Earlier this week, the United States Department of Energy (DOE) proposed revisions to its calculation of the petroleum-equivalent fuel economy of electric vehicles (EV) for use in the Corporate Average Fuel Economy (CAFE) program. This follows a petition by the Natural Resource Defense Council (NRDC) and Sierra Club, asserting that the data forming the basis for the current regulation is outdated and results in inflated fuel economy values for EVs. Though slightly counterintuitive, these inflated values reduce the incentive for further adoption of EVs. This post will explore the reason behind this in further detail while discussing the foundation for and calculation of the new petroleum-equivalent fuel economy, including key background information to assist in understanding the current proposal.
Corporate Average Fuel Economy Standards
Corporate Average Fuel Economy (CAFE) is a set of regulations in the United States (US) that requires automakers to meet certain fuel economy standards for their fleet of light-duty vehicles (under 8,500 lbs.) that are manufactured and sold in the country. The standards are set by the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) and are designed to both improve fuel efficiency of vehicles and reduce greenhouse gas emissions. Rather than regulate each individual vehicle, the CAFE standards are based on the average fuel economy of a manufacturer's fleet of vehicles. Should an automaker fail to meet the specific fuel economy target, they may face fines or other penalties.
The CAFE standards were first enacted in 1975, but it wasn’t until 1980 that considerations were made for EVs. This gave rise to the need for a measure to compare the energy efficiency of vehicles that run on different types of fuels. The equivalent petroleum-based fuel economy resulted, measuring the energy efficiency of EVs expressed in terms of the amount of petroleum-based fuel that would be required to produce the same amount of energy. Initially, the values were to be reviewed annually based on the following factors:
- Electrical energy efficiency of the vehicle.
- National average generation and transmission efficiencies.
- US need to conserve all forms of energy.
- Specific patterns of use of EVs compared to petroleum-fueled vehicles.
Current Petroleum Equivalence Factor
The 1980-proposed “petroleum equivalency factor” (PEF) used to calculate the petroleum-equivalent fuel economy of EVs went through several iterations until the Final Rule of June 2000 established a permanent method for calculation that is still used to this day. The PEF calculation procedure involves converting the measured electrical energy consumption of an EV into a raw gasoline-equivalent fuel economy value. This value is then divided by 0.15 to arrive at the final petroleum-equivalent fuel economy value, which is then used in the calculation of the automaker’s corporate average fuel economy. The division by 0.15 is a result of the 1.0/0.15 fuel-content factor, which addresses the scarcity of fossil fuels and the benefit of EVs to reduce depletion of those resources.
Criticism & Review of the Current Petroleum Equivalence Factor
Unfortunately, the current means of calculation result in inappropriately high PEF values that enable automakers to meet fleet-wide CAFE standards compliance with a smaller number of EVs. This both results in a more limited production of EVs and allows automakers to continue producing vehicles with poor fuel economy and high emissions by simply producing a few more EVs. This was noted by the NRDC and Sierra Club, prompting the DOE to review the PEF calculation based on updated data.
The review is based on the same four factors established in the annual review process originally outlined in 1980. Following this guide, the DOE notes that the factors reflecting energy efficiency and driving patterns of EVs need not be amended, while those that consider fuel scarcity, and electricity generation and transmission efficiency should be updated to reflect the current climate. With respect to scarcity, the 1.0/0.15 fuel-content factor is no longer warranted due to the rise in renewable electricity sources and change in current EV technology and market penetration. As to the updates for generation and transmission efficiency, the inputs need to be updated to reflect the projected grid mix.
To estimate the contribution of different energy sources (e.g., natural gas, nuclear, solar, wind) to the electricity generation mix, the DOE used the 2021 Electrification 95 by 2050, Standard Scenario, developed by the National Renewable Energy Laboratory. Taking the combination of all these sources, the model calculates the overall efficiency of electricity generation, which can then be used in the calculation of the PEF.
Calculation of the Proposed Petroleum Equivalence Factor
In short, the revised PEF is calculated by comparing the full-cycle efficiencies of gasoline and electricity. This includes an evaluation of the overall well-to-tank efficiency of gasoline and a comparison of the input energy required to achieve the total energy output from all electricity sources, as well as the efficiencies involved in distributing and transmitting both gasoline and electricity. Dividing the full-cycle energy content of gasoline (141,347 BTU/gal) by the full-cycle energy content of electricity (6.105 BTU/Wh), results in a PEF of 23,153 Wh/gal.
The proposed PEF value of 23,160 Wh/gal would take effect for the CAFE regulatory period of 2027-2031. Unless there is a compelling reason to change it, the proposed PEF will remain stable over the entire regulatory period. The critical factor that could change the PEF calculation is changes to the projected grid mix. The PEF will be reviewed annually to determine if any changes are warranted.
Key Implications & Takeaways
The current PEF value of 82,049Wh/gal is nearly four times that of the proposed value, demonstrating the significant power it holds in inflating fuel economy standards for EVs. This is further indicated upon comparing the current and proposed values in their application to 2022 EV models and their ICE equivalents. For instance, the Ford F-150 ICE has a fuel economy of 25.9 MPG, while the Ford Lightning EV has equivalent fuel economies of 237.7 MPGe and 67.1 MPGe under the current and proposed PEFs, respectively. Assuming a CAFE standard of 50 MPG, Ford could produce nearly 8 F-150 ICE vehicles for every Lightning, while under the new rule, the company would have to produce the vehicles at a near 1:1 ratio.
Without doubt, the CAFE standards and PEF hold significant power in further incentivizing the growth in production of EVs. If approved, the proposed changes to the PEF will have resounding effects across the automotive industry, forcing many automakers to make substantial changes to their production mix and manufacturing operations. Furthermore, by reducing the impact that EVs have on the fleet-wide average fuel economy, it will disincentivize manufacturers from the production of inefficient internal combustion engine vehicles that, under the current rules, can be offset with a relatively small number of EVs. Altogether, the DOE’s willingness to review the PEF calculation reflects a commitment to electrification, improved energy efficiency and a reduction in emissions in the US.