Financing the Infrastructure to Support Alternative Fuel Vehicles: How Much Investment is Needed and How Will It Be Funded?
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Financing the Infrastructure to Support Alternative Fuel Vehicles: How Much Investment is Needed and How Will It Be Funded? Prepared by: 
Ellen Hughes-Cromwick Director and Chief Economist Corporate Economics and Strategic Issues Ford Motor Company One American Road Dearborn, MI 48126 
Joshua Cregger Project Manager Center for Automotive Research 3005 Boardwalk, Suite 200 Ann Arbor, MI 48108
April 9, 2013 All statements, findings, and conclusions in this report are those of the authors and do not necessarily reflect those of the Global Interdependence Center, Ford Motor Company, or the Center for Automotive Research. TABLE OF CONTENTSAcknowledgements 6 ABSTRACT 7 INTRODUCTION 9 ALTERNATIVE FUELS 13 Gasoline 14 Diesel 14 Natural Gas 15
Electricity 16 Hydrogen 17
Biofuels 18 Ethanol 19 Biodiesel 19 Drop-in Biofuels 19 Comparison of Fuels 20 CASE STUDIES 22 Biofuels Growth in Brazil 22 The Proalcool 22 Fall of the Ethanol Car and the Rise of Flex-Fuel Vehicles 23 Fuel Blending 24 Infrastructure Financing 24 Vehicles 25 Lessons Learned 25 Diesel Adoption in Europe 26 Renewable Energy Development in Germany 29
EXISTING INFRASTRUCTURE INVESTMENTS IN SELECTED COUNTRIES 34 Brazil 34 China 35
European Union 36 United States 37 AFV Policies 38 Funding of Infrastructure 39 California 40 AFV Policies 41 FUTURE INFRASTRUCTURE INVESTMENT 42 Clean Fuels Outlet Regulation 42 Required Infrastructure 43 Comparison of Infrastructure Costs to Other Estimates 46 Infrastructure Estimates by Country 48 Gap between Current Investment and 2030 Investment 52 FINANCING MODELS TO SUPPORT INFRASTRUCTURE INVESTMENT 55 Public Support 56
Infrastructure Development Banks 59 Public-Private Partnerships 60
Private Financing 62 Surcharges and User Fees to Recoup Investment Outlays 63 Green Bonds 63 Funding the Infrastructure of the Future 64 Conclusions 65 REFERENCES 67 APPENBDIX A: ABBREVIATIONS 77 APPENDIX B: COMPARISON OF GHG EMISSIONS FROM AFVS 78 APPENDIX C: CALIFORNIA CLEAN FUELS OUTLET REGULATION 80
List of Figures
AcknowledgementsThe authors would like to thank the Global Interdependence Council for its support of this work. This study is the result of a group effort, and the authors would like to thank their many colleagues at Ford and the Center for Automotive Research (CAR) for providing assistance and guidance. At Ford, we would like to thank Michael Tamor, Michael Tinskey, and Mark Edie; at CAR, we would like to thank Sean McAlinden, Kim Hill, Michael Schultz, and Diana Douglass. The authors would also like to thank John DeCicco from the University of Michigan and Adam Cooper at the Edison Foundation for their insight. We would also like to thank Wendy Barhydt for her assistance with editing the final paper. Financing the Infrastructure to Support Alternative Fuel Vehicles: How Much Investment is Needed and How Will It Be Funded? ABSTRACTCountries around the world have implemented regulatory requirements to improve fuel economy and reduce greenhouse gas emissions from vehicles. These regulations encourage automakers to sell alternative fuel vehicles (AFVs), which use fuels such as natural gas, electricity, hydrogen, and biofuels. Automakers are already making investments in developing and manufacturing AFVs. There are many challenges to increasing AFV market share and providing appropriate support of fueling infrastructure for these unconventional vehicles. The cost of installing new refueling infrastructure is high. The lack of available breadth of the fueling infrastructure is one factor which may reduce consumer acceptance and confidence in this new technology. Private rates of return from investing in such infrastructure can be low or negative for the private sector, and the required infrastructure spending may be in excess of the private sector’s ability to finance. However, infrastructure for fueling may also have “public good” attributes, thereby providing a role for government funding. This paper describes several different types of alternative fuels and summarizes the existing infrastructure investments to support AFVs in several countries and one U.S. state (Brazil, China, the European Union, the United States, and California). This research offers a long run projection of what the likely future investment requirements would be, in order to support future AFV volumes. The authors have also included an assessment of the gap between what infrastructure investment is needed for successful growth of AFV sales and what has been built out so far, with particular attention to selected countries. Several examples of public financing programs and public-private partnerships to encourage sales of AFVs, construction of refueling infrastructure, and adoption of other environmental technologies are detailed. This paper will describe the costs and benefits of various funding models (e.g. tax incentives, government loan programs, convertible bonds, and joint ventures) which have been or could be put in place to support AFV infrastructure investment spending.
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