CARB ZEV Program Changes; Tesla Takes Largest Hit, Fuel Cell Tech Wins

8 months ago by Jay Cole 68

Biggest Loser From CARB Changes Tesla - Biggest Winner Is Pretty Much Any Fuel Cell Vehicle

Biggest Loser From CARB Changes Tesla – Biggest Winner Is Pretty Much Any Fuel Cell Vehicle

While the eventual lowering of environmental credits for California for electric vehicles (or ZEV credits) comes as no surprise – the action had previously been delayed from last September; so to see a 15 Day Notice posted on CARB’s website this week was noteworthy.

CARB ZEV Thresholds (new & old)

CARB ZEV Thresholds (new & old)

The ultimate loser for these changes?  Tesla Motors

Under the new rules Tesla will only qualify for 4 credits per new Model S, down from as much as 7, thanks to a harder/lower threshold for the rapid-refueling requirement.

The winner?  Any fuel cell with 300 miles of range

The ZEV credit maximum raises to 9 credits, provided the vehicle can refuel in 15 minutes and has a range of 300 miles.  Naturally this makes players like Toyota and Hyundai very happy.  The Hyundai Tucson fuel cell for example, just so happens to have a 300 mile range and can be filled in 10 minutes.

Despite the fact that Tesla netted $129.8 million worth of ZEV credits in sales to other automakers in 2013, as well as almost $65 million in other efficiency credits, this event comes as no surprise as the company has long ago said that ZEV revenue would rapidly decline in 2013 and they had zero expectations for it going forward. (Tesla booked no ZEV revenue at all in Q4)

“We think an automotive gross margin of 28%, excluding potential ZEV credit sales, is a reasonable target for Q4 2014, even if a lower option take rate is assumed.” – Tesla statement Q4

Also, while it might appear that Tesla’s battery swap technology that enabled the automaker to previously book 7 credits per Model S might still apply to the new standard, there is a rather lengthy submission (and usage verification) process that has to be filed to ARB’s executive officer.  In other words, if there are more hoops now to jump through for not much (if any) ZEV transfer revenue – you can bet that Tesla’s battery swap plans probably just died.

The truth of the matter really is that the ‘value‘ of a ZEV credit as been rapidly decreasing of late anyway with the proliferation of EV sales in the United States.

In fact, thanks to the automakers’ ability to transfer credits amongst themselves, the effectiveness of the entire program to encourage all OEMs to produce zero emission vehicles in set numbers is now coming into question.

Check out ARB’s 15 day notice bulletin here…or their full PDF report on the changes here.

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68 responses to "CARB ZEV Program Changes; Tesla Takes Largest Hit, Fuel Cell Tech Wins"

  1. Omar Sultan says:

    Given Tesla’s waning dependence on ZEV credit revenue, I am not sure how much this is really going to impact their battery swap plans–I think they will continue on that path if they think it makes sense. Looking at the revised reporting requirements 1962.1(d)(5)(B)(1), they actually do not seem that onerous: date, address and VIN for every fast charge. Since battery swap is automated, Tesla would collect the info anyway as it does at SuperChargers. It seems like it would be more onerous for an FC manufacturer since the owner would be presumably buying the Hydrogen from a third party.

    I do wonder what the impact on the overall ZEV market is. CARB is potentially taking a large number of credits off the market and I don’t see FC cars having the volume to make that up, so I wonder what the impact will be on manufacturers that need to buy the credits to maintain compliance?

    1. Jay Cole says:

      I think it is a question whether or not they really ever wanted to do the swap stations, or if they wanted to book as many credits as they could in the past.

      The 7 credits (achievable by their swap station plans) have already been collected and sold by Tesla when they were worth something. They gained 75% more revenue in 2013 alone (or $84 million) because of that loophole.

      Had it not been for the extra credits, that money would never have been realized. Going forward ZEV revenue has been written down significantly at Tesla and other OEMs…so if the primary function of the battery swap station was for that revenue, then it makes sense that we would see no huge infrastructure realized in the future, other than the few they have in development today to stay in retro-compliance.

      1. SeattleTeslaGuy says:

        Frankly, the whole issue of “fast fueling” is going away. As average EV Fleet range increases, the perceived need for non-home based charging is rapidly decreasing. And, people are increasingly comfortable with plugging their car in at home and never anywhere else. Clearly the CARB is not keeping up with the times and their leverage is waning.

        I certainly think battery swapping is an idea who’s time has passed. Hoping Tesla focuses their time and money on more superchargers rather than battery swapping.

        1. Paul Scott says:

          There are still significant numbers of folks who live in multi-family housing with difficult or no access to charging at home. The need for workplace and public charging is enormous and will grow dramatically over the next decade.

          1. miimura says:

            While I agree that the need for public charging infrastructure is there, I would find it extremely tiresome and potentially stressful to have an electric car and no means to charge at home. To my thinking, there are only two arrangements that can relieve that stress – guaranteed workplace L2 charging or prevalent and low cost DCFC that doesn’t require me to go out of my way. The convenience of charging at home is so compelling that it’s hard to imagine going without it.

          2. SeattleTeslaGuy says:

            Sorry Paul, I keep hearing the “apartment argument” and simply don’t buy it. Without a place that is “mine” to charge my car, I would stick with an ICE. The idea of having to find a place to put my car for even 15-20 minutes every day is pretty much of a non-starter. Who wants to be an electron hunter-gatherer?? Only true believers. Until apartments have dedicated EVSEs (or just power outlets), I would recommend apartment dwellers to steer clear of EVs. I suppose that workplace charging is OK but it still will require daily jockeying.

            Except for long distance travel, the need for a public charging infrastructure is basically transitional. Once people get over the range anxiety hump there will be little need. As I’ve said many times, the utilization level of the public charging networks is ludicrously low. If people were actually using it, I’d be singing a different tune.

        2. pjwood says:

          I agree with Seattle Tesla Guy, to the extent 15 minutes is the maximum allotted time. It isn’t that hard to think of a cultural shift that combines getting coffee with recharging for 20-30 minutes. To get a couple hundred miles, I’d call that “fast enough”.

          1. pjwood says:

            ..ok, 100 miles

        3. TimE says:

          I fully agree with SeattleTeslaGuy. Longer range EVs definitely don’t have a regular need for charging anywhere but home except when on long trips. If I had a Tesla, for the few times on road trips the 30-45 minute stop for a SuperCharger is perfect and perfectly aligns with my needs to get out of the car, stretch, use the restroom, get a bite to eat, then be back on the road. Personally I don’t see the need for the battery swap and would likely never use it, but nice as an option for those that may want it. Still – put the priority by far on expanding the supercharger network first.

          CARB also needs to assign some value from the perspective of being able to “fill” at home too – most non-EV drivers understand the convenience that it really is.

        4. Fast fueling is unlikely to go away for the reasons Paul mentioned, but for two other reasons also.

          You need fast charge whenever you travel more than halfway past your max travel radius.

          Even with an 85kWh Tesla Model S, I need to charge in LA if I want to get back home to San Diego the same day. That needs to be a fast charge. A supercharger fits the bill perfectly. We just need more of them (in progress).

          The second reason is public perception. Even if you’re not making that 250mi trip very often, most people would balk at accepting that limitation.

          There’s a third reason also. If you’ve ever forgotten, or been unable to plug in at home overnight, you need a fast charge.

      2. TomArt says:

        I don’t buy the swapping-was-for-ZEV-credits line.

        The Model S was designed for swapping from the very beginning. Supercharging is the low-hanging fruit that they picked in order to get the vehicle to market, but swapping was always part of the plan. They were thinking way ahead in terms of the “refueling” issues with EVs. It is the sort of thinking we’ve come to expect from them.

        Whether Tesla management chooses to expand swapping is a different story. It may prove to be a viable, nationwide model, or not.

        They’ve made bold plans in many respects, and so far, all of them have paid off. If swapping ends up being a dud, then their batting average is still excellent.

        1. scottf200 says:

          Actually I heard Elon say that there is a dichotomy of getting battery swapping up to speed vs rate of battery density/capacity growing. In other words, by the time swapping would be figured out on a large scale the battery tech would be here. So waste of time/money is the thought or concern.

      3. Omar Sultan says:

        I think there was a time when they were unsure whether swapping or SuperCharging was the way to go–the ZEV credits were a bonus. The fact that all Model Ses are reportedly swap-ready makes me think they were hedging a bit.

        Fast forward 20 thousand some cars and I think the overwhelming consensus now is to build more SCs faster! :). It seems like a no-brainer now, but it was a paradigm shift from the ICE model, and I guess it would be foolish to assume folks with be OK with waiting 20-30 min for a “fill-up”, even if it was “free”.

        There is still supposed to be a pilot built somewhere between LA and SF so perhaps they still see a use case–perhaps as the solution for urban owners who don’t have easy access to their own charger?

        Personally, I am hard pressed to come up with a good use case for swapping.

        1. GSP says:

          My thoughts exactly. Well said Omar.

          GSP

  2. Ambulator says:

    I agree that seven credits for a Tesla was stupid, but nine for a fuel cell vehicle is even more ridiculous.

    1. Koz says:

      It was stupid for swapping that didn’t exist. It is fine for 150 mile/20 min charge but instead of rewarding that by changing the rules to encourage it they pulled the rug out.

  3. David Murray says:

    So this might spell the end for battery swapping then? I’m fine with that. Superchargers are the way to go for long distance travel… Either that or PHEV.

  4. Alaa says:

    H2 is the smallest atom we know. It is impossible to make a 100% tight valve for it. It will be mad to park a car with a H2 tank in a closed garage.

    http://www.fuelcelltoday.com/news-archive/2012/may/hydrogen-leak-occurs-at-linde%E2%80%99s-emeryville-fuel-cell-bus-filling-station

  5. DanCar says:

    I wish the government would go away. A new better, smarter, faster government would take its place.

    1. Gsned57 says:

      0 credits to maintain the status quo.
      5 credit to eliminate a beaurocrat
      20 credits to eliminate a politician

      1. TomArt says:

        I wouldn’t go there…FauxNews has enough nutcases worked up into a frenzy who have more rounds than functioning brain cells.

        1. Tedfredrick says:

          I watch Fox and so does most of my family. That kind of blanket stetent shows where the brain cells are. By the way the most searched website on Teslas web browser is the Drudge report.

          1. Trace says:

            Ad populum fallacy. So Drudge is the most gone to site, so Faux Nooz is the most watched cable talking head blather channel. Also, Fleets enema is the most popular anal douche in pharmacies. In other words, so effing what?

            The popularity of either of these information sources doesn’t make either of them accurate, truthful, or unbiased. Their popularity means nothing.

          2. Robert says:

            “That kind of blanket stetent shows where the brain cells are.”

            Heh…”you talk pertier than a twenty-dollar whore…”

    2. TomArt says:

      HAHAHAHAHA – that was hilarious! Thanks.

      If you were serious, then you are alarmingly naive.

    3. evnow says:

      Look at any of the African failed states to see what happens when the government goes away.

      1. Dr. Kenneth Noisewater says:

        And look at Cuba or the former Soviet Union for an example of when there’s too MUCH government.

        I can strawman too!

        1. Trace says:

          And then look at Norway, Sweden, Denmark, Netherlands, Germany and Japan for examples of effective and responsible government.

          And, the USSR & Cuba are/were classic autocratic oligarchies. Much like the feudalism of medieval Europe and modern day Corporatocracy USA. The called themselves Marxist only for propaganda purposes.

  6. mustang_sallad says:

    It doesn’t make sense to me that CARB is rewarding H2 technology for having faster refuelling capabilities. Market demand should reward faster refuelling, CARB responsibility is to reward technologies that are more energy efficient and that pollute less. In that regard, a well-to-wheels analysis would likely conclude that hydrogen as a transportation fuel is less efficient as a whole, uses more energy, contributes more to air pollution, and should be rewarded less under the ZEV program.

    Government intervention to recognize the value of reducing air pollution is important as it’s not a very direct factor that influences consumer purchases. Government can help us collectively recognize this value and pass it down to people buying or making products.

    Government intervention is not required to recognize value of fast refuelling. This already has a direct business driver as it’s a major convenience factor for people who are buying these products.

    1. TomArt says:

      Excellent point. Agreed.

      1. GSP says:

        Yes. Excellent point indeed.

        GSP

    2. Omar Sultan says:

      This is a curious move. EVs are finally starting to get some momentum and you would think CARB would continue to encourage that, but this seems to muddy the waters.

      I guess you could argue that EVs are over the hump, so they should turn their focus to FCVs and encourage those, but I think FCVs are a pipe dream and creating the uncertainty in the minds of the general public only cases folks to keep buying ICEs until things sort themselves out.

    3. jkw says:

      I don’t think the point of the CARB program is related to global warming. It is about reducing smog in LA. The only thing they really care about is local air pollution. Assuming that is actually their goal, then why would they care about a well-to-wheels analysis? They only care about what emissions the car has. If the emissions are transferred to a hydrogen production facility that is not in LA (or any other smog-heavy location), then they have accomplished their goal.

      1. mustang_sallad says:

        Nobody ever said well-to-wheels only considers CO2. Argonne National Labs’ GREET model will let you calculate emissions of all sorts, including things like SOx and NOx that have a big impact on air quality. The only feasible way to support a large number of FCEVs is by generating the hydrogen regionally (likely within California) using electricity. If there are emissions associated with that electricity (there sure are), then the fact that FCEVs consume a lot more of that electricity on a per mile basis means that they will have a greater impact on air quality than PEVs.

      2. mustang_sallad says:

        But that is a valid point about displacing emissions out of population centers, I just think that CARB should probably still be concerned with air quality downstream of any power plants in California and should recognize that EVs are lower impact than FCEVs and reward them accordingly.

  7. GeorgeS says:

    Article quote:
    “In fact, thanks to the automakers’ ability to transfer credits amongst themselves, the effectiveness of the entire program to encourage all OEMs to produce zero emission vehicles in set numbers is now coming into question.”

    Hi jay. Thx for the article.

    Could you give an example of one of these credit “transfers” between 2 automakers and explain why it makes some OEM NOT make any EV’s.

    Let’s say Tesla has credits and Chrysler doesn’t. Tesla should be able to sell some credits to Chrysler and make some money. Where does a transfer come into it?? It looks like Chrysler is transfering MONEY to Tesla. This means Tesla makes money and Chrysler loses money and therefore this gives Chrysler an incentive to make EV’s

    Or maybe it’s cuz it’s cheaper for Chrysler to buy credits than make EV’s because the value of the credits is low for some reason.

    1. pjwood says:

      George, I think it is a lot like carbon credits, where at some level behavior doesn’t change and market participants simply bear the cost. If the cost of ZEV credits is less than the cumulative hit to producing more EV’s, at lower margins, the program is less, or arguably not effective. Tesla got the money, but the market as a whole, took a pass on deploying the technology.

      I’m glad Tesla isn’t dependent upon ZEV revenues. It’s enough to explain why non-GAAP is how auto-analysts see their earnings.

      1. TomArt says:

        I wouldn’t say that…the automakers went to great lengths to make ZEVs for the CARB-compliant states.

    2. TimE says:

      Transferring ZEV credits should be at a significantly higher cost (x10 or x100) over what they were sold at, and should also involve an incredibly high transfer tax to the government.

      Force the “sit on our hands” companies to take action, not work around the system.

  8. Michael says:

    Fuel Cell is the biggest shit! The oil industry wants to sell us H2. I have my one solar panels to drive 20.000 miles per year.

  9. Spec9 says:

    Whoah. I think I’m having some Deja Vu again. Did the oil company lobbyists again succeed in pushing CARB away from electric vehicles and back toward Fuel Cell vehicles that they can sell their steam-reformed natural gas to?

    Why 15 minutes on fueling? Why not 5 minutes like a typical gas car? It is clear they picked a number that is larger so they can accommodate FCVs but not large enough accommodate EVs on a fast-charge.

    And will Tesla’s battery swap count?

    1. Mark H says:

      Are there any requirements on how the hydrogen fuel is produced? It can still be pretty carbon dirty if it is produced in the classic fashion.

      1. There’s no CARB requirement for the energy used to make electricity, either.

        1. Mark H says:

          Good point. I wonder why CARB has not evolved on that matter.

          1. Mark Williams says:

            I would point you to the first step on that path: http://www.arb.ca.gov/cc/energyaudits/energyaudits.htm

        2. GSP says:

          Really? If so, why do Californians pay such high electricity prices, and have such a clean mix of electric generation plants?

          GSP

          1. Tedfredrick says:

            We don’t have a lot of cool in California. Natural gas is used primarily for electric generation as well as hydroelectric

            1. Tedfredrick says:

              Sorry I meant Coal

        3. Dr. Kenneth Noisewater says:

          However, dirtier electric plants tend to be farther away from human habitation, thus not contributing to point pollution and smog in cities.

          H2 infrastructure will piggyback on existing NG lines with onsite reformulators at filling stations, so while not necessarily generating the combustion particulates or NOx that ICEs produce, there could be elevated point pollution at the reformulation site while it’s running. Perhaps with H2 tanks installed at those sites, reformulation can be run at night when temps are lower.

        4. Spec9 says:

          Well there is no need for CARB to specify how the electricity is generated since California already has another set of rules that require lots of renewable electricity. We have a renewable portfolio standard that requires 30% of electricity from renewables. Plus we have a net-metering program that is growing like crazy despite the CSI program running out of money.

    2. Dave R says:

      I’m with you on the fast refueling requirement. If a 100mi FCV qualifies for fast refueling credits, it seems that fast refueling should be determined by whether or not the car can fuel 100 miles in 15 minutes (400 miles/hr), not completey refuel in 15 minutes.

      Maybe it says that, haven’t read the fine print.

  10. evnow says:

    I’m just waiting for the new CARB % to kick in (2017?) – that would mean the OEMs have to sell a lot more ZEVs. That would force almost all OEMs to either have serious ZEV programs or fund a competitor’s ZEV program.

    1. They just lobby to change it, or use to stop it.

      It will be 2000-2003 all over again. Even the hydrogen game is a generation two game.

      Auto manufacturer’s Oct 19, 2012 request to EPA for waiver from CARB:

      http://www.globalautomakers.org/sites/default/files/document/attachments/JointCommentsCAWaiverRequest10-19-12.pdf

      1. Omar Sultan says:

        Yeah – they will just come back and say the Hydrogen infrastructure is not in place, so they should get a waiver. Perhaps a sequel” “Who Killed the FCV”? :)

  11. jkw says:

    Battery swapping never made sense for refueling. It’s too easy to fast charge to bother with the logistical issues of swapping out $20k batteries. I can only think of two economically sensible uses of battery swapping. The first is to allow people to buy a cheaper car with a small range and then swap out for a rented battery when they need a larger one. The second is to allow people to replace/refurbish/upgrade their battery easily. I would imagine that with battery swapping, the labor cost of a battery swap would be under $100. My guess is that the labor cost to replace a Leaf battery would be over $1000.

    1. Dave R says:

      The LEAF battery can be swapped out in well under an hour by someone who’s done it before.

      Its just a dozen bolts and a plug, not much more complicated than a Model S.

    2. Spec9 says:

      Meh. Why not both? Like Tesla has proposed. Battery swapping does provide a way to “recharge” an electric car within minutes. I think it will be done in the future once EVs are more mainstream and common automotive standards can be developed. But I think it will be another 15 to 25 years before that is possible. We need to figure out what is the best battery shape, thermal management system, battery chemistry, etc.

  12. JakeY says:

    The reporting requirements for fast refueling are a bit tough: they have to report the date, address, and VIN number of the car refueled. The former two is not a challenge but the last one might run into privacy concerns.

    “The fast refueling data submission requirement in this paragraph does not apply to manufacturers of fuel cell electric vehicles.”
    That makes it explicitly clear they are playing favoritism for FCVs. Before, it was just thinly veiled (the 15 minute requirement was just barely fast enough to eliminate quick charging, but not so fast to eliminate FCVs).

  13. Jesse Gurr says:

    What happened to the 45 day commenting period that they did before? Now its only 15 days? Sounds suspicious…

    1. Mark Williams says:

      The 45-day period precedes the board hearing. The 15-day comment period(s) follow the board hearing and provide the public an opportunity to comment on changes made to respond to the 45-day comments.

  14. Loboc says:

    I wouldn’t call this move by CARB a ‘hit’ to Tesla’s revenue. Tesla had already projected that ZEV credits would go to zero.

    I think that H2 vehicles are stupid other than space travel. Yet another move by big oil to muddy the waters.

    1. Alaa says:

      @Loboc
      I agree with you and the 480 Wh/kg suppercapacitors and the Giga factory are the proper answer to Fuel Cells.

      https://en.wikipedia.org/wiki/Supercapacitor

  15. It was CARB that got EV’s in the Running the last time, and it was CARB that essentially Abandoned them for FCV’s that time too, ‘Killing the EV’ once more – seems to be their general goal here!

  16. Nix says:

    The ZEV credit system seems to be getting skewed further and further away from actual cleaning up of emissions.

    Does it really matter that much if the ZEV vehicle is topped off in half an hour at a Tesla Supercharger in order to finish a trip, vs. filled up in 15 minutes at an H2 filling station, if both produce zero emissions from the vehicle at they drive? (both have upstream emissions)

    It seems to me that if the ability to fill up the vehicle is such an important part of ZEV credits, then points should be credited for being able to fill up from home overnight, and not have to drive extra miles in order to go to a filling station. Extra distance driven to go to filling stations is pure wasted energy.

    If I were writing the ZEV credit standards, I’d give and extra ZEV credit for each vehicle sold with a home energy generation system that can generate 15,000 miles worth of pure green energy for that vehicle. For example, Ford working with SunPower to package roof-top solar installs with their electric cars:

    http://www.autoguide.com/auto-news/2011/08/ford-focus-electric-gets-optional-rooftop-solar-panel-charging-system.html

    That would be a direct link between a ZEV credit and actual emissions produced by that vehicle over the life of the vehicle.

    1. Spec9 says:

      Yeah, the “fill-up in 15 minutes” is quite arbitrary. There is no need for filling up in 15 minutes when you can charge at home with the exception of LONG trips. And those make up less than 2% of driving.

      Perhaps fill up 100 miles in 30 minutes would be acceptable?

      1. Robert says:

        “There is no need for filling up in 15 minutes when you can charge at home with the exception of LONG trips…”

        Yeah, there is…technically not for “filling up”, but there is certainly a case made for fast charging away from home but still in the home area. I live in the Atlanta, Ga., area, which is #1 in Leaf sales (http://cleantechnica.com/2014/02/13/1-nissan-leaf-market-atlanta-city-risk-losing-secret-sauce/). One of our Facebook pages is the Atlanta Leaf Owners. Here are some quotes from Leaf drivers: “QC for 17 min; QC for 12 min; QC for 4 min”. These folks have learned that they can fast charge for just a few minutes to obtain enough range to make their next destination, usually home.

  17. Blind Guy says:

    Designing very small EVs like: e-bikes and scooters etc… to be able to swap-out their batteries quickly & easily, makes sense. Pursuing battery swapping for larger vehicles isn’t practical when they can already quick charge in reasonable time. I can’t afford a HFC vehicle, but I’m curious about what kind of tax incentive plan would be used for consumers? A little better battery should win-out over HFC vehicles for regular sized autos, but I worry about companies that are pushing Hydrogen, buying-out battery tech to eliminate the competition.

  18. themotorman says:

    Battery swap has many advantages but needs a standard battery pack to be a success. With this the ecar could have the same range as a gascar and a much smaller weight battery pack. I wrote a published paper on this 20 plus years ago and not much has changed since then. Battery swap with standard packs would allow for bases and trucks to be included in the eV system.
    IMHO Hydrogen fuel is a non starter.