Although not as popular as the automotive sector and its electric vehicle (EV) hot trend, the transportation industry represents a major portion of global greenhouse gas (“GHG”) emissions and developing viable solutions to make it greener is a fairly complex challenge. To clearly define the industry’s perimeter, transportation here does not include passenger transportation but only raw materials to finished goods freight via airline cargo, trucking / logistics, rail and maritime routes. Remaining mostly powered by gasoline and diesel, transportation industry players collectively emitted ~7.5 GTCO2 in 2014 (or ~15% of total emissions that year), an amount 64% higher than in 1990. Although the current diplomatic context between the US, China and the EU is not favorable to global trade, and even considering annual merchandise exports globally remain below 2014 levels, reducing the negative environmental impact of the transport industry must remain a top priority. Furthermore, the recent spike in oil spot prices and higher forward prices confirm both the lack of conviction by investors towards decreasing crude oil demand in the near to medium term and the strong economic rationale that pulling out of oil dependency represents. Short economic circuits and locally sourced & manufactured products help solving the equation exogenously, but clean transportation will allow remote smarter and cleaner solutions to remain ecologically attractive anywhere.
Direct CO2 emissions by transport sub-sector
Source: IPCC WG3 report, chapter 8
Unlike the automotive industry and its ability to develop new technologies answering most end-users’ needs, most breakthrough enabling massive reductions of GHG emissions in the transportation sector are for the most part at the design / preliminary testing level. Indeed, companies like Tesla, NIO, Toyota, Nissan, Hyundai or BMW have already started mass manufacturing of electric, hydrogen-powered or hybrid cars. Others such as Porsche, Byton, Polestar (Volvo), Tata Automotive or Sono Motors are also working on upgrading existing electrical vehicle concepts. Just like electric buses, light trucks and cars could enable saving 279,000 barrels of oil in 2018, the transportation sector needs to get involved and adopt sustainable technologies.
Total emission reduction basic potentials compared to the current policy scenario in 2030
Source: UN environment, The Emissions Gap Report 2017
Trucks – Small portion of vehicle stocks but high GHG emissions
Within the transportation industry, the closest to the automotive industry in terms of cleantech innovation is the trucking sector. In 2017, more than 4m heavy trucks (class 7 & 8) were manufactured globally, of which ~80% in Asia-Oceania. According to Navigant Research, medium and heavy-duty electric truck production reached 31,000 vehicles in 2016… Tesla recently entered the heavy truck market with Semi, already ordered by Pepsi, Walmart and Sysco. Other startups have been developing all-electric trucks, including Thor Trucks, Nikola Motor, claiming over $6.5bn pre-order reservations for its Hydrogen Electric Truck and a partnership with Bosch for its powertrain system, or Einride, which designed a window-less electric and autonomous heavy truck.
Industrial giants are also weighting in to bring electric long-haul trucks to market. Navistar, one of the largest class 4 through 8 truck manufacturer in North America (~293K trucks delivered in FY2017), partnered with Volkswagen Trucks to enter the clean and connected truck market. Cummins, the dominant player in the US diesel heavy-duty truck market, unveiled in August 2017 its AEOS prototype, an all-electric powertrain system for heavy-duty trucks. Daimler Trucks’ Japanese subsidiary also presented its heavy-duty truck E-FUSO Vision One at the Tokyo Motor Show in October 2017. Dominant players understand that upcoming competitors and technologies are disrupting their market and, hopefully, also apprehend the urgency with which fuel cell, all-electric or hybrid technologies need to overtake diesel powered engines.
Although McKinsey forecasts a 15% penetration for eTrucks by 2030 globally, upcoming breakthrough in battery technology (capacity, charging speed, product life, manufacturing processes, production costs) and fuel cells, combined with infrastructure investments in charging station networks as well as a greener energy mix in hydrogen production and tougher environmental regulations, should increase this forecast substantially. Considering that trucks only represent ~5% of the global vehicle stock but consume more than 20% of the total road transport fuel, enabling the industry to become greener will have a significant positive impact on air pollution.
The sub-segment which is logically adopting electric technology first is the short-distance and primarily urban truck fleet: the light and medium-duty truck classes. Daimler delivered its FUSO eCanter truck to UPS in September 2017, highlighting that €1,000 can be saved every 10,000kms in diesel costs and maintenance expenses can be reduced by 30%. Workhorse, in partnership with BMW, Panasonic and Morgan Olson, also developed an hybrid truck which demonstrates a 400% improvement in fuel efficiency and maintenance expenses reduced by at least 60%. BYD, the Chinese giant which just opened a 24 GWh battery factory in China and famous for its electric buses, is now offering an extensive product line of electric medium-duty trucks in the US. French company Symbio powers the new hydrogen-powered Renault Kangoo ZE H2, a light-duty truck, featuring a 350km+ autonomy range and a 5-minute refueling time.
Clean energy alternatives to fossil fuel will power tomorrow’s fleet of trucks. Considering that autonomous trucks will be able to run 24/7, light to heavy-duty trucks for urban / regional or long-distance transportation will need to use a mix of hydrogen and electricity to function. If we can imagine fast electricity charging technologies combined with battery swapping for urban / regional transportation trucks during loading and off-loading (although these will be shortened as much as possible), the relevance of hydrogen with its fast-refueling process seems critical for long-haul transportation. Other solutions involving heavier infrastructure developments are being explored and could be an optimal fit for developing economies which are investing in new roadway infrastructure. Although at rather early stages, these include solar roads which could be combined with wireless charging technologies while the vehicle is moving (France/US and Israel leading the way), or a rail / a cable charging vehicles while on the move.
Other companies are developing new types of fuels, such as Canada-based Carbon Engineering, which patented technical processes to capture CO2 in the air, and then mix it with hydrogen generated from water electrolysis using renewable energy sources, thus producing hydrocarbon fuel such as diesel, gasoline, and Jet-A. Clear advantages include a lower usage of water compared to biofuels, the option to gradually increase the mix with standard fuel with no blending limit, the full drop-in compatibility with existing infrastructure and combustion engines, and a cleaner burning with no sulfur and low particulates. The company claims that once fully scaled-up, it will be able to produce fuels for less than $1.00/L. The company does not disclose which energy source is used in the electrolysis process to get to such low prices and does not disclose either which percentage of the CO2 captured in the air, and used to produce 1L of clean fuel, is emitted when this 1L is burnt. However, if not a 100% CO2 “recycling rate”, this breakthrough technology drastically reduces GHG emissions and air pollution.
Hydrogen use from initial commercialization to mass-market acceptability
Source: McKinsey & Company; Hydrogen: The next wave for electric vehicles?
Railways – Investments in hydrorail rather than infrastructure electrification
Other sub-segments of the transportation industry do not enjoy such a prolific number of promising innovations than the automotive industry. Although the railway sector has seen its electrification rate increase significantly over the last decades, there are important portions of the worldwide railway network that are not yet electrified. To replace diesel-powered locomotives, French company Alstom, in a close partnership with Air Liquide, is testing the first hydrogen powered train (Coradia iLint) on German railroads. Two trains are already running and a total of 14 trains are to be built. Siemens and Ballard Power Systems are also developing their hydrogen-powered regional train, the Mireo. Given that hydrogen is most relevant as a clean energy source when it is produced via a “green” water electrolysis process, it would make sense to develop wind and solar projects along unelectrified railway tracks and use the electric current to produce hydrogen. Then, this new renewable fuel would be stored before getting transferred into train tanks. Nowadays, the water electrolysis process to create hydrogen costs four times the standard method using natural gas, excluding the cost of electricity used in the process. However, new technics such as an electrolysis at elevated temperatures (between 700 and 800 degrees Celsius) should enable these prohibitive costs to decrease.
Although hydrogen is not being tested for freight trains yet, Norway’s SINTEF conducted a study comparing alternatives to diesel for the country’s freight network, and hydrogen turned out to be the cheapest solution available. These results are to be considered in the specific Norwegian context but a gradual decrease in hydrogen production and storage prices will have a considerable impact on its global viability.
Greater energy efficiency can also be generated by other components than the type of fuel used. Italian company Greenrail introduced an eco-friendly sleeper made of recycled tyres and plastic. Its sleepers can also feature solar panels (Greenrail Solar) and communicate safety and diagnostic data for maintenance purpose (Greenrail LinkBox).
Maritime and air transportation – Innovation at work but facing battery capacity limitations and significant infrastructure transformation
These are the least advanced sectors within the broad transportation industry spectrum. Transformational initiatives lack adaptable existing technologies due to scale issues and a lack of new viable solutions.
Most startups in the maritime industry are innovating in the logistics and supply chain efficiency domain, using artificial intelligence, real time satellite data and big data to digitalize a quite ageing sector. Some, like WE4SEA, are using big data (wind, currents and waves) to improve a vessel’s or a fleet’s fuel consumption. Norway’s Yara and Kongsberg Maritime’s emission-free & autonomous shipping vessel project is probably the most advanced to date. However, being able to carry 120 Twenty-foot Equivalent Units (TEU), the technology gap between a 6-meter long ship and a 400-meter cargo carrying up to ~21,000 TEU seems fairly disconcerting… Massterly, a JV between Kongsberg Maritime and Wilhelmsen Group, aims to develop and market autonomous and greener shipping technologies on a broader scale. Eco Marine Power developed the Aquarius MRE System which uses a combination of wind and solar power to reduce ships’ fuel consumption by 10% to 40%.
Potential energy efficiency improvements by source
Source: International Maritime Organization, UNFCCC Technical Experts Meeting, May 2016
Another technology, which is not a clean alternative energy source but could still help curb carbon emissions in the maritime shipping industry, is blockchain. IBM and Maersk launched a new technology platform called TradeLens, enabling a secured digital supply chain. Its decentralized ledger allows shippers, shipping lines, freight forwarders, port and terminal operators, inland transportation and customs authorities to collaborate and access real time data including documents, contracts, as well as temperatures or container weight powered by sensors and the IoT. This project is already backed by 94 organizations.
Maritime shipping moves four trillion dollars’ worth of goods around the globe every year as 90% of world trade by volume is carried by shipping. As the maritime shipping industry is estimated to release ~2.5% of the total carbon dioxide emissions created by human activity in the atmosphere annually, it is absolutely critical to turn it into a carbon neutral sector as fast as possible. Understanding the urgency, the UN announced in October 2016 that the sulfur emissions by ships would be cut and new rules would be enforced by 2020. The new requirements will limit the maximum amount of sulfur from 3.5% of fuel content currently to 0.5%. Analysts estimate that it will cost the container shipping industry $35-40bn. Unfortunately, they do no try and model the implied costs generated by the non-implementation of such requirements in the long run…
Source: Lloyd’s Register, Katharine Palmer, April 16, 2018, “IMO GHG Strategy – What does it mean?”
The most impressive progresses made in clean air transportation are in the single-passenger vehicle space, with companies like Aeromobil, Volvo’s Terrafugia, Kitty Hawk, Airbus/Audi/Italdesign, Uber, and Aston Martin. Solar Impulse represented a breakthrough and tested numerous new technologies but cannot be applied in the near future to turn a cargo plane into a zero-emission plane.
It appears, and quite logically, that most initiatives to make the aviation industry cleaner applies to both passenger transportation and cargo shipping. The Air Transportation Action Group (ATAG) released a report in September 2015 laying out the main levers in the industry to reduce its environmental footprint. Solutions are being developed in the field of airplane manufacturing (assembly but also product supply chain), alternative fuels, energy efficient infrastructure and air traffic management, as well as aircraft operational improvements.
Examples of innovative startups optimizing processes and leading the industry towards its 2020 carbon-neutral growth and net reduction of carbon emissions goals (50% by 2050 compared to 2005 levels) include: Lanzatech, which developed a more sustainable jet fuel that reduces GHG emissions by at least 65% compared to conventional (petroleum) jet fuel; e-peas harvests & stores ambient energy and provides energy efficient and high tech microcontrollers for very diverse applications beyond the aviation industry; Openairlines is a fuel saving and CO2 reducing software which optimizes an aircraft’s energy consumption during the flight; Humatics developed a microlocation-as-a-service technology which locates objects with millimeter-scale precision and contributes to more optimized operations; or Sunpartner Technologies, which holds 130 patents related to transparent photovoltaic surfaces.
Cleaner regional passenger planes under development like Zunum Aero’s hybrid prototype or Eviation’s all-electric prototype do not represent viable solutions today for the air shipping industry, but projects like Wright Electric’s 180-seat electric aircraft with less than 300 miles in range scheduled to be developed by 2027 is a significant milestone on the road toward clean air shipping.
The freight transportation sector is evolving as its respective sub-sector international organizations have laid out strategies and goals to reach by 2025, 2030 and 2050. However, the uncertainty remains high as most large GHG emitting countries which signed the Paris Climate Agreement are adopting restricting laws behind schedule. In Europe, transport is the only sector that has been increasing GHG emissions between 1990 and 2014 (including passenger transportation but excluding international maritime). For example, the Paris Agreement only applies to domestic flights whereas international flights are covered by ICAO’s CORSIA program adopted in 2016. Thus, the EU decided that its Emission Trading System (ETS) applying to flights within the European Economic Area (EEA) since the 2008 legislation would not apply to international flights, despite the fact that the European Court of Justice confirmed its compatibility with international law. Thus, if the CORSIA initiative is not successful in effectively reducing the air shipping industry’s GHG emissions, the EU ETS would only revert back to its original full scope from 2024 onward, 6 years before the +2-degree Celsius deadline…
Economic viability of operational improvements, vehicle electrification, cleaner energy sources, infrastructure transformation, digitalization and telecommunication technologies have the potential to accelerate our ability to reach the 2030 goal set by the Paris Agreement if companies understand and prioritize the financial and environmental benefits of investing in such transformational technologies today.
CO2 emissions by sector (million tonnes, baseline scenario)
Source: OECD, ITF Transport Outlook 2017, p63