MEETING CALIFORNIAS AIR QUALITY GOALS THROUGH CLEAN HD VEHICLE - PowerPoint PPT Presentation

MEETING CALIFORNIA’S AIR QUALITY GOALS THROUGH CLEAN HD VEHICLE MARKET COMMERCIALIZATION Prepared for the California Dairy Digester Working Group 9/7/2017

California’s Robust GHG Emission Reduction Goals Renewable natural gas created by digesters can help the state get there SB 350 Cut GHG emissions 40% below 1990 levels by 2030, and 80% by 2050 SB 1383 Cut dairy and livestock methane emissions 40% from 2013 levels by “Lowest carbon” pathways are anaerobic digesters 2030 • 26 million metric tons of CO2e (1) 2 2 (1) CARB SLCP Reduction study, March 2017, Table 8

Dairy and Livestock RNG Development Opportunity “ California’s dairy and livestock Contribute to the state’s GHG 1. industries account for more than half of reduction goals the State's total methane emissions and Produce a very low carbon 2. for about five percent of the State’s GHG intensity fuel inventory.” Reduce harmful air pollutants -CARB SLCP Strategy 3. (NOx) through the deployment of new NZ transportation technologies Support the California economy 4. by creating a “demand pull” for RNG: • Creating jobs • Creating additional tax revenue • Promoting technological development/advancement 3

Meeting SB 1383 Goals with RNG in Transportation RNG Required ed to R Reduce G e GHG E Emission ons by 26 m y 26 millio llion m metric ic t ton ons 6,000 GGE OF RNG REQUIRED 5,000 4,000 MILLIONS 3,000 Dairy Digesters CI Range -250 to -273 2,000 516 591 1,000 0 -300 -250 -200 -150 -100 -50 0 50 AVERAGE RNG CI (GCO 2E /MJ)

Benefits of RNG as a Transportation Fuel Captures and redeploys GHG emissions to “The transportation sector remains the the benefit of the California economy largest source of GHG emissions in the  Supports state’s GHG goals, creates jobs, state , accounting for 37% of the inventory, advances technology and had an increase in emissions in 2015.”  Reduces harmful emissions in the most CARB 2017 GHG Inventory polluted areas in the state with NZ technology Reduces the risk associated with agricultural RNG development  Clean fuel programs – RIN, LCFS  Contracted offtake  Indirect grants for end users (trucks) Targets largest GHG source: transportation  HDVs are “low hanging fruit”  High mileage, high fuel consumption  HD NZ technology is available today  Capability to deploy in large numbers 5

HD diesel trucks are “low hanging fruit” for NOx reduction 6

CA’s current approach to cleaning up heavy duty truck emissions Regulatory: Truck & Bus, Vehicle standards, Anti- Current incentive challenges: idling. Results in fleets meeting minimum • Not aligned with market conditions to standard to reduce cost and maintain service. incentivize HD commercial carriers Incentive Based: • Focus is on older truck replacement  NGVIP @ $25k maximum • Not sector focused in most cases  Insufficient funding to achieve market penetration • Not comprehensive  HVIP @ $15k maximum for low NOx engine  Insufficient funding to achieve market penetration What does this mean?  Prop1B @ $100k maximum • Conversion economics don’t pencil out  Requires scrappage of older vehicles (pre 2009) for most fleets, conversion rate is slow  Carl Moyer @ $60k maximum • Smaller fleets with older, higher polluting  Insufficient funding to achieve market penetration. trucks can’t afford a new HD AFV  Requires scrappage of older vehicles (pre 2010) • The larger, more financially capable  MSRC Infrastructure @ $325K maximum fleets are turned away due to “newness”  Only one air district of fleet, and conversion economics  Doesn’t focus on corridor completion 7

Infrastructure Deployment is Still Needed While CA has a significant number of NGV stations, many fail to meet the needs of large fleets: slow filling (inconvenient) | not located along major routes | not 53’ truck accessible Public, 53’ All California NGV • 418 CNG Accessible Stations and LNG California NGV stations in Stations CA. • 76 are public and accessible to 53’ trucks. • Only 18% of NGV stations meet the needs of large fleets. 8

“Effective” RNG Deployment in Transportation is needed to meet the State’s GHG Goals Define the target segment and eliminate barriers to conversion  Different sectors need different levels of support to reach “commercialization”  Focus should be on “fleet economics”  Highest potential fleets with capability  Commercialization requires a primary and a secondary market Create appropriate incentives  Consider “fleet economics” To meet aggressive GHG goals, the  Fuel costs; Vehicle costs; Residual Value; state requires a comprehensive Maintenance costs; Convenience incentive program that presents  Package approach: Vehicle, attractive conversion economics for Infrastructure, Facilities, Training fleet operators 9

Achieving true market commercialization Align incentives appropriately to attract large user deployment to tip the scale and bring down costs for all users Align incentives with fleet economics • Sector specific, comprehensive Incentive Scenarios for HD CNG vs. Diesel (1) • Aim for equivalent or better fleet economics ($0.75/gal fuel spread) • Larger fleets are better suited for early adoption 250 Rethink scrappage and replacement focus 200 • Larger fleets have newer units - locked out Annual Miles Thousands 150 • Residual truck value impacts fleet economics National average is • Secondary truck market has real value towards 68,155 annual miles 100 market commercialization and emission goals 50 Comprehensive approach - • Attractive vehicle incentives that achieve equivalent $- $0.10 $0.20 $0.30 $0.40 $0.50 or better cost per mile Cost/Mile Differential - CNG minus Diesel • Address public infrastructure gaps • Technician training, OEM support network $0K $50K $75K • Facility modifications New Truck Incentive Levels 1) Cost per Mile (CPM) Model developed by ACT Research: $0.75/gge spread between Diesel/CNG; trade in cycle 48/60 mos.; residual values $45K,/$25K; 10 10 annual maintenance $15K/$30K; tires and insurance $11.5K for both

Summary Slide  CA has ambitious emissions reduction goals, which include dairies. RNG can help dairies meet these goals with less risk and a positive ROI  RNG reduces emissions, reduce development risk, create jobs and accelerate a new industry  Transportation represents California’s largest single source of emissions. RNG used in transportation offers a realistic pathway to meet both the state’s GHG and air quality goals  The NZ engine can help address largest single source of NOx emissions for South Coast & San Joaquin Air Basins – HD Trucks – while contributing to GHG reduction goals  There is no silver bullet to achieving market penetration: a long term, comprehensive, flexible and market relevant approach is needed  Current vehicle incentives do not move the market – Incentives aimed at fostering fleet conversion to RNG must tie to positive fleet economics  Infrastructure support is much needed - California still has insufficient HD natural gas fueling infrastructure to meet the needs of HD goods movement. Focus should be on filling gaps in public refueling infrastructure along major freight corridors to facilitate broad deployment

Questions? Bill Zobel, Vice President, Business Development & Marketing Trillium CNG 11