The R&D Tax Credit Aspects of Truck Fuel Efficiency
Truck-Fuel-Efficiency
The U.S. trucking industry is experiencing
major innovations in order to increase fuel efficiency.
Trucking is vital to the national economy and almost every
industry in the nation depends on it in one way or
another. The cost of shipping is internalized into
everything from healthcare, ATM fees, hamburgers, and
everything in between.
Most large trucks get
less than six miles per gallon and the rate at which they
consume fuel has remained stagnant for the past fifty
years. Realizing this, President Obama directed the
Environmental Protection Agency (EPA) and the Department of
Transportation’s (DOT) National Highway Traffic Safety
Administration (NHTSA) to develop joint greenhouse gas and
fuel efficiency standards for heavy-duty vehicles in 2010.
The agencies responded
in August 2011 with the first standards for new heavy-duty
vehicles for model years 2014 through 2018. Since then,
a second phase of even more stringent standards has been
proposed that would increase fuel efficiency by 24% by 2027.
Manufacturers can meet
those standards with a range of different innovative
technologies. More efficient combustion processes,
engine, and drive train improvements and shapely aerodynamics
are a few of the possibilities. Truck manufacturers developing
these and similar technologies are eligible for federal and
state R&D tax credits which can be quite substantial.
The R&D Tax Credit
Enacted in 1981, the federal Research and
Development (R&D) Tax Credit allows a credit of up to 13%
of eligible spending for new and improved products and
processes. Qualified research must meet the following four
criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent. On December 19, 2014, President Obama signed the bill
extending the R&D Tax Credit for the 2014 tax year.
Trucking and the
National Economy
Tractor trailes, buses, trucks and other
heavy duty vehicles drive the national and local economies in
a way that many people often overlook. Almost every industry
relies on them in one way or another in order to sustain
oparations.
If they stopped running
for just a few days, there would be extreme food shortages,
hospitals would cease to operate, waste would pile up on the
curb, ATMs would run out of cash, gas stations would run out
of fuel, and nearly every type of manufacturer would shut
down. The recent popularity of just-in-time manufacturing,
zero inventory, and lean distribution chains have amplified
this effect.
The cost of maintaining
inventory and transporting goods each day is ultimately passed
on to the final consumer of any given product. The largest
expense per mile for trucking companies is fuel.
Fuel costs per mile ($0.65) are even more than the competitive
salaries that the industry pays their drivers ($0.56 including
benefits). Given the broad range of products and
materials shipped by truck each day, the impact of fuel
efficiency on the national economy is profound. In
2014, the industry spent $150 billion on diesel fuel in order
to ship 70% of freight in the country that is moved by
truck. Even the 30% of freight shipments moved by rail
must ultimately be transported from rail yards to their final
destination using trucks.
While trucks and buses
make up only 7% of U.S. vehicles, they consume more than 25%
of all the fuel used to travel them. The annual
emissions savings from just a 10% improvement in fuel
efficiency for a typical tractor-trailer is equivalent to the
annual emissions from nearly four passenger vehicles.
Given the fact that each long-haul tractor trailer averages
over 100,000 miles per year, it is easy to see how a more fuel
efficient vehicle could have a large impact on cost savings
for trucking companies, a healthier environment and ultimately
cheaper prices for consumers in every industry.
Regulations
The EPA recently proposed regulations for
heavy duty trucks, requiring manufacturers to increase their
fuel economy 40% by 2027. The new
regulations seek to raise the average mile per gallon from
five to six to as much as nine miles per gallon. The
latest proposal which came out June 2015, is the second of a
series of mandates that have been implemented incrementally
since 2010.
Before 2010, heavy duty
trucks and buses were required only to meet pollution
standards for soot and smog causing air pollutants.
There were no such requirements for the fuel efficiency or
even carbon pollution. In 2010, total fuel consumption and
greenhouse gas emissions from heavy duty vehicles accounted
for 23% of total U.S. transportation related greenhouse gas
emissions.
Beginning in 2011, fuel
economy and global warming standards are applied to new trucks
sold between 2014 and 2018. These requirements will reduce oil
consumption from the heavy duty vehicle fleet by 390,000
barrels per day in 2030, roughly equivalent to the amount of
oil we import each year. The standards will also cut global
warming emissions by 270 million metric tons in 2030,
equivalent to the emissions from more than 4 million of
today’s passenger cars over their lifetimes.
Separate standards are
required for gasoline powered trucks which must achieve up to
15% reduction in fuel consumption and greenhouse gas emissions
by model year 2018. Under the finalized standards, this
translates to a savings of about one gallon of fuel for every
100 miles traveled.
These proposed more
advanced regulations are expected to apply to model years 2018
and beyond and cover almost any truck larger than a standard
pickup and will cut millions of tons of carbon dioxide
pollution in addition to saving millions of barrels of
oil.
The EPA and DOT estimate
the proposed standards would result in approximately $230
billion in net benefits over the lifetime of the vehicles sold
in the regulatory timeframe, while costing the affected
industry less than one-tenth that amount. Per truck,
those costs would amount to an increase of about
$10,000-$14,000 on the sticker price but owners would recoup
that amount in fuel savings in less than 2 years which is why
the large majority of the industry is embracing the
regulations. Requiring all truck manufacturers to meet
the standards eliminates a possible race to the bottom in
which some manufacturers might otherwise try to appeal to a
certain niche market that prefers a cheaper sticker price even
if that means a less fuel efficient truck in the long run.
Technologies
There are a broad range of technologies
being developed in the trucking industry to increase fuel
efficiency. Medium and heavy duty trucks and truck
components are produced by a diverse group of manufacturers,
including truck makers, engine, trailer, and tire
manufacturers, and a large supply chain. Together, they are
responsible for the sale of roughly 1,500,000 new vehicles
each year, employing workers across the country.
Combustion Chamber
Improving the efficiency
of internal combustion engines is one of the most promising
and cost-effective approaches to increasing heavy duty
vehicles' fuel economy. At highway speeds, more
than half of the energy contained in diesel fuel is lost to
inefficiencies in the combustion process of the engine.
Despite the evolution of engine technology over the past 100
years, the diesel engines used in most of today’s tractor
trailers convert less than half of the energy in the fuel to
operating the vehicle. The DOE sees that inefficiency as a
good opportunity to improve fuel efficiency.
The Vehicle Technologies
Office (VTO) undertakes R&D activities to improve the
efficiency of engines for both light and heavy duty highway
vehicles. Research, in close collaboration with
automobile and engine manufacturers, will directly impact the
development of the next generation of high efficiency
engines. The Advanced Combustion Engine R&D
subprogram’s SuperTruck initiative focuses on increasing the
efficiency of internal combustion engines for commercial
vehicles from 42% to 50% (a 20% improvement) by 2015.
The goal by 2020 is to
further improve engine efficiency to 55% with demonstrations
on commercial vehicle platforms. Besides collaborating
with industry manufacturers, the federal government also works
closely with universities in order to develop fuel efficient
technologies.
The amount of recent
grant money given to universities to develop combustion engine
fuel efficiency technologies is listed below:
DOE Engine R&D
Grants:
- University of California,
Berkeley - $1.65M
- Michigan State University -
$1.30M
- Michigan Technological
University - $0.65M
- University of New Hampshire -
$0.60M
- The Pennsylvania State
University - $0.60M
- University of Connecticut -
$0.80M
- Stanford University - $1.2M
- Clemson University - $1.0M
- Yale University - $0.60M
Emission Control Research
- University of Kentucky - $0.90M
- University of Houston - $1.20M
- Purdue University - $1.50M
Diesel & Alternative Fuels
Much of the innovation
surrounding fuel efficiency involves not only using less of
the fuel used to propel the engine but also making engines
that run off non-conventional fuels or even have the capacity
to interchange fuel types. Many medium sized trucks run
off gasoline however, greater use of diesel technology and
other fuel alternatives would help the U.S. reduce petroleum
consumption and improve energy security. The EPA
estimates that America could save up to 1.4 million barrels of
oil per day if one third of U.S. cars, pickup trucks, and SUVs
were diesel-powered or ran off alternative fuels.
MIT professors are
developing an engine that has the ability to run off both
gasoline and ethanol. To make the engine workable they
started with a regular gasoline turbo engine and added a
conventional port-fuel injection system to it, then added a
second, small fuel tank and filled it with ethanol. When
pulling light loads, the engine runs off regular gasoline and
port injection. When more power is needed, the system
injects the ethanol fuel. The ethanol has a higher
octane rating, saves the driver gasoline costs, and has an
impressive cooling effect.
Natural Gas
Natural gas is a good
alternative to diesel fuel for trucking companies who are
looking to identify with the green market. Although the
trucks cost as much as $50,000 more than diesel trucks, the
initial cost outlay can be made up in a period of 4-5 years
depending on how many miles the truck travels per
year. This year, UPS has ordered about 300 natural
gas-powered heavy duty trucks and bought 700 gas tractors last
year. The trucks operate mostly in corridors in the West and
South that have plenty of natural gas stations, some of which
UPS helped to finance. By the end of the year, about 2% of
UPS's 100,000 vehicles worldwide will be powered by natural
gas.
Although there was an
initial hype about natural gas alternatives in the trucking
industry, some of that enthusiasm might have been curbed by
the new mandates which require diesel and gas engines to
improve fuel mileage by 6% by 2017. With the new
mandates, diesel trucks that are more fuel efficient can
compete more competitively with the more efficient natural gas
alternatives.
Some trucking companies
prefer to convert diesel vehicles to run on natural gas.
Properly implemented, this is an excellent way to quickly
reduce fuel costs, clean up the air and reduce noise with
minimum capital costs. A poorly executed conversion, on the
other hand, can lead to higher exhaust emissions, much higher
fuel consumption, unacceptable power losses, poor durability,
and high maintenance costs.
EPA's emissions
requirements and regulations still apply to vehicles converted
to run on CNG or LNG.
EPA requires conversion system manufacturers to demonstrate
that converted vehicles or engines meet or exceed the same
standards as the original vehicle/engine. The benchmark for
these vehicles is the required efficiency of an equivalent
vehicle powered by diesel. Thus, a natural gas vehicle,
with 30% less CO2 emissions per gallon equivalent than the
identical vehicle fueled by diesel, would be presumed to be
30% more efficient. Such a large improvement of course
would be more than the 6% requirement for diesels by 2017.
Drive Train Improvements
In addition to
combustion chamber research and innovative fuel alternatives,
innovations in the drive chain also increase fuel efficiency.
Transferring power from the engine to the transmission can
account for up to 6% of total heavy duty vehicle energy
losses. The SuperTruck program has set a goal of
increasing drive train efficiency to 55% and is currently
demonstrating many technologies in order to achieve that
result.
One approach aimed at
improving this inefficiency is called engine down
speeding. With this technology, the engine is designed
to provide more torque at lower revolutions per minute (RPMs),
meaning less fuel consumption. Also, because lower
engine speeds require more shifting, engine down speeding is
typically combined with an innovative automated manual
transmission to save even more fuel.
Manual transmissions
have long dominated the tractor trailer industry, primarily
because of the superior fuel economy they deliver when
compared with automatic ones. However, Automated manual
transmission (AMT) hybrid technology is even more fuel
efficient. AMTs, which have been recently gaining market
share, combine the fuel economy benefits of a manual gearbox
with an electronically controlled gearshift. The
electronic gearshift ensures consistent, fuel-efficient
shifting under all conditions. Electronic sensors help
the transmission determine the right gear under any given road
conditions, vehicle speed, and load to make optimal shift
decisions. In other words, the computer controls gear
switching decisions with more accuracy than the driver.
In addition, further
efficiencies are achieved by implementing dual clutching
automation. When shifting gears on a manual
transmission, the engine must be disengaged for a short time
during the shift. In between shifts the engine is
running but the drive train is not being powered.
Dual clutch automated transmissions can eliminate this
inefficiency by applying the engine’s power to one gear at the
same time as it is being disengaged from the other.
Smart technologies such as this are maximizing efficiencies in
a broad range of engine and drive train
technologies.
Mack Econodyne
The MACK® MP8 Econodyne®
engine for highway applications offers 505 horsepower and
1,860 lbs. of torque when operating at top gear. This
maximizes fuel efficiency while also providing the necessary
power to help drivers conquer long and steep grades.
When ascending a steep
incline, engine RPMs drop to around peak torque output.
When a driver is applying 100% throttle and the RPMs reach
1300, Mack’s EconoBoost torque strategy kicks in, providing
the driver with an additional 200 lb. of torque, enabling the
truck to remain in top gear for a longer time period until the
hill is crested. Drivers get more torque at lower engine
speeds, resulting in greater fuel efficiency.
Aerodynamics
Aerodynamic truck body
designs can have a huge impact on fuel efficiency.
Traditional big rigs expend as much as 50% of their power just
pushing air out of the way. Innovative aerodynamic
designs can increase efficiency by at least 15- 20%,
eliminating a large chunk of that effect. Much of the
innovation here involves creative ways of closing the gaps in
between sections of the outer truck and trailer bodies.
For example, gap fairings reduce turbulence by smoothing the
airflow between the tractor and trailer.
Aerofficient, based in
Livonia, MI develops aerodynamic technology and holds several
patents pending. Aerofficient’s innovative products are
used to improve aerodynamics and have been awarded “Top 20
products of 2011” by Heavy Duty Trucking magazine for their
Aerofficient Side Skirts product.
Other innovations being
developed in the industry sector involve closing the gap
between the tractor and trailer, replacing side-view mirrors
with less-obtrusive cameras, low-rolling resistance tires and
even a so called “Airflow BulletTruck” designed for Wal-Mart
with a front end so sharp that it only has one driver seat
directly in the middle of the cab.
Electric Trucks
Electric trucks are a
good option for medium and light duty operators with short
distance stop and go daily routines. They can haul as
much as 16,000 pounds and have a range of about 100 miles on a
single charge. Large fleets such as Coca-Cola, UPS, and Fed-Ex
utilize electric trucks.
Not only do they
completely eliminate fossil fuel, achieve zero direct
emissions, and reduce noise pollution, they also generate
positive PR since they are extremely sustainable. With
about 1,000 on U.S. roads today, sales are expected to reach
2,500 to 3,500 units per year by 2020.
DOE Super Truck
Program
The super truck program, sponsored by the
Department of Energy is an industry cost-shared project with a
goal to design a heavy duty class 8 truck which demonstrates a
50% improvement in overall freight efficiency measured in ton
miles per gallon. The collaboration of government and
industry has far exceeded that goal. Daimler Trucks
North America (DTNA) announced that their Freightliner vehicle
achieved a 115% freight efficiency improvement, measured in
ton miles per gallon. The truck achieves an impressive 12.2
miles per gallon.
Peterbilt’s version is
the class 8 Peterbilt 587, powered by a six-cylinder, Cummins
ISX15 engine with 400-600 HP and a host of energy saving
subsystems, including waste heat collectors, navigation
guidance that automatically reroutes to maximize fuel economy,
and low-rolling resistance tires. The Mercedes-Benz
Aerodynamic Truck and Trailer increases aerodynamic savings by
about 12% over conventional designs. Mercedes says that
if there is a demand for the truck, they could quickly have it
ready for production.
Conclusion
The trucking industry in the U.S. is
experiencing major innovations in order to increase fuel
efficiency. Recent government mandates are raising the
bar for manufacturers who must now develop more fuel efficient
technologies. More efficient combustion chambers, drive
trains, alternative fuels, and aerodynamics are a few ways of
accomplishing fuel efficiency goals. Truck manufacturers
should be aware of federal and state R&D tax credits which
are available to stimulate and support these innovative
efforts.
