 2RD.12/272601.5Contents Scope of study Technologies/segments Analysis methodology Analysis results– Diesel vs. NG, Diesel HEV, NG HEV, EV Conclusions / next steps
  3. 3. © Ricardo plc 2013 3RD.12/272601.5Model Summary – Included Technologies and SegmentsSix technologies and 22 technology vehicle segmentcombinations were included in the modelCV Market: Based on Project Segments
  4. 4. © Ricardo plc 2013 4RD.12/272601.5Representative vehicles were selected to characterize eachfleet segment and each technologyBaseline Diesel Vehicle Inputs – Representative VehiclesSource: U-Haul, Kenworth of Florida, HT&T Truck Centre, Rock& Dirt, Peterbilt, Kenworth, Ford, NREL, Fleet Equipment Magazine, TRB, CalstartDiesel HEV reference: HEV Express Cargo Van with Duramax 6.6L V8 Turbo Diesel with 260 hp, 525 lb.-ft. torque and B20-Diesel compatibility
  5. 5. © Ricardo plc 2013 5RD.12/272601.5Vehicle TCO is modeled as the PV of the sum of both CAPEXand OPEX for that vehicle within its first ownership periodVehicle TCOMaintenanceCostModel Summary – Model StructureVehicle OPEX(PV over vehicle life)Vehicle CAPEXVehiclePurchase CostPer VehicleInfrastructureCost*Fuel CostEngineTransmissionBrakesEmission ControlInstallationPermitsPV ofMaintenanceFuelConsumptionFuel PricePurchasePriceIncentivesPV of SalvageProportionalUse ofCapacityTotalInfrastructureCostVehicle FuelConsumptionTotal CapacityFuel EconomyIdle TimeDriving Distance++x x+* Infrastructure costs assumed to be $0for diesel
  6. 6. © Ricardo plc 2013 6RD.12/272601.5Vehicle level TCO and Payback Periods vary with each vehicleclass and duty cycle combination: NG best for Class 3vehicles; Diesel for Class 8 trucksModel Summary – Vehicle TCO OutputTCO Summary TableSource: Diesel Tab2012 2015 2020 2012 2015 2020 2012 2015 2020 2012 2015 2020 2012 2015 2020Per Vehicle OPEX $Diesel 39,864 41,774 46,354 91,556 95,282 105,687 156,911 158,043 168,206 163,600 171,119 192,759 251,418 250,992 263,456Natural Gas 29,765 33,342 36,625 69,274 77,762 85,333 115,637 127,720 134,810 131,327 148,501 165,576 186,266 199,232 205,072Electric 12,480 12,938 14,601 58,524 57,645 59,488 3,932 4,064 4,593 2,208 2,275 2,559 6,446 6,726 7,719HEV 37,067 37,252 39,284 80,351 76,143 80,092 137,160 130,611 131,202 51,730 76,143 1,409 231,651 224,555 226,267HEV+NG 21,985 24,040 24,863 46,073 50,188 51,734 87,443 93,363 92,800 35,689 41,024 9,601 158,496 166,720 164,210PHEV #REF! #REF! #REF! #REF! #REF! #REF! 100,377 94,849 89,253 68,391 65,673 64,579 #REF! #REF! #REF!Net CAPEX - Vehicle*Diesel 29,149 30,401 32,604 53,856 56,086 60,008 58,016 60,489 64,841 133,460 138,793 148,158 90,637 95,258 102,172Natural Gas 31,550 32,528 34,329 72,020 73,016 75,167 82,766 82,900 83,836 142,523 145,398 151,065 160,924 161,750 151,703Electric 108,688 105,272 82,790 98,527 104,551 92,622 62,572 64,947 69,142 116,268 120,752 128,652 90,936 94,428 100,583HEV 48,149 50,032 49,152 76,756 79,348 79,821 82,916 88,544 89,123 137,367 79,348 151,735 156,800 164,751 170,767HEV+NG 52,924 54,485 53,127 93,056 94,238 92,641 109,666 112,896 109,963 159,267 162,367 168,543 213,537 217,478 205,636PHEV 42,749 45,163 45,030 71,796 74,896 76,088 146,016 135,285 122,246 155,360 157,481 162,595 102,577 111,068 115,252CAPEX - Per Vehicle InfrastructureDiesel - - - - - - - - - - - - - - -Natural Gas - - - - - - - - - - - - - - -Electric 1,850 1,906 2,003 1,850 1,906 2,003 - - - - - - - - -HEV - - - - - - - - - - - - - - -HEV+NG - - - - - - - - - - - - - - -PHEV - - - - - - - - - - - - - - -TCO (dollars for year of purchase)Diesel 69,013 72,175 78,958 145,412 151,368 165,695 214,927 218,531 233,047 297,060 309,913 340,918 342,054 346,251 365,629Natural Gas 61,315 65,870 70,954 141,294 150,778 160,500 198,403 210,620 218,646 273,849 293,899 316,641 347,189 360,982 356,775Electric 123,017 120,116 99,394 158,901 164,102 154,113 66,504 69,011 73,735 118,477 123,028 131,211 97,382 101,153 108,301HEV 85,216 87,284 88,436 157,107 155,491 159,913 220,077 219,155 220,325 189,097 155,491 153,144 388,451 389,306 397,034HEV+NG 74,910 78,526 77,990 139,129 144,425 144,375 197,109 206,259 202,764 194,956 203,391 178,144 372,033 384,197 369,847PHEV #REF! #REF! #REF! #REF! #REF! #REF! 246,393 230,134 211,499 223,751 223,154 227,175 #REF! #REF! #REF!Payback Period (Excluding Infrastructure)Diesel - - - - - - - - - - - - - - -Natural Gas 1 1 <1 9 11 7 5 7 5 2 2 1 5 6 4Electric 23 19 10 8 9 5 <1 <1 <1 <1 <1 <1 <1 <1 <1HEV 14 12 9 12 9 7 8 7 5 <1 <1 <1 8 7 6HEV+NG 7 7 5 10 10 6 7 9 6 #VALUE! #VALUE! #VALUE! 6 6 4PHEV >30 >30 >30 >30 >30 >30 15 10 5 2 2 1 #REF! #REF! #REF!Delivery Delivery Delivery Work Truck Intercity TruckClass 3 Class 4-6 Class 7-8 Class 6 Class 8TCO SummaryNotes:1. CAPEX weighted based on proportion of total capacity used by anindividual vehicle. For example if a truck used 10DGE /year of anavailable 100 DGE infrastructure that cost $100, then the pervehicle infrastructure CAPEX for that truck would be $102. The payback period listed in this table excludes infrastructure andbattery replacements. Other payback periods including both ofthese costs can be found at the bottom of the individualTechnology Worksheets3. All costs are in present value $ for the year stated at the columnheadClass 3DeliveryClass 8IntercityTCO:LowestNG lowest,followed bydiesel andNG+HEVDiesel, followedby NG HEV+NG& HEVPaybackPeriod:LowestNG (~ 1 year)followed byHEV+NG (5-7years), andHEV (9-14years)NG (4-6 yrs),followed byHEV+NG (4-6yrs) and HEV(6-8 yrs)OPEX:LowestEV HEV+NGCAPEX:LowestDiesel Diesel= Best in vehicle class/duty cycle
  7. 7. © Ricardo plc 2013 7RD.12/272601.569145215297342611411982733471231598515722038875139197372246223Diesel best: Class 8; NG best: Class 3 delivery; NG+HEV best:Class 4-6 & 7-8 delivery; PHEV best: Class 6 work truckTCO by Segment and TechnologySource: Ricardo Fleet TCO ModelTCO Model Output – Segment, Technology and Year ComparisonDiesel Natural Gas Electric Vehicle72151218310346661512112933611201648715521938978144206384230 2237916623334036571161219317356991548816022039779144202369215 227Class 3 Delivery Class 4-6DeliveryClass 7-8DeliveryClass 6 WorkTruckClass 8 Intercity201220152020Key Takeaways Class 3: NG and diesel arelowest TCO.– NG +HEV is slightly higher thandiesel vehicle– EV is consistently the highestdriven by large CAPEX. Relatively small range forTCO except for Class 6 worktruck– Driven by high initial vehicle price(relatively smaller percentchange for the addition of newtechnologies)– Majority idle fuel usage– Longest period of ownership Class 8 Intercity has very lowrelative variation in TCO– Driven by short ownership periodassumption– Mid range annual mileageassumption$1,000s$1,000s$1,000s6 year TCO12 year TCO 12 year TCO 15 year TCO5 year TCOHEV NG-HEV PHEVDieselNaturalGasNaturalGasNG-HEVPHEVNaturalGasNG-HEVNG-HEVPHEVNGNaturalGasNG-HEVNG-HEVPHEVDieselBest-in-sector shown in green frame
  8. 8. © Ricardo plc 2013 8RD.12/272601.5Class 3: For all but diesel, CAPEX exceeds OPEX. For highestcost vehicles, CAPEX is 1.5-9X higher than OPEXClass 3 Delivery TCO Net CAPEX and OPEX Contributors29,149 31,550108,68848,14952,92430,400 32,528119,86050,03054,48532,604 34,328108,15249,152 53,1271,8501,9062,00339,13427,58112,48031,067 21,98555,22030,53312,93837,25224,04061,01133,42014,60139,29424,86368,28359,131123,01879,21674,90985,62063,061134,70487,28278,52593,61567,748124,75688,44677,990Diesel NaturalGasElectric HEV NG+HEV Diesel NaturalGasElectric HEV NG+HEV Diesel NaturalGasElectric HEV NG+HEVSource: Ricardo Fleet TCO ModelExample TCO Model Output – Class 3 DeliveryDiesel Vehicle Net CAPEXDiesel OPEXCNG Vehicle Net CAPEXCNG OPEXEV Vehicle Net CAPEXEV OPEXEV Infrastructure CAPEX2012 2015 2020Key Takeaways Lowest OPEX by far is withEV, but highest CAPEX Lowest OPEX+CAPEX isCNG, followed by diesel Shorter ownership periods(6 years vs. 12-15 for otherclasses) lead to higher %contribution of Net CAPEXto overall TCO. Start-stop drive cyclefavors electric vehicles inoperating costs, but thehigh initial pricesignificantly affects theTCOHEV Vehicle Net CAPEXHEV OPEXNG+HEV Vehicle Net CAPEXNG+HEV OPEXOPEXCAPEX
  9. 9. © Ricardo plc 2013 9RD.12/272601.5$50,000$55,000$60,000$65,000$70,000$75,000$80,000$85,000$90,000$95,000$100,0002012 2015 2020CNG - Public Station CNG - Private StationCNG - In house 50 vehicles CNG - In house 100 vehiclesCNG - In house 300 vehicles Nominal DieselHigh Diesel Low DieselSmall fleets see little financial benefit from installing their ownCNG infrastructure but may have few other options availableClass 3 Delivery TCO: Multiple Pricing CasesTCO Comparison – Sensitivity to AssumptionsClass3DeliveryVehicleTCOKey Takeaways Use of private fueling stationsleads to savings over publicfueling stations Small and medium fleets (100vehicle or less) see no financialbenefit from installing on-siteinfrastructure Fleets >300 vehicles will justifyinfrastructure investment evenwith low diesel fuel costs 50 vehicle fleets can only justifyinfrastructure investment ifdiesel fuel cost is high The financial benefit of naturalgas class 3 delivery vehiclesdiminishes in areas where thereis a lack of public and privaterefueling infrastructureAssumptions:•Phoenix Urban Drive Cycle•No Natural Gas Incentives•No additional maintenance facility upgrades•Land costs not included in infrastructure costsSource: Ricardo Fleet TCO ModelHigh Diesel$6.43/galNominal Diesel$4.67/galLow Diesel$2.94/gal50vehicles100vehicles300vehicles50vehicles100vehicles300vehicles50vehicles100vehicles300vehiclesHigh Diesel$4.37/galNominal Diesel$3.90/galLow Diesel$3.01/gal
  10. 10. © Ricardo plc 2013 10RD.12/272601.5Class 8: OPEX >> CAPEX for diesel, OPEX is smaller % of totalcosts for LNG. LNG expected to outperform diesel in out yearsas diesel $ continues to rise, and technology cost matures2 scenarios for LNG Class 8 Intercity are compared to a diesel baseline$90,637$135,924$160,924$95,258$137,749$161,750$102,172$132,132$151,703$251,418$146,136$191,808$250,992$140,978$183,785$263,456$133,728$172,153$342,055$282,060$352,732$346,250$278,727$345,535$365,628$265,860$323,856Diesel NG Case1 NG Case2 Diesel NG Case1 NG Case2 Diesel NG Case1 NG Case2Source: Ricardo Fleet TCO ModelExample TCO Model Output – Sensitivity to AssumptionsDiesel Vehicle Net CAPEX Diesel OPEX LNG Vehicle Net CAPEX LNG OPEX2012 2015 2020Case Descriptions / KeyTakeaways Natural Gas Case 1:– In-house fuel cost– 120 DGE tank (~300 milerange) Natural Gas Case 2:– Public Pump fuel Price– 240 DGE tank (~600 milerange) 2020 Cost advantage of NGCase #1 due to lower pumpprice than in-house price,(~$35K) and lower cost ofsmaller fuel tank (~$25K) Downward cost trend of LNGdue to increasing forecast ofdiesel price, and decreasingcost of LNG technology astechnology matures andincremental cost penaltydecreasesOPEXCAPEX
  11. 11. © Ricardo plc 2013 11RD.12/272601.5$200,000$250,000$300,000$350,000$400,000$450,000$500,0002012 2015 2020LNG - Public Station LNG - Private StationLNG - In house 50 vehicles LNG - In house 100 vehiclesLNG - In house 300 vehicles Nominal DieselHigh Diesel Low DieselSensitivity of infrastructure: high fuel consumption of Class 8Intercity trucks makes on-site infrastructure more appealingClass 8 Intercity TCO: LNG fueling and infrastructure case evaluationExample TCO Model Output – Sensitivity to AssumptionsClass8IntercityVehicleTCOKey Takeaways High fuel consumption of Class8 Intercity trucks makes on-siteinfrastructure more appealingthan public or private fueling forfleets as small as 50 trucks Dependant on routes anddistances travelled, this mayonly be true if a single hub inthe shipping network has atleast 50 vehicles:– This scenario only includesone filling station– Intercity trucks may not beable to return to that stationat the end of the dayAdditional Assumptions:•No Natural Gas Incentives•No additional maintenance facility upgrades•Land costs not included in infrastructure costs•One LNG station per fleet•LNG transported 300 miles or lessSource: Ricardo Fleet TCO ModelHigh Diesel$6.43/galNominal Diesel$4.67/galLow Diesel$2.94/galHigh Diesel$4.37/galNominal Diesel$3.90/galLow Diesel$3.01/gal50vehicles100vehicles300vehicles50vehicles100vehicles300vehicles50vehicles100vehicles300vehicles
  12. 12. © Ricardo plc 2013 12RD.12/272601.5Operating cost variables are effected by brake life, battery life,oil change intervals, filter replacements and oil costKey observations:1. Hybrid systems significantly reduce brake replacement frequency, significantly reducing maintenance costs for highmileage duty cycles. HEV brake maintenance savings more than offsets battery replacement costs for vehicles keptlonger than the estimated 8 year battery life2. NG: shorter oil change intervals, tank inspections, and more frequent filter replacements lead to slightly highermaintenance costs for natural gas vehicles. SI engines also require that natural gas engine oil be used.3. NG HEV: maintenance costs offer significant reductions over conventional diesel vehiclesSource: Peterbilt Hybrid System Maintenance Manual, NREL/TP-5400-53503, NREL Merit Review - Coca Cola, NREL/TP-540-44314, NREL/CR-540-42534OPEX: MaintenanceNotes: 1. This study does not take into account increased diagnostic time involved in introducing a new technology into your shop. In several NREL hybrid fleet studies,the troubleshooting of problems with HEV systems offset maintenance cost advantages.2. Battery replacement PV is used for all model calculations. Annualized battery replacement is used only for illustrative comparisons between baseline and HEV maintenance.3. New technology troubleshooting and low volume part scarcity potential with this technology are not considered in the model4. Additional diagnostic costs associated with the repairs to new technologies are not includedClass 3 Class 4-6 Class 7-8 Class 6 Class 8Delivery Delivery Delivery Work Truck Intercity TruckHEV Maintenance and Overhead 693$ 1,234$ 854$ #VALUE! 2,598$HEV Brake Maintenance 161$ 250$ 282$ -$ 589$HEV Other Maintenance and Overhead 533$ 743$ 494$ #VALUE! 2,010$HEV Battery Replacement (annualized) -$ 241$ 79$ #VALUE! -$HEV Battery Replacement (PV) -$ 2,896$ 945$ #VALUE! -$Diesel Maintenance and Overhead 1,255$ 1,877$ 1,949$ 3,425$ 4,360$Diesel Brake Maintenance 804$ 1,248$ 1,472$ 2,944$ 2,944$Diesel Other Maintenance and Overhead 451$ 629$ 477$ 481$ 1,416$Class 3 Class 4-6 Class 7-8 Class 6 Class 8Delivery Delivery Delivery Work Truck Intercity TruckNatural Gas Maintenance and Overhead 1,748$ 2,155$ 2,606$ 3,653$ 5,831$Diesel Maintenance and Overhead 1,500$ 1,877$ 2,181$ 3,425$ 4,360$Class 3 Class 4-6 Class 7-8 Class 6 Class 8Delivery Delivery Delivery Work Truck Intercity TruckNG-HEV Maintenance and Overhead 779$ 1,318$ 1,423$ -$ 2,532$Baseline Diesel Maintenance and Overhead 1,255$ 1,877$ 1,949$ 3,425$ 4,360$
  13. 13. © Ricardo plc 2013 13RD.12/272601.5Conclusions Commercial vehicles were modeled with 6 powertrain technology configurations, including diesel as thebaseline powertrain, and 22 combinations of powertrain & vehicle/duty cycle TCO:– TCO can be reduced by 14% or increase by as much as 80% depending on technology, duty cycle,infrastructure and fuel costs– Operating cost variation is effected by brake life, battery life, oil change intervals, filter replacementsand oil cost Payback period:– Payback period for introducing new technology ranges from 1 to 23 years• 1 year: Class 3 delivery NG, and Class 6 work truck NG and PHEV• 23 years: Class 3 delivery EV, driven by CAPEX: battery pack, motor and power electronics,charging infrastructure and low volumes associated with new technology– Payback period is sensitive to infrastructure requirements paced by fleet size, the rate of diesel fuelcost increase and desired vehicle range (battery or tank size) Technology choice for lowest TCO:– Diesel best: Class 8– NG best: Class 3 delivery Next steps: expand to more technologies, and more applications such as off highway, agriculture,mining, marine, power generation…– NG+HEV best: Class 4-6 delivery & 7-8 delivery– PHEV best: Class 6 work truck
  14. 14. www.ricardo.com© Ricardo plc 2013Total Cost of Ownership: Economics ofEmerging Fleet TechnologiesThank you!Links: American Gas Association Natural Gas Fleet Savings Calculatorhttp://www.aga.org/our-issues/natural-gas-vehicles/Pages/Natural-Gas-Fleet-Savings-Calculator.aspxOr Google: Ricardo Fleet Savings CalculatorRicardo Strategic Consulting•Ricardo Inc.Detroit Technology Campus, 40000 Ricardo DriveVan Buren Twp., Michigan 48111 USAChristopher YeeManagerTelephone: +1 734.306.5055Facsimile: +1 734.397.6677louis.bailoni@ricardo.comRicardo Strategic Consulting•Ricardo Inc.Detroit Technology Campus, 40000 Ricardo DriveVan Buren Twp., Michigan 48111 USAMark S. Kuhn, P.E.PrincipalMark.kuhn@ricardo.comMobile: +1 248 819 5744Recption: +1 734 397 6666Facsimile: +1 734 397 6677www.ricardo.com

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