R&D Tax Credit Opportunities for the Utility and Auto Industry's Common Needs
When two major industries have a large
common growth challenge, a major innovation platform arises.
Increased urbanization, greatly improved vehicle fuel
efficiency, and environmental concerns are decreasing the
demand for fossil fueled automobiles. Energy efficiency
measures and alternative energy investments are decreasing
worldwide electricity utility revenue. The common opportunity
that addresses both the utility industry and the auto
industry's needs and challenges is an increased amount of
electric vehicles (EV). However, to effectuate the massive
conversion of fossil fuel vehicles to electric vehicles, a
wave of new and innovative products and processes is required.
These new and improved products and processes can be supported
by federal Research & Development tax credits.
The Research &
Development Tax Credit
Enacted in 1981, the federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent 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 January 2, 2013, President Obama
signed the bill extending the R&D Tax Credit for 2012 and
2013 tax years.
BMW Studies Global
Urbanization
BMW is one of the first major auto
manufacturers to study the impact of urbanization on the
future of the auto industry. In an effort to create
environmentally friendly car technologies and assist with
transportation challenges, BMW engaged in research efforts
with battery manufacturers and utilities, concluding that
electric vehicles were the key to developments within highly
urbanized areas. In 2011, BMW introduced their electric
vehicle, the BMW i.
BMW also partnered with the global rental car company, Sixt,
to develop a car-sharing service for highly populated cities.
Gaining an estimated 10,000 new customers a month, DriveNow is
a service that allows drivers to rent a vehicle for a short
period of time and pick up and return at designated spots. The
car-sharing concept paired with BWM's high-end electric
vehicles offers a sustainable option that is particularly
beneficial in densely populated areas. In addition to
DriveNow, BMW offers ParkNow, a parking spot reservation
service, and ChargePoint, an electric car charging service.
These BMW ventures focus on the global urbanization trends
with the first roll out of BMW electric cars targeted for
specific cities. BMW's November 2013 financial presentation
identifies China's largest cities by population.
Fast Charging
Charging methods is a key aspect in the
developing electric car market. CHAdeMO is a quick charging
technology for electric vehicles that can deliver up to 62.5
kW of direct, high-voltage and charge low-range vehicles in
less than thirty minutes. Electronic vehicle manufacturers
including Nissan, Mitsubishi, Subaru, and Toyota are all
compatible with the CHAdeMO technology and have charging
stations throughout the world equipped with CHAdeMO. The
Nissan DC Quick Charger can charge a fully depleted Nissan
LEAF to 80% power in thirty minutes. Creating a convenient
charging technology for drivers plays a significant role in
the growth of the EV sector and the conversion from fossil
fuels.
Utility Revenue
Declines
Europe's major electric utilities are
experiencing alarming continuous revenue declines that have
plunged virtually the entire European utility industry into an
economic downturn. The same causal effects of increased
energy-efficient products such as LED lighting and alternative
energy are occurring in the United States. Some U.S utilities
are beginning to experience flat revenues at a time when many
of them need to make large capital upgrades to meet EPA
emission requirements. Accordingly, U.S utilities could
greatly benefit from a new revenue source.
The Utility/Electric
Car Advantage
The critical business driver for most
utilities is to ensure that they have enough generation
resources to meet "peak demand", the highest customer demand
level which occurs in the daytime. The economic advantage with
electric cars is that for the most part, they can be recharged
at night when overall customer electricity demand is low. This
means that utilities can use the same power plant assets while
generating a new revenue stream. This is also a win/win for
the consumer since many utilities offer lower electricity
prices at night. With the number of EVs expected to reach 1
million by 2020, the U.S. utilities need to define other
technologies to ease the implications.
Figure 1:
SOURCE: ChargePoint, Press
Releases https://www.chargepoint.com/press-releases/2014/0224
The Need for
Innovation
Current economic trends and the electric
car market give way to the following areas that are in need of
innovation:
Long Range Batteries
The biggest technological hurdle remains long-range battery
life. Consumers state that their biggest reservation is
so-called "range fear" a fear that they will be out of range
of a recharging station and become stranded.
Smart Grid Bi-Directional Flow
One of the most exciting opportunities with electric battery
charging is two-way electric flow or bi-directional flow. With
this approach, a home or the grid could utilize the battery
reserve when needed.
The vehicle to grid or V2G process is an opportunity in which
electronic vehicles absorb power from the grid and return it
when it is needed. There is also the idea of EVs interacting
with the grid in short-term intervals of a few seconds. This
would provide the quick power absorption and energy storage
the grid needs. The V2G process could also help when the grid
is in danger of shutting down by absorbing power from electric
vehicles.
New Design and Materials
In terms of equipment, electric cars typically have an
electric motor in place of a traditional gasoline engine. The
electric motor is battery powered through the controller
component. The EV mechanics differ greatly from gasoline
powered vehicles in that they also do not require fuel lines,
exhaust pipes, coolant hoses, mufflers, catalytic converter,
etc. Compared to a gasoline engine which is more of a plumbing
concept, an electric vehicle is more of a wiring centered
project.
Electric Vehicles introduce new systems such as gear boxes,
electric power steering, water pumps to cool the electric
engine, battery packs, and cell components. These new systems
and designs require major research and development as the EV
market continues to evolve.
Figure 2: How Do Gasoline
and Electric Vehicles Compare?
SOURCE: https://www1.eere.energy.gov/vehiclesandfuels/avta/light_duty/fsev/fsev_gas_elec1.html
Solar Paneled Surfaces
Vehicle surfaces can also be used to help recharge batteries.
By integrating solar panels on the roofs and other surfaces,
electronic vehicles can further create efficiency in the
market. Ford unveiled its concept for their electric car
outfitted with solar panels at the 2014 Consumer Electronics
Show. The Ford C-Max Energi's roof would be equipped with 5
square feet of solar panels, which can power up to 75% of a
typical driver's needs. The solar paneled C-Max Energi will
perform the same as the C-Max plug-in hybrid by utilizing a
day's worth of sunlight.
Mobile Applications
Mobile apps that identify car charging stations and other
resources are now emerging on the market. Applications like
ChargePoint, CarStations, and PlugShare have been developed to
help users locate the nearest charging stations. The
PlugShare app allows users to locate residential, public, and
high power charging stations as well as plan a travel trip.
ChargePoint, Inc. allows you to map the 16,000 ChargePoint
charging stations and their real-time availability. R&D
tax incentives are available to companies further developing
mobile apps for EV users.
|
Gasoline
Vehicle
|
Function
|
Electric
Vehicle
|
|
Gasoline
tank
|
Stores the
energy to run the vehicle
|
Battery
|
|
Gasoline
pump
|
Replaces the
energy to run the vehicle
|
Charger
|
|
Gasoline
engine
|
Provides the
force to move the vehicle
|
Electric Motor
|
|
Carburetor
|
Controls
acceleration and speed
|
Controller
|
|
Alternator
|
Provides power
to accessories
|
DC/DC converter
|
|
|
Converts DC to
AC to power AC motor
|
DC/AC converter
|
|
Smog
controls
|
Lowers the
toxicity of exhaust gases
|
|
Tesla Efforts
As the Tesla electric vehicles continute to
develop in the market, Tesla expands its efforts to include
creating charging networks. In 2014, Tesla announced the
completion of their nationwide supercharging network. The
network spans from Connecticut, down the East Coast, across
middle America to Los Angeles, and then up the West Coast to
Vancouver. The free Tesla charging stations now create a very
accessible route for Tesla EVs to travel from coast to coast.
Tesla recently filed a patent for the
"Multiport Vehicle DC Charging System" which would allow
stations to prioritize multiple EV charging based on need and
arrival time. Also recently patented, Tesla's hybrid EV
battery with 400 mile capability. Innovation in EV batteries
and charging technology can lead to a major expansion of the
EV market and these efforts may qualify for R&D tax
credits.
Utility Electric
Vehicle Initiatives
Utilities across the country are
implementing electric vehicle initiatives to jumpstart and
support the growth of the market. Fortune 250 company Duke
Energy, headquartered in Charlotte, NC, has pledged that by
2020, new vehicle purchases will be plug-in electric vehicles.
Duke is also working with EV industry leaders to research,
test, and deploy charging stations.
In 2013, PESG opened the largest New Jersey electric car
charging station at their Newark, NJ headquarters. The
initiative provides free EV charging at the 13 plug-in
stations and free garage parking (which can be around $600 a
year).
Portland General Electric, headquartered in Portland, OR, has
joined forces with Portland State University for research,
economic development, community projects, and training. PGE
also helped in the selection of Oregon for the DOE funded 'EV
Project' which will place charging stations throughout the
Portland metro area.
Conclusion
Electric vehicle makers and utilities alike
are working to prime the market for upcoming environmental and
economic changes. Both sectors share a common connection and
new developments in both markets are underway. Research and
development activities, particularly assisting the conversion
from fossil fuels to electric vehicles may qualify for federal
R&D tax incentives.
