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For the gristmill, I ran across this article which argues the future of the internal combustion engine is bright for much of this century. Long post but otherwise unavailable without subscription.

nathan
~~~~~~

That fabulous invalid the internal-combustion engine is very far from dead.

http://www.mckinseyquarterly.com/articl ... L2=2&L3=38
Lance A. Ealey and Glenn A. Mercer
The McKinsey Quarterly, 2002 Number 3

The internal-combustion engine was synonymous with the automobile throughout
the 20th century. But its future is now at risk, since it faces competition
from both the hybrid gasoline- and diesel-electric engine (that is, the
hybrid) and from the fuel cell.1 As befits any new technology, fuel cells
(see sidebar "Challenge or opportunity?") and hybrids are attracting heavy
investment and media attention. You would think that the internal-combustion
engine had nowhere to go but out.

But todays internal-combustion engine is far more advanced and efficient
than its predecessors. Over the past 20 years, automakers have significantly
improved its power, its fuel efficiency, and its emissions, with more
changes to come. Not that it will always outperform the alternatives; fuel
cells‹rapidly gaining market acceptance and slated to be in mass production
for some premium markets by 2010‹may become the leading technology of the
late 21st century. However, given the current economics of the
internal-combustion engine, we predict that it will still be installed in 90
percent of all new vehicles sold in developed economies in 2015 and remain
dominant in new vehicles for at least another decade after that, both as a
stand-alone technology and as an integral part of hybrids.

Only regulation could facilitate a quicker transition to the fuel cell.
Indeed, environmental concerns about greenhouse gas emissions such as carbon
dioxide and the geopolitical desire for energy independence may accelerate
the demise of the internal-combustion engine, for governments could enact
policy reforms to favor the development of alternative technologies2 and
their adoption by the consumer.3 But until the consumer is ready to embrace
them, most governments are unlikely to accept the political risk of radical
reform.

The lay of the land

Until the late 1960s, business economics and perceived consumer values
shaped the automotive industrys power plant choices. Carmakers could choose
from a range of technologies.4 The value to the consumer of each of them was
determined by its fuel and cost efficiency as well as its safety,
durability, and ease of use. The convenience of the supporting
infrastructure available for the internal-combustion engine was another very
important consideration in the power plant choices of the automakers. In
addition, increasingly strict emissions regulations have been influencing
their priorities since about 1970.

A closer examination of these issues‹technology, infrastructure, and
emissions regulation‹can help make it possible to forecast which technology
will power cars in the coming decades. Other factors too may eventually be
important. Fuel cells, for example, may have unique advantages for what auto
engineers call "packaging": since they dont need an engine bay, they offer
greater freedom in styling and structural safety. For the time being,
however, the three fundamental issues will prove decisive.

Here we focus on only two technologies: fuel cells and gasoline- or
diesel-powered internal-combustion engines. Hybrids‹the third contender‹are
clean and fuel efficient and have a valuable role to play in the near term,
but they sacrifice performance and raise costs, since two separate
technologies must be integrated and controlled.5 Although hybrids are in
compliance with todays lower emissions targets, only the fuel cell can
power the zero-emission vehicles (ZEVs) that regulation will require in
ever-increasing numbers.

Technology

At the beginning of the 1980s, the average horsepower per liter of cars in
the US market had been drifting for 25 years‹since the introduction of the
high-compression engine, in the mid-1950s. A complacent industry was making
few efforts to improve the underlying technology. But in the early 1970s,
pressure for improved efficiency and emissions performance rose sharply. The
US Clean Air Act as amended throughout the 1970s embodied in law the
environmentalists demand for stricter emissions rules. Furthermore, the
Arab oil embargoes of the 1970s squeezed the fuel supply and drove the need
for more efficient engines.

Early efforts to meet new efficiency and emissions requirements succeeded,
though at the cost of a huge erosion of power, drivability, and overall
performance. But breakthroughs such as electronic engine-control systems and
catalytic converters enabled the internal-combustion engine to more than
double its average horsepower per liter, from 29 in 1980 to 64 in 2002, at a
significantly lower cost, and to reduce its emissions sharply. In 1986, the
engine of an entry-level car accounted for more than 15 percent of its total
production cost. That figure has dropped to 8 percent today, even though
engines now use more expensive materials (such as aluminum) and components.
These developments represent a new and continuing S-curve in the
internal-combustion engines evolution (Exhibit 1).


Indeed, the technology has come a long way, and automakers are committed to
improving its power capacity, fuel efficiency, and emissions still further.
Projections suggest that in these respects, internal-combustion engines will
continue to gain at a rate of 1.5 percent annually‹an impressive pace for a
century-old technology and well in line with current R&D investment. (In
general, on the contrary, returns to R&D investment fall over time.) During
the next ten years, several other advances are expected, including
continuously variable transmissions, infinitely variable engine-valve
timing, direct fuel injection, cylinder deactivation (Exhibit 2), and
drive-by-wire technologies (see sidebar "AUTOnomy raises the stakes").


In the past five years, the number of internal-combustion-related patents
issued by the US Patent and Trademark Office has gone up 25 percent, a huge
leap compared with the incremental increase in the number of such patents
granted over the previous two decades. This upsurge suggests that innovation
in the field isnt in danger of slowing down. The fact that automakers
continue to support such R&D should come as no surprise given their enormous
investment in the technology.

How do fuel cells compare with the internal-combustion engine in raw
performance? At the heart of a typical hydrogen fuel cell lies a
proton-exchange-membrane6 (PEM) stack that electrochemically converts
hydrogen and air into electricity and water (Exhibit 3). This elec-tricity
directly powers the cars electric motors and accessories. Depending on how
efficiently the hydrogen is produced, fuel cells not only are clean "at the
tailpipe" but also tend to use fewer resources along the whole chain, from
the production of fuel to the turning of a cars wheels (Exhibit 4). Fuel
cells also have other potential advantages, such as instant-on torque
response, less noise, and cheaper maintenance. In addition, fuel cells are
more efficient because they generate electric power directly, so they will
be well suited to cars that have increasing numbers of electrically powered
features: the 2002 BMW 7 series, for example, has nine temperature-control
fans just in the drivers seat. The internal-combustion engine, by contrast,
drives an alternator to meet a cars electrical needs and incurs "parasitic"
losses in efficiency by mechanically driving accessories such as power
steering.





Nonetheless, internal-combustion engines are currently well positioned,
technologically and economically, to outperform the fuel cell in powering
vehicles. Although the fuel cell was commercialized at General Electric in
the early 1960s for military and aerospace applications, current prototypes
are still expensive producers of energy, and the reliability and durability
of the PEM generate concerns, especially under real driving conditions.
Despite the rapid development of fuel cells, they are still prohibitively
expensive to produce if the goal is to match the range and performance of
conventionally powered cars. Depending on the manufacturer, current
estimates for the cost of PEM fuel cell prototypes range from $500 to $2,500
per kilowatt produced, which is still a figurative mile behind the
internal-combustion engines $30 to $35 per kilowatt. But ten years ago, the
cost of experimental PEM fuel cells probably exceeded $50,000 per kilowatt
produced, and marked improvements in the underlying technology since then
have captured the interest of the industry, not to mention an estimated $3
billion-plus in investments through 2004.

Another hurdle now being overcome is the amount of space needed for a fuel
cell that can power a car, because the size and weight of the cell affects
its performance and utility. The one in DaimlerChryslers 1994 "concept car"
NECAR (New Electric Car) 1 filled the rear of a van, leaving room only for
the driver and a single passenger. Six years later, the NECAR 5 power plant
fit neatly within the Mercedes small A-Class engine bay and could power
vehicles at speeds greater than 150 kilometers (90 miles) an hour.

Motoring infrastructure

A well-established infrastructure for fuel and repair services is vital for
any driver. The internal-combustion engine clearly has the advantage here,
for developed economies provide ready access to these services. The hydrogen
fuel cell faces one of its greatest challenges in precisely this arena,
since it lacks an infrastructure for its upkeep and maintenance. The
creation of such facilities poses several potential problems. Building
hydrogen storage facilities at filling stations (or the stainless-steel
tanks needed for convertible methanol) and manufacturing tankers to supply
those stations will require billions of investment dollars, for example.
Experts predict that the infrastructure will develop gradually, beginning
with large stations for centrally fueled fleets (of city buses, to give one
example) and then moving to more dispersed and consumer-friendly locations,
while existing gasoline stations are slowly converted to the fuel cell
technology and new outlets are constructed to service it. Appropriately
trained technicians and equipment must also be made available everywhere
drivers might need them.

Because hydrogen doesnt exist in a natural form that can be tapped, the
generation of the vast quantities necessary to supply power to a large
automobile market is also problematic. Energy- and emissions-efficient
methods of extracting hydrogen from other compounds and of converting it for
onboard use remain elusive. Solar-powered "farms" to extract hydrogen from
water via electrolysis have been suggested but are not yet practical. Fuel
cell vehicles also pose their own potential safety hazards: given the
volatility of hydrogen gas, for example, stringent universal safety
regulations must be imposed for storing, handling, and disposing of it.

The alternatives to a hydrogen gas infrastructure are equally troublesome.
Onboard fuel reformation processes‹which convert conventional hydrocarbon
fuels such as natural gas or methanol into hydrogen‹would require each car
to contain all the essential elements of a small refinery. The increase in
size, weight, complexity, emissions, and costs would further diminish the
ability of fuel cells to compete with other technologies. Moreover, even if
an onboard cryogenic tank could store liquid hydrogen at its vapor point
(-253C), the cost, the risk of accidents, and the problem of refueling
would all present serious obstacles.

Indeed, the cost of deploying a reliable hydrogen infrastructure on par with
current gasoline networks has been estimated at $100 billion and more.
Unless governments subsidize the development of such an infrastructure, it
is quite hard to imagine fuel cells competing economically with the
internal-combustion engine in the foreseeable future.

Emissions and regulations

Emissions regulation is the Achilles heel of the internal-combustion
engine. Carbon dioxide, the primary greenhouse gas, is an unavoidable
by-product of fossil fuel combustion, whether the engine uses gasoline,
natural gas, or diesel fuel or is an electric hybrid. If the public were
convinced of the environmental dangers posed by air pollution and global
warming, or of the geopolitical risks of an overreliance on fossil fuels,
the technology could be regulated out of existence. The cleaner and quieter
fuel cell is far better from an environmental point of view.

If pure hydrogen powers fuel cells, they emit almost no hydrocarbons, carbon
monoxide, carbon dioxide, or nitrogen oxides. What carbon dioxide emissions
there may be are by-products of the steam reformation of natural gas,
currently the cheapest way to produce hydrogen.

Although the internal-combustion engine generates far higher exhaust and
evaporative emissions, the auto industry, despite considerable difficulties,
has proved remarkably effective at reducing many of them (Exhibit 5): other
than the greenhouse-enhancing carbon dioxide, they have fallen by 90 percent
or more since 1968.7 In fact, by 2000, late-model cars emitted less
pollution while running than 1970s-era cars did while turned off (large
amounts of gasoline vapor leaked from old models).


Todays safer, cleaner, and more efficient vehicles have been the result of
the regulators willingness to impose restrictions and of the carmakers
ability to respond to them. Reengineered catalyst technologies and new
close-coupled high-flow exhaust-gas recirculation will further reduce
emissions. What is more, BMW and Mazda are working to adapt
internal-combustion engines to use hydrogen fuel, so they may eventually be
able to piggyback on breakthroughs in techniques for storing it‹a
development that would reduce their emissions almost to fuel cell levels and
further prolong their ascendancy, though with penalties in efficiency.

Nonetheless, this regulatory wave could be reaching its crest. Further
restrictions may be beyond the automakers capacity to meet at a reasonable
cost. Particularly in large metropolitan areas, the internal-combustion
engine is facing a raft of proposed regulations to limit emissions; the
possibilities include banning it from city centers and imposing special
taxes for vehicles fueled by hydrocarbons. The California Air Resources
Board (CARB), for example, has required high-volume automakers to sell a
percentage of zero- or near-zero-emissions vehicles in the state by 2003.
Because of the immaturity of pure-electric-vehicle technologies, CARB
withdrew two previous ZEV phase-in milestones and has relaxed the 2003
targets. Yet carmakers might still miss the final deadline, thereby exposing
themselves to millions of dollars in potential fines.

In April 2002, California became the first US state in which a bill
restricting carbon dioxide emissions from automobiles was introduced. Will
regulators go further and impose the ZEV standard on all automobiles or
enforce carbon dioxide emissions limits that the internal-combustion engine
cant meet? Barring a dramatic shift in the level of consumer concern for
the environment, these scenarios seem unlikely. Surveys show that while a
majority of consumers support efforts to reduce emissions and conserve fuel
in principle, fewer are willing to sacrifice cost, performance, or
convenience.8 Any attempt to regulate the internal-combustion engine out of
existence, it seems, would proceed very slowly.

Besides complacency, the major constraint on regulation is the potential
loss to governments of revenues from fossil fuel taxes. This problem, in
addition to the need to subsidize the hydrogen supply chain, may place an
intolerable fiscal burden on those governments, in the developed world, that
are thinking about using regulation to accelerate a switch to fuel cells
before consumers have made that choice.9
------------------------------------------------------------------------

Given the many advantages of the internal-combustion engine, it will remain
the dominant power plant well into the present century, both as a
stand-alone technology and in gasoline- and diesel-electric hybrids. Its
tremendous capacity for improvement means that its competitors should take a
long time to catch up or even to assume a strong position in the automobile
market. Developing countries, which have less onerous greenhouse gas
restrictions, will likely embrace the best available internal-combustion
technology rather than confront the cost and infrastructure obstacles of
alternative power.

Well into the middle of this century, more cars around the world will be
propelled by the internal-combustion engine than by any other power source.
These cars will require all the fossil fuel and maintenance support
currently in place. While the fuel cell is an up-and-coming technology, its
advantages are being realized more slowly than many had hoped. A brash leap
into a fuel cell world is risky and, at present, unlikely. A well-planned
transition will avoid a premature launch, a disappointed public, and a
fallback to industry and environmental complacency.
Challenge or opportunity?

For the foreseeable future, automakers will likely have to manage a variety
of power plant technologies. To stay competitive and to meet regulatory
emissions targets, these companies must continue to develop and service the
internal-combustion engine and its hybrids while concurrently advancing fuel
cell technology.

Significant structural changes to the industry appear imminent. Automakers
have begun to seek corporate partnerships within and outside it to mitigate
the costs and risks of developing fuel cell technology. They will also have
to predict whether their fuel cells will offer significant proprietary
advantages in power density, fueling strategy, and convenience or will
ultimately become commodity items, allowing automakers to outsource the
production of fuel cells and the associated power trains.

The fuel cell is just one of many new technologies‹including drive- and
brake-by-wire‹that will accelerate the cars current transformation from a
mechanical-hydraulic machine with electronic trim into a fully electronic
system akin to the modern jet fighter. These technologies will require a new
breed of engineering, purchasing, research, service, and management talent.
It is doubtful that any automaker or retail auto service shop now has the
mix of specialists to handle this new paradigm.

Further alliances with electronics suppliers can be expected; indeed, cars
might become a new vessel for "Intel Inside"style co-branding. Automakers
might also use the new technologies to pursue opportunities throughout the
value chain. New brands could generate new distribution concepts and
retailing innovations, facilitating the shift away from todays entrenched
and high-cost dealer networks. It is the ability to exploit such
opportunities and to develop a judicious sunset policy for the
multibillion-dollar asset base of the internal-combustion engine that will
determine whether the current automotive OEMs will remain the
personal-transport leaders in the future or will be suffocated by their
legacy of sunk costs.

Return to reference
AUTOnomy RAISES THE STAKES

The AUTOnomy, a concept car from General Motors, showcases two advanced
technologies: fuel cells and drive-by-wire. According to Dr. Christopher
Borroni-Bird, the director of GMs Design and Technology Fusion Group, the
AUTOnomy was designed around the premise, "What if we were inventing the
automobile today rather than converting a century-old concept?" The
following interview was conducted by Lance Ealey in March 2002.

The Quarterly: With all the media buzz around fuel cells, many people
overlook the fact that the AUTOnomy is no less about drive-by-wire. What is
drive-by-wire, and why do you see it as the partner of fuel cells?

Christopher Borroni-Bird: Drive-by-wire replaces an automobiles hydraulic
and mechanical systems, such as the brakes, throttle, and steering, with
electrical and electronic systems. Fuel cells and drive-by-wire technologies
have several natural affinities, so that combining them makes sense. Both
will likely become commercially viable in the same time frame, maybe five to
ten years, so they will evolve side by side, which could help resolve
technology compatibility issues. Also, drive-by-wire at the level used in
the AUTOnomy‹electric steering, braking, et cetera‹requires high voltage, 42
volts or more, to work, because braking can be very energy intensive. That
kind of voltage is difficult to sustain with todays 12-volt systems. What
is needed is a high-voltage supply, and thats what the fuel cell provides.
We realized that this was a powerful concept from a technology standpoint.
It made so much sense to combine the fuel cell and drive-by-wire.

More to the point, combining the fuel cell and drive-by-wire is what breaks
the automotive paradigm. When our supplier SKF introduced us to its
drive-by-wire technologies, it really got us thinking about eliminating all
of the mechanical links between the chassis and the body. The core of the
AUTOnomy is a skateboardlike chassis that contains the fuel cell, the power
train, the suspension‹in fact, the entire functional apparatus of the car.
But because all vehicle controls, including steering, braking, and
acceleration, are operated electronically, no mechanical links intrude into
the body. This makes the vehicle body itself interchangeable. And that makes
deconstructing the automotive business model a very interesting proposition.

The Quarterly: How so?

Christopher Borroni-Bird: For wealthy individuals, this could mean seasonal
body changes. For fleets with specialized vehicles, it could offer a way to
dramatically increase asset utilization. For the industry itself, it
portends new ways of doing business. An automaker might have three or four
skateboards of different shapes, sizes, and capabilities and would produce
these in the millions of units each, generating tremendous scale economies.
Bodies could be outsourced or made locally in foreign markets to meet
local-content requirements. The licensing of bodymakers could become an
attractive new revenue stream for auto companies.

The Quarterly: Isnt the fuel cell itself scalable in a similar way? Does
its design provide for further flexibility?

Christopher Borroni-Bird: Thats right. To increase power output, for
example, you simply increase the number of plates in the fuel cell stack.
That would allow auto companies to basically build one scalable power plant
and so replace the many different internal-combustion-engine factories they
now must have.

The Quarterly: That flexibility actually has historical precedents. Before
the coming of mass production, a wealthy car buyer often bought a rolling
chassis from a carmaker and would then commission an independent bodymaker
to build the body for it. An additional service such companies would offer
their customers was the storage of additional bodies, which could be swapped
on and off the chassis as needed.

Christopher Borroni-Bird: One can easily imagine a similar business model
evolving for the AUTOnomy. The AUTOnomys skateboard is modular, updatable,
and envisioned to last 20 years. This last point could make it an
interesting choice, in future years, for emerging markets. With far fewer
mechanical systems, the components of the skateboard should be more durable.
After 20 years it would still work. And it would still be a zero-emissions
vehicle.

The Quarterly: One of the perceived problems with fuel cells is that a good
many customers for automobiles and other vehicles now appear to be unwilling
to pay premium prices for the purposes of promoting broader social and
environmental priorities, such as cleaner air. How can this problem be
overcome?

Christopher Borroni-Bird: Most companies have been working on fitting fuel
cells to conventional internal-combustion-engine vehicles. In a sense,
thats low risk, but in another sense it may be a doomed approach. Like it
or not, I think you have to offer more to the general public than just
cleaner air or fuel independence. I think were getting closer to that value
proposition with vehicles like the AUTOnomy.

The Quarterly: Was the design freedom the AUTOnomy offers always a priority
for the development team?

Christopher Borroni-Bird: Yes and no. Our biggest surprise during the
AUTOnomy project was coaxing people to take advantage of the design freedom
the concept offered. At first, it was difficult for the designers to come to
grips with. But if we can make this vehicle look attractive in a way that a
conventional vehicle cant duplicate, that will be a real win.

Return to reference


Notes:
Lance Ealey is an alumnus of McKinseys Cleveland office, where Glenn Mercer
is a principal.
1The industrys enthusiasm for another contender, the pure electric vehicle,
has been severely curbed for a number of reasons. Batteries with suitable
power are too big and heavy for most vehicles, and ranges and recharging
times remain unresolved issues. Barring an unanticipated breakthrough in
battery technology, the pure electric vehicle will likely be a niche player
in the foreseeable future.
2Supply-side measures, including R&D assistance.
3Demand-side measures, such as tax credits.
4From the early years of motoring, steam engines, electric motors, and
gasoline and diesel engines have appeared in many configurations. In fact,
hindsight obscures the hard-fought battle waged over the internal-combustion
engine. In the 1890s and 1900s, journals noted the ease of use, quietness,
and simplicity of electric vehicles. By 1910, gasoline-electric urban
delivery trucks were fairly common, since, according to a high-tech journal
of the day, The Horseless Age, they "overcame the lack of flexibility of
internal-combustion engines." Steam power, the forgotten latecomer, quickly
surpassed electric vehicles in range, speed, and convenience; Germany
produced high-pressure steam-powered trucks as late as 1936.
5The "hybrid" noted here is the true hybrid, such as the one in the Toyota
Prius, a car that can be propelled by either its internal-combustion engine
or its battery. "Mild" hybrids, in which the battery is little more than an
alternator-motor that can power a cars accessories, represent an extension
of the internal-combustion engine.
6Also known as the polymer-electrolyte membrane.
7Honda, whose 2000 Accord SULEV was the first vehicle powered by an
internal-combustion engine to achieve the hybrid-equaling SULEV (super
ultralow emission vehicle) status, has announced that its 2003 Civic SULEV
will match the emission status of its Civic Hybrid and will also achieve
better fuel efficiency.
8A 2002 survey by J. D. Power and Associates, for example, revealed that
while 60 percent of US consumers would consider a hybrid for their next
vehicle‹primarily to reduce fuel costs‹that proportion dropped to under 20
percent if the extra purchase cost exceeded the fuel savings. And of
recently marketed "green" vehicles, only those (such as the Toyota Prius)
with performance comparable to that of cars powered by internal-combustion
engines have had acceptable sales, even in Europe.
9In 2002, Oregon became the first US state to raise registration fees for
hybrid vehicles because they use less fuel and therefore reduce fuel tax
revenues, which typically help pay for road construction. This issue could
become increasingly problematic in parts of the world where fuel taxes
contribute a disproportionate share of general tax revenues.
 
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