Does innovation drive policy or does policy drive innovation? That question is as perplexing as the great American vehicle debate, Ford or Chevy? Getting an opportunity to take a brief look at Ford’s energy innovation this week helped to solidify my typical answer to the great vehicle debate: Ford. Perhaps my answer is partly biased since I learned to drive in a 1969 Ford Bronco and have since owned many Ford vehicles. Now that I may have gotten the attention of the die-hard Chevy fans, I will shift gears to the real discussion.
From my previous post, Complimentary Energy and Climate Policy is generally better than a Single Policy, I provided examples of historic energy innovations (steam power from coal, combustion engine using petroleum) that were developed without government policy. In those cases, policy followed innovation. This is a perfectly natural market response. So historically, I am inclined to say that innovation comes first. So let’s take a look at Ford’s current energy research and development.
The Energy Policy and Conservation Act of 1975 really started the energy efficiency improvements in our automobiles. Without this policy, the economics would have eventually led vehicle efficiency improvements as consumers got tired of high fuel prices. Part of the motivation behind the act was energy independence through a reduction in our dependence of foreign petroleum. The CAFE standards were noted as a driving force behind Ford’s research and development focus (Rissman and Savitz, 2013). Today, Ford has a couple interesting energy innovation research and development projects; hydrogen fuel cell research and battery research. Both of these projects have used some government support.
The hydrogen fuel cell research is being used to develop a fuel cell vehicle (FCV). From 2005 to 2009, Ford participated in a FCV technology demonstration that had partial funding support from the Department of Energy. Ford also participated in technology demonstrations in Canada and Europe that were partially government funded. This policy supported research and development assistance led to 30 Ford Focus FCV’s that traveled over 1 million miles to demonstrate the technology. Currently, more innovation is needed to make the technology economically viable, more reliable, and acceptable to government safety regulators. Ford has partnered with Daimler AG and Nissan Motor Co ltd to develop a hydrogen fuel cell that will be commercially viable. Ford hopes to have a FCV vehicle available by 2017 (Ford, 2013). This is encouraging since the byproduct of the fuel cell is water and heat. However, it is important to understand the carbon footprint needed to produce the hydrogen. Typically, electricity is used to separate water into hydrogen and oxygen. If the electricity is largely based on fossil fuel power generation, we may not be making much progress in saving the environment but may be making progress for energy independence since we have large coal and natural gas resources in the US.
Ford recently partnered with the University of Michigan, battery manufacturers, and State and Federal governments to open a battery lab to develop smaller, lighter, less expensive batteries for electric vehicles. Ford has certainly been involved in battery research for a long time and has an extensive battery testing laboratory (Ford, 2013). While this is a new initiative and has not produced innovative results yet, the battery testing laboratory is partly supported by government policy providing funding.
With financial support through government policy, the FCV and battery research should produce innovation that could help lead the energy transition away from petroleum based fuels for transportation. Since the economics does not currently support shifting away from petroleum based transportation technology for Ford, policy is driving innovation for now. This policy is working to fix two factors in advance of natural market forces; energy security through independence from foreign petroleum and emissions reductions to help mitigate climate impacts.
This result is consistent with the solar incentives article by Sarzynski, Larrieu, and Shrimali as well as the small scale wind policies article by Weiner and Koontz. In these articles like the Ford innovations, the economics did not support deployment of the product without government policy assistance through research and development assistance as well as financial incentives. Finally, the motivation for solar and wind technology policy support is the same as Ford example; ensuring energy security and mitigating climate impacts. For current energy and climate innovation, policy is driving innovation.
References:
Rissman, J. and M. Savitz. Unleashing private-sector energy R&D: Insights from interviews with 17 R&D leaders. AEIC Staff Report, American Energy Innovation Council (2013).
Ford Motor Company. Sustainability Report 2012-13: Hydrogen Fuel Cell Vehicles (FCVs). Corporate.ford.com. 2013.
Ford Motor Company. News Center: Ford, University of Michigan Create New Kind of Battery Lab to Speed Development of Future Electrified Vehicles. Corportate.ford.com. 14 October 2013.
Sarzynski, A., J. Larrieu, G. Shrimali. The impact of state financial incentives on market deployment of solar technology. Energy Policy 46 (2012). pp. 550-557.
Wiener, J.G. and T.M. Koontz. Extent and types of small-scale wind policies in the U.S. states: Adoption and effectiveness. Energy Policy 46 (2012). pp. 15-24.
Thanks for this summary of Ford’s current research and development endeavors, it was a good read. I found it particularly interesting because I recently became a Ford owner myself – purchasing a 2013 C-Max hybrid. I really like the car so far and am quite pleased with the vast improvement in mileage it offers over my 2007 Mazda 3 5-door. I love having a wagon, and the C-Max fit the bill of sitting a little higher (it’s built on the Escape platform) without compromising fuel economy. Many people have complained that it doesn’t perform at 47 mpg as advertised by its EPA rating but I knew that before I bought it (and then the dealer also mentioned it) so I don’t feel duped by getting low 40s most of the time. It’s still a huge improvement, especially since most of my driving is in-town.
Auto companies are poised to really be successful if they can figure out some of these new lower emission technologies. Transportation emissions are a large piece of the pie, and so reductions we make here are quite tangible. I’d really like to see some of our American auto makers lead the way in producing not just fuel efficient cars but alternative fuel vehicles, like the hydrogen-powered ones you mention, and really put themselves on the map as leaders in this field.