Webinar on the Role of Government in Natural Gas Vehicle Policymaking and Strategy Process (Text Version)

This is a text version of the video for Webinar on the Role of Government in Natural Gas Vehicle Policymaking and Strategy Process presented on Dec. 15, 2014.

COORDINATOR: Welcome and thank you for standing by. Lines are on listen only until the question and answer session. To ask a question press star 1 on your touchtone phone, unmute you're phone and record your name. This call is being recorded, if you have any objections you may disconnect at this time. I would like to now turn the call over to Marcy Rood Werpy. Ma'am you may begin.

MARCY ROOD WERPY: Thank you. Hello Clean Cities and friends, I'm Marcy Rood Werpy of Argonne National Laboratory, and my team supports the Clean Cities program at the Department of Energy and at the local level. I am very pleased today to introduce our guest speaker, Dr. Jeff Seisler, in a final webinar in a series of webinars that we've had on natural gas vehicles.

And Jeff has vast experience in natural gas vehicle technology throughout the world, more than thirty years of experience in this field. He has supported our effort in our international program, in particular in the country of Kazakhstan and soon to be working us in Israel.

He is the CEO of Plainfields Consulting which has offices both in Washington as well in Brussels, he is an internationally recognized expert in global NGB development as I mentioned, he is—he was the Director of the NGB Coalition in Washington, D.C., he was the first Director of the European NGB Association, and is a founder and past President of NGB Global.

Dr. Seisler received his BA in International Affairs and Communications from George Washington University, as well as advanced degrees from the University of London. And for this webinar he will be talking about lessons learned from around the world to create deployment strategies for commercializing NGBs. So Jeff, want to go ahead and get started.

JEFF SEISLER: Thank you very much, Marcy for the very nice introduction and I also want to thank the Clean Cities—the DOE staff both in Washington and Argonne, Colorado—all the people who have made this possible and particularly Dan Santini who's been working with clean cities in Argonne for many years, he was—his help was instrumental in making good quality presentation so we can give out some good information to you all today.

So, NGB's past and prologue—what can we learn from things that people have done around the world? And as well in the United States—this presentation as Marcy said has been broken into three parts, initially it was one very large presentation of about 170+ slides, so the structure of this whole framework—the way it was set up—we looked at three topic areas. We looked at politics, which you can see on the left, which is what this is about, we also had a session and a section on technology development and then in between is what I call poly-tech and that has to do with standards and regulations.

So our first look was at looking past and looking forward along with the poly-tech and then technology and politics. All of these things impact on the markets and the stakeholders as you can see in the diagram. The decisions made by government and things that happen in technology and the markets are going to affect the customers, whether they're road vehicle customers, off road, marine, etcetera, clearly the business and equipment service suppliers are affected and the fuel suppliers. And so all the stakeholders are affected, and we try to understand what happens in the response to certain activities in the marketplace and then we want to study that, analyze that and look at it and then learn from these lessons and best practices.

So we know what we can do that's good and what we, you know, need to improve upon. So let's talk about the role in government, the people with the carrots and sticks. Just as an overview, and this comes from Dan Santini and another colleague of his to sort of summarize this and wraps up what we're about to get into. The alternative fuel sources—all of them—they've got to be pursued on a timely basis because any transition is going to take many years to accomplish.

And these fuel transitions—we try to see them as—make them as few as possible because the infrastructure changeover and the expense—not may—which is what the original author said—but it will be very expensive. And the realignment of all these shifts away from petroleum toward—not to exclude petroleum—but toward alternative fuels—there are a lot of things that are affecting it and it's going to be technology, international fares, international politics and of course, the world pricing and the supply of fuels.

Each of these things has major impacts upon the progress and the marketability of the various fuels. Overall what we've seen in almost every single market where natural gas vehicles have been successful, government involvement has been absolutely essential.

And so what do governments typical do outside of the role they play for defense? Well, they can create incentives, and those incentives, you know, are going to be either financial or non-financial, they can create and enforce mandates, developing standards which also goes in the direction of developing regulations—they fund research and development, they can be leaders by example to those people who've elected them and they can do their own PR and communications. In government we call it sort of jaw boning—but talking, you know, the good talk and trying to convince people of what the right things are to do.

And typically with government policy, what's good for one alternative fuel is good for them all. Now we've always tried to be partners in politics whether it's electrical vehicles or LPG or hydrogen, etcetera, it really doesn't matter, these alternative fuels will compete in the marketplace and ultimately it's going to be the customer who decides which one of these fuels is best suited for them.

So in politics, we're all playing on the same field. Now, what are we looking like when we look at what's expected from the market and the market realities? We drew this—I drew this triangle a number of years ago—probably going back as far as 1988 when we first started looking at the NGB coalition and trying to understand what the best markets were. So there are different approaches to the NGB market development that will help shape government approaches also to policies.

And typically we've looked at the high fuel consuming vehicles, the buses, the trucks, and then over time we kind of went down in the direction many markets toward commuter vehicles and others. And fleets were the first targets because they're centrally fueled and they're trying to build a fueling infrastructure—you can't just go out with a complete fueling infrastructure publicly.

And each country has taken a different approach, the French, they started looking with municipalities and they have several thousand urban buses running on natural gas in France and most of the main cities. In the UK, they focused on heavy duty urban vehicles, the delivery vehicles and the trucks.

And Germany and the United States, we started looking at light, medium duty vehicles and in the U.S. in particular, we looked at pickup trucks, we got into that market early as well as vans because they're very, very popular. Italy on the other hand, going back to 1935—they started with commuter vehicles, but they also were busy trying to put in a fueling infrastructure so it was convenient for those drivers to find fuel.

And then in places like Norway, which have a very singular topography—a lot of mountainous regions and very difficult to lay gas lines, they focused on ships because that becomes both for commuters and delivery of goods going in and out of the fjords—that's a principle vehicle for them so they did natural pick up in the marine application market.

Now what's popular amongst the market based instruments that governments do use, taxation is the one that cuts across everything. You've got incentives, you can have penalties for doing something or not doing something, and you can also have exemptions from taxation. Now there are three major options when we look at the transport sector tax potential, you can have taxes on fuels, you can tax the vehicles at the point of sale, when you import them if they're coming from abroad, when you register them—so there's lots of opportunities and governments usually avail themselves of all the opportunities to tax vehicles.

And then you can tax the use of those vehicles, that's why we have road tolls, you can have parking taxes and parking fees, and so as people use the vehicles, you can then get money from them based upon the use. So those are the three ways that vehicles and fuels can generate income. Now, when we talk about trying to have incentives, typically we're looking at either tax credits or tax deductions. And deductions are going to be worth less to the consumer but cheaper for government.

So for example, if you are receiving a $5000 deduction from your taxable income, and they income tax rate is 50%—the way it is in Belgium and other places in Europe and Canada—well that $5000 deduction from your taxable income is only worth $2500. A credit on the other hand, which is coming off the money you owe in taxes, $5000 credit will be worth $5000.

So we've had a lot of experience dealing with Congress and whether or not they look at deductions or credits, and there's always that trade off and pay off between the revenue impact on governments and the impact that it's going to have on consumers.

Now looking at the New Zealand experience, incentives there—experience shows that conversions per month when they started their program were sharply affected by government incentives. When the incentives were in, then the market share increased and when the incentives were removed, the market share dropped significantly. And after the worldwide oil price collapse of 1985 and 1986, their whole program kind of went down the tubes.

Now this is just an example, I'm not going to go into all of these details but it's a very good graphic of the reaction that markets can have when incentives appear and when they go away. So they started their program in early 1980 because they were at the end of the oil supply line in the world, so they wanted to do something to get incentives—to get an alternative to oil. So they started incentives and the conversions on the left—you can see the numbers of conversion per month—they went up and when they started dipping, they added some more incentives. But over time, these things had a function of going up and down—when they dipped they started a loan program in 1983 and then you can see how the market changed. The big thing—as we said in the early slide—international relations and international economics changed so when the New Zealand dollar became devalued and the cost of petrol went up, well so too did natural gas vehicles conversions.

But anyway, this has had an up and a down and when all those incentives were finally removed, this 130 natural gas vehicles—which was a model outside of Italy for NGB programs—the whole program then sort of disappeared. So they had a significant progress and well, because of the way the government handled it, it—the program ultimately didn't succeed.

Now in the U.S. incentives, what do we have to learn? Projects on reducing emissions and petroleum use—we looked at these kinds of things, we look at incentives that must be offered for reducing emissions and for using fuel more efficiently, but the incentives that are offered—when they are offered they should be looking at the cost differential between the NGB and the petroleum vehicle—the gasoline vehicle and not on the full value of the vehicle.

And legislators have made the mistake of offering incentives on the full value of the vehicle, but you can actually bankrupt, you know, government budgets because you're looking at that as opposed to just the cost differentials. So that's a critical lesson to be learned.

And also the program should be easy to administer. If it's a hassle for people to get in and get their money back, it's going to lose popularity. And the incentives not only should be for vehicles, but they also need to be for the installation of the fueling infrastructure. We know that grants and cash—cash rebates are much more popular than tax credits. Especially for the ultimate consumer or in some cases, there has been incentives that have gone directly to the vehicle sales people and the people who own the car dealerships. This happened in a number of countries to help promote the sales and so when people walk into the showroom, they're not just shown diesel and gasoline vehicles, but they say hey, there's also a natural gas vehicle over here that you might want to consider.

Also non-profit organizations and local governments, they can be qualified for grants and cash rebates as well. The issue with the United States typically—and this is not just the United States, it's also happened in the UK—the tax incentives have been too short lived and that's something we're going to talk about a little bit more—these policies need to be longer term if they're going to be successful.

Again, just one other example of what happened in Italy with incentives, you can see back in 2002 there were no incentives and the market adoption of natural gas vehicles is fairly flat and as you moved in time and you can see that 1500 Euros and 2000 Euros and 3500 Euros—you can just see how that market—how that line increased and then just after 2009, notwithstanding the international plunge in the economy, when the incentives were removed then there was a sharp dip in the growth of natural gas vehicles. Again, all tied to whether or not there are incentives and whether they're removed immediately or whether they're moved gradually.

There was another interesting incentive program in Berlin, and they wanted to put a 1000 taxi cabs into Berlin—this goes back in 2001—at the very beginning of their program. And focusing on taxi cabs—you'll see in a couple of other examples—is a tremendous opportunity. So what they did is they gave the first 400 purchases of the natural gas taxi cabs that were meeting Euro four at that time—they had to meet the highest level emission standards—they received just over 3000 Euros. The second group of 300 purchases received a little bit less money and then the last group to join received 2045 Euros per car and then thereafter, anybody who bought cars didn't receive the incentives, so they missed out.

The local gas company also provided fuel vouchers for the early adopters, they were at the highest level—1534 Euros and then for the later purchases, they went down a bit. So this structure we saw worked very, very well, so the concept here is to reward the innovators those earliest adopters who are really taking the most risk and they're also demonstrating leadership.

You give those innovators the highest level incentive and then the early adopters are slightly less than the people who are coming into the majority later on—you can give them a little bit less incentive and then the incentives tales off and hopefully the market is moving successfully over time.

Another tremendous taxi cab program was in Cairo and in Cairo they had horrendous air pollution and it was because a lot of vehicles were using diesel and they were using a lot of smaller vehicles that are, you know, two stroke diesels so terribly polluting vehicles.

And the concept there was very clever, it's what I call the shared savings plan. They organized between government and the national NASAR Bank an opportunity to provide loans to taxi drivers to convert vehicles, but they were no cost loans.

So basically the bank paid the conversion company to do the conversions of the taxi cabs. So for the cab driver it was free, they drove into a fueling station and they had a series of fueling stations and they were working with BP, Amoco and they set up conversion shops at the same place where they get natural gas.

Then once they got their vehicles running on bi-fuel, national gas, gasoline, each of the drivers was given a card and the credit card or the fuel card, they would use that when they would go to buy natural gas but the cost of that loan was repaid by paying the full petro price even though they were buying natural gas and so they were paying about 50% more for the gas at that point, but the day that—when they put that card in and that showed up that the loan was repaid, they're fuel cost dropped by 50%.

So what was great about that—not only the fact that the driver's didn't have to lay out any money—but the bank got cash flow right back to the bank and the government, so the cash flow is continual. So the money can then be recycled back into the new customers who they wanted to provide loans for.

So they made a clear air contribution immediately, they continued to grow this program and the revenue impact for the government was really only the time value of the money that was loaned that they might not have gotten, you know, as much as interest on it. But the calculus was great and the program worked very, very well. So taxi cabs can be a very successful way of entering to the market.

Now what about some of the non-financial tools? I mentioned exemptions and for a while as pollution has been increasing, some cities have decided to ban traffic and starting with force, the Italian cities have blossomed to several—I think it was about twelve cities eventually—on seriously bad air days and Paris did the same thing—they would restrict cars driving to the city based upon their license plate. Whether it was an even license plate or an odd number license plate. So on an odd number day, if a policeman saw an even number car driving around, he can give them a ticket.

So that's one form that was used somewhat successfully. And then of course, the time of day traffic restrictions, like, the London congestion charge. And if you want to drive your natural gas or electric vehicle into London during the time when they have the congestion charge, you can save yourself quite a lot of money because you're exempted from the charge.

Then there are restrictions on commercial traffic, again in London, there were restrictions of driving late at night for large commercial vehicles. And one of the NGB customer's—Safeway—who could not deliver food and other things to their supermarkets at night when they were driving diesel found that a reduction in the noise by about 40 or 50% when they drove on natural gas—brought them below the noise level restrictions.

So they could operate late at night when there was very little traffic, they were not restricted at all to operate, you know, throughout the—whatever time they chose to do. So it was good for the business, they saved money, they saved fuel costs because they weren't stuck in traffic, and that kind of exemption worked very, very well.

And in the United States—going back to the Energy Policy Act of 1992—the advocates were able to get car pool lanes—access to car pool lanes and that's happened in various parts of the country. It's been implemented, like, in California but they're twist on that is that if you want to be exempt from having two or three or four people in a car, it has to be a dedicated vehicle. Something else we tried when that law was passed in Virginia from the NGB coalition we went to the Virginia State Motor Vehicle people—the Highway and Traffic people it was—and we tried to get them to put signage up on the road signs to say that, you know, HOV2 or HOV3, high occupancy vehicle lanes restricted except if you drive an alternative fuel vehicle. They came back to us and said no, it was way too expensive to do that, but that concept to get free advertising to show that actually your vehicles can run on natural gas and that they're viable vehicles and other alternative fuels is also a very interesting strategy as well as just being able to drive with one person in your clean fuel vehicle.

The other concept is interesting, very interesting, this no wait taxi zones at airports and train stations. It was first tried—that I know of—in Sweden so anybody who drove a natural gas vehicle or in some cases the electric vehicle, they didn't have to wait in the queue—wait in the line to pick up passengers. So if you have a long, you know, a long line of cabs sitting for one hour or two hours as is typical, they have a special lane and you can just drive up and pick up passengers.

And for that kind of process for taxi cabs, time is money and the same cab can go back, you know, two or three times in the same hour while some of his colleagues are still standing in line. Now of course they tried that in Texas but it was challenged in the Texas courts by the taxi association. So you have some places where it's going to work and in some places it's not going to work so well. But that's why, you know, these things have to be tried out to see if they do work.

Now mandates, the other policy tool, when do mandates work? Well we know from experience that it's—they work best with incentives. The financial carrot is going to help insure compliance on a mandate. Typically a transitional approach is most likely for success. So the gradual increase of procurements of vehicles over time, if they're going to be required to buy vehicles, that tends to work as opposed to forcing people to do something immediately and in a large scale. And to be successful, mandates must be implemented and enforced. I put a little asterisk in there because we remember at one point the federal government tried to mandate the sale of electric vehicles—2% of electric—vehicles sold had to be electric—but you can't mandate car companies to sell or produce specific products in vehicles, this is just not enforceable.

So all of these things have to be enforced or they lose their teeth and they lose their effectiveness. So I see things as mentioned—that Marcy mentioned—we were in Kazakhstan—yes, to have a vehicle inspection program—but if you go up to the guy who's inspecting your vehicle and, you know, give him the equivalent of a couple of dollars, he's going to hand you your sticker and say have a nice day. So these things have to be enforced if they're going to work properly.

And just as an example here, the Energy Policy Act of 1992—we felt that we were on the right track by looking at fleet owners of ten or more vehicles as well as government fleets, because government fleets are also potentially customers because they drive vehicles. And very slowly based upon the new purchases, begin to change small percentages of that fleet over to alternative fuels. So if you have a fleet of 100 vehicles for example, you're going to turn those over typically about 20% a year is what happens.

Every five years it seems to completely change over, so that means you only have 20 vehicles—well 10% of 20 vehicles, you know, you're only going to have to, you know, convert one or two vehicles in any particular time. So that's not too bad, but there were loopholes that were created in this policy because of objections from, you know, fleet operator associations in particular, and they basically said if you can't get your vehicle or you can't get the fuel, then forget about it, you don't have to worry about the mandate.

So that loophole, you know, was big enough to drive a bus through and the only vehicles that actually really turned up in this program tended to be the fuel flexible ethanol vehicles, but even those that were purchased by a lot of state governments, they typically ended up driving on natural gas—sorry on gasoline as opposed to ethanol. So it was a good concept, but in the implementation phase and because it was set up with loopholes, it just never worked.

Funding of research development demonstrations is very critical. Support can be provided to advance market proven technologies, like natural gas vehicles, and to accelerate the growth in the market. Because the private sector really can't be expected to pay all of the costs of development and simultaneously keep the product cost low. And this goes for car companies, for equipment suppliers—the people making the fuel storage systems—these kinds of things are very expensive and that's one of the good functions that government can play.

Over investment though in long term alternative fuels and technologies, seriously expensive long term investments and things like hydrogen and battery vehicles, they can have a penalizing effect on other technologies that are market ready and there is by the way an appendix in this—to these slides and when people come and try to download the slides, you'll see some supporting slides of in this particular case, in the past 30 years how governments have gone up and down over time funding different fuels at very high levels.

And it's a question of the cost effectiveness. So we've learned that the investment has to be, you know, steady but it shouldn't be overarching in favor of one fuel versus another.

And we don't want to see governments put all the financial eggs in one fuel basket because it's not going to—it's not going to pan out.

So if we look for example, you know, billions of dollars in Euros and Yens that have been invested for example, in hydrogen fuel cells and we look around the world and see maybe 500 vehicles or less are running on hydrogen and you look at the cost benefit versus not having a lot of money that was invested in things like natural gas or LPG vehicles. This questionable aspect of the cost benefits, although we still have to support long term research. It's a very important thing, so there's a balance to be achieved is the message there.

And what happens is where governments can play a good role is what I call the chasm of commercialization. Most products—many—most products newly developed, do not make it into the commercial market because once you get through the development stage, research development demonstration to field test, right there on the edge of jumping to the commercial market, it usually takes as much or twice as much or three times as much money to leap over that chasm into the commercial market. And governments can help in that regard too, although typically they tend to like to fund the longer term research.

So that's another function of this RD&D support—is leaping over that chasm as opposed to falling into it. Because the time it takes—and that's what this slide shows—if a technology is going to require an infrastructure—and these are real numbers, real world numbers, it has taken to spread to 25% of the U.S. population.

Look at that third bar, the automobile. Starting around 1885 when the first—the auto engine and the diesel cycle engine came to be and cars started being developed 15 years later, its taken 55 years—it took 55 years just to reach 25% of the U.S. population. Household electricity, the airplane, these are the kind of things that needed very expensive infrastructures and so it has taken 30 to 50 years or more to reach even a quarter of the population.

So we have to know that, we have to understand that, and that's why policy should be long term as well because we know by practice this is what it takes to get new technologies in the marketplace. I mentioned leadership by example for governments, it's very important.

As I said before, governments are customers, they use vehicles, they should be purchasing clean vehicles which can motivate the industry, they focus on safety, on environmentally enhanced vehicles, on putting in renewable energy, and all of the purchases of government—even though they're not massive numbers of vehicles the way they are in the commercial sector—it still helps create that critical mass that's needed by companies to reach those economies at scale. And it also can be very useful in getting the fueling infrastructure in place because you know where those vehicles are going to be located in certain key cities and certain key regions.

New initiatives fostered by innovators, those champions, you know, they follow—or are going to be followed by the rest of the bell shaped curve. So we can look at government as being an innovator, as being an early champion, and actually, you know, people who elect governments and they follow—they can follow the leads in certain good ways, it's a real good way to enter the market if you can see the government is actually doing something. Same thing happened years ago with the development of seat belts. It was the government who bought vehicles with seat belts and slowly but surely and then it became mandated—but it was the government that championed these kinds of things with the notion of safety.

New initiatives fostered by innovators and satisfied early adopters will be leading to the early majority market take off and that's that bell shaped curve.

So we need those early adopters to make this market really work. And here's some historical pictures of leadership by example, Bill Clinton looking at NGVs and assigning one of the vehicles, the Queen of Sweden driving her NGV and John Major—this other picture here of then Congressman Bob Weiss from West Virginia, that car that he purchased there, NGV 1 was actually the car that I was driving for a couple of years, it was funny because at the same time, there was a scandal in the House of Representatives over the banking—a banking scandal—and when I was selling this car to Bob and his staff turned to me and I said to the Congressman, would you actually buy a used car from this guy? And I said well, I don't know, would I take a check from a Congressman?

So interesting background and history but Bob was very active, he had a van and his car and again, coming from a state the produced a lot of natural gas, this was a good demonstration.

Down in the lower right hand corner, George Bush Sr.—President Bush—took possession of one of the first natural gas vehicles that was given to the White House and drove that around the circle inside the—by the Rose Garden, and my favorite one is this picture of Boone Pickens in his backyard, you can see a fuel maker, if you look at the tail of the car, just above that tail, you can see a fuel maker next to the brick wall of the house.

And Boone is expounding on the virtues of natural gas to President George Bush and the guy standing next to him is George Bush Jr., and Robert Redford and well back in the corner you can actually see Andrew Littlefair—so some leading personalities of the time and Boone certainly was an early champion of natural gas vehicles.

Now looking at the policy making process and the strategy process. How do we decide in government, what to do and in what order of priority? This becomes a challenge. Well number one, a comprehensive alternative fuel vehicle policy is very important. We already have spaghetti like this and what we really want is to have a clear path and a straight path in terms of policy. Now one of the tools that have been developed have been road maps because maps can provide direction. They provide direction when you're in the car like your GPS system, or they can provide direction strategically for governments and even for companies.

Now road maps help governments prevent one of the favorite things that they—not favored—but one of the typical things is disjoined incrementalism. You make a policy and one piece doesn't relate to the other so it's disjointed. That's inefficient and is less effective than when you try and coordinate the policies. Incremental is okay, it's the disjointed aspect that runs into a problem.

One of the typical examples of this is when you have energy and environment policy makers who are trying to promote let's say alternative fuels but the guy from the tax side on the revenue raisers, they're not connected to them and they may be raising taxes on fuels so there all level and equal on an energy basis but it's the antithesis of what's being tried and accomplished by people on the energy environment side. So that's why this disjointed is not the best way to go and things have to be more coordinated.

Short and mid-term planning will also lay the foundation for the longer term infrastructure development of the fuels. And the more certainty in policies the better it's going to be to encourage the commitment of investors of vehicle equipment suppliers and customers. And that's something that's really potentially a benefit of a longer term road map plan that you can not only make short term policies, but you can start looking at the long term which is going to boost the confidence of the market.

So it's really a matter of getting traction instead of spinning the wheels in terms of policy makers. We have to understand what the situation is, where we are today, the goals of the program, where we want to be, what the gaps and challenges are—so what's in the way of us getting to where we want to go, and what do we have to do? And by the way, what's the most important thing to do first and in what order? And also very importantly in this road map process, needs to be a series of milestones so we can look at the landmarks and measure success or where there's not success. So these are the kinds of generic things that are engaged in—when people develop road maps.

Every stakeholder has to have a role to play in the development of this road map, and that's what makes these things successful and viable. Governments, the energy suppliers, the vehicle equipment suppliers, the commercial fleet operators, research institutes—so you can get some good analysis about what's happening and what the impacts are going to be. Educational and training institutes, because there's a huge value in training as these markets develop and we cannot do without education and training.

The environmental groups also have a lot of sway with governments, with the population, they have an intellectual leadership role so it's good to get them involved and of course non-governmental organizations also. The associations and the trade organizations that represent these other groups above—all of these groups have an important role to play when it comes to developing a road map. And this alternative fuel as an infrastructure and urban transit, this is something I developed some time ago—I don't know 2002—it's really a representation of what the Clean Cities program is. And that's kind of a living road map in a way, where you're pulling together all of the stakeholders in the center, they can deal with any of the fuels and they're looking also to development—developing policy that they've talked about—those policies become implemented and then as I said, you need that feedback so you can change the policy if it's not working the way you want or you can continue the policy if it is being successful. And of course you can use all the other analytic support tools, tighter emission standards, etcetera, that is going to help drive these policies forward.

So that's what this whole process of road mapping is all about. And we've looked at a whole bunch of different road maps, and so I just wanted to highlight just a little bit of a couple of, you know, of good road maps because understanding that every single one of these are going to be different depending upon the entity that's creating them, whether it's a private sector entity or a public sector entity and the objective to timeframe, it's all going to be different.

So there are going to be different outcomes and different values placed into making these things happen. Now the Germans have been very well organized and they had a road map and here's—just to give you an example of what they're outgrowth, what the final results of their road map were—which also has some applications in the United States as well, what they have needed to do is priorities to increase the number of OEMs—the original equipment manufactured offerings.

They have a fair amount but they still don't have enough to satisfy the demands of the customers. They want to continue their energy tax reduction which started in 2003 or so and then beyond 2018, they're going to start looking at differentiation by the amount of CO2 output because in Europe greenhouse gasses and the reduction of greenhouse gasses is very important. So they're trying to structure a tax policy that's going to be favorable in that direction as it relates to vehicles. They are building a fueling station not under the philosophy of build it and they will come, they have discovered that doesn't work. They need to be demand oriented to develop a CNG network in the place where the vehicles run and as close to the fuel consumers as possible.

The other interesting thing which we've talked about in the United States and I've used the examples in the United States and Europe as well about trying to get the fuel pump price displayed for whether it's CNG or LNG in the petroleum equivalence.

I know there's a lot of activity in various states because the federal government hasn't chosen to pick up on this, but it's very important for the consumer to know when he looks at the prices of the fuel, the competing fuels, you're not looking at natural gas as a standard cubic feet—or foot—or as a kilogram or as a standard cubic meter. Because these thing have no meaning and it actually may affect what the price competitiveness looks on the fuel station side—it may look like natural gas is more expensive then petrol and gasoline and diesel.

So the diesel gallon equivalent or the liter—diesel liter equivalent—all these things are very, very important and the Germans have recognized that. But it was a very difficult thing and still is in Europe because of differences in the way people are used to selling fuel.

Capacity utilization for the German fueling stations must be increased and this is a measure of success that we use all over the world—is how many vehicles are there per station? Now the Germans have about 100,000 vehicles—natural gas vehicles—and 1000 stations but when you start looking at the numbers of vehicles per station, it's just over 100 vehicles a station.

And to make the stations economically viable, we found around the world and in the United States and other places that usually you need about 600 to 1000 vehicles per station to make them economically viable. So that was a goal and is a goal to the Germans, and others as well is they are using renewable resources.

One of the countries that are using the largest amount of energy and renewable form and they want to increase that and have that used by vehicles. So they want to increase this putting it into the pipeline or selling it dedicated as natural gas so that's one of their goals as well.

So you can see that it's very well thought out program, and it is working. And it will continue to work. The Canadians also had a very interesting road map program, very simply—very much like the United States in certain ways, they focused on the high fuel consuming centrally fueled fleets, heavy duty and medium duty OEMs and then also light duty vehicles but not necessarily the commuter vehicles. They're also moving into the short sea shipping with LNG because a ship uses a lot of natural gas. Locomotives use a lot of natural gas so they're also experimenting with railway applications.

So they're trying to create a collaborative environment with the shareholders to move forward. And that's the theme that I think has been shown most successful, is the collaboration amongst the various stakeholders.

Now looking very briefly, we've talked about the fueling infrastructure in certain ways, I want to just focus just for a moment on cores, rings and corridors and blue corridors and gas highways. When we start looking at and trying to incorporate natural gas vehicles and CNG and LNG, we have to ask ourselves who are the best partners who are going to invest in the fueling infrastructure? Well, the answer is who owns the gasoline retail stations? And is there profit in alternative fuels?

Fortunately for natural gas, the margin on the sale of the gas at the fueling station is usually higher than gasoline. So it becomes very attractive for the fueling station owners potentially, if there are enough vehicles.

Now in the United States, about 80% of the gasoline is sold through convenience stores independent, branded stations like the Mobile and Exxon and Shell, etcetera, there's a lot of those that are owned by independents though it's on a franchise basis, so these are the people we have to go to and that is happening and we can see that in the United States successfully that a lot of the independent, unbranded owners of stations—those are the guys that make decisions quickly, they don't have a huge bureaucracy very often, they're willing to invest money, they're willing to take more risk, that's where it's been successful by and large in the U.S. fueling infrastructure.

On the European side, it's just the opposite, the oil companies are still in charge of marketing the fuel and again, various, you know, country by country—Italy, very strong infrastructure for the typical oil companies which are oil and gas companies. Similarly in Austria, but if you look in France, you can see that green bar there, they are selling a lot of gasoline through the hyper markets, very much like the United States and the supermarket chains and the, you know, the independent petroleum sellers.

So all of these are different in different countries and they have to be looked at. Now the Germans did market research to identify what the customer's tolerances are for travel to a CNG station. And they discovered that in towns I the urban areas, and all these are in kilometers so if you just multiply by .6 you'll get the equivalence more or less in miles, but the tolerance for driving to a fueling station in inner city or in the urban areas is only about 3 miles or 5 kilometers.

As you go out into the suburban areas, well people will be able to—willing, more willing to go, you know, 6 to 9 miles to find a fueling station and as you go into rural areas, they're willing to drive much further because again, you just don't have that many fueling stations. So they're more used to driving further. So this was the basis of when they started looking at their thousand vehicles to very carefully identify where these things should be going and they've invested—the gas companies have invested about $250 million Euros in doing this.

And what they've come up with is this cores, rings and corridor strategy so they want to provide first in the urban areas in those cores, it's like throwing a rock in the water, then you provide it to the rings and you look in where the people are driving in the rings around the city and when they're coming in and put the fueling stations in good places, and then you want to connect the dots. And that's exactly what they're doing in Germany and it's not unlike what is happening in to some degree in the United States as well.

We're—there are different strategies for LNG in this case or CNG, focused on central fueling fleets, we can then also in some cases—some gas companies have opened up their fueling stations to customers—what I call selling through the fence—where you can actually take a credit card and put a dispenser outside—use it in a dispenser outside the fence of either a fleet operator or of a gas company let's say, and they can buy that fuel from a non-fueling station owner but someone who owns a NGV fleet. Fueling at the end terminences of LNG, truck locations has been another strategy and then of course connecting the dots as we see here the map of Southern California region.

So this is an effective way to expand that network and it's what's happening now also in Europe there's been a new directive, the clean power for transport policy has resulted in an alternative fuel directive—alternative fuel infrastructure directive—that initially actually prescribed to have CNG stations every 150 to 200 kilometers and LNG stations every 400 kilometers, they had a very well thought out projection of where these things should go.

But politically it didn't fly so what we ended up with was a mandate to 2020, 2025 and 2030 to install the appropriately numbers—that's the quote—the appropriate numbers of fueling stations.

Well maybe that weakened the mandate however, it was adopted and we are going to see more and more fueling stations go in, not only over the road but this mandate includes ports and inland shipping lanes as well. So we see this as a very good term policy for the Europeans to try to develop their fuelling infrastructure.

So the main points and concerns about the infrastructure policy, the private sector investment alone is not likely to achieve all the targets. Some financial incentives are going to be required. The historical evidence suggests that private and public partnerships are the most successful in developing policy and also financing. And engagement of the traditional and independent fuel suppliers for niche market road transport fuels, it's challenging but absolutely it's essential.

So overall, all of the alternative fuels to one degree or another, have solved the common chicken and egg problem and which comes first? The answer is they both have to come at roughly the same time. The fueling and the vehicles and some of the alternative fuels are going to have larger eggs than others. And the chickens and eggs for the natural gas vehicle network—we're dealing with that—hydrogen is going to be a difficult—more difficult challenge for different reasons and that's a little bit more like this chicken is standing on an ostrich egg. So chickens and eggs are common to all the alternative fuels.

So best strategies, what can we do to avoid the past mistakes and what can we do to learn from the creative successes that we've had both in politics or in all politic markets and technologies? And this is kind of a summary of the three different sections of the overall presentation.

So the best strategy, break it down by sectors, institutional requirements, there's a vast opportunity to incentivize the market. And all the tools that I've listed should be used to ensure this long term sustainable strategy for alternative fuels. Incentives or rewards or mandates, both can work, but as we've said, the carrots are good with sticks when you need to achieve that balance.

Governments should also understand the cost benefit of the environmental and health impacts of these policies. The value of a cost per ton of reduced pollution is something that has meaning to a government. It may not mean very much to a commercial operator or to a local consumer, but it does provide a rationale for governments to equate the cost of, you know, that pollution with how much it is costing for example in public health benefit. So if governments are also paying for public health and less people are going to the hospital because they have respiratory disease, it's a win for the government.

Energy security of course is enhanced by diversifying away from petroleum transportation fuels to the alternatives and when the market share rises, correspondingly the incentives can be reduced—although they should be reduced gradually. And that's what this shows, government incentives can be based on the market share—it can be an attractive element from a revenue impact perspective and promote longer lasting policies. So governments know they can run a long policy for alternative fuels because overall as the market share increases, their cost to support that and to incentivize it can actually drop over time.

So the best strategies, the positive sum win-win approach is advisable because that's going to give motivation for everybody. Stakeholder input and hopefully consensus is best for a sustainable policy that reporting and feedback mechanisms allows for the mid-stream corrections and improvements in sustainability.

And pro-active is always better than reactive. Strategic road maps with flexible milestones can be helpful, again, consensus building amongst the key stakeholders is a proven technique in particular when you pull together the chickens and the eggs.

You have to have somebody to produce the vehicles, you have to have somebody to buy the vehicles. And understanding the customer's fueling needs—both public and private—and the nature of the fueling infrastructure business is essential if we're going to have a successful infrastructure, you know, development.

Again on the market side, entry strategy targeting of the high fuel users have been the logical first targets—fleets but others like taxi cabs and buses can help establish the critical massive stations, particularly in some of the urban areas which is then going to allow for this hub and spoke including these blue corridors, natural gas corridors, it's been a proven, logical, logistical strategy.

Ports are also readymade hubs for natural gas vehicles. Airports and seaports because they're a function of where a lot of vehicles come in and go out. Back and forth, back and forth.

So that's another very important part of this strategy to play to develop the infrastructure. Technology considerations, you have to understand that no matter how much money you invest in research and technology, product development to that tier one quality level takes a lot of time and that's what the OEMs—the car manufacturers and the truck manufacturers require—tier one. So to go from a retrofit to quality, which is happening in the United States probably faster than most other places, it takes time.

We have to be aware of height before hardware, we don't want to have technology prematurely entering the market, without the adequate downstream service and support—that can be a disaster. And standard regulations are the foundations of the technology progress and with safety in mind, implementation and enforcement of the regulations is absolutely critical for the global growth of the technology. Cheap is not safe and when we see cheap stuff coming in the market we have to make sure buyer beware—that it's fulfilling all the standards and regulatory requirements.

The other thing is we want to try to support and create the alternative fuels associations, these associations have been lighting rods and catalysts for alternative fuel vehicle growth. They provide a focus for advocacy work, the lobbying particularly at the national level, for developing market strategies and developing pathways for technology advancement. The stakeholders need to continue and expand their support through these associations because it does elevate the commercialization effort overall.

So that's the conclusion of this particular sector and I think we now would like to open it up for questions and comments.

COORDINATOR: Thank you. To ask a question you may press star 1 on your touchtone phone, unmute your phone, record your name clearly and I will introduce you. Your name is required to introduce your question, please stand by for incoming questions.

SANDRA LOI: While we wait—thank you so much for that presentation—there is a question on the line Q&A—I'm not sure if you're able to view it here.

JEFF SEISLER: No, I can't.

SANDRA LOI: Okay.

JEFF SEISLER: Just read it to me.

SANDRA LOI: Sure, I'll go ahead and do that—the question is from Rob Grass says for a passenger vehicle, a 100 cf up of natural gas will move the car about 25 miles, if the same 100 cf of natural gas used to generate electricity, a similar size vehicle can travel about 50 miles. For passenger vehicles, the best use of natural gas is electric vehicles this also avoids the need for adding another fueling option. For heavy vehicles, CNG makes sense not for passenger cars, you have a response to that?

JEFF SEISLER: Well I think—like I said before—the customers have to make the decision as to what fuel and vehicle profile is going to be, you know, best for them. In an urban areas, maybe very conducive to electrical vehicles, but for heavy, you know, heavy duty vehicles that need a lot of torque and a lot of power, it's questionable whether the amount of batteries and electric motor is going to be able to satisfy those.

So yes, the view of how many miles is going to be going on tanks of different fuels is very important, but like I say, you're going to have to let the customers try to figure out which of these things—which of the technologies are going to be best for them and which of the fuels are going to meet their needs and at what economics.

And that's one of the reasons we've tried to focus on the high fuel consuming vehicles and customers first because that's where the best economics are going to lie. So for someone who just drives around town in their natural gas vehicle and goes to the supermarket and, you know, maybe does 10,000 miles a year, that may take a very long time to pay back, it may be acceptable, it may be unacceptable. And the commercial sector has its own guidelines for how to make those investments based upon their financial needs.

SANDRA LOI: Okay, thank you. Operator, are there any questions on the phone line.

COORDINATOR: At this time I am showing no questions over the phone. Again, if you would like to ask a question, please press star then 1, record your name after the prompt and I will introduce you for your question.

SANDRA LOI: Alright, thank you. And everyone on the phone line, this is Sandra Loi, from Enrell supporting Clean Cities and we will be posting as we have with the other two webinars at the—that we're part of this series—the first and second—this is the third—we will be posting the recording and the Power Point on the Clean Cities website on our archives pages. So know that you can access it afterwards of if you'd like to share it with any colleagues or constituents you are welcome to since that will be on our live website, CleanCities.energy.gov. Jeff, did you want to add anything else or talk—or maybe anything you might have wanted to just make of note before we wrap up the webinar today?

JEFF SEISLER: No, but we might want to just—I can just very quickly breeze through—if there are no further questions—we've got the appendix slides—just to give people an idea if they might want to, you know, look more closely at this.

Some word slides about, you know, governments, some back up on the United States, how the NGV development has worked since 1965 and how that correlates to different policies and different growths.

I've got some more details about the Germans, this is a little bit of a backup about the Egyptian policy, again, I try to show these correlations between market growth and what governments do and what's happening in the markets to be able to see how those reactions are.

We talk about India and here's the slide that I mentioned about the government support, long term government support for different fuels, how that's increased and then dropped off and then picked up a different times and you can see along the very bottom, NGVs and LPGs receive very little support but in terms of the market growth, we're doing okay.

A little road map here of the petroleum retail product chain to figure out which of the petroleum avenues are going to be the best way to enter the market, and just a few other things about non-pipeline access to natural gas via the virtual pipeline—I haven't addressed this in the presentation—but this is yet another interesting pathway and some more things about trying to create policies that are brought in carefully and transitionally and also are brought out transitionally.

And again, institution requirements that we've covered some of these things before. So just to give people an idea that there's some backup to these and there are more slides to be seen from the other few presentations and if there are any more questions—are there any more questions?

COORDINATOR: Yes, there is a question from Dave Ruderly, you're line is open.

DAVE RUDERLY: Hi Jeff, Dave Ruderly here in Jacksonville, Florida. On the issue of emission comparisons between electric and natural gas vehicles, I think folks need to be—make sure they're talking about apples to apples comparisons because when you look at the life cycle emissions of a central natural gas power plant and all the line losses and other inefficiencies, the natural gas vehicles start to look pretty good, even compared to a battery electric vehicles.

You know, if you're electric car is running on solar electricity, sure it's a zero emission vehicle, but if you're using a fossil fuel to make that electricity, the direct use of that natural gas in a vehicle makes a lot of not only economic sense but also can result in very comparable life cycle emissions. And I really get upset when I hear people slamming the gastourous fuels when they use—what I consider to be somewhat reckless emission comparisons. Thank you.

JEFF SEISLER: I think this is a really important point Dave, that you made and if you look at the way electricity is generated, if it's generated by coal or oil and that electricity is then used in electric vehicles versus a dedicated natural gas vehicle, on a well to wheel basis—okay—that natural gas vehicle is probably going to be a cleaner vehicle even though the point emissions at the so called tailpipe of an electric vehicle are zero.

So the—Argonne National Labs have developed a great model and other various generations of that to try to look at in a common way using one model vehicle as to what the well to tank and the tank to wheel emissions are.

There are some things you have to be careful about too, there's a model also that's used in Europe to do the same thing, the well to wheel, but you have to understand that it's not always transferable amongst vehicles because in the United States they used I think a pickup truck and in Europe they used a 1.6 liter engine Volkswagen platform to base the tank to wheel emissions are. It may not be exactly comparable to a bus or a truck, but the concept is there.

We have to look holistically at the complete cycle of the emissions. Fortunately for natural gas, if you look at well to wheel and you start looking at renewable resources, bio-gas upgraded to bio-methane, the CO2 output is actually negative.

You can reduce the well to wheel greenhouse gases by about 100% below the zero, actually it's negative because you're taking material off the land that otherwise would turn to methane and cooking and cleaning it and putting it into a vehicle.

So there are different ways and I don't think we should be critical of one alternative fuel to alternative fuel technology versus the other, again it's less important to compare the alternative fuels to each other, it's more important to compare the alternative fuels to what's happening with gasoline and diesel—which by the way—is also good news, gasoline and diesel technology are making huge strides in efficiency and cleanliness.

Some people are negative toward alternative fuels use this as an excuse not to look at alternative fuels, however, I've always said, better the quality of the gasoline in diesel vehicles are when we put natural gas into them, they'll even be better.

So yes, we have to look Dave in a very balanced way and you make a good point that we shouldn't be going after all the different alternative fuels. Each one's going to have a role to play and so too will gasoline and diesel. It's a question of how the policy makers can balance out what they need from an energy security standpoint, from an environmental standpoint and from a public health standpoint and from an economic standpoint. And those are the factors that hopefully in a logical way will help drive good policy that can be balanced for all of these fuels.

SANDRA LOI: Thanks Jeff, Operator any other questions on the phone line?

COORDINATOR: There are no further questions.

SANDRA LOI: Okay, well with that, thank you everyone for participating today, don't hesitate to reach out to any of us should you have any further questions and thank you so much to Jeff for your time and the presentation. And we look forward to hosting other future webinars and I think that's it. Jeff you have anything else or are we all set for today?

JEFF SEISLER: Yes, I just want to thank all the people who've, you know, managed to sit through this and listen carefully and again, I want to thank the people from DOE and Argonne Clean Cities program, you folks are doing a great job and making a great contribution and it's really a pleasure to be affiliated with you and thank you very much.

SANDRA LOI: Great, thank you so much and this concludes today's webinar. Thank you everyone.

COORDINATOR: This concludes today's conference, thank you for your attendance, you may disconnect your lines.