European Climate Foundation Decarbonising road freight in ...€¦ · Britain’s Future’, 20152, ‘En route pour un transport durable’, 20163, ‘Low-carbon cars in Germany’,

FinalReport August2018

CambridgeEconometricsCambridge,UK

[email protected]

EuropeanClimateFoundation

DecarbonisingroadfreightinEurope:Asocio-economicassessment


2Cambridge Econometrics

Ourmissionistoprovideclearinsights,basedonrigorousandindependenteconomicanalysis,tosupportpolicy-makersandstrategicplannersingovernment,civilsocietyandbusinessinaddressing

thecomplexchallengesfacingsociety.

CambridgeEconometricsLimitedisownedbyacharitablebody,theCambridgeTrustforNewThinkinginEconomics.

www.neweconomicthinking.org



AuthorisationandVersionHistory

Version Date Authorisedforreleaseby

Description

1.0 21/08/18 JonStenning Finaltechnicalreport



Acknowledgments

Inrecentyearsanumberofstudieshaveassessedthesocio-economicimpactofatransitiontolow-carboncarsinEurope,attheleveloftheEUasawhole(‘FuellingEurope’sFuture’,2013and20181)andMemberState(‘FuellingBritain’sFuture’,20152,‘Enroutepouruntransportdurable’,20163,‘Low-carboncarsinGermany’,20174,‘FuellingSpain’sFuture’,20185).However,thisisthefirststudythathaslookedatthewhole-economyimpactofasimilartransitionintheheavy-dutyfreighttransportsegment.

CambridgeEconometricsprovidedtheanalyticalworkpresentedinthisreport,includingvehiclestockanalysisandeconomicmodelling(usingtheE3ME6model).

ThereportwasfundedbytheEuropeanClimateFoundationwhoconvenedacoreworkinggrouptoadviseandreviewtheanalysisandreporting.Theauthorswouldliketothankallmembersofthecoreworkinggroupfortheirrespectiveinputs.

Thestakeholderswhocontributedtothisstudysharedtheaimofestablishingaconstructiveandtransparentexchangeofviewsonthetechnical,economicandenvironmentalissuesassociatedwiththedevelopmentoflow-carbontechnologiesforHGVs.TheobjectivewastoevaluatetheboundarieswithinwhichvehicletechnologiescancontributetomitigatingcarbonemissionsfromHGVsacrossEurope.Eachstakeholdercontributedtheirknowledgeandvisionoftheseissues.Theinformationandconclusionsinthisreporthavebenefittedfromthesecontributionsbutshouldnotbetreatedasnecessarilyreflectingtheviewsofthecompaniesandorganisationsinvolved.

ThetechnologycostdatausedinthisanalysiswasindependentlyreviewedbyFelipeRodriguezandRachelMuncriefoftheInternationalCouncilforCleanTransportation.TheinfrastructuredataandassumptionsusedweresimilarlyreviewedbyCélineCluzelofElementEnergy.

1https://www.camecon.com/how/our-work/fuelling-europes-future/2https://www.camecon.com/how/our-work/fuelling-britains-future/3https://www.camecon.com/how/our-work/en-route-pour-un-transport-durable/4https://www.camecon.com/how/our-work/low-carbon-cars-in-germany/5https://www.camecon.com/how/our-work/fuelling-spains-future/6Moredetailonthismodelispresentedinanannextothisreport,andcanalsobefoundatwww.e3me.com

Background

Coreanalyticalteam

Disclaimer

Review



Contents

Page

Acronymsandabbreviations 6

Executivesummary 8

1 Introduction 10

2 Overviewofscenarios 13

3 Modellingassumptions 18

4 Infrastructurerequirements 34

5 Hauliers’Perspective 42

6 Economicimpacts 45

7 Environmentalimpacts 51

8 Conclusions 52

AppendixA E3MEmodeldescription 53



Acronymsandabbreviations

Table0.1setsouttheacronymsandabbreviationscommonlyusedinthereport.Table0.1Acronymsandabbreviations

Abbreviation Definition

Powertrain types

Internal combustion engine

ICE These are conventional diesel vehicles with an internal combustion engine. In the various scenarios modelled there is variation in the level of efficiency improvements to the ICE. Efficiency improvements cover engine options, transmission options, driving resistance reduction, tyres and hybridisation.

Plug-in hybrid electric vehicle

PHEV Plug-in hybrid electric vehicles have a large battery and an internal combustion engine. They can be plugged in to recharge the vehicle battery. EVs with range extenders are not included in the study.

Battery electric vehicle

BEV This category refers to fully electric vehicles, with a battery but no internal combustion engine.

Fuel cell electric vehicle

FCEV FCEVs are hydrogen fuelled vehicles, which include a fuel cell and a battery-powered electric motor.

Zero emissions vehicle

ZEV Includes all vehicles with zero tailpipe emissions (e.g. FCEVs and BEVs).

Electric vehicles EV All vehicles which are fuelled directly via electricity (i.e. BEVs and PHEVs)

Electric road system

ERS Refers to electrified infrastructure to supply EV vehicles with a constant power supply across portions of the road network. PHEV-ERS and BEV-ERS are vehicles with the required pantograph to enable them to draw charge from ERS.

Economic terminology

Gross domestic product

GDP A monetary measure of the market value of all final goods and services produced in the national economy

Gross value added

GVA A measure of the total value of incomes generated from production (largely wages and gross profits); it is equal to the difference between the value of output and the value of bought-in goods and services (hence ‘value added’).

Other acronyms

Original equipment manufacturers

OEMs Refers to equipment manufacturers of motor vehicles

Million/billion barrels of oil equivalent

Mboe/Bboe A unit for measuring oil volumes

Total Cost of Ownership

TCO Total cost of owning and operating (fuel etc) a vehicle

Light Heavy goods vehicles

LHGVs Heavy goods vehicles with a gross vehicle weight of 3.5-7.5 tonnes

Medium Heavy goods vehicles

MHGVs Heavy goods vehicles with a gross vehicle weight of 7.5-16 tonnes

Heavy Heavy goods vehicles

HHGVs Heavy goods vehicles with a gross vehicle weight of greater than 16 tonnes

Operations and maintenance

O&M Refers to the category of expenditure covering the operations and maintenance to provide a good or service.



Hyrdogen refuelling station

HRS Refers to infrastructure for the dispensing of hydrogen for motor vehicles



Executivesummary

ThisreportassessestheeconomiccostsandbenefitsofdecarbonisingHeavyGoodsVehicles(HGVs)inEurope.Ascenarioapproachhasbeendevelopedtoenvisagevariouspossiblevehicletechnologyfutures,andtheneconomicmodellinghasbeenappliedtoassessimpacts.

CambridgeEconometricswascommissionedbytheEuropeanClimateFoundation(ECF)toassessthelikelyeconomicimpactsandthetransitionalchallengesassociatedwithdecarbonisingtheEuropeanfleetofvansandheavygoodsvehicleinthemediumterm(to2030)andthelongterm(to2050).

Thistechnicalreportsetsoutthefindingsfromouranalysis.Itprovidesdetailsaboutthecharginginfrastructurerequirements,technologycostsandeconomicimpactsofthetransitiontolow-carbonmobilityinthefreightsector.Asummaryreport,presentingthekeymessagesfromthestudy,isalsoavailable7.

Thestudyshowsthat,whiletherearepotentiallylargeeconomicandenvironmentalbenefitsassociatedwithdecarbonisingroadfreightinEurope,therearealsotransitionalchallengeswhichmustbeaddressedifthebenefitsaretoberealised.UpuntilnowtherehasbeenlittleeffortfromOEMandpolicymakerstodecarbonisevansandHGVs.Buttherearesignsthatthemarketisabouttochange.InMay2018theEuropeanCommissionputforwardaproposalforthefirsteverEuropeanCO2emissionstandardsforHGVs,busesandcoaches8.Throughout2017and2018,anumberofOEMshaveunveiledprototypesofelectricandhydrogen-fuelledpropulsionsystemsforHGVs.

ThepotentialbenefitsifEuropeembracesthetransitionaresubstantial:

• Reduceduseofoilandpetroleumproductswillcutenergyimportdependenceandbringaboutlargereductionsincarbonemissions.

• Therearenetgainsinvalueaddedandemploymentwhichincreaseasoilimportsarereducedovertime.By2030,ineachoftheZero-EmissionVehicletechnology(ZEV)scenariosthereisanincreaseinGDPof0.07%comparedtothe‘BusinessasUsual’case,andanincreaseinemploymentofaround120,000jobs.

• Thetransitionofferstheopportunityoflowercostsofroadfreighttransportation,withlowertotalcostofownershipassociatedwithBEVandERStechnologies,andFCEVsachievingcostparitywithICEsby2050.

However,ourmodelling,incombinationwithinsightfromtheCoreWorkingGroup,alsohighlightsanumberoftransitionalchallenges:

• Theimplementationofarapidcharginginfrastructureandhydrogenrefuelingstationswillrequireinvestmentsreachingseveralbillioneuros

7See:https://www.camecon.com/how/our-work/trucking-to-a-greener-future8EuropeanCommission(2018),ReducingCO2emissionsfromheavydutyvehicles,Accessed02/08/18https://ec.europa.eu/clima/policies/transport/vehicles/heavy_en



peryearfrom2030to2050.Alltechnologyoptionsrequireadeterminedandjointeffortoftheindustry,governmentandcivilsocietytodeploysufficientfuelingandcharginginfrastructure.Timing,location,capabilityandinteroperabilityarekeyissues.

• Thetransitiontolow-carbonmobilitycausesawiderangeofimpactsinemploymentacrossseveralsectors.EmploymentinthemotorvehiclessectorintheZEVscenariosatthestartoftheprojectedperiodisalittlehigherthaninthe‘BusinessasUsual’case.ButthegrowingimportanceoftheZEVvaluechaininvolvesashiftinthesupplychainawayfromtraditionalmotorvehiclecomponentsandtowardstheproducersoftheadvancedpowertraintechnologies.Jobsarealsocreatedintheprovisionofchargingandrefuelinginfrastructurewhiletheshiftawayfromoiltolower-costmobilityleadstoincreasedemploymentinservicesasconsumersbenefitfromlower-costgoodsastransportationcostsfall.

• ThetransitionposesasignificantchallengetomaintainthecompetitivenessandmarketshareoftheEuropeanautoindustry,byremainingatthecuttingedgeofcleantechnologyinnovation.



1 Introduction

1.1 Background

TomeetclimategoalsoftheParisAgreementtheEuropeanCommission’s“StrategyonLowEmissionsMobility”envisagesashiftawayfromtheuseofpetroleumtowardsgreenerenergysources.Policyisinplacetopromotethisinpassengertransportation:theEuropeanParliamentandtheCounciloftheEuropeanUnionsetoutlegislationtolimittheemissionsofnewpassengercars.Untilrecently,roadfreighthaslaggedbehind.Butnowchangeisontheway;inMay2018,theEuropeanCommissionputforwardaproposaltotheEuropeanParliamenttointroduceasetofemissionsstandardsforHGVs,busesandcoaches.TheproposalrecognizesthatallformsofHGVsneedtobeincluded,butinitiallytheregulationwillbelimitedtolargearticulatedtrucksandthenin2022extendedtoothersmallertruckssuchasdeliveryvansincities,aswellasbusesandcoaches.Ifaccepted,therewillbeamandatorytargetfornewheavy-dutyvehiclestoonaverageemit15%fewerCO2emissionsin2025comparedto2019.

AheadofthesetargetsmajorHGVsmanufacturersaredevelopingnewproductlinesthatareincreasinglyfuelefficient,andarealsostartingtoreleasevehicleswithalternativepowertrains,includingelectricdrivetrainsandfuelcells.Theseannouncementssignifyapushtokeepupwithpotentialfutureemissionsstandardsandhelppavethewaytowardsadecarbonisedfreightsector.

Therehasbeenmuchdebateaboutthepotentialrolefor,andimpactof,thetransitiontoZEVswithinthefreightsector.ThepurposeofthisstudyistoshedlightontheeconomicimpactsandthetransitionalchallengesofdecarbonisingvansandHGVsfortheEuropeanautomotiveindustryandthewidereconomyovertheperiodto2050.Indoingso,ithighlightssomeofthekeyissuesthatpolicymakersshouldfocuson,including;

• Whatisthescaleandpaceofinvestmentininfrastructurerequired?Willinfrastructureactasacatalystforsalesofalternativepowertrains;ifso,sufficientinfrastructureneedstobeinplacebeforehauliersbegintotransition.

• Howwillgovernmenttaxrevenuesbeaffectedduetoreducedfuelduty?

• Inwhatareasoftheeconomyshouldgovernmentsofferretrainingprogramstoensureworkersfrom‘losing’sectorscanberedeployed?

• Whatwillbetheimpactontheelectricitygrid,andpeakelectricitydemand,andhowcouldthisbebettermanaged?

1.2 Methodology

Forthisstudy,asetofscenariosweredefinedineachofwhichitwasassumedthatacertainlow-carbonvehicletechnologymixwouldbeintroducedandtakenup.Theparticularfactorsaffectinghauliers’decisionstopurchasealternativevehicletechnologieswerenotassessed.

Low-carbonfreighttransportpolicy

Motivationforthestudy



Asshowninthegraphicbelow,themethodologyinvolveddistinctstages:

1) Stakeholderconsultationtodefinethescenariosandagreeonthekeymodellingassumptions.

2) Anintegratedmodellingframeworkthatinvolved(i)applicationoftheCE’svehiclestockmodeltoassesstheimpactofalternativelow-carbonvehiclesalesmixonenergydemandandemissions,vehicleprices,technologycostsandthetotalvehiclecostofownershipand(ii)applicationoftheE3MEmodeltoassessthewidersocio-economiceffectsofthelow-carbonvehicletransition.

Figure1.1:Ourapproach

ThetwomodelsthatwereappliedinourframeworkareCambridgeEconometrics’VehicleStockModelanditsE3MEmodel.

Thevehiclestockmodelcalculatesvehiclefueldemand,vehicleemissionsandvehiclepricesforagivenmixofvehicletechnologies.Themodelusesinformationabouttheefficiencyofnewvehiclesandvehiclesurvivalratestoassesshowchangesinnewvehiclessalesaffectstockcharacteristics.Themodelalsoincludesadetailedtechnologysub-modeltocalculatehowtheefficiencyandpriceofnewvehiclesareaffected,withincreasinguptakeoffuelefficienttechnologies.Thevehiclestockmodelishighlydisaggregated,modelling16differenttechnologytypesacrossfourdifferentclassesofcommercialvehicles(Vans,LHGV,MHGV,HHGV)9.

Outputsfromthevehiclestockmodel(includingfueldemandandvehicleprices)arethenusedasinputstoE3ME,anintegratedmacro-econometricmodel,whichhasfullrepresentationofthelinkagesbetweentheenergysystem,environmentandtheeconomyatnationalandgloballevel.Thehighregionalandsectoraldisaggregation(includingexplicitcoverageofeveryEU

9SeeSection3,Table3.1formoredetails.

VehicleStockModel

E3ME



MemberState)allowsmodellingofscenariosspecifictoEuropeanddetailedanalysisofsectorsandtraderelationshipsinkeysupplychains(fortheautomotiveandpetroleumrefiningindustries).E3MEwasusedtoassesshowthetransitiontolowcarbonvehiclesaffectshouseholdincomes,tradeinoilandpetroleum,consumption,GDP,employment,CO2,NOxandparticulates.

Formoreinformationseewww.e3me.com.AsummarydescriptionofthemodelisalsoavailableinAppendixAofthisreport.

MuchofthetechnicalanalysispresentedinthisreportfocusesontheHHGVsegment;however,similaranalysishasbeencarriedoutforvans,LHGVandMHGVsegments.ThefocusisprimarilyplaceduponHHGVsbecausethesedeliverthevastmajorityoffreighttonnekilometres,andassuchdominatethecost,economicandenvironmentalimpactsofthetransitionofroadfreight.

1.3 Structureofthereport

Thereportisstructuredasfollows:

• Section2setsoutthescenariosthatweredevelopedtoinformtheanalysisandarerequiredtoanswerthequestionsraisedbytheCoreWorkingGroup.

• ThemainmodellingassumptionsandtechnologycostdataaresetoutinSection3.

• Newinfrastructurerequirementsareakeyconsiderationforthedeploymentofzeroemissionvehicles;theseareconsideredinSection4.

• Aboveall,atransitionrequireshaulierstoadoptlowandzeroemissionvehicles.InSection5welookatthecapitalandfuelcostsfacinghauliersinthefuture.

• Thecoreanalysisfocusesonthemacroeconomicimpactofthedifferentscenarios.ThenetimpactsandtransitionalchallengesaresetoutinSection6.

• Themainmotivationforpromotingadoptionoflowemissionsfreightvehiclesistoreducetheharmfulimpactthatroadtransporthasontheenvironment.ThecontributionofroadfreighttoCO2emissionsissetoutinSection7.

• ThereportfinisheswithourconclusionsinSection8.Thesearetheviewsofthereport’sauthorsanddonotnecessarilyrepresenttheviewsoftheEuropeanClimateFoundationorthemembersoftheCoreWorkingGroup,eitherindividuallyorcollectively.

Scopeoftheanalysisandthe

report



2 Overviewofscenarios

2.1 Scenariodesign

TheanalysissetoutinthisreportisbasedonasetofscenariosdevelopedbytheCoreWorkingGroup,eachassumingadifferentnewvehiclesalesmix.Theserepresentarangeofdecarbonisationpathwaysandaredesignedtoassesstheimpactsofashifttowardslowcarbonpowertrains;theydonotnecessarilyreflectcurrentpredictionsofthefuturemakeupoftheEuropeanheavygoodsfleet.Uptakeofeachkindofvehicleisbyassumption:implicitlyweassumethatthischangeisbroughtaboutbypolicy.Thefivecorescenariostobemodelledforthisstudyaresummarisedinthetablebelow:Table2.1:Descriptionofthefivecoremodellingscenarios

Scenario Scenariodescription

REF(Reference)

• Nochangeinthedeploymentofefficiencytechnologyorthesalesmixfrom2018onwards

• Someimprovementsinthefuel-efficiencyofthevehiclestock,duetostockturnover

TECH-ICE(Fuelefficienttechnologiesonly)

• AmbitiousdeploymentoffuelefficienttechnologiestoimprovetheefficiencyofICEvehicleovertheperiodto2050(e.g.light-weighting)

• Nodeploymentofadvancedpowertrains

TECH-BEV(HighTechnology,BEVsdominate)

• Ambitiousdeploymentoffuel-efficienttechnologiesinallnewvehiclesovertheperiodto2050(e.g.light-weighting)

• Deploymentofadvancedpowertrains(predominatelyBEVs)from2025

• BEVsdominatethesalesmixfrom2040onwards

TECHERS(HighTechnology,ERSsystemdominates)


• Deploymentofadvancedpowertrains(predominatelyPHEVandBEVsreliantonERSinfrastructure)from2025

• DeploymentofadvancedpowertrainsisdominatedbyPHEV-ERSvehiclesuntil2040,afterwhichBEV-ERSsalesbegintoaccelerate,reaching70%ofsalesby2050

TECHFCEV(HighTechnology,Fuelcellvehiclesdominate)


• Deploymentofadvancedpowertrains(predominatelyFCEVs)from2025

• FCEVsslowtodeployintonewsalesuntil2030,butincreaserapidlytodominatethesalesmixfrom2040onwards

2.2 Vehiclesalesandstock

Inthissectionweoutlinethesalesmixbypowertraindeployedacrosseachofthescenariosandvehiclesizeclass.Wethenshowtheimpactoftheseassumedsalesmixesontheresultingstockascalculatedbythevehiclestockmodel.

Thereferencescenarioexcludesanyfurtherimprovementsinnewvehicleefficiencyafterthelastyearofhistory,2018.Thisisthebaselineagainstwhich

Referencescenario



allotherscenariosarecompared.IntheabsenceofanyexistingEUfuelstandardsforHGVs,thisscenarioshowstheimpactof‘currentpolicy’.

Thescenariosfocusonthedeploymentofadvancedpowertrainsintoheavygoodsvehicles.ForvansandLHGVS(<7.5t)weassumethedeploymentofadvancedpowertrainsisthesameacrossallTECHscenariosexceptTECH-ICE,whichhasnodeploymentofadvancedpowertrains.Amongstvans,advancedpowertrainsare50%ofnewsalesby2030,and100%by2040,withBEVsemergingasthedominanttechnology.Intermsofimpactontheoverallstock,overhalf(60%)ofthestockin2040isadvancedpowertrains,withBEVscontributing34%.By2050BEVsmakeupoverhalfofthetotalstock(55%).Figure2.1:SalesandStockcompositionforVansintheTECHscenarios

AcrossLHGVs,PHEVsandBEVsaccountfor30%ofnewsalesin2030.By2050newICEsarecompletedphasedout,andnewsalesaresplitevenlybetweenPHEVsandBEVs.By2050thereisanevensplitofadvancedpowertrainsinthestock,with34%PHEVsand34%BEVs.

TreatmentofMHGVsinthestockmodel

ThesectionsbelowexplicitlyrefertoHHGVsonly,becauseitisthemostimportantvehiclesegmentintermsofmileageandemissions.However,MHGVsfollowtheexactsamedeploymentofadvancedpowertrainsintosalesasHHGVsineachofthebelowscenarios.Note,however,thattheydonotfollowthesamestockcomposition,aseachvehiclesegmenthasdifferentsurvivalrates.

Asdiscussedabove,theTECH-ICEscenariohasnodeploymentofadvancedpowertrainsinHHGVs,insteadonlyfuel-efficienttechnologiesaredeployed.

VansandLHGVS

HHGVpowertraindeploymentintheTECH-ICEscenario

Figure2.2:SalesandstockcompositionforLHGVsintheTECHscenarios



IntheTECH-ERSscenario,ERS-enabledvehiclesemergeasthedominanttechnology,buttakesometimetoemergeduetotheirdependenceuponERSinfrastructurebeinginplace.PHEV-ERSandBEV-ERSvehiclescombinedareonly12%ofsalesin2030;however,theirmarketsharerapidlyexpandsthereafter,reaching55%in2040and80%in2050.BEVsdominatetheERSsegmentandarebythemselves70%ofnewsalesin2050.Theslowbuild-up,atleastinitially,meansthatlessthan30%ofthevehiclestockin2040areERS-enabled,andthestockremainsdominatedbyICEsatthispoint.However,by2050ERS-enabledvehiclesare60%ofthestock,andICEshaveshrunktoonly32%.

AsthedeploymentofERSroadsincreases(seeInfrastructuresectionformoredetail),ERS-enabledvehiclesbecomemoreattractivetohauliers.Vehiclecostsarerelativelylow(ascomparedtonon-ERSadvancedpowertrains),becausetheERSvariantsdonotneedlargebatteries.ThebatteryinanERS-enabledvehicleisassumedtobesmallerinsize(50kWhforPHEV-ERSand200kWhforBEV-ERS)thanthebatteryinaBEV(700kWh)in2025.Furthermore,asmoreERSinfrastructureisdeployed,thesizeofthebatteryinERS-enabledvehiclesfalls,andsodothecosts10.

Inthisscenario,BEVsreach80%ofnewsalesby2050(upfrom12%in2030),whichtranslatesto60%ofthestockinthe2050(upfrom5%ofthestockin2030),enabledbyimprovedbatterytechnologyandthedeploymentofrapidrecharginginfrastructure.

In2025,only5%oftotalsalesareBEVs.ThosewhopurchaseBEVsdosobecausethetechnologyissufficienttomeettheircurrentrequirements(e.g.rangebetweendistributioncentrescanbemetbyonefullchargeofaBEV).InthesameyearthereisasmallpercentageofPHEVssold,4%,tofleetoperatorswhorequiretheabilitytotravellongerdistances.

10FormoredetailonsizeandcostofbatteriesofPHEV-ERSandBEV-ERSseeSection3.3,Table3.15andTable3.17.

HHGVpowertraindeploymentintheTECH-ERSscenario

HHGVpowertraindeploymentintheTECH-BEVscenario

Figure2.3:SalesandStockcompositionforHHGVsinTECH-PHEV

Figure2.4:SaleandStockcompositionforHHGVsinTECH-BEV



However,asadvancesinbatterytechnologyaremade,reducingthecostsandincreasingtherangeofBEVs,thesalesofPHEVsarereplacedbyBEVs,andby2045PHEVsnolongerfeatureinsales.Thereislow-levelpenetrationofPHEV-ERSvehiclesfrom2025,withBEV-ERSenteringthemarketsoonafter,butneitherestablishasubstantialmarketshare.

IntheTECH-FCEVscenario,FCEVsemergeasthedominatepowertrainandby2050theymakeup80%ofnewsales.Duetotherelativelyhighstartingcostsforthetechnology,FCEVdeploymentdoesnotstartinearnestuntil2030,whenitachieves12%ofsales.Underthisscenario,vehicleswithbatteries(BEVsandPHEVs)failtoestablishamarketshare,andinsteadFCEVsachieverapiddeploymentfrom2030onwards,reaching27%ofthestockin2040and60%in2050.

2.3 Fueldemand

Figure2.6showsthecombinedeffectsofefficiencyimprovementsanddeploymentofadvancedpowertrainsonfuelconsumptionbytheEuropeanvehiclestockintheTECHscenarios.By2030,weseeamodestreductionindemandforfuel,withan8%reductioninfossilfueldemandrelativeto2015intheTECH-ICEscenarioanda20%reductionindemandintheTECHscenarios.By2050,thedemandforfossilfuelsintheadvancedpowertrainscenarioswillhavefallenby82%comparedto2015levels.Thesereductionsarestarkerwhencomparedtothereferencecase,wherefossilfueldemandincreasesby23%over2015-2050duetoincreasesinfreightdemand.

HHGVpowertraindeploymentinthe

TECH-FCEVscenario

Figure2.5:SaleandStockcompositionforHHGVsinTECH-FCEV



Electricityandhydrogendemandgrowinlinewiththerolloutofthestockoftherelevantadvancedpowertrains.By2050,duetotheirhigherefficiencies,theirshareoftotalenergydemandislowerthantheirshareofthevehiclestock.

Figure2.6:Stockfuelconsumptionoffossilfuels,hydrogenandelectricity(Mtoe)



3 Modellingassumptions

Thissectionsetsoutthekeymodellingassumptionsunderpinningtheanalysis.

Thescenariosaredefinedby(i)thenewsalesmixbyvehiclepowertraintypeand(ii)theuptakeoffuelefficienttechnologies.KeyassumptionsthatarecommontoallscenariosandarebrieflyoutlinedinTable3.1.Thesubsequentsectionsprovideinformationaboutourassumptionsfortechnologycostsanddeployment,batterycosts,fuelcellvehicleandthepowersector.

3.1 CommonmodellingassumptionsTable3.1:Keyassumptionsusedinstockmodel

Detailsofassumptionsused

Vehiclesales • Historicalsalesdatafor2005-2016takenfromtheACEAnewHGVregistrationstatistics.

• Totalnewregistrationsbeyond2016arecalculatedtoensurethestockmeetfreightdemandthroughaccountingforbothreplacementdemandanddemandfromgrowingfreightdemand.

Mileagebyagecohort

• Weassumethataverageannualmileagefallsgraduallyoverthelifetimeofavehicleandvariesdependingonsizeandpowertrain.FromtheTRACCS11databasewehavederivedmileagefactorswhichshowtheannualmileageofeachvehicle.Mileagefactorswerecalibratedtomeetthetotaltonnekilometrestravelled(exogenouslydefined).

Totaltonnekmtravelled

• TotaltonnekmtravelledbyroadfreightareincreasedinlinewiththeEuropeanCommission’sPRIMES2016referencescenario.Thisresultsina48%increaseintotaltonneskmtravelledfrom2015-2050.

Vehiclesurvivalrates

• ThesurvivalratewasderivedfromanalysisoftheagedistributionofthetotalEUHGVstockbetween2005-2010(usingstockdatafromtheTRACCSdatabase).DifferentsurvivalratesareusedforeachsizeofHGV.

Fuelprices • HistoricaldataforfuelpricesistakenfromtheEuropeanCommission’sOilBulletin.

• Forthecentralscenarios,weassumeoilpricesgrowinlinewiththeIEAWorldEnergyOutlookCurrentPoliciesScenario(andaconstantpercentagemark-upisappliedtoderivethepetrolanddieselfuelprice).

• PricesexcludeVAT,asthiscanberecoveredbyhauliers.

Electricityprices • ElectricitypricesassumethatadditionalcapacityisprovidedtomeetdemandfromEVsinthesamemixasinthePRIMES2016ReferenceScenario.

• TheelectricitypriceforEVusersisassumedtobethesameasthatpaidbyindustrialusers.

11Transportdatacollectionsupportingthequantitativeanalysisofmeasuresrelatingtotransportandclimatechange,EuropeanCommission,2013.



Restofworld • Therestoftheworldassumptionsonlowcarbontransportpolicyaffecttheglobaloilpriceandaretestedthroughsensitivityanalysis.

Valuechains • Inallscenarios,weassumethatMemberStatescaptureaconsistentshareofthevehiclevaluechainforconventionalICEs.FortheZEVdeploymentscenarios,weassumethat,forEVs,batterymodulesandbatterypacksareassembledintheEUbutthatthebatterycellsaremanufacturedinAsia,inlinewithcurrentpractice.

Tradeinmotorvehicles

• Weassumethesamevolumeofvehicleimportsandexportsineachscenario.Thepriceofvehicleimportsandvehicleexportschangesinlinewiththechangeindomesticvehicleprices(reflectingthattransportpolicyisassumedtobeconsistentacrosstheEU).

Vehicledepreciation

• Weassumeanannualdepreciationrateof20%.

3.2 ICEefficiencygains

Fuel-efficienttechnologiesforHGVsegmentswerecollectedfromfourdifferentsources:

• Ricardo-AEA2011,ReductionandTestingofGreenhouseGas(GHG)EmissionsfromHeavyDutyVehicles–Lot1:Strategy

• TIAX2012,EuropeanUnionGreenhouseGasReductionPotentialforHeavy-DutyVehicles

• Ricardo-AEA2012,Areviewoftheefficiencyandcostassumptionsforroadtransportvehiclesto2050forUKCCC

• Ricardo-AEA2017,HeavyDutyVehiclesTechnologyPotentialandCostStudyforICCTTechnology

Wheretherewasoverlapintechnologies,datafromthelatestRicardo-AEA(2017)tookprecedence.



Technologycostsandenergysavings

ThreeaerodynamictechnologiesfromR-AEA(2017)havebeenincludedinthetechnologylistforHGVs(seeTable3.2).Thesetechnologiesincludeseveralaerodynamictechnologies,forexample,aerodynamicbodies/trailersandboxskirts,whichwhendeployedtogethergivethepercentagereductioninaerodynamicdrag.However,thereportbyR-AEA(2017)isnotexplicitintermsofwhichspecificaspectsareincluded;aerodynamictechnologiesfromolderstudieshavethereforebeenremovedtoavoiddoublecounting.Table3.2:Aerodynamictechnologies

Energysaving Cost(€,2015)

LHGV MHGV HHGV LHGV MHGV HHGV

10%reductioninaerodynamicdrag 0.6% - - 250 - -

15%reductioninaerodynamicdrag - 6.3% - - 375 -

25%reductioninaerodynamicdrag - - 10.6% - - 2000

Light-weightingtechnologiesweretakenfromR-AEA(2017),mostofthissaving(R-AEA,2017)occursduetomaterialsubstitution.Thus,materialsubstitution(TIAX,2012)hasbeenremoved.Notethatthelight-weightingtechnologies(light-weighting1,2and3)areadditive,rathermutuallyexclusive.Table3.3:Light-weightingtechnologies



Light-weighting1 0.5% 0.2% 0.3% 0 0 0

Light-weighting2 0.03% - 0.1% 1 - 53

Light-weighting3 0.7% 0.7% 0.3% 91 300 300

EnergysavingandcostsforLowrollingresistancetiresarefromR-AEA(2017)whereasdataonsingle-widetiresisfromR-AEA(2012).Automatictirepressureadjustmentisanuncertaintechnology,thepaybackperiodisunknownandtheimpactonTotalCostofOwnership(TCO)isnegative,accordingtoourcalculation.TirePressureMonitoringSystem(TPMS)supersedesit,sinceTPMSisfarcheaperwithonlyasmallsacrificeinenergysavingreduction.Table3.4:Tireandwheeltechnologies



Lowrollingresistancetires 2.5% 4.8% 5.1% 644 1820 5880

Singlewidetires 4.0% 4.0% 5.0% 866 866 1364Automatictirepressureadjustment 1.0% 1.0% 2.0% 10111 10111 14633

TirePressureMonitoringSystem(TPMS) 0.4% 0.4% 0.4% 250 250 475

Aerodynamictechnologies

Light-weightingtechnologies

Tireandwheeltechnologies



Transmissionfrictionreduction(TIAX,2012)andimprovedcontrolswithaggressiveshiftlogicandearlylockup(TIAX,2012)canbedeployedalongsideautomatedmanual.Table3.5:Transmissionanddrivelinetechnologies



Transmissionfrictionreduction 0.5% 1.3% 1.3% 204 204 204Improvedcontrols,withaggressiveshiftlogicandearlylockup 2.0% - - 49 - -

Automatedmanual 7.0% 5.0% 1.7% 2300 2300 1500

Improveddieselengine(TIAX,2012)hasbeenremovedfromourtechnologylistasitoverlapswithnearlyalltheothertechnologiesincludedinthiscategory.Infact,thesumofalltheotherengineefficiencytechnologies(16%)isroughlythesameenergysavingpercentageastheimproveddieselengine.Mechanicalandelectricalturbocompoundaremutuallyexclusive.Table3.6:Engineefficiencytechnologies


LHGV MHGV HHGV LHGV MHGV HHGVControllableaircompressor - - 1.0% - - 199Mechanicalturbocompound 0.7% 0.7% 2.0% 2393 2393 1800Electricalturbocompound 1.0% 1.0% 2.0% 6002 6002 1800Turbocharging 1.9% 2.0% 2.5% 1050 1050 1050Heatrecovery 1.5% 1.5% 4.5% 9922 9922 5000UnspecifiedFMEPimprovements 3.7% 2.3% 1.4% 0 0 0Variableoilpump 2.0% 1.5% 1.0% 90 90 90Variablecoolantpump 1.2% 0.8% 0.5% 90 90 90Bypassoilcooler 0.8% 0.5% 0.2% 25 25 25Lowviscosityoil 2.0% 2.0% 1.0% 410 1550 0Engineencapsulation 1.5% - - 25 - -

Enhancedstop/start(R-AEA,2017)isdeployedonlyinLHGVsandMHGVsaslong-hauldrivingismorecontinuous.Forlonghaulthedualmodelhybridelectricsystemisdeployedasanalternative.Table3.7:Hybridisationtechnologies



Dual-modehybridelectric 25.0% 30.0% 6.5% 23694 18997 8535

Enhancedstop/startsystem 4.5% 4.5% - 1160 1160 -

VehicleimprovementsusingdriveraidsfromtheTIAX(2012)onlycamewithfuelsaving-nocostswereincluded.Thecostwasestimatedbysummingsimilartechnologies,routemanagementandtrainingandfeedbackfromR-AEA(2012).

Transmissionanddriveline

technologies

Engineefficiencytechnologies

Hybridisationtechnologies

Managementtechnologies



Table3.8:Managementtechnologies



Predictivecruisecontrol - - 2.0% - - 640SmartAlternator,BatterySensor&AGMBattery 1.5% 1.5% 1.5% 548 548 986

Vehicleimprovementsusingdriveraids - - 10.0% - - 1144

Auxiliarycomponentsinthevehiclealsohaveroomforimprovement.Electriccoolingfansofferagreateramountofenergysavingforaslightlysmallercost.Table3.9:Reductionofauxiliary(parasitic)loads



Electriccoolingfans 0.5% 0.5% 0.5% 50 90 180

Electrichydraulicpowersteering 1.3% 0.8% 0.3% 95 180 360

Highefficiencyairconditioning 0.5% 0.3% 0.1% 55 105 210

TomakeastandardelectricHHGVcompatiblewithERS(definedasaPHEV-ERSandBEV-ERSvehicles),technologiesneedtobeaddedtothevehicle.Foracatenarywiresystem,apantographattachedtothehoodofthecabisneeded.Siemenshavedevelopedan‘activepantograph’whichcanconnecttotheERS-highwayatspeedsof90km/h.Builtinsensortechnologyadjuststhepantographtomaintaincontactwiththecatenarywireswhichwouldotherwisebedisplacedfromthetruckslateralmovementsinthelane.Thistechnologyisassumedtocost€17,000pervehicleininitialdeployments,andfalltoroughly€11,000duetomarketmaturity12.

ThecostofthepantographisaddedtobaselinecostofaPHEV-ERSandBEV-ERSasitisastandardrequirementofthevehicletobecompatiblewiththeERS.Thecostdoesnotfeatureinthetechnologypackagesbelow.

Deploymentrates

ThedeploymentoftechnologiesisbrokendownintofourdifferentTechnologyPackages.Technologiesaregroupedbasedonthepaybackperiodoftechnologies,withspecificdeploymentsdrawnfromR-AEA(2012).Thepaybackperiodmeasureshowlongitwouldtaketopayoffthetechnologyintermsoffuelexpendituresaved.Atechnologyissaidtohaveapaybackperiodofoneyearifthefuelsavinginthefirstyearamountstotheup-frontcostofthetechnology.Thedeploymentrateshavebeendrawnfromthe2012Ricardo-AEAstudy,andadjustedtocorrespondbroadlytothefollowingaims:

• TechnologyPackage1assumesthatby2025therewillbedeploymentofnewtechnologiesintovehicleswheretheyhaveapaybackperiodof2yearsorless.Thiswillnotcorrespondto100%coverageofsales,duetothedifferentusecaseswithineachcategory(i.e.actualcostsavingdependsupontotaldistancedriven).

12SeeSection3.3,Table3.15.

Reductionofauxiliary

(parasitic)loads

ERScompatibletechnologies



• TechnologyPackage2assumesthatover2025-33therewillbedeploymentinnewvehiclesoftechnologiesinusecaseswheretheyhaveapaybackperiodof3.5yearsorless.

• TechnologyPackage3assumesdeploymentinnewvehiclesover2033-42oftechnologiesincaseswheretheyhaveapaybackperiodof5yearsorless.

• TechnologyPackage4assumesthatby2050therewillbefulldeploymentinnewvehiclesofalltechnologieswheretheyhaveapositiveimpactontheTCO.

Fortechnologieswithnoavailablepaybackperiod,deploymentratesinpreviousstudieswereusedinstead.Table3.10:DeploymentratesoftechnologiesforLHGVs

Technology TechnologyPackages,LHGVs1(2025) 2(2033) 3(2042) 4(2050)

10%reductioninaerodynamicdrag 0% 0% 50% 100%Light-weighting2 100% 100% 100% 100%Light-weighting3 30% 60% 100% 100%Light-weighting4 15% 30% 60% 100%Lowrollingresistancetires 50% 75% 50% 0%Singlewidetires 0% 25% 50% 100%TirePressureMonitoringSystem(TPMS) 0% 0% 30% 100%Transmissionfrictionreduction 0% 100% 100% 100%Improvedcontrols,withaggressiveshiftlogicandearlylockup 0% 100% 100% 100%

Mechanicalturbocompound 0% 10% 30% 40%Electricalturbocompound 0% 1% 15% 30%Turbocharging 0% 0% 30% 100%Heatrecovery 0% 0% 5% 20%UnspecifiedFMEPimprovements 100% 100% 100% 100%Variableoilpump 100% 100% 100% 100%Variablecoolantpump 100% 100% 100% 100%Bypassoilcooler 100% 100% 100% 100%Lowviscosityoil 100% 100% 100% 100%Engineencapsulation 100% 100% 100% 100%Enhancedstop/startsystem 35% 25% 15% 0%Fullhybrid 20% 30% 50% 100%SmartAlternator,BatterySensor&AGMBattery 20% 60% 100% 100%

Electriccoolingfans 50% 100% 100% 100%Electrichydraulicpowersteering 100% 100% 100% 100%Highefficiencyairconditioning 20% 100% 100% 100%

Lowrollingresistancetiresandsinglewidetirescannotbothbedeployedonthesamevehicle–thetotaldeploymentofthesetwotechnologiescannotexceed100%.Lowrollingresistancetiresfeaturein50%ofallsalesinTechnologypackage1becausethecostsandenergysavingarebothlower.Purchasersinvestasmallamount(€644)andarecompensatedbysmallenergysavings(2.5%).Thedeploymentincreasesto75%by2033,withthe



remainingusecasesincludingsinglewidetires,across25%ofnewsales.By2050singlewidetiresmakeupalltiresalesbecauseofthelargeenergysavingpotential.

Thesameistrueofenhancedstop/startsystemsandfullhybridtechnologies.Bothcannotfeatureonasinglevehicle.Thecostofenhancedstop/startissmaller,soitisimplementedinafewbusinesscases,covering35%ofnewsales.Fullhybridtechnologyismoreexpensivebutinthelong-runtheenergysavingsaremuchhigher(soitsuitsusecaseswhichcoveralargermileage).Itonlymakeseconomicsensefor20%ofsalesinTechnologypackage1.By2033,fullhybridsbegintodominateasthepotentialTCOsavingcoversmoreusecases,attheexpenseofenhancedstop/start.Moreover,theimplementationofastop/startsystemiscomplex,requiringhightorqueanddurabilityrequirementswhichmaymeanitismorelikelyhauliersinvestinafullhybridsysteminstead(R-AEA,2017).Table3.11:DeploymentrateoftechnologiesforMHGVs

TechnologyTechnologyPackages,MHGVs

1(2025) 2(2033) 3(2042) 4(2050)15%reductioninaerodynamicdrag 100% 100% 100% 100%Lightweighting1 100% 100% 100% 100%Lightweighting3 20% 50% 100% 100%Lightweighting4 0% 50% 100% 100%Lowrollingresistancetires 100% 100% 100% 100%TirePressureMonitoringSystem(TPMS) 0% 50% 100% 100%Transmissionfrictionreduction 0% 0% 100% 100%

Mechanicalturbocompound0% 10% 30% 40%

Electricalturbocompound 0% 1% 15% 30%Turbocharging 0% 0% 0% 100%Heatrecovery 0% 0% 5% 20%UnspecifiedFMEPimprovements 100% 100% 100% 100%Variableoilpump 100% 100% 100% 100%Variablecoolantpump 100% 100% 100% 100%Bypassoilcooler 100% 100% 100% 100%Lowviscosityoil 100% 100% 100% 100%Enhancedstop/startsystem 100% 75% 50% 0%Fullhybrid 0% 25% 50% 100%SmartAlternator,BatterySensor&AGMBattery 20% 60% 100% 100%Electriccoolingfans 100% 100% 100% 100%Electrichydraulicpowersteering 100% 100% 100% 100%Highefficiencyairconditioning 20% 60% 100% 100%Table3.12:DeploymentrateoftechnologiesforHHGVs

TechnologyTechnologyPackages,HHGVs

1(2025) 2(2033) 3(2042) 4(2050)25%reductioninaerodynamicdrag 50% 100% 100% 100%Lightweighting1 50% 100% 100% 100%



Lightweighting2 50% 100% 100% 100%Lightweighting3 50% 100% 100% 100%Lightweighting4 15% 30% 60% 100%Singlewidetires 50% 75% 100% 100%TirePressureMonitoringSystem(TPMS) 50% 100% 100% 100%Transmissionfrictionreduction 100% 100% 100% 100%

Controllableaircompressor20% 50% 100% 100%

Mechanicalturbocompound 50% 100% 100% 100%Turbocharging 50% 100% 100% 100%Heatrecovery 0% 100% 100% 100%UnspecifiedFMEPimprovements 50% 100% 100% 100%Variableoilpump 50% 100% 100% 100%Variablecoolantpump 50% 100% 100% 100%Bypassoilcooler 50% 100% 100% 100%Lowviscosityoil 50% 100% 100% 100%Dual-modehybridelectric 0% 30% 50% 100%Predictivecruisecontrol 100% 100% 100% 100%SmartAlternator,BatterySensor&AGMBattery 45% 50% 70% 100%Vehicleimprovementsusingdriveraids 50% 75% 100% 100%Electriccoolingfans 100% 100% 100% 100%Electrichydraulicpowersteering 25% 75% 100% 100%



Totalimpactoftechnologypackages

Table3.13showsthetotalenergysavingandcostofeachtechnologypackagetobedeployedinICEHGVs.Thetechnologypackagesvarybypowertrainbecausenotalltechnologiesareapplicabletoalladvancedpowertrains.Forexample,therewillbenodeploymentofheatrecoveryinBEVsorFCEVsasthereisnointernalcombustionenginetorecoverheatfrom.TheimplicationisthatthetotalenergysavingandcostsforeachtechnologypackagedecreaseasyoumovethroughpowertrainsfromICEtoPHEV/PHEV-ERSandPHEV/PHEV-ERStoBEV/FCEV.Table3.13:TechnologyPackagesforICEs

LHGV Energysaving

Cost Incrementalenergysaving

IncrementalCost

Technologypackage1 19.9% €4,254 19.9% €4,254Technologypackage2 26.3% €6,700 6.4% €2,446Technologypackage3 32.4% €11,858 6.1% €5,158Technologypackage4 45.0% €22,108 12.5% €10,250MHGV Energy

savingCost Incremental

energysavingIncrementalCost

Technologypackage1 22.3% €5,571 22.3% €5,571Technologypackage2 26.4% €9,454 4.1% €3,883Technologypackage3 31.6% €15,117 5.2% €5,663Technologypackage4 39.3% €24,714 7.7% €9,598HHGV Energy

savingCost Incremental

energysavingIncrementalCost

Technologypackage1 20.4% €5,992 20.4% €5,992Technologypackage2 35.9% €17,572 15.6% €11,580Technologypackage3 39.8% €20,082 3.9% €2,510Technologypackage4 42.2% €24,746 2.3% €4,663

ApatternseenacrossallpowertrainsintheHGVsegmentisthepotentialenergysavingsinTechnologypackage1,whichareconsiderablylowerintheotherpackages.

3.3 Vehiclecosts

ThecostofabaselineICEHHGVwastakenfromareportwastakenfromCEDelft(2013)13,andre-basedto2015.Thecostofatractorwascalculatedtobe€85,201,and€15,243foratrailer.

Allcostsstatedbelowaretheproductioncostandexcludetaxesandmargins.Allcostsareexpressedin2015Euros.Notethecostengine,tractorandtrailerinthetablesbelowexcludethecostoffuelefficienttechnologies.

ThecostestimatefortheadvancedpowertrainHHGVswascalculatedbysubtractingthecostoftheenginefromthebaselineICEHHGV,andthenaddingthecostoftheadvancedpowertrainandotheradditionalcomponents.

13Zeroemissionstrucks:Anoverviewofstate-of-the-arttechnologiesandtheirpotential,CEDelft(2013),Accessedhereon11/12/2017

Baselinevehicle

Advancedpowertraincosts



HybridvehiclesaddthecostoftheadditionalpowertrainandcomponentstothebaseICEcost.

Thetablesbelowbreakdownthesize,marginalcostandtotalcostofeachcomponentforeachadvancedpowertrain.

ThecostoftheICEinthebaselinevehicleisapproximately€37,000.ThiswascalculatedfromthecostoftheengineperkW(106€/kW)14multipliedbytheassumedenginesized(350kW)fromthearchetypeHHGVfromR-AEA(2017).

Theadditionalrequiredbatteryelectricsystemsaretheelectricsystems(powerelectronics,batterymanagementsystems,etc.)necessarytocontrolthepowertransfer(ICCT,2017).Theyarescaledwiththesizeoftheelectricmotor.Table3.14:SizeandcostbreakdownofPHEV

2025 2030 2040 2050Enginesize(kW) 322 322 322 322Enginemarginalcost(€/kW) 106 106 106 106Costofengine(€) 37224 37224 37224 37224Batterypack(kWh) 165 165 165 165Batterymarginalcost(€/kWh) 113 90 82 70Costofbatterypack(€) 18563 14850 13530 11550Electricmotor(kW) 350 350 350 350Electricmotormarginalcost(€/kW) 16 14 14 14Additionalsystemrequirements(€/kW) 41 37 37 37Costofelectricmotor(€) 5477 4861 4861 4861Costofadditionalelectricsystemrequirements(€) 14511 12934 12934 12934

Costoftractor(excl.ICE)(€) 47977 47977 47977 47977Costoftrailer(€) 15243 15243 15243 15243TotalcostofPHEV(€) 138995 133089 131769 129789ThemarginalcostestimatesforabatterypackarefromtheOEMannouncementscenarioofElementEnergy’s(EE)workonFuellingEurope’sFuture(2018).ThemarginalcostoftheelectricmotorandadditionalsystemrequirementsweretakenfromICCT(2017)15.Thisreportonlyconsidersthecoststo2030;thesecostsarethenassumedtoholdconstantoutto2050.

14TransitioningtoZero-EmissionHeavy-DutyFreightVehicles,ICCT(2017).Accessedhereon5/12/201715TransitioningtoZero-EmissionHeavy-DutyFreightVehicles,ICCT(2017).Accessedhereon5/12/2017

Plug-inhybrid(PHEV)

Batterycosts



Figure3.1:BatterycostperkWhestimatesfromE

Intermsofcomponents,therearetwomaindifferencesbetweenPHEVandthePHEV-ERSvehicles.First,thebatteryissmallerinaPHEV-ERS.Second,aPHEV-ERSincludesanactivepantograph,whichenablescompatibilitywithERS.Table3.15:SizeandcostbreakdownofPHEV-ERS

2025 2030 2040 2050Enginesize(kW) 350 350 350 350Enginemarginalcost(€/kW) 106 106 106 106Costofengine(€) 37224 37224 37224 37224Batterypack(kWh) 50 50 50 50Batterymarginalcost(€/kWh) 113 90 82 70Costofbatterypack(€) 5625 4500 4100 3500Electricmotor(kW) 350 350 350 350Electricmotormarginalcost(€/kW) 16 14 14 14Additionalsystemrequirements(€/kW) 41 37 37 37Costofelectricmotor(€) 5477 4861 4861 4861Costofadditionalsystemrequirements(€) 14511 12934 12934 12934

Costofactivepantograph(€) 17670 10591 10591 10591Costoftractor(excl.ICE)(€) 47977 47977 47977 47977Costoftrailer(€) 15243 15243 15243 15243TotalcostofPHEV-ERS 143727 133330 132930 132330ThemarginalbatterypackcostiscalculatedbasedonElementEnergy’scostprojections.TheelectricmotorandadditionalsystemrequirementscostsarefromICCT(2017).ThecostoftheactivepantographwassuppliedbySiemens.

WeassumeanaveragebatterysizeinaBEVof700kWh,baseduponanefficientvehicleconsuming1kWhperkm(1.6kWhpermile,inlinewiththelowerendofefficienciesannouncedbyTesla(1.5–2kWhpermile),andassumingan80%usablestateofcharge,arangeof580km(inthemiddleofTesla’sstatedrangesof300and500miles).

PHEV-ERS

BEV



Table3.16:SizeandcostbreakdownofBEV

2025 2030 2040 2050Batterypack(kWh) 700 700 700 700Batterymarginalcost(€/kWh) 113 90 82 70Costofbatterypack(€) 78750 63000 57400 49000Electricmotor(kW) 350 350 350 350Electricmotormarginalcost(€/kW) 16 14 14 14Additionalelectricsystemrequirements(€/kW) 41 37 37 37

Costofelectricmotor(€) 5477 4861 4861 4861Costofadditionalsystemrequirements(€) 14511 12934 12934 12934Costoftractor(excl.ICE)(€) 47977 47977 47977 47977Costoftrailer(€) 15243 15243 15243 15243TotalcostofBEV 161958 144015 138415 130015Thesourceforthemarginalbatterycosts,electricmotorandadditionalsystemrequirementsisthesameasthecostsusedforPHEV-ERSandPHEV(theICCTandEE’sOEMannouncementscenario).

Table3.17showsadetailedbreakdownofthecostsofaBEV-ERS.ThedifferenceincostbetweenaBEV-ERSandPHEV-ERSisthecostoftheinternalcombustionengine.Table3.17:SizeandcostbreakdownofBEV-ERS

2025 2030 2040 2050Batterypack(kWh) 200 200 200 200Batterymarginalcost(€/kWh) 113 90 82 70Costofbatterypack(€) 22500 18000 16400 14000Electricmotor(kW) 350 350 350 350Electricmotormarginalcost(€/kW) 16 14 14 14Additionalsystemrequirements(€/kW) 41 37 37 37Costofelectricmotor(€) 5477 4861 4861 4861Costofadditionalsystemrequirements(€) 14511 12934 12934 12934Costofactivepantograph(€) 17670 10591 10591 10591Costoftractor(excl.ICE)($) 47977 47977 47977 47977Costoftrailer(€) 15243 15243 15243 15243TotalcostofBEV-ERS 123378 109606 108006 105606Table3.18showsthebreakdownofcomponentsrequiredinaFCEV.ThesizeoftheindividualcomponentsandthecostsweretakenfromICCT(2017).TheICCTreportassumesthattheperkWcostofHHGVFCEVcomponentsisthesameasforpassengercars;thisissupportedbytheannouncementfromToyotathattheirnewfuelcelldrayagewillcontaintwoMiraifuelcellstacks(asusedintheMiraipassengercar),suggestingthatsuchscalingofcostsisareasonableassumption.

ThesizeofthecompressedH2tank(63kg)isdeterminedbythemid-pointoftheestimatedrangeoftheNikolaOneSemiTruck16,theenergyefficiencyofaFCEVin2025;6MJ/km,andanenergydensityof120MJ/kg.

16NikolaOneSemiTruck.Accessedhereon15/01/2018

BEV-ERS

FCEV



Table3.18:SizeandcostbreakdownofFCEV

2025 2030 2040 2050Batterypack(kWh) 12 12 12 12Batterymarginalcost(€/kWh) 113 90 82 70Costofbatterypack(€) 1350 1080 984 840Electricmotor(kW) 350 350 350 350Electricmotormarginalcost(€/kW) 16 14 14 14Additionalelectricsystemrequirements(€/kW) 41 37 37 37

Costofelectricmotor(€) 5477 4861 4861 4861Costofadditionalelectricsystemrequirements(€) 14511 12934 12934 12934

Fuelcell(kW) 350 350 350 350Fuelcellmarginalcost(€/kW) 80 53 42 33Additionalfuelcellsystemrequirements(€/kW) 28 25 25 25

Costoffuelcell(€) 28076 18612 14709 11407Costofadditionalsystemrequirements(€) 9779 8833 8833 8833CompressedH2tankcapacity(kg) 63 62 61 61H2tankmarginalcost(€/kg) 630 570 507 475CostofcompressedH2tank(€) 39974 35603 31162 29181Costoftractor(excl.ICE)(€) 47977 47977 47977 47977Costoftrailer(€) 15243 15243 15243 15243TotalcostofFCEV 162387 145142 136703 131276

3.4 Fuelcosts

ThepriceofpetrolfacedbyhauliersintheEUexcludesVAT(becausethisisreclaimed)butincludesfuelduty.FuturepetrolpricesareprojectedtobeconsistentwiththeoilpriceforecastintheIEACurrentPoliciesScenario(2016).

ThepriceofdieselfacedbyhauliersintheEUdoesnotincludeVATandineightofmemberstatestheycanreclaimfuelduty.TheimpactoffueldutyontheEUaveragepriceiscalculatedbyTransportandEnvironment17tobe€0.04/L.Thedieselpricesareadjustedtoreflectthis.FuturedieselpricesareprojectedtobeconsistentwiththeoilpriceforecastbytheIEAintheirCurrentPoliciesScenario(2016).

Thehistoricaldataforelectricprices(excludingVATandotherrecoverabletaxies/levies)fornon-householdsfromEurostat18isusedinthemodel.Thepricevariesbyconsumptiontype;forthismodellingtheconsumptionBandIE:20000MWh<Consumption<70000MWhisused.Table3.19:Realelectricitypricesfornon-householdsformEurostat(BandIE)

2010 2011 2012 2013 2014 2015Total(€/MWh,real2015) 78 85 91 92 92 93

17TransportandEnvironment.Europe’staxdealsfordiesel.Accessedhereon11/01/201818Dataseries:nrg_pc_205

Petrol

Diesel

Electricity



ProjectedelectricitypricesarebasedonthegrowthrateofelectricitypricesforfinaldemandsectorsfromPRIMESreferencescenario(2016)19(seeFigure5.2).

OurassumptionsforhydrogenproductioncostsarebasedonworkdonebyElementEnergyinFuellingEurope’sFuture(2018).Thefollowingtextisdrawnfromthetechnicalreportforthatstudy.

Hydrogenproductionforthetransportsectorisexpectedtobedominatedbywaterelectrolysers,steammethanereforming(SMR)andby-productfromindustrialprocesses(forexamplechloralkaliplants).Thesesourcesformthebasisoftheproductionmixinthisstudy.Otherpotentialsourcesincludewasteorbiomassgasification,orSMRwithcarboncaptureandstorage.Theseadditionalroutescouldpotentiallyprovidelowcost,lowcarbonhydrogen,butarenotyettechnicallyoreconomicallyprovenandhavenotbeenincludedinthecostassumptionsbelow.

HydrogenproductioncostdatawassourcedfromtheUKTechnologyInnovationNeedsAssessment,andElementEnergyandE4Tech’sDevelopmentofWaterElectrolysisintheEuropeanUnionstudy.ThecapitalandfixedoperatingcostsperkgofhydrogenproducedareshowninFigure3.2.SMRandby-producttechnologiesarealreadymature,andsofuturecostreductionsareassumedtobezeroforthisstudy.Currentelectrolysercostsarerelativelyhigh,drivenbylowmanufacturingvolumesandrelativeimmaturityatthescaleexpectedforhydrogenproduction(e.g.500kg-5t/day).Compression,distributionandmargincostsforSMRandby-productarespecifictoeachsupplier,thenumberofstationsservedandthegeographicaldistributionofrefuellingstations.Valuesforcompressioncosts,distributionandmarginareconsistentwithobservedpricesinfundeddemonstrationprojects(whichalsoshowsignificantlyhigherandlowercosts)andwereagreedbyindustryparticipantsfortheFrenchenRoutePourunTransportDurablestudy.

19Europeancommission2016:EUReferenceScenario,2016Energy,transportandGHGemissionsTrendsto2050.Accessedhere30/08/2016

Hydrogen

Hydrogenproductioncosts



Figure3.2-Capitalcosts,fixedoperatingcostsandcompression,distributionandmargincostsinEUR/kg

ThetotalproductioncostsfromeachproductionrouteareshowninFigure3.3.Thesecostsincludethefeedstockcostsassumptionsforgas(30EUR/MWhin2015risingto40EUR/MWhby2030)andelectricity(107EUR/MWhin2015risingto148EUR/MWhin2050).TheresultsbelowshowsignificantlyhighercostsforelectrolyserhydrogencomparedtoSMRandby-product.Thisisduetotheuseofastandardelectricitypriceinthebaselinescenariothatdoesnotaccountforoptimisationintermsoftimeofdayusageortheprovisionofgridservices.InsomeMemberStatessuchasFrance,electrolyseroperatorsareabletoaccesselectricitypricesofc.€65/MWh,whichissufficientlylowtobecompetitivewithhydrogenfromSMR(oncedeliverycostsforthelatteraretakenintoaccount)Theimpactoflowerelectricitypricesthroughoptimiseduseofrenewablesinperiodsoflowdemandwillbeconsideredasaseparatesensitivity,asthisisacriticalfactorifelectrolysersaretobecompetitivewithotherhydrogensourcesinthefuture.ThewaterelectrolysercostsinFigure3.3alsoincludearevenueof1EUR/kgfromtheprovisionofbalancingservicestotheelectricitygrid.ThisisanindicativevaluebasedondiscussionswithRTEinFranceandtheNationalGridintheUK.

Figure3.3-Totalcostsofhydrogenproduction,€/kg



Thehydrogenproductionmixinanygivenhydrogenmarketwillbeinfluencedbyrelativecostsofeachproductionsource,customerdemand(intermsofthecarbonfootprintofthehydrogen)andpoliciessuchasincentivesforgreenhydrogen.TheproductionmixalreadyvariessignificantlybetweenleadinghydrogenmarketsinEurope.Forexample,most,ifnotall,ofthefirst100stationsdeployedbyH2MobilityGermanywillusehydrogenfromsteammethanereformingorindustrialby-producthydrogendeliveredbytruck.Incontrast,mostoftherecentstationsdeployedintheUKundertheEU-FinancedHyFIVEandH2MEprojectsaresuppliedbyon-sitewaterelectrolysers.ThisisdueinparttoelectrolysisspecialistsmakingsignificantinvestmentsintheUK(astheyareinScandinavia),butalsoduetotherelativeeaseofguaranteeinghydrogenpurityfromelectrolyserscomparedwithSMRroutes.TheproductionmixusedtocalculatetheCO2footprintofhydrogenisshowninFigure3.4,andshowsaslightdominanceofSMR-derivedhydrogenin2015,withequalquantitiesofelectrolyserandSMRhydrogenbeyond2020.Itshouldbenotedthatiftheelectrolysermarketdevelopsquickly,bothintermsoftechnologycostreductionsandtheabilitytoprovidegridservicesandtakeadvantageofotherwise-curtailedrenewableenergy,greenhydrogencouldbecomethedominantproductionmethodduringthe2020s.Gridservicescanpotentiallyprovideuptoanadditional€80000perMWcapacityperyearandcouldprovetobeasignificantincentivetodevelopingtheelectrolysermarket.Theproductionmixshownbelowin2020woulddeliveranapproximately50%well-to-wheelCO2savingrelativetoanequivalentdieselcar(assumingtheelectricitysuppliedtothewaterelectrolysersisgreen).

Figure3.4-Hydrogenproductionmixscenarios

Hydrogenproductionmix



4 Infrastructurerequirements

Thissectiondescribesthedefinition,costsandrateofdeploymentof

• electricroadsystems• electricchargingposts• hydrogenrefuellingstations

Italsoprovidesabreakdownofourcalculationfortotalinfrastructurerequirements.

ThemainsourceofelectricityforERS-enabledvehicleswillbeviaanelectricroadsystem(ERS).Therewillalsobearolloutofslowdepotchargers(22kW)foreachvehicle,tofacilitateovernightchargingofvehicles.AsthedeploymentofERSincreasesthetimespentinelectricmodewillincrease,reflectinganincreaseduseoftheERSinfrastructure.ToincentivisethetakeupofERSvehiclestheERSinfrastructuredeploymenthasbeenfront-loaded.

ThemaininfrastructuretoserveBEVswillberapidchargersonhighways,withanoutputof700kW.AlongsidethesetherewillalsobeBEVdepotchargers(90kW)forslowchargingovernight.

ThemaininfrastructurerequiredtoserveFCEVswillbehydrogenrefuellingstations(HRS).Forthistechnologytotakeoff,sufficientfrontloadingisneededtoincentivisehaulierstoinvestinFCEVHGVs.Afteraninitialspikeindeploymenttherolloutofhydrogenrefuellingisdeterminedbyarefuellingdensityassumption.

4.1 ElectricRoadSystems

ThecentralcostassumptionsforinstallationandoperationandmaintenanceofERSintheHGVstockmodelisUmweltBundesamt(2016)20.Therearetwoinstallationcosts:thefirst,‘Installationcostin2020(€m/km)’representsthecostintheearlierstagesofdeployment,andthesecond‘Installationcostin2050(€m/km)’isthecostestimateofamaturedeployment,afterlearninghastakenplace.Linearinterpolationisusedtoderivethecostineachyearbetween2020and2050.Table4.1:CostassumptionforERS

Figure4.1:CumulativeERSinfrastructurecostsinTECHERSscenarioFigure4.1belowshowsthecumulativecostofinstallationandO&Mcostfrom2020and2050.By2050thetotalamountofinvestment(includingO&M)reaches€45billion.

20UmweltBundesamt(2016)ErarbeitungeinerfachlichenStrategiezurEnergieversorgungdesVerkehrsbiszumJahr2050)20,accessedhere.

Costs

Installationcostin2020(€m/km)

Installationcostin2050(€m/km) O&Mcost(€m/km)

Centralassumption 2.43 2.02 0.05



Figure4.1:CumulativeERSinfrastructurecostsinTECHERSscenario

ERSwillbedeployedacrossthecoreTEN-Tnetwork.ThedeploymentofERSenvisagedintheTECH-ERSscenarioisthemostambitious(relativetotheotherTECHscenarios).ItisbasedonadensityassumptionderivedfromFraunhofer(2017)21.Thestudyassumesthat19%ofGermanhighwaysareelectrifiedby2030.Thisenables25%oftheHHGVstocktobeERS-enabledvehicles;weestimatethistoequatetoapproximately300HHGVsERS-enabledvehiclesinthestockforeverykmofERS.AssumingthatthedensityofERS-enabledvehiclesperkmchangesasthevehiclesachievegreaterpenetrationinthestock,weassume300vehiclesperkmisthe‘peak’density,i.e.thatatlowerlevelsofERSinstallation,therearefewervehiclesperkm(whichrepresentssufficientfrontloading),andthatbeyondthispointeachadditionalkmofERSinstalledisalesser-usedroad,meaningthattherearenofurtherincreasesinvehicledensityinadditionalinstalledERS(andinfactvehicledensityfallsslightly).

21Fraunhofer(2017):MachbarkeitsstudiezurErmittlungderPotentialedesHybrid-Oberleitungs-Lkw,accessedhereAug2018

Deployment



Figure4.2:DeploymentofERSbyscenario

ThedensityassumptionfortherolloutofERSinTECHBEVandTECHFCEVscenariosisbasedonfixingthepeakvalueofvehiclesperkilometreatthelowerfigureof220.TherolloutofERSinfrastructureinthesescenariosismuchlessbecausethestockofERS-enabledvehiclesissmaller.

ThepercentageoftimespentinelectricmodeisanimportantdeterminantforcalculatingthefuelconsumptionofbothPHEVandPHEV-ERSvehicles.Figure4.3illustratesthepercentageofthetimeeachvehiclespendsinelectricmode–eitherdrawingelectricityfromERSorusingtheon-boardbattery.ABEV-ERSspends100%ofitstimeinelectricmode.Figure4.3:Timespentinelectricmode(completetrend)

ThetimespentinelectricmodeforaPHEViscalculatedbasedonanumberofassumptions.TheaveragetriplengthofanHHGVinEuropeisapproximately525km(TRACCS).ForaHHGVtravellingatanaveragespeedof80km/h,the

Percentageoftimespentinelectric

mode



timetakenforacompletetripisjustunder7hours.Withabatterycapacityof165kWhandelectricityconsumptionof1kWh/km,afullychargedbatteryhasarangeof150km.Afterthis,thevehicleswitchestodiesel.However,theWorkingTimeDirectivemeansthatthedrivermuststopafter4½hours(i.e.afterdrivingaround360km).Assumingthatthis45-minuterestisusedtorechargethePHEVbattery(usingarapidcharger),thefirst150kmafterthestopcanagainbedoneusingtheelectricmotor,andtherestofthetripontheICE.Bytheendofthetrip,thevehiclehascoveredjustover300kminelectricmodeofatotalof525km,oraround57%,whichisourworkingassumptionfortimespentinelectricmodebyaPHEV.

However,whilethetimespentinelectricmodebyaPHEVisconstantovertime,thesameisnottrueofaPHEV-ERS.Forthesevehicles,thetimespentinelectricmodeincreasesovertime,inresponsetotheincreasingdeploymentofERS.TheinitialstartpointforPHEV-ERSisthesameasPHEV,fromwhichitincreasesbasedondatafromthreeGermanstudies(seeTable4.2).Table4.2:ModelledestimatesoftimespentinelectricmodebyERSvehicles

4.2 Rapidcharging

AfewfirmshaverecentlyannouncedbatteryelectricHGVswhichwillrelyuponrapidchargingtechnologyforon-routerecharging.Suchvehicleswillrequirededicatedhigh-powercharginginfrastructureinstalledalongkeytransportroutes(e.g.thecoreTEN-Tnetwork)andlower-poweredchargersinstalledathaulagedepotstoenableovernightcharging.

ThecostsfordepotandrapidcharginghavebeenbasedoncostanalysisforchargersfromFuellingEurope’sFuture(2018).Thestudyexploredtheproductionandinstallationcostofrapidchargers(150kWand350kW)forlightdutyvehicles.ArapidchargerneedstobeabletodispensehigherpowertorechargeaHHGVwitha700kWhbatteryinareasonabletime.However,thereisanabsenceofcostdataonrapidchargersoftherequiredsizeso,theseareestimatedbylinearlyscalingup(ordown,for‘slow’chargers)thecostsfromFuellingEurope’sFuture(2018).TheanalysisfromFuellingEurope’sFuture(2018)showedclosetoalinearrelationshipofa150kWand350kWcharger,suggestingthatthisisareasonableassumption.

Depotchargershavebeenincludedatdifferentsizestosupportdifferentsizebatteriesinthefleet.Thefunctionofthesechargersistoenableovernightslowchargingofvehicles,anditisassumedthatdepotownerswouldbuythecheapestchargerthatfulfilstheirneed.

Study ERSdeployed(km) Timespentinelectricmode(%)

UBA72(2016) 4000 75RenewbilityIII–Endbericht(2016) 8000 80IFEU(2015) 10400 90

Costs

Source:eHighway,Siemens(2017)



Table4.3:Rapidcharginginfrastructure

Theinstallationcostofpreparingthesesiteswilldependonthenumberofchargingpostsinstalled,thelocationandexistingfacilitiesofthesite,andmostsignificantly,thelevelofgridreinforcementneededtocopewiththeincreasedlocalelectricitydemand.Thesecostsarebasedonlinearscaleupoftheadditionalcostsof350kWchargingpostsfromFuellingEurope’sFuture(2018),seeTable4.4below.Wehaveassumedthatalldepotchargersarebrownfieldsites,andrapidchargingsiteswillbegreenfield,reflectingthesubstantialadditionalspacerequirementsofnewrapidchargingstationsandthetightlimitstoexistingHGVstoppingandrefuellingspaceinmuchofEurope.Table4.4:Additionalcostsforpreparingsitesforrapidcharging

Source:SDGfortheEC,CleanPowerforTransportInfrastructureDeployment,2017.

TodeterminetherolloutofrapidcharginginfrastructuretomeetthedemandofHGVswehavederivedaninfrastructuredensityassumption.Withstaggeredchargetimesandotherlogisticaloptionssuchasadvancedbookingofchargingslotsbyhauliers,weassumethatanaverageusagefactorof50%couldbeachieved.Assuch,16vehiclescanuseasinglechargerinoneday,for

Mainapplication

Chargingpointfeatures

Power(kW)

Chargetime(emptytofull)

Cost(€)

Production Installation

Depot–vans

VanwallboxBrownfield

7kW

Battery:33kWhTime:5hr

800 400

Depot–PHEV&ERSHHGVs

OvernightchargingBrownfield

22kWBattery:165kWhTime:7.5hr

10,000 3,813

Deport–BEVHHGVs

OvernightchargingBrownfield

90kWBattery:700kWhTime:7.7hr

36,000 13,775

Rapidcharging Greenfield 700kW

Battery:700kWhTime:1hr

480,000 373,125

Item Initialstage(2chargers)

MatureStage(8ormorechargers)

BrownfieldsiteGridconnection €10,000 €345,000

Civils €64,000 €82,000

TOTAL €74,000 €427,000

Greenfieldsite

Accessroads €50,000 €50,000

Siteworks €100,000 €100,000

Professionalfees €33,000 €33,000

Gridconnection €5,000 €340,000

Civils €64,000 €82,000

TOTAL €252,000 €605,000

Deployment



aperiodof45minuteseach.Furthermore,becauseonly34%oftripsaregreaterthan600km(accordingtodatafromEurostat),onlyathirdofvehiclesneedtouseachargeratall(theremainderwouldbeabletocompletethejourneyfromasinglechargeatthedepotandwouldstoponlytoadheretothelawratherthanrefuel).Finally,weassumethattherearethreeindividualchargersperstation.Therefore,theinfrastructuredensityrequiredisonerapidchargingstationforevery141HHGVs.

Rapidchargingstationsaretheonlyinfrastructurethatdonothaveanydegreeoffrontloading(i.e.buildingouttheinfrastructureinadvanceofthestockrequirements).Thisisbecause,foreveryBEVinthestock,oneovernightchargerisavailable;onafullchargeaBEVcancompletetheaveragetripdistance,essentiallygoingfromdepottodepotwithoutrequiringanyrapidchargingstations,alongtheroute.WethereforeimplicitlyassumethattheinitialdeploymentofEVswillbeusedforshortertriplengths(althoughcompletingonanannualbasisatotalmileageconsistentwiththewholefleetaverage).

Figure4.4belowshowsthegrossadditionalrapidchargingpointsrequiredtoservetheEV(PHEVandBEV)fleetintheTECHBEVscenario.Figure4.5showsthegrossadditionaldepotchargingpointstoserveEVfleetintheTECHBEVscenario.Thegraphshavebeensplittoshowthenumberofrapidchargingpointsinmoredetail.Figure4.4:AdditionalrapidchargingpointstosupportEVfleetinTECHBEV



Figure4.5:AdditionaldepotchargingpointstosupportEVfleetinTECHBEV

4.3 Hydrogenrefuellingstations

Themaincomponentsofahydrogenrefuellingstation(HRS)areacompressor,refrigerationequipmentandadispenser.AnHRSwilldispense700barhydrogeninconjunctionwiththeperformancespecificationsetoutintheSAEJ2601internationalstandard.Thecurrenttechnologylevelandmanufacturingvolumesmeansthatthecostsofahydrogenrefuellingtankarerelativelyhigh.Ourassumptioninthisanalysis(inlinewithmodellingofhydrogenrefuellingstationsinFuellingEurope’sFuture(2018)andpreviousstudies)isthathydrogenisproducedlocallybyanon-siteelectrolyser;notethatthisgenerationcostisnotincludedintheinfrastructurecostsconsideredbelow;itmattersonlyinasmuchasitaffectsthepriceofhydrogenfuel.

WehaveselectedtwodifferentHRSsizesforthestockmodel;10,000kg/dayand25,000kg/day.TheuppersizeisinlinewithNikola’sannouncementthattheywillbuildHRSwhichcandispenseupto25,000kgofhydrogenperday22.

OurcostestimatesofHRSarelinearlyscaledusingthe0.6powerrulefromthecostofa3000kg/daystationinitialconceivedforhydrogenbuses23.Thecostofadispenser(includinginstallation&civiletc.)isintherangeof€100,000–€300,000.Notea3000kg/daychargerrequires5dispensers,thisratioisusedtodeterminethenumberofdispensersneededfora10,000kgand25,000kgHRS.Theinvestmentcostofastorageandcompressionunitcombinediswithintherangeof2,500–5,000€/(kgH2/day).LargerHRScanachievecostsatthelowerendoftherange,andsincethemodelledchargersarelarge,weassumecostsatthebottomendoftheseranges.

22FuelCellCars.Accessedhereon11/07/201723NewBusFuel.Accessedhereon07/12/2017



Table4.5:Installationcostsforhydrogenrefuellingstations

Theinfrastructuredensitywasbasedonourassumptions,andcrosscheckedagainstNikolaestimates.Assuminganefficiencyof6MJ/km(2025efficiencyestimateofrealworldefficiency)andenergydensityofhydrogenof120MJ/kgandanaveragetriplengthof525km,eachtriprequiresaround26kgofhydrogenThisislessthantheNikolaestimatewhichisbetween50-70kg/dayperFCEVHHGV,reflectingtheloweraveragedistancecoveredbyEuropeanHHGVscomparedtothoseintheUS.Assuming75%usageofthecapital,26kg/daymeansthat286vehiclescanbesupportedbyasingle10,000kg/dayHRSand714vehiclesbya25,000kg/dayHRS.

InthefirstfouryearsofFCEVHHGVdeploymentweassumesomefront-loadingofinfrastructure.GrossadditionalHRSisillustratedinFigure4.6below.AseachHRSisassumedtohavea20-yearlifespan,thefirstreplacementchargersareintroducedin2046.Figure4.6:AdditionalHRStosupportFCEVfleetinTECHFCEV

Sizeofcharger

Numberofdispensersperstation

Installationcostofdispensers(€m)

Installationcostofstorageandcompressionunit(€m)

Totalinstallationcost(€m)

10000kg 17 1.7 24.7 26.4

25000kg 42 4.2 42.8 44.5

Deployment



5 Hauliers’perspective

5.1 Vehiclecosts

Thecapitalcostofeachvehicleisderivedbycombiningprojectionsofthepowertrainandglidercostwithestimatesofthecostoffuel-efficienttechnologiesinstalledinthevehicle(includinglow-rollingresistancetyres,aerodynamicimprovements,weightreductions).

Inthiscapitalcostcalculation,onlythemanufacturingcostofthevehicleisconsidered,thereforeexcludingmargins,distributioncostsandVAT.Totheextentthattheselattercostsareproportionaltothefinalsaleprice,theywouldbehigherinabsolutetermsforadvancedpowertrainsthanforICEvehicles;however,theywouldnotimpacttherelativedifferenceincapitalcost.

InFigure5.1below,andinallsubsequentchartswherethecostofdifferentpowertrainsarecompared,wecomparetechnologiesatthesamelevelofmaturity((i.e.similarpercentagecostreductionshavebeenachievedthrougheconomiesofscaleandlearningeffects).

ThecostoftechnologieswhichreduceCO2emissionsfromroadfreightwillreduceovertimeasscaleeconomiesareachieved,butthecostfacedbyhaulierswillincreaseasmoretechnologiesareaddedtoreachtighterCO2limits.In2030,battery-electricandfuel-cellelectricvehiclesareprojectedtobesignificantlymoreexpensivethandieselandgasolinevehiclesandtheirhybridvariants.By2050,thedifferenceinpricewillbenarrowedslightlybutstillsomedistancefromconvergencewithICEpurchasecosts,eventhoughthecostofdieselvehiclesisincreasing(asadditionalfuelefficienttechnologiesaredeployedtomeetenvironmentalgoals)andzero-emissionsvehiclesbecomecheaperastheystartbeingmanufacturedatscale.

Figure5.1CapitalcostofanewheavyHGVsizedvehicleintheTECHscenarios



5.2 Fuelcosts

OnefeatureoftheTECHscenariosisthesubstantialimprovementtotheefficiencyofconventionalICEs,leadingtofuelbillsavingsforoperatorsofdieselvehicles.Inaddition,thetransitiontowardsanincreaseintheshareofadvancedpowertrainshasimplicationsforfuelbillsintheTECHscenariosduetothedifferencesinthecostsofthesealternativefuels,aswellastheimprovementsintheefficiencyofenergyconversioninanelectricpowertrainrelativetoaconventionalICE.

TheoilpriceprojectionsusedforthisanalysisaretakenfromIEA’sNovember2016WorldEnergyOutlookandthecostofpetrolanddieselproductionisassumedprojectedtobeconsistentwiththeseoilpricesovertheperiodto2050.TheelectricitypriceisconsideredattheEUlevelandincreasesinlinewiththe2016PRIMESReferenceScenario24;anEUaverageispresentedinthechartbelow.

Asadvancedpowertrainsbecomemoreprevalentinthevehiclemix,assumptionsaboutthepriceofelectricityandhydrogenbecomemoreimportantanddomesticelectricitypricesaremodelledasrelativelyconstantreflectingthetrendinthewholesalecostofproductionfromthegenerationmixinPRIMES.

5.3 Totalcostofownership(TCO)

Toevaluatetheimpactofthelowcarbontransitiononhauliers,itisalsoimportanttolookatthetotalcostofowningavehicleforthefirstowner,whosepurchasingdecisionwilldeterminewhetherthelow-carbontechnologiesenterthevehiclefleetornot.Tounderstandthisrequiresthatovertheinitialownershipperiodthecapitalcost,thecostsoffuellingthevehicle,shareofinfrastructurecosts,andtheamountforwhichitcanberesoldattheendoftheownershipperiodareallconsidered.Figure5.3shows

24Europeancommission2016:EUReferenceScenario,2016Energy,transportandGHGemissionsTrendsto2050.Accessedhere30/08/2016

Figure5.2Projectedcostofpetrol,diesel,hydrogenandelectricity(2016€/MWh),EUaverage



thisperspectiveovera5-yearownershipperiod,andagainconsiderssimilarmaturitylevelsacrossthedifferenttechnologies.Figure5.3TotalcostofowningandrunningaheavyHGVover5yearswithvariouspowertrainsintheTECHscenariosin2030and2050(€)

ThemainfindingoftheTCOanalysisisthatduetothehighmileageofHHGVsandincreasedefficiencyoftheelectricmotor,thelowerrunningcostsofBEVandPHEVbasedpowertrainsmorethanoutweighthehighercapitalcosts.ForFCEVs,thevehiclesachievecost-competitivenesswithICEsby2050,althoughremainmoreexpensivethanotheradvancedpowertrains.Thislargelyreflectsthefactthathydrogenfuelcostsaresubstantiallyhigherthanobtainingtheequivalentenergycontentdirectlyfromelectricity.

OveralltheTCOcomparisonshowsthattheuptakeoffuelefficientvehiclesshouldnotraiseoverallcoststohauliers.However,thereareotherchallengestoovercometoensureuptakeofmorefuel-efficientvehicles:

• fuelexpensesarecoveredbytheclientsaspartofstandardcontracts,reducingtheincentiveofhaulierstoreducethesecosts

• thehaulagesectorhasmanySMEoperatorsthatlackthecapacitytofinanceinvestmentsinmorefuel-efficientrollingstock



6 Economicimpacts

TheeconomicimpactofdecarbonisingEurope’sgoodsvehicles,comparedtoareferencecase(REF)inwhichvansandheavygoodsvehiclesremainunchangedfromtoday,wasmodelledusingE3ME25.

6.1 GDPimpacts

AllscenariosshowasmallpositiveimpactonGDPfromthetransitiontomoreefficientvehiclesandalternativepowertrains.Thiscomesfromtheshiftinspendingawayfromimportedoilandtowardsahighercapitalcontentinvehiclesandspendingondecarbonisedfuels.SinceoilisimportedintoEuropeandthedecarbonisedfuels(hydrogen,electricity)areproducedwithinEurope,theshiftinspendingonfuelreducesleakagefromtheEuropeaneconomyandisreflectedinanimprovementinthebalanceoftrade.

Thehighercostofvehiclesraisespricestoconsumersanddepressesrealincomesandspending.Itdivertsspendingtowardsthevaluechainformanufacturingvehiclesandtheircomponentpartsandawayfromothersectorsoftheeconomy.However,wherethisisdisplacingspendingonoil,sincethereisgreaterdomesticsupplycontentinmotorvehiclesascomparedtooil,thisrepresentsanetbenefittotheEuropeaneconomy.Inaddition,whentheTCOofvehiclesislowerinthescenariothaninthereferencecase,theoverallcostofmobilityofroadfreightisreduced.Thishastheeffectofreducingcostsfacedbyhauliers,thebusinessesthattheysupply(assomeofthecostreductionispassedonintheformoflowerprices)andultimatelyconsumers.Whenconsumersarefacedwithlowerprices,theyareabletore-allocatetheirexpenditureontoothergoodsandserviceswhichfurtherboostsGDP.AsummaryofthemaineconomicindicatorsispresentedinTable6.1.Table6.1:Mainmacroeconomicindicators

TECHICE TECHBEV TECHFCEV TECHERS

2030impacts (relativetoREF)

GDP(%) 0.03% 0.07% 0.07% 0.06%

Employment(000s) 80 121 122 116

Oilimports(mboe) -106 -197 -192 -193

CO2emissionsfromroadfreight(mtCO2) -43 -80 -78 -79

TECHICE TECHBEV TECHFCEV TECHERS

2050impacts (relativetoREF)

GDP(%) 0.03% 0.24% 0.24% 0.22%

Employment(000s) 215 288 341 223

Oilimports(mboe) -188 -749 -749 -743

25https://www.camecon.com/how/e3me-model/



CO2emissionsfromroadfreight(mtCO2) -77 -307 -307 -304

Thescaleofthelong-termeconomicimpactisuncertain,dependingonanumberofcompetingfactors:thecostofvehicles,low-carbontechnologiesandEVbatteries;thelocationofvehiclesupplychains;andfutureoilprices,amongstothers.However,thedominantimpactarisesfromthereductioninoilimports.ThisisevidentinthemacroeconomicresultsintheTECH-ICErelativetootherTECHscenarios,inwhichthereductioninoilimportsismuchsmallerwithouttheshifttoadvancedpowertrainsinHGVs.

ComparedtotheTECHBEVandTECHFCEVscenario,TECHERSleadstoasmallerimprovementinemployment,asmallerreductioninemissionsandaslightlylowerboosttoGDP.Thisisduetothesmallerinfrastructureinvestmentrequiredinthisscenario,andthefactthatoilimportsarereducedbyslightlyless,duetothecontinuedroleforPHEVvehiclesinthescenario.ThedifferencebetweenTECHBEVandTECHFCEVismarginalintermsofboththeimpactonbothGDPandemployment,withasimilarreductioninoilimportsinbothscenarios.

Figure6.1showstheGDPimpactsunderdifferentscenarios.IntheTECHscenarios,by2030thereisaverysmall(0.07%)GDPimprovementcomparedtobaseline,astheeconomicbenefitsofreducedspendingonoilandpetroleumimportsoutweighthenegativeeconomicimpactsassociatedwithhighervehicleprices.However,by2050thishaswidenedtojustover0.24%,asspendingonimportedfuelsfallsfurtherduetocontinuedimprovementinefficiencyofthestockandacontinuedshiftawayfromICEsandtowardseitherERS-enabledvehicles,BEVsorFCEVs.Figure6.1GDPresultsrelativetothereferencescenario

6.2 Sectoralimpacts

Thecostsandbenefitsvarybysector:somebenefitandsomeareadverselyaffectedbythetransition.



IntheTECHBEVscenario,spendingonfossilfuelimportsis€18billionlower(in2015prices)thaninthereferencescenarioby2030.WhilemuchofthisspendingintheREFscenarioflowstoproducersbasedoutsideofEurope,reducedspendinghasanadverseimpactondomesticrefining.IntheTECHscenario,grossoutputinthepetroleumrefiningsectorisconsiderablylowerthaninthereferencescenarioby2030.

Theelectricityandhydrogensectorsbenefitfromimprovedcapitalstockthroughinvestmentincharginginfrastructureandthroughhauliers’expenditureonelectricityandhydrogen.IntheTECHBEVscenario,grossoutputintheelectricitysectoris€2.6bnhigherthaninthereferencescenarioby2030.

IntheTECHBEVscenario,theautomotivesupplychainshowsanetincreaseingrossoutputof€9billionandanincreaseof31,000jobsin2030comparedtothereferencescenario.However,withinthesupplychainthereisasubstantialtransitionincontentfromtraditionalmotorvehiclesproductiontoelectricalequipmentinthelongtermnettingoutwithamoderateincrease.By2050,outputintraditionalmotorvehiclesfallsby€22billionwhereaselectricalequipmentoutputincreasesby€34billion.

6.3 Employment

Thepatternofimpactsonemployment,whilerelatedtotheoutputimpacts,aresomewhatdifferent.Toassesstheimpactonemployment,wealsoneedtotakeaccountofthedifferentemploymentintensitiesinthevarioussectorsthatareaffected.Thetrendtowardsgreaterautomationintheautoindustryisexpectedtoreducethenumberofjobs,regardlessofthelow-carbontransition.Buildingbattery-electricvehiclesisexpectedtobelesslabourintensivethanbuildingthegasolineanddieselvehiclestheywillreplace,whilebuildinghybridsandplug-inhybridsisexpectedtobemorelabourintensive(reflectingthefactthatthesevehicleshavedualpowertrains).Ourmodellingconfirmsthatthenetemploymentimpactfortheautosectorfromthetransitiondependsonthemarketsharesofthesevarioustechnologies,andthedegreetowhichtheyareimportedorproducedinEurope.

Figure6.2showstheevolutionofjobsinEuropebecauseofthetransitiontolow-carbonroadfreightin2030and2050underourTECHBEVscenario,relativetotheReferencecase.Thereisanetincreaseinemploymentinthefollowingsectors:electricity,hydrogen,servicesandmostmanufacturingsectors.Employmentinthepetrolanddieselfuelssectorisreduced.Employmentintheautomotivemanufacturingsectorishigheruntil2030butislowerthereafterinourTECHBEVscenario.

Oilandpetroleumrefining

Otherenergyindustries

Theautomotivesupplychain



Figure6.2Theemploymentimpactpersectorofthetransitiontolow-carbonroadfreight(TECHBEVcomparedtoREF)

InourTECHBEVscenario,by2050,thenetimpactonautojobsisnegativebecauseICEswithfuelefficienttechnologiesareincreasinglyreplacedbybattery-electricvehicles,whicharesimplertobuildandthereforerequirefewerjobstoproduce.

Employmentimpactswithintheautosectorareanimportantissue.Thebenefitofusingamacro-economicmodellingapproachisthatitallowsustoassesstheeconomy-wideimpactsofthistransition,buttherearelimitstothelevelofdetailthatcanbeprovided.Forthelow-carbontransitiontobesuccessful,carewillneedtobetakentosupportthosewholosetheirjobsintechnologiesthatarebeingphasedout.Managingtheswitchinthemotorvehiclesindustry,toensurea“justtransition”,shouldbeakeyfocusofpolicy,particularlyagainstanoverallbackgroundofincreasingautomation.

6.4 Oilimports

By2030,IntheTECHBEVscenario,cumulativeoilimportssince2018arereducedbyaround1billionboe.By2050,thecumulativereductioninoilimportscomparedtotheReferencecaseincreasesto11bboe.(seeFigure6.3).

ThereductioninoilimportsisthemaineconomicdriverandexplainsthelevellingoffoftheeconomicbenefitsintheTECHICEscenariofrom2030onwards,comparedtotheincreasingGDPbenefitsintheotherTECHscenariosoutto2050.



Figure6.3Oilimports(differencefromREF)

6.5 Governmentrevenues

InmanyEuropeancountries,fueltaxisleviedtoraisegeneralrevenueandtopayforroadinfrastructureimprovements.Vehicleefficiencyimprovementsandaswitchtolow-carbonvehicleswillreducespendingonpetrolanddieselfuelswithconsequentimpactsontaxrevenuesandthemodelforfinancingroadmaintenanceandroadinfrastructureimprovements.InsomeMemberStates,hauliershavetaxexemptionswhichmeanthattheimpactonfueldutieswouldbeminimal;intheanalysisthatfollows,weadoptaconservativeperspective,andassumethatallfossilfuelsalesthatareforegoneintheTECHscenarioswouldbesubjecttofuelduty.Thisthereforerepresentsa‘worstcase’oflostrevenues,withtheactualimpactonfueldutyrevenuesataEuropeanlevellikelytobesomewhatsmaller.

OuranalysisshowsthattheadvancedpowertrainsasintheTECHBEVscenariowouldcutfueldutyrevenuesby€23billionin2050.However,asdescribedabove,thestructuralshiftspromptedbythistransitionleadtoincreasedeconomicactivitywhichboostsothertaxrevenues.Thismitigatessomeofthelossofrevenues,and,toclosethegapentirelycomparedwiththebaseline,thestandardrateofVATwasincreasedby1-2%(varyingbyMemberState).Thisensuresthatnoneoftheeconomicbenefitsoutlinedabovearetheresultofunfundedborrowingbygovernment;thetotaltaxtakebygovernmentisunchanged,andtheincreaseinVATratesthatismodelledservestodepresstheeconomicoutcomesintheTECHscenariossomewhat.



Figure6.4Fueldutyrevenuesin2050(€2015bn)

Whiletheeconomicmodellingdemonstratesthisbalanceinrevenues,Europeangovernmentsmayfocusonthelossoffueltaxrevenuesandattempttorecoupthelostrevenuedirectlythroughothertaxesonthesamegroup,forexamplethroughincreasesinexciseduties(wheretheyexist)orroadcharging.Theneteconomiceffectwoulddependonwhichtaxesarechanged.Thishighlightstheimportanceofindustry,governmentandcivilsocietyworkingtogethertofindconsensusontheoptimalapproach.



7 Environmentalimpacts

7.1 ImpactonCO2emissions

TheevolutionofaverageCO2emissionsfornewHGVsineachscenarioisshowninFigure7.1.ApartfromtheREFscenario,allscenariosmeetorexceedtheEuropeanCommission’sproposedreductionsof15%by2025and30%by2030.IntheTECHBEVscenario,theaverageHGVsis25%moreefficientin2025and39%in2030.Figure7.1AverageCO2emissionsofHGVsfrom2018-2050

Figure7.2showsthevehiclestock’sCO2tailpipeemissionsundereachscenario.IntheTECHBEVscenario,CO2emissionsfromvansandHGVSarereducedfromaround290Mtperannumin2018to51Mtperannumin2050.Thisisachievedviaacombinationofincreasedfuelefficiencyandswitchingtheenergysourcefromdieseltolow-carbonelectricity.

Figure7.2TotalEUvehiclestockCO2tailpipeemissions(Mt)



8 Conclusions

ThisstudyfocusedonthepotentialeconomicimpactsofdecarbonisingvansandHGVsinEurope.

Wefindthatallthescenariosyieldneteconomicbenefitsintheshort,mediumandlongterm,strengtheningEurope’seconomy.Thiscomesaboutbecauseoftheeconomicbenefitsofreducingoilimports,andallscenariosleadtoreductionsinoilconsumptionandemissions.Theeconomicbenefitsincreaseovertheperiodto2050andoveralltherearemildbenefitstobothGDPandemployment,asoilimportsarefurtherreducedasefficientvehiclesandadvancedpowertrainstakeahighershareofthestock.TheimplicationofthisfindingisthatatransitiontowardslowcarbonroadfreighttransportationtomeetEurope’sclimategoalscanbeachievedwithoutfearofeconomiccollapse,buttherearesignificantchallengesalongtheway.

Policymakersmustbereadytomanagethetransitionandshouldfocustheireffortsonafewkeyareas:

• Theinvestmentofrecharginginfrastructuremustbedeliveredinanefficientfashion,likelybybothprivateandpublicactors,tosupporthauliertake-upofnewpowertrains.

• Retrainingprogramsmustbeavailabletomanagethelabourmarketimpactsofthetransition,givingworkersinvolvedintraditionalICEmanufacturingtheopportunitytore-skilltotakeupjobseitherinthenewsupplychainsaroundelectricvehicles,ortotakeadvantageofthewideropportunitiescreatedbyhighereconomicgrowth.

• Fueldutyrevenueswilldeclineduetothetransition,butthenetbenefitstotherestoftheeconomywouldmakeupmuchoftheshortfallbyexpandingthetaxbaseelsewhere.Thescaleofnetdeclineinrevenuescouldbemetinanumberofdifferentways;however,politiciansmightbeinclinedtointroduceothertaxesonthesamegroupofroaduserstoavoidchangingincentivesaroundexistingroadfreighttransportationbehaviours.

AppendixA E3MEmodeldescription

Introduction

E3MEisacomputer-basedmodeloftheworld’seconomicandenergysystemsandtheenvironment.ItwasoriginallydevelopedthroughtheEuropeanCommission’sresearchframeworkprogrammesandisnowwidelyusedinEuropeandbeyondforpolicyassessment,forforecastingandforresearchpurposes.

RecentapplicationsofE3MEinclude:

• aglobalassessmentoftheeconomicimpactofrenewablesforIRENA

• contributiontotheEU’sImpactAssessmentofits2030climateandenergypackage

• evaluationsoftheeconomicimpactofremovingfossilfuelsubsidiesinIndiaandIndonesia

• analysisoffutureenergysystems,environmentaltaxreformandtradedealsinEastAsia

• anassessmentofthepotentialforgreenjobsinEurope

• aneconomicevaluationfortheEUImpactAssessmentoftheEnergyEfficiencyDirective

ThismodeldescriptionprovidesashortsummaryoftheE3MEmodel.Forfurtherdetails,thereaderisreferredtothefullmodelmanualavailableonlinefromwww.e3me.com.

E3ME’sbasicstructureanddata

ThestructureofE3MEisbasedonthesystemofnationalaccounts,withfurtherlinkagestoenergydemandandenvironmentalemissions.Thelabourmarketisalsocoveredindetail,includingbothvoluntaryandinvoluntaryunemployment.Intotalthereare33setsofeconometricallyestimatedequations,alsoincludingthecomponentsofGDP(consumption,investment,internationaltrade),prices,energydemandandmaterialsdemand.Eachequationsetisdisaggregatedbycountryandbysector.

E3ME’shistoricaldatabasecoverstheperiod1970-2014andthemodelprojectsforwardannuallyto2050.ThemaindatasourcesforEuropeancountriesareEurostatandtheIEA,supplementedbytheOECD’sSTANdatabaseandothersourceswhereappropriate.ForregionsoutsideEurope,additionalsourcesfordataincludetheUN,OECD,WorldBank,IMF,ILOandnationalstatistics.Gapsinthedataareestimatedusingcustomisedsoftwarealgorithms.

Themaindimensionsofthemodel

ThemaindimensionsofE3MEare:

• 59countries–allmajorworldeconomies,theEU28andcandidatecountriesplusothercountries’economiesgrouped

Overview

Recentapplications



• 43or69(Europe)industrysectors,basedonstandardinternationalclassifications

• 28or43(Europe)categoriesofhouseholdexpenditure

• 22differentusersof12differentfueltypes

• 14typesofair-borneemission(wheredataareavailable)includingthesixgreenhousegasesmonitoredundertheKyotoprotocol

Thecountriesandsectorscoveredbythemodelarelistedattheendofthisdocument.

Standardoutputsfromthemodel

Asageneralmodeloftheeconomy,basedonthefullstructureofthenationalaccounts,E3MEiscapableofproducingabroadrangeofeconomicindicators.Inadditionthereisrangeofenergyandenvironmentindicators.Thefollowinglistprovidesasummaryofthemostcommonmodeloutputs:

• GDPandtheaggregatecomponentsofGDP(householdexpenditure,investment,governmentexpenditureandinternationaltrade)

• sectoraloutputandGVA,prices,tradeandcompetitivenesseffects

• internationaltradebysector,originanddestination

• consumerpricesandexpenditures

• sectoralemployment,unemployment,sectoralwageratesandlaboursupply

• energydemand,bysectorandbyfuel,energyprices

• CO2emissionsbysectorandbyfuel

• otherair-borneemissions

• materialdemands

Thislistisbynomeansexhaustiveandthedeliveredoutputsoftendependontherequirementsofthespecificapplication.Inadditiontothesectoraldimensionmentionedinthelist,allindicatorsareproducedatthenationalandregionallevelandannuallyovertheperiodupto2050.

E3MEasanE3model

Thefigurebelowshowshowthethreecomponents(modules)ofthemodel-energy,environmentandeconomy-fittogether.Eachcomponentisshowninitsownbox.Eachdatasethasbeenconstructedbystatisticalofficestoconformwithaccountingconventions.Exogenousfactorscomingfromoutsidethemodellingframeworkareshownontheoutsideedgeofthechartasinputsintoeachcomponent.Foreachregion’seconomytheexogenousfactorsareeconomicpolicies(includingtaxrates,growthingovernmentexpenditures,interestratesandexchangerates).Fortheenergysystem,theoutsidefactorsaretheworldoilpricesandenergypolicy(includingregulationoftheenergyindustries).Fortheenvironmentcomponent,exogenousfactorsincludepoliciessuchasreductioninSO2emissionsbymeansofend-of-pipefiltersfromlargecombustionplants.Thelinkagesbetweenthe

TheE3interactions



componentsofthemodelareshownexplicitlybythearrowsthatindicatewhichvaluesaretransmittedbetweencomponents.

Theeconomymoduleprovidesmeasuresofeconomicactivityandgeneralpricelevelstotheenergymodule;theenergymoduleprovidesmeasuresofemissionsofthemainairpollutantstotheenvironmentmodule,whichinturncangivemeasuresofdamagetohealthandbuildings.Theenergymoduleprovidesdetailedpricelevelsforenergycarriersdistinguishedintheeconomymoduleandtheoverallpriceofenergyaswellasenergyuseintheeconomy.

TechnologicalprogressplaysanimportantroleintheE3MEmodel,affectingallthreeEs:economy,energyandenvironment.Themodel’sendogenoustechnicalprogressindicators(TPIs),afunctionofR&Dandgrossinvestment,appearinnineofE3ME’seconometricequationsetsincludingtrade,thelabourmarketandprices.InvestmentandR&DinnewtechnologiesalsoappearsintheE3ME’senergyandmaterialdemandequationstocaptureenergy/resourcesavingstechnologiesaswellaspollutionabatementequipment.Inaddition,E3MEalsocaptureslowcarbontechnologiesinthepowersectorthroughtheFTTpowersectormodel26.

Treatmentofinternationaltrade

Animportantpartofthemodellingconcernsinternationaltrade.E3MEsolvesfordetailedbilateraltradebetweenregions(similartoatwo-tierArmingtonmodel).Tradeismodelledinthreestages:

• econometricestimationofregions’sectoralimportdemand

26SeeMercure(2012).

Theroleoftechnology



• econometricestimationofregions’bilateralimportsfromeachpartner

• formingexportsfromotherregions’importdemands

Tradevolumesaredeterminedbyacombinationofeconomicactivityindicators,relativepricesandtechnology.

Thelabourmarket

TreatmentofthelabourmarketisanareathatdistinguishesE3MEfromothermacroeconomicmodels.E3MEincludeseconometricequationsetsforemployment,averageworkinghours,wageratesandparticipationrates.Thefirstthreeofthesearedisaggregatedbyeconomicsectorwhileparticipationratesaredisaggregatedbygenderandfive-yearageband.

Thelabourforceisdeterminedbymultiplyinglabourmarketparticipationratesbypopulation.Unemployment(includingbothvoluntaryandinvoluntaryunemployment)isdeterminedbytakingthedifferencebetweenthelabourforceandemployment.Thisistypicallyakeyvariableofinterestforpolicymakers.

ComparisonwithCGEmodelsandeconometricspecification

E3MEisoftencomparedtoComputableGeneralEquilibrium(CGE)models.Inmanywaysthemodellingapproachesaresimilar;theyareusedtoanswersimilarquestionsandusesimilarinputsandoutputs.However,underlyingthisthereareimportanttheoreticaldifferencesbetweenthemodellingapproaches.

InatypicalCGEframework,optimalbehaviourisassumed,outputisdeterminedbysupply-sideconstraintsandpricesadjustfullysothatalltheavailablecapacityisused.InE3MEthedeterminationofoutputcomesfromapost-Keynesianframeworkanditispossibletohavesparecapacity.Themodelismoredemand-drivenanditisnotassumedthatpricesalwaysadjusttomarketclearinglevels.

Thedifferenceshaveimportantpracticalimplications,astheymeanthatinE3MEregulationandotherpolicymayleadtoincreasesinoutputiftheyareabletodrawuponspareeconomiccapacity.Thisisdescribedinmoredetailinthemodelmanual.

TheeconometricspecificationofE3MEgivesthemodelastrongempiricalgrounding.E3MEusesasystemoferrorcorrection,allowingshort-termdynamic(ortransition)outcomes,movingtowardsalong-termtrend.Thedynamicspecificationisimportantwhenconsideringshortandmedium-termanalysis(e.g.upto2020)andreboundeffects27,whichareincludedasstandardinthemodel’sresults.

KeystrengthsofE3ME

InsummarythekeystrengthsofE3MEare:

27Whereaninitialincreaseinefficiencyreducesdemand,butthisisnegatedinthelongrunasgreaterefficiencylowerstherelativecostandincreasesconsumption.SeeBarkeretal(2009).



• thecloseintegrationoftheeconomy,energysystemsandtheenvironment,withtwo-waylinkagesbetweeneachcomponent

• thedetailedsectoraldisaggregationinthemodel’sclassifications,allowingfortheanalysisofsimilarlydetailedscenarios

• itsglobalcoverage,whilestillallowingforanalysisatthenationallevelforlargeeconomies

• theeconometricapproach,whichprovidesastrongempiricalbasisforthemodelandmeansitisnotreliantonsomeoftherestrictiveassumptionscommontoCGEmodels

• theeconometricspecificationofthemodel,makingitsuitableforshortandmedium-termassessment,aswellaslonger-termtrends

ApplicationsofE3ME

AlthoughE3MEcanbeusedforforecasting,themodelismorecommonlyusedforevaluatingtheimpactsofaninputshockthroughascenario-basedanalysis.Theshockmaybeeitherachangeinpolicy,achangeineconomicassumptionsoranotherchangetoamodelvariable.Theanalysiscanbeeitherforwardlooking(ex-ante)orevaluatingpreviousdevelopmentsinanex-postmanner.Scenariosmaybeusedeithertoassesspolicy,ortoassesssensitivitiestokeyinputs(e.g.internationalenergyprices).

Forex-anteanalysisabaselineforecastupto2050isrequired;E3MEisusuallycalibratedtomatchasetofprojectionsthatarepublishedbytheEuropeanCommissionandtheIEAbutalternativeprojectionsmaybeused.Thescenariosrepresentalternativeversionsofthefuturebasedonadifferentsetofinputs.Bycomparingtheoutcomestothebaseline(usuallyinpercentageterms),theeffectsofthechangeininputscanbedetermined.

Itispossibletosetupascenarioinwhichanyofthemodel’sinputsorvariablesarechanged.Inthecaseofexogenousinputs,suchaspopulationorenergyprices,thisisstraightforward.However,itisalsopossibletoaddshockstoothermodelvariables.Forexample,investmentisendogenouslydeterminedbyE3ME,butadditionalexogenousinvestment(e.g.throughanincreaseinpublicinvestmentexpenditure)canalsobemodelledaspartofascenarioinput.

Model-basedscenarioanalysesoftenfocusonchangesinpricebecausethisiseasytoquantifyandrepresentinthemodelstructure.Examplesinclude:

• changesintaxratesincludingdirect,indirect,border,energyandenvironmenttaxes

• changesininternationalenergyprices

• emissiontradingschemes

AllofthepricechangesabovecanberepresentedinE3ME’sframeworkreasonablywell,giventhelevelofdisaggregationavailable.However,itisalsopossibletoassesstheeffectsofregulation,albeitwithanassumptionabouteffectivenessandcost.Forexample,anincreaseinvehiclefuel-efficiencystandardscouldbeassessedinthemodelwithanassumptionabouthow

Scenario-basedanalysis

Priceortaxscenarios

Regulatoryimpacts



efficientvehiclesbecome,andthecostofthesemeasures.Thiswouldbeenteredintothemodelasahigherpriceformotorvehiclesandareductioninfuelconsumption(allotherthingsbeingequal).E3MEcouldthenbeusedtodetermine:

• secondaryeffects,forexampleonfuelsuppliers

• reboundeffects28

• overallmacroeconomicimpacts

Table1:MaindimensionsoftheE3MEmodel

Regions Industries

(Europe)Industries

(non-Europe)1 Belgium Crops,animals,etc Agricultureetc2 Denmark Forestry&logging Coal3 Germany Fishing Oil&Gasetc4 Greece Coal OtherMining5 Spain OilandGas Food,Drink&Tobacco6 France Othermining Textiles,Clothing&Leather7 Ireland Food,drink&tobacco Wood&Paper8 Italy Textiles&leather Printing&Publishing9 Luxembourg Wood&woodprods ManufacturedFuels10 Netherlands Paper&paperprods Pharmaceuticals11 Austria Printing&reproduction Otherchemicals12 Portugal Coke&refpetroleum Rubber&Plastics13 Finland Otherchemicals Non-MetallicMinerals14 Sweden Pharmaceuticals BasicMetals15 UK Rubber&plasticproducts MetalGoods16 CzechRep. Non-metallicmineralprods MechanicalEngineering17 Estonia Basicmetals Electronics18 Cyprus Fabricatedmetalprods ElectricalEngineering19 Latvia Computersetc MotorVehicles20 Lithuania Electricalequipment OtherTransportEquipment21 Hungary Othermachinery/equipment OtherManufacturing22 Malta Motorvehicles Electricity23 Poland Othertransportequip GasSupply24 Slovenia Furniture;othermanufacture WaterSupply25 Slovakia Machineryrepair/installation Construction26 Bulgaria Electricity Distribution27 Romania Gas,steam&aircond. Retailing28 Norway Water,treatment&supply Hotels&Catering29 Switzerland Sewerage&waste LandTransportetc30 Iceland Construction WaterTransport31 Croatia Wholesale&retailMV AirTransport32 Turkey WholesaleexclMV Communications33 Macedonia RetailexclMV Banking&Finance34 USA Landtransport,pipelines Insurance35 Japan Watertransport ComputingServices36 Canada Airtransport ProfessionalServices37 Australia Warehousing OtherBusinessServices38 NewZealand Postal&courieractivities PublicAdministration39 RussianFed. Accommodation&foodserv Education40 RestofAnnexI Publishingactivities Health&SocialWork41 China Motionpic,video,television MiscellaneousServices42 India Telecommunications Unallocated43 Mexico Computerprogrammingetc.

28Intheexample,thehigherfuelefficiencyeffectivelyreducesthecostofmotoring.Inthelong-runthisislikelytoleadtoanincreaseindemand,meaningsomeoftheinitialsavingsarelost.Barkeretal(2009)demonstratethatthiscanbeashighas50%oftheoriginalreduction.



44 Brazil Financialservices 45 Argentina Insurance 46 Colombia Auxtofinancialservices 47 RestLatinAm. Realestate 48 Korea Imputedrents 49 Taiwan Legal,account,consult 50 Indonesia Architectural&engineering 51 RestofASEAN R&D 52 RestofOPEC Advertising 53 Restofworld Otherprofessional 54 Ukraine Rental&leasing 55 SaudiArabia Employmentactivities 56 Nigeria Travelagency 57 SouthAfrica Security&investigation,etc 58 RestofAfrica Publicadmin&defence 59 AfricaOPEC Education 60 Humanhealthactivities

61 Residentialcare

62 Creative,arts,recreational

63 Sportsactivities 64 Membershiporgs 65 Repaircomp.&pers.goods 66 Otherpersonalserv. 67 Hholdsasemployers 68 Extraterritorialorgs 69 Unallocated/Dwellings Source(s):CambridgeEconometrics.

European Climate Foundation Decarbonising road freight in ...€¦ · Britain’s Future’, 20152, ‘En route pour un transport durable’, 20163, ‘Low-carbon cars in Germany’,

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