California environmental protection agency air resources board staff proposal regarding the
Lifetime Cost Of Technologies To Vehicle Owner-Operator
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- Engine, Drivetrain and Hybrid Electric Vehicle Technologies
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Lifetime Cost Of Technologies To Vehicle Owner-OperatorFollowing the direction of AB 1493 to demonstrate maximum cost-effective greenhouse gas reductions that are “economical to an owner or operator of a vehicle, taking into account the full life-cycle costs of a vehicle,” this portion of the assessment provides estimations of the lifetime impact to vehicle operators for the greenhouse gas reduction technologies that were described previously. Such a detailed analysis has not been needed for previous California motor vehicle emission standards and regulations to meet federal requirements and is not needed here for that purpose; it is introduced here to satisfy AB 1493. Applying estimations for the technology costs and assumptions for vehicle use and economic variables, estimations of the lifetime vehicle costs are quantified using a net present value (NPV) framework. This section conducts a NPV analysis on the engine, drivetrain, hybrid-electric, and alternative fuel vehicle technologies that were described in the technology section. The ARB staff is currently investigating ways to integrate the air conditioning cost-effectiveness work presented in the previous section with the engine, drivetrain, and other technologies into this section on lifetime costs. This NPV analysis involves an assessment of an initial consumer cost for the climate change reduction technologies and the potential net lifetime benefits in the future that result from the initial investment. If the sum of net future benefits outweighs the initial technology cost within the lifetime of the technology, the investment in the new technology is cost beneficial. The first year in which the net future benefits exceed the initial cost of the technology is called the break-even, or payback, period. The total initial cost to consumers, including the manufacturing cost plus the 40% mark-up for profit, and overhead, is K0 . 
Future vehicle operator benefits and costs due to the new technology are discounted by the discount rate, or time value of money, d, to correct for the difference in the value of money in hand today versus money in the future (based primarily on interest rate and inflation). The NPV of the investment one year from now (in current dollars) is calculated, 
Or, more generally in any year x, 
Following historical trends, the analysis uses a real discount rate, or time value of money, of 5%. These values for the discount rate are based on ten-year averages of automobile interest rate and the general inflation rate. The costs of the alternative fuels that are considered in this report were taken from the Tiax LLC alternative fuel vehicle study. For gasoline and diesel fuels, the prices are inflation adjusted from the values in the California Energy Commission (CEC) Integrated Energy Policy Report (CEC, 2004). For gasoline the price is $1.74 per gallon, and the diesel price is $1.73 per gallon (in 2004 dollars). These values are roughly consistent with the 3-yr historical California fuel prices. Engine, Drivetrain and Hybrid Electric Vehicle TechnologiesThe greenhouse gas reduction technologies evaluated in this report yield reductions in operating cost over the lifetime of the vehicle. The effects of the new engine and drivetrain technology systems on the lifetime vehicle maintenance costs are currently being investigated. For example, technologies that involve a reduction of the number of moving parts, like a camless valve actuation system, are expected to reduce lifetime maintenance costs. Similarly, lower leakage rate air conditioning systems should reduce maintenance costs. Without comprehensive data on these effects, maintenance costs are excluded here. The costs and lifetime benefits for the technology packages were evaluated over the vehicle lifetime, using the same vehicle use parameters as Section 5.3. The results are shown in the “lifetime Net Present Value” and “Payback Period” columns in Table 5.3 -24. Nearly all of the technologies evaluated provide a positive lifetime net present value, and thus are economical to the owner over the lifecycle of the vehicle. Alternative Fuel VehiclesARB staff has estimated the incremental costs of deploying alternative fuel vehicles to reduce greenhouse gases. This analysis compared the lifecycle costs of alternative fuel vehicles to the lifecycle cost of a conventional gasoline vehicle. The analysis is similar to the net present value analysis of engine and drivetrain technologies presented above. For this analysis, however, comprehensive data on how alternative fuel vehicle technologies differ among different vehicle types (e.g. small cars and large trucks) were not available. Therefore, the analysis compared a mid-sized alternative-fueled vehicle produced in volume production to a baseline conventional vehicle. The baseline conventional vehicle represents the California-specific sales weighting of 2009 small and large cars (i.e. trucks, minivans and SUVs are excluded). ARB staff relied on modeling and cost information presented as part of the Tiax LLC analysis. This analysis included an evaluation of the incremental retail costs associated with equipping vehicles to operate on alternative fuels, and the costs of alternative fuels for 2009. The analysis does not include transitional costs such as vehicle development, certification or fuel transition infrastructure costs. Projecting fuel cost for 2009 is particularly difficult and can substantially affect the overall net present value. All cost estimates are presented in Table 5.4 -25. Staff then estimated the net present value of the various alternative fuel vehicles using the same vehicle characteristics as given above. The results demonstrate that two alternative fuel technologies can meet the life cycle costs of conventional gasoline vehicles. These include plug-in HEVs with an all-electric range of 20 miles, and LPG. Each of these technologies can also provide significant climate change emission reductions and thus provide automakers with additional cost effective compliance pathways in meeting the regulation. Table 5.4‑25. Life Cycle Cost of Alternative Fuel Vehicles 
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