Tag Archives: Toyota

Steven Chu maintains conservative stance on fuel cells

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The U.S. Department of Energy (DOE) recently announced that it “is accepting applications for a total of up to $74 million to support the research and development of clean, reliable fuel cells for stationary and transportation applications.” This relatively small number is not much of a surprise, since the head of the DOE, Steven Chu, has previously made clear that he feels the “hydrogen economy” is not the future of transportation, and he has slashed budgets accordingly (see the May 13, 2009 LRPJ – client registration required). 

Indeed, under the Bush administration, the Department of Energy’s (DOE) budget for fuel-cell-vehicle development, including hydrogen-storage technologies, infrastructure, and various demonstration projects averaged hundreds of millions a year. Specifically, it was about $250 million annually in FY 2008 and FY 2009, and totaled $1.3 billion in the last 10 years. Following Chu’s appointment, the same budget dropped to about $70 million in FY 2010.

However, it’s significant that the recent grants are for both “stationary and transportation applications” because Chu – and Lux Research – believe that stationary applications for fuel cells are much more promising in the near term than fuel-cell vehicles. In a 2009 interview with MIT’s Technology Review, Chu said, “I think that hydrogen could be effectively a ‘battery’ in the sense that suppose you had a way of using excess electricity – let’s say a nuclear plant at night, or solar or wind excess capacity, and there was an efficient electrolysis way of turning that into hydrogen, and then we have stationary fuel cells. It could effectively be a battery of sorts.”

Lux Research will be looking into the “battery”-type applications for hydrogen in more detail in an upcoming report on distributed storage. In the meantime, we believe the best near-term opportunity for stationary fuel cells is not as an enabler for hydrogen storage, but rather a means to provide combined heat and power (CHP) in distributed applications (see the Lux Research Report, “Finding Fuel Cells’ Real Future.” Client registration required). To be sure, fuel cell makers like Bloom Energy, Plug Power, and Nordic Power Systems still confront numerous hurdles as they seek to sell into the embryonic CHP market – high cost being first among them. But CHP remains a more likely driver for significant adoption of fuel cells by 2015 than the applications that Honda and Toyota are pursuing.

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Is Nissan losing money on every Leaf it sells?

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Nissan recently announced the U.S. pricing for its all-electric vehicle (EV), the Leaf: $32,780 before incentives, or $25,280 after a $7,500 federal tax credit. Notably, Nissan decided not to lease the battery separately, like Nissan Renault is doing with Better Place in Israel (see the August 5, 2009 LRPJ – client registration required). Instead, it will offer the entire vehicle including the battery for $349/month for 36 months after an initial payment of $1,999. In January, Nissan selected AeroVironment to provide chargers that will fully charge the Leaf’s 24 kWh pack in eight hours with a connection to a 220 V power line. 
 
According to the Wall Street Journal, the Leaf will sell for ¥3.76 million ($40,700) in Japan, or ¥2.99 million ($31,600) after incentives. For comparison, the Toyota Prius hybrid electric vehicle (HEV) starts at $22,800 in the U.S. and about ¥2.05 million ($21,700) in Japan. One way to view this information is that the Leaf will be competitive with the Prius when it goes on sale in select markets in the U.S. in December. After the federal tax credit, the Leaf’s invoice price is less than $3,000 above the Prius’s; and in some states, prospective purchasers get additional state tax incentives (California, one of the most progressive states, offers $5,000).
 
However, apart from price, the Leaf faces additional challenges that the Prius does not. First, a director-level executive from a major California utility emphasized that before a would-be EV buyer takes possession of the vehicle he or she has just purchased, there is a 20-day to 60-day (more likely 60-day) waiting period to allow the utility and the city to ensure the grid can handle the additional load (see the February 3, 2010 LRPJ – client registration required). Second, unlike the Prius, EV owners have to overcome the range anxiety of owning a vehicle with a 100-mile range without the benefit of a widespread municipal charging infrastructure. Finally, while Nissan hasn’t released information on the Leaf’s cargo/passenger space, its hefty 24 kWh battery pack certainly will take up a lot more room than the 1.3 kWh pack of the Prius, even after accounting for the higher energy density of Li-ion compared to NiMH.
 
Even if the Leaf does sell successfully, some question remains whether or not Nissan will actually make money on its new EV? Our most current estimates have pack costs over $920/kWh today. That means the 24 kWh Leaf pack most likely costs over $22,000 today, which would imply that Nissan (or its battery partner NEC) is losing money on every vehicle Nissan sells for $32,780. While we see pack prices dropping to just over $700/kWh by 2015, even at these prices the Leaf packs will still account for over half of the total price of the vehicles. Unless Nissan and its battery partner NEC have unlocked the magic Li-ion formula that allows them to manufacture batteries at half the cost of their competitors, Nissan/NEC is almost certainly taking a loss on every Leaf it sells in the U.S., in order to encourage EV adoption and unseat Toyota/Panasonic as the greenest auto-making team. While this strategy might make Nissan the market leader in EVs and boost NEC’s battery sales, it may impose a big financial hit in the process if the EV market fails to develop quickly – as we have argued (see the report “Unplugging the Hype around Electric Vehicles“).

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