California Energy Commission drafts $100M 2011-2012 investment plan for Alternative and Renewable Fuel and Vehicle Technology Program

Proposed allocation of 2011-2012 investment plan. Click to enlarge.

The staff of the California Energy Commission has prepared a draft 2011-2012 Investment Plan for the
Alternative and Renewable Fuel and Vehicle Technology Program, its third year of program funding. Anticipated
funding for fiscal year 2011-2012 is approximately $100 million, with the largest single portion ($22 million) proposed to be allocated to medium-and heavy-duty trucks. Medium- and heavy-duty vehicles are a significant component of California’s transportation sector, accounting for a combined 16% of the state’s petroleum consumption and greenhouse gas emissions within the transportation sector; however, these vehicles represent less than 4% of the in-state vehicle population. The committee is seeking input from the Advisory Committee, stakeholders, and the public regarding the analyses and recommendations contained in the draft plan.

California Assembly Bill 118 (Núñez, Chapter 750, Statutes of 2007), created the Alternative and
Renewable Fuel and Vehicle Technology Program. The statute, subsequently amended by
AB 109 (Núñez, Chapter 313, Statutes of 2008), authorizes the Energy Commission to
develop and deploy alternative and renewable fuels and advanced transportation
technologies to help attain the state’s climate change policies. The Energy Commission
has an annual program budget of approximately $100 million to support projects that:

Develop and improve alternative and renewable low-carbon fuels.
Optimize alternative and renewable fuels for existing and developing engine
technologies.
Produce alternative and renewable low-carbon fuels in California.
Decrease, on a full fuel cycle basis, the overall impact and carbon footprint of
alternative and renewable fuels and increase sustainability.
Expand fuel infrastructure, fueling stations, and equipment.
Improve light-, medium-, and heavy-duty vehicle technologies.
Retrofit medium- and heavy-duty on-road and non-road vehicle fleets.
Expand infrastructure connected with existing fleets, public transit, and
transportation corridors.
Establish workforce training programs, conduct public education and promotion, and
create technology centers.

The statute requires the Energy Commission to annually prepare and adopt an investment
plan that determines the funding priorities and opportunities and describes how program
funding will be used to complement other public and private investments, including existing
state programs. All projects funded by the Energy Commission must be consistent with the
priorities established in the investment plan.

The investment plan for 2011-2012 is spread across 11 technologies and areas:

Plug-In Electric Vehicles ($8 Million). Sales of in-state plug-in electric vehicles are expected to rapidly increase over the next 2-3 years, as major automakers begin offering fully electric and plug-in hybrid electric vehicles. The
Energy Commission and Air Resources Board are awaiting the results of a survey of major
automakers regarding their anticipated plug-in electric vehicle deployments. To accelerate the
deployment of these vehicles, the Energy Commission is providing $8 million to support charging infrastructure.
Hydrogen ($3 Million) . Hydrogen vehicles, including fuel cell vehicles, are expected to rapidly expand within the state
over the next decade. As in previous investment plans, the Energy Commission seeks to ensure
a sufficient supply of hydrogen fueling infrastructure for these vehicles. An updated survey of
major automakers suggests that, despite a drop in anticipated vehicles before 2015, the number
of vehicles expected after 2015 will be in the tens of thousands. Before 2015, anticipated
hydrogen fueling stations should be able to provide sufficient coverage for the expected number
of vehicles. This survey data will be considered as the Energy Commission develops a funding
strategy for its fiscal year 2010-2011 allocation of $10.2 million. For fiscal year 2011-2012, the
Energy Commission intends to focus $3 million in funding on transit demonstration
opportunities.
Natural Gas ($8 Million). Natural gas is expected to play a growing role in the state’s transportation sector, in response to greenhouse gas emission reduction targets, volatile petroleum prices, and air quality standards.
Significant opportunities remain for expanding the use of medium- and heavy-duty natural gas
vehicles in a variety of applications, the CEC staff notes. These opportunities are discussed in greater detail in the
Medium- and Heavy-Duty Vehicles section of the investment plan.

A “modest” network of fueling infrastructure already exists for natural gas vehicles. However,
many of these stations require upgrades, and increases in natural gas vehicles will only occur
when range anxiety and fleet fueling operations are addressed. The Energy Commission is
allocating $8 million to support the installation of new natural gas fueling infrastructure and
upgrades to existing infrastructure. An expanded natural gas fueling infrastructure also creates
additional opportunities to incorporate biomethane from anaerobically digested waste-based
biomass feedstocks into California’s transportation fueling infrastructure
Propane ($1.5 Million). The Energy Commission is allocating $1
million specifically for light-duty propane vehicle deployment, and $500,000 to expand propane
infrastructure in Northern California. Further allocations for medium- and heavy-duty propane
vehicles are discussed in the Medium- and Heavy-Duty Vehicles section of the investment plan.
Ethanol ($12.5 Million). Ethanol and other gasoline substitutes offer a significant opportunity for reducing both
greenhouse gas emissions and petroleum use, the CEC staff says. The state’s Low Carbon Fuel Standard and
Bioenergy Action Plan, and the federal Renewable Fuel Standard, rely heavily on biofuels
(including ethanol) to meet their targets. The Energy Commission is providing $7.5 million to
expand in-state production for gasoline substitutes. This funding is intended for the
development of new facilities that can use waste-based cellulosic feedstocks to produce a low
carbon fuel.

An additional $5 million will be provided to expand E-85 dispensers and retail outlets. Given
the relatively modest marginal cost for the purchase of flex-fuel vehicles, the Energy
Commission is not proposing vehicle funding for this fuel category
Diesel Substitutes ($11.5 Million). To accelerate the in-state production of diesel substitutes such as biodiesel and renewable diesel, the Energy Commission will provide $7.5 million to expand and support California’s diesel
substitute production plants. The Energy Commission additionally allocates $4 million to support needed fuel terminal and
distribution infrastructure for diesel substitutes. This funding will include modifications to
existing rack-terminals, enabling them to dispense biomass-based diesel, and the expansion of
bulk terminal and storage facility capacity.
Biomethane ($8 Million). Biomethane, when produced from waste-based resources or byproducts,
possesses one of the lowest carbon intensities of any existing fuel. Additionally, biomethane can
reduce the lifecycle greenhouse gas emissions in a broad variety of fuel pathways, from natural
gas to hydrogen to ethanol. Anaerobic digestion of waste-based feedstocks is proving to be a
robust and cost-effective technology for creating very low carbon transportation fuels that can
be readily incorporated into vehicles and fueling systems that can use natural gas. The annual
fuel potential from California’s waste-based feedstocks is estimated to be more than 1,750
million diesel gallon-equivalents. For these reasons, the Energy Commission is allocating $8
million to develop in-state biomethane production for use in the transportation sector.
Medium- and Heavy-Duty Vehicles ($22 Million). Given the high amount of petroleum use
per vehicle (in comparison to passenger vehicles), these vehicles offer an excellent opportunity
to expand alternative fuel use, reduce petroleum consumption, and reduce greenhouse gas
emissions. The Energy Commission is allocating $12 million in deployment incentives for
medium- and heavy-duty natural gas vehicles, and $3 million for propane vehicles.

Advanced technologies, such as battery electric applications, hybrid hydraulics, and fuel cell
technology, can also be incorporated into medium- and heavy-duty vehicles. In comparison to
passenger vehicles, medium- and heavy-duty vehicles serve a broader variety of purposes,
however. The early use of advanced technologies may be limited to certain niche applications.
Some vehicle suppliers have already begun incorporating a variety of advanced vehicle
technologies. To expand the use of these technologies, the Energy Commission will provide $7
million for the demonstration of advanced technologies in the medium- and heavy-duty sector.
Manufacturing ($10 Million). Given the amount of venture capital invested in California’s clean transportation sector, the
state has the potential to develop and attract new opportunities for the manufacturing of
alternative fuel vehicles and components. The Energy Commission has already made
substantial investments in manufacturing. For fiscal year 2011-2012, the
Energy Commission will allocate $10 million to fund projects that establish commercial-scale
alternative fuel vehicle and component manufacturing facilities in California.
Workforce Development and Training ($5.5 Million). As the Energy Commission funds
alternative fuel and low-emission vehicle projects, it is critical that funds are allocated to assist
in the development of a skilled workforce to implement and sustain those projects. The Energy
Commission allocates $5.5 million for this purpose.
Market and Program Development ($10 Million). The Energy Commission is providing $2.5 million for sustainability studies to
support commercializing renewable fuels and minimizing negative environmental impacts.
Existing efforts in marketing and program outreach will continue, but do not require additional
funding at this time. The Energy Commission will provide $4.5 million for technical assistance and environmental, market, and technology analysis. This work will assist the program to focus
on funding priorities and identifying preferred opportunities for future funding. This category
may also provide funding for full fuel cycle analysis, to assist small companies in developing
and demonstrating the carbon intensity of their alternative and renewable fuels and
technologies. Finally, the Energy Commission will reserve $3 million for program support for
the measurement, verification and evaluation of the program’s activities.