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URGENT: What You Need to Know about California's Plans to Regulate PHEV Conversions

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  • Felix Kramer
    In the midst of all the excitement about new plug-in vehicles at the Detroit Auto Show and a new administration in Washington, momentous developments are
    Message 1 of 1 , Jan 16, 2009
      In the midst of all the excitement about new
      plug-in vehicles at the Detroit Auto Show and a
      new administration in Washington, momentous
      developments are brewing in California that could
      seriously threaten the viability of the nascent
      industry that's converting hybrids to plug in.
      This long document includes some background
      followed by our draft testimony to be presented
      at the California Air Resource Board (ARB or
      CARB) next Thursday or Friday. If you want the
      quick version, halfway through you'll find our
      effort to link what's going on in Sacramento and
      in Washington by invoking the spirit of Abraham
      Lincoln. We'd appreciate comments or suggestions
      before we file our comments electronically on
      Monday and testify late in the week.

      (Shortly after it goes out on email, this posting
      will also be viewable at
      http://www.calcars.org/news-archive.html -- there
      you can add CalCars-News to your RSS feed.)

      SUMMARY: The California Air Resources Board is
      moving ahead rapidly to regulate many aspects of
      conversions of hybrids to PHEVs. We appreciate
      the good intentions of the dedicated staff at
      CARB. But we believe the proposed rules will
      drastically slow or prevent further development
      in an industry that at this point needs
      encouragement more than restriction. The proposed
      regulations impose onerous requirements for
      testing procedures, emissions, warranties and
      related issues. It is not easy for an agency
      accustomed to working with large auto industry
      players to accommodate entrepreneurial startups
      often working on vehicles one at a time in search
      of innovative ways to reduce the emissions in
      existing vehicles -- but we think it's important
      to do this carefully and right.

      No one has pointed out that the rules have
      implications not only for this nascent
      aftermarket conversion industry but also for
      companies planning to supply batteries for
      plug-ins, for those evaluating and testing the
      vehicles, and for the potential to convert
      non-hybrid internal combustion vehicles to
      plug-in. CalCars has hoped the affected companies
      would take the early lead in responding
      effectively to these regulations that place in
      jeopardy their future business prospects, but
      they have not had the time/resources etc. to do
      so (nor have we). Developments to date imply that
      they won't have the resources to comply with the proposed regulations.

      The Board will consider the regulations for
      adoption at its January 22-23 meeting in
      Sacramento. We strongly urge all supporters of
      the continued development of plug-in vehicles to
      attend the hearing and testify in person as well
      as electronically. The meeting agenda at
      shows the topic is scheduled as the first item
      (8:30AM) Jan 23. But in the past, items have been
      moved forward at the last moment, causing people
      intending to testify at the stated time to miss their chance.

      See the background materials below, our draft
      testimony, and the very comprehensive cover story
      on the East Bay Express, "Who's Killing the
      Plug-In Hybrid" by Robert Gammon, as well as some
      comments at
      . To get a sense of the trends in this industry,
      also see the story the Wall Street Journal put on
      the front page of its business section on
      December 30, "Squeezing More Miles Out of that
      Hybrid" http://online.wsj.com/article/SB123059301640740831.html .

      Below are some initial resources, followed by the
      draft of our planned testimony we will file
      electronically on Monday and deliver on Thursday or Friday.

      The process has been going on for about a year.
      The first version of the rules were available at
      . Public comments from then are at a URL we have not found.

      Last summer, CalCars Technical Lead Ron Gremban,
      following discussions with the individuals and
      companies involved in the EAA-PHEV (Electric Auto
      Association - Plug in Hybrid Electric Vehicle)
      project (the Open Source home of the
      do-it-yourself and engineering experimenters at
      http://www.eaa-phev.org and its discussions
      archived at
      gave a formal reply strongly opposing many of the
      proposed regulations. You can see our overview of
      the business and technical issues surrounding
      regulation of aftermarket conversions, followed
      by Ron's formal reply, at 08/01/08: Response to
      CA Air Resources Board's Proposed PHEV/Conversion
      Regulations http://www.calcars.org/calcars-news/977.html

      We introduced Ron's testimony, which included a
      proposal for graduated regulation based on the
      number of conversions a converter sells, by
      saying: "Let's be very careful of unintended
      consequences of too-early and too-specific
      restrictions, which could inhibit invention.
      Right now the auto industry is benefiting from
      new ideas that could help them make money
      producing clean cars. And conversions have
      already stimulated discussion about public and
      private incentives for these 'green-tuned'
      vehicles and for the even better mass-produced
      versions that will follow them. Let's take this
      step by step and not shut down the small innovators."

      Following ARB staff revision of the proposals
      (which eliminated obviously impractical charging
      time and special charging plug requirements but
      retained or softened only slightly other onerous
      provisions -- for example, conversions now reset
      the vehicle mileage to zero for warranty purposes
      only if done to vehicles 6 or less years old)
      another comment period began December 8. The link
      is http://www.arb.ca.gov/regact/2008/phev09/phev09.htm . Most relevant are:
      * Notice of Public Hearing, which explains the
      issue, the Board meeting to consider it, and how
      to submit testimony in person or electronically.
      * Staff Report: Initial Statement of Reasons (ISOR)
      * Appendix G: Proposed Language for Aftermarket
      Parts Certification of Off-Vehicle Charge Capable Hybrid-Electric Vehicles
      * Appendix J: On Board Diagnostics (OBD)
      Considerations for Aftermarket PHEV Conversion Systems

      See over a dozen comments received since Dec. 8
      . Comments can be submitted electronically at
      Written comments must be received by January 21.
      If you go to the hearing, bring at least 30 copies of printed testimony.

      DRAFT CalCars Response to the California Air
      Resources Board's Proposed PHEV Conversion Regulations

      [CalCars' representative will verbally present
      the first five paragraphs followed by the
      "Fourscore and seven months ago" section that
      follows immediately. We will submit the entire document electronically.]

      SUMMARY: The California Cars Initiative
      (CalCars.org) has been promoting PHEVs for seven
      years. As a nonprofit technology and advocacy
      group, we worked to spark the interest in PHEVs.
      We gained attention through conversions -- our
      strategy to build public awareness and motivate
      carmakers to mass produce PHEVS. In 2004 we did
      the first retrofit in a Corte Madera residential
      garage, placing our designs into the public
      domain at PriusPlus.org. We built on the work
      done by Prof. Andy Frank and dedicated people in
      the auto and utilities industry and government to
      advance PHEV concepts. Our advocacy and
      technology efforts since then has helped bring us
      to the point where many carmakers are now
      planning to build PHEVs. From that perspective,
      WE NOW URGENTLY PROPOSE that the California Air
      Resources Board take one step backward and decide
      to slow down regulation of aftermarket conversions.

      The industry is still so young and small that
      most innovation is still coming from self-funded,
      skilled, dedicated, engineers and entrepreneurs.
      These players and other affected parties have not
      yet had a chance to fully and productively
      present and discuss their concerns to CARB.
      Implementing the proposed rules will drastically
      slow growth of the conversion industry, and it
      could prevent further progress with components,
      software and usability. Only one or two
      companies may have the deep pockets to comply.
      Other operating companies and entering
      entrepreneurs will have difficulty gaining the
      financing and personnel to handle the up-front
      deep engineering and testing -- plus the
      warranties -- that CARB gets from auto
      manufacturers and may now expect from converters.

      REQUIRE: that all the companies involved in
      conversions simply register with CARB, inventory
      their completed conversions, project their 2009
      volume, and make themselves available for a more
      deliberative process. Failing that, we propose
      the staff devise a set of graduated rules,
      suggested in our extended testimony, to require
      increasing compliance only as manufacturers sells
      significant volumes of conversions.

      Below we are present some detailed
      justifications, in addition to those we submitted
      August 1, for this urgent request, along with
      specific technical and business arguments. We
      have submitted this new testimony electronically.
      (We leave to others to re-address the specifics
      of the regulations about which we testified on August 1.)

      Felix Kramer, CalCars' founder, says, "I
      recognize with much regret that this regulatory
      process has come so far without including some
      very important issues. I am sorry I could not be
      here in person. This week I will be in Washington
      DC. A key theme of this Presidential Inauguration
      is cooperative inclusion. The problems we have
      are so great that we can't solve them unless we
      work together. That theme reflects the timeless
      words of Abraham Lincoln's Second Inaugural,
      which concluded in part, "With malice toward
      none, with charity for all, let us strive on to
      finish the work we are in." I expect that we will
      have heard similar eloquence on January 20 that
      continues to evoke Lincoln's approach.

      In that spirit, I am presenting for your
      consideration an update of another Lincoln speech
      that still inspires us all. In a spirit of
      humility, I attempt to look at the issues the
      Board faces today through the prism of almost 300
      words written a century and a half ago:


      Four years and seven months ago, our colleagues
      brought forth in this state a new breakthrough,
      conceived in garages, and dedicated to the
      proposition that all travel should be low carbon.
      Now we are engaged in a great transition, testing
      whether our state, and any state so concerned and
      dedicated, can so evolve. We are met in a great
      capitol of that change. Here a powerful board is
      poised to make a final resting place for the
      dreams of those who have fully pledged their livelihoods to that cause.

      It is in no way fitting or proper that you who
      sit in judgment should reach a final verdict
      today. And, in a larger sense, you can not
      undermine -- you can not regulate -- you can not
      fallow -- this ground. The brave pioneers, here
      and globally, who took the first steps, have set
      in motion a transformation, far beyond your power to approve or deny.

      The world may little note, nor understand, what
      you decree here. But it will be shaped by what we
      do here. It is for us, the experimenters, rather,
      to rededicate ourselves to refine the unfinished
      solutions which we who first plugged in hybrids
      have thus far so seriously advanced. It is rather
      for you, the board, to reflect on the greater
      task remaining before us all -- that from these
      early steps we gain increased momentum for that
      cause for which we have given our full measure of
      imagination -- so that our past efforts shall not
      have been in vain, that you here highly resolve
      instead to encourage those pioneers, that this
      nation, in the name of science, shall have a new
      birth of freedom from oil -- and that innovation
      of the engineers, by the entrepreneurs, and for
      the people, shall not perish with the earth.


      It's too early to impose specific regulations

      The embryonic aftermarket conversion industry is
      mainly comprised of promising small startups. So
      far we see only one hardly-mature mid-sized
      company with deep enough pockets to have good
      prospects of complying with CARB's proposed
      regulations. These proposed rules would require
      potential conversion suppliers to complete all
      design, long-term emissions testing and
      verification, and CARB certifications up-front,
      as well as provide very extended warranties.
      These new regulations would require existing and
      yet-to-be-formed small companies to act as if
      they were large auto companies with substantial
      technical and financial resources and dramatically slower development cycles.

      But today's conversions are the product of
      continuous design refinement and street testing.
      Many have been financed from a handful of sales
      by small companies with a few tens of thousands
      of dollars to work with at any time. The proposed
      rules will significantly raise the cost of entry,
      potentially excluding the very entrepreneurial
      engineers whose innovations established the
      market in the first place. Tellingly, today's
      highest-volume converter, Hymotion, was such a
      small business until it was acquired by battery maker A123 Systems.

      Unfortunately, these companies have been too busy
      developing their technology and products and
      responding to public demand even to fully
      recognize, let alone adequately respond to, the
      developing governmental processes that could so
      significantly affect their work. Now we expect
      that too-early regulation will force some or all
      of these companies to close, halting their
      continued development work, losing jobs,
      promoting stagnation rather than innovation in the industry.

      The contraction of these companies will affect
      their suppliers. Many have promising innovative
      products but lack the track record and resources
      to bid for, let alone get, auto manufacturer
      contracts. Small battery manufacturers, for whom
      testing and validating their products in
      real-world vehicles is the sine qua non of
      engineering and marketing success, will be most affected.

      The consequences will not be restricted to
      California, since some of these companies have
      been establishing installers or franchisers in
      other locations in the US and globally. This is a
      broad industry -- but California is its nerve
      center, and whatever is decided here will have an
      impact everywhere. And finally: the result will
      be less opportunity to reduce CO2 by displacing gasoline with electricity.

      Let's recognize how important conversions have been

      A look back shows the unprecedented impact of the
      conversions from late 2004-2006: they
      demonstrated how close we were to real products
      from carmakers; they gave utilities and national
      labs, the California Energy Commission, CARB and
      the state's air quality districts testbeds upon
      which to evaluate the benefits and logistics of
      PHEVs. They prompted the President, the US
      Department of Energy, Senators, Representatives,
      Governors, Mayors, and others to endorse this
      solution as a way to solve key intersecting
      problems: energy security, CO2 emissions, the
      future product mix of the auto industry, and
      costs per mile. They gave elected officials,
      corporate executives, industry analysts, NGOs and
      ordinary drivers a preview of a plug-in future.
      They helped motivate battery developers to focus
      on the opportunities within the auto industry.

      As the technology and solutions evolve, many of
      these constituencies will still be eager to see
      and derive PHEVs during the next two to five
      years until OEM-produced PHEVs are widely
      available from dealers. They will want PHEVs, as
      will thousands of citizen-drivers. Hundreds of
      citizen-drivers have visited our listings at "How
      To Get a PHEV" at
      http://www.calcars.org/howtoget.html and from
      there they (and hopefully in the future,
      thousands more) will find a company to convert their vehicles.

      An unrecognized broader implication of the regulations

      Regulation now could provide potentially
      dangerous precedent for regulation of conversions
      of non-hybrids to plug-in vehicles, both PHEVs
      and EVs. (See our descriptive page and links
      about this enormous market at
      http://www.calcars.org/ice-conversions/.) The
      very aftermarket conversion companies and their
      suppliers whose existences are threatened or
      prevented are precisely among the firms we expect
      to take the lead in ICE conversions, which we
      believe offer the opportunity to make significant
      near-term reductions in CO2 and petroleum
      dependency during the five to ten years before
      new plug-in vehicles achieve significant
      overwhelming market penetration. And CARB, more
      than almost anyone, knows we have no time to
      delay in replacing fossil fuels with low-carbon electricity.

      We believe this opportunity has been
      under-appreciated, with some exceptions, such as
      former Intel CEO Andy Grove, singer Neil Young,
      and PHEV inventor Andy Frank, and that they
      affect the prospects of such far-flung companies as:
      * Efficient Drivetrains Inc in California
      * Electradrive in California
      * EV Power Systems in North Carolina
      * H-Line Conversions in Kansas
      * Hybrid Electric Vehicle Technologies in Illinois
      * Linc Volt in California
      * Poulsen Hybrid in Connecticut
      * Rapid Electric Vehicles in Vancouver

      None of these companies are directly involved in
      or affected by the current regulatory process.
      But, importantly, they are interested parties,
      because the regulations the ARB adopts for
      aftermarket conversions of hybrids could become
      precedents for their (or other state/federal
      government agencies) imposing unrealistic or
      unduly burdensome limitations on conversions of ICE vehicles in the future.

      Learning the lessons of unintended consequences

      Though this issue begins on a far smaller scale,
      it reminds us of what happened when we moved to
      insufficiently considered massive support for
      biofuels, invoking cellulosic ethanol but giving
      us corn ethanol. What happened should at least
      cause us to move from a greenlight "go" to a yellow "caution--advance slowly."

      Remember when the Energy Policy Act of 2005? It
      increased the amount of biofuel (usually ethanol)
      that must be mixed with gasoline sold in the
      United States to 4 billion gallons by 2006, 6.1
      billion by 2009, 7.5 billion by 2012 -- and 30
      billion gallons by 2020. The European Union
      followed with similar targets. We can only list
      the consequences that have been directly and
      indirectly linked with this decision, which
      include the belated recognition of the negative
      energy balance of corn ethanol and the
      overestimated near-term prospects for cellulosic
      ethanol; the lack of greenhouse gas benefits; the
      impact on corn, feed and human food prices;
      global deforestation and water impacts; the boom
      and bust in Midwestern farm states and the
      subsequent bankruptcy of ethanol companies; and
      periodic food riots in locations around the
      world. To its credit, Europe recognized the error
      and stepped back; we still struggle with bad
      legislation and inappropriate incentives.

      The Staff and Executive Officer have prematurely
      concluded there are no negative impacts

      The Staff Report: Initial Statement of Reasons
      for Proposed Rulemaking for Plug-In
      Hybrid-Electric Vehicles on page 28 says, "The
      proposed amendments to the Exhaust and
      Evaporative Test Procedures are not expected to
      have a noticeable impact on the status of
      California business creation, elimination, or expansion."

      In the Notice of Public Hearing, we read, "The
      Executive Officer has made an initial
      determination that the proposed regulatory action
      would not have a significant statewide adverse
      economic impact directly affecting businesses,
      including the ability of California businesses to
      compete with businesses in other states, or on
      representative private persons. In accordance
      with Government Code section 11346.3, the
      Executive Officer has determined that the
      proposed regulatory action would not affect the
      creation or elimination of jobs within the State
      of California, the creation of new businesses or
      elimination of existing businesses within the
      State of California, or the expansion of
      businesses currently doing business within the State of California."

      CalCars believes that although the companies
      involved have not yet made their case
      effectively, the difficulties these regulations
      cause will in fact have very significant impacts
      in these areas and in the development path for
      plug-in vehicles. We believe the Board needs to
      allow more time to explore these issues.

      As a non-profit organization, CalCars has
      encouraged the aftermarket companies and their
      suppliers (especially battery manufacturers) to
      form a trade association. That way an organized
      constituency can quantify the value and jobs it
      provides, demonstrate that it is part of a supply
      chain that needs to be encouraged, and
      characterize the significant social and
      environmental benefits it delivers, and
      cooperatively to come up with workable solutions
      . We hope this will happen in the coming months.

      We accept the magnanimous offer in the Notice of Public Hearing

      There we find, "Before taking final action on the
      proposed regulatory action, the Board must
      determine that no reasonable alternative
      considered by the board or that has otherwise
      been identified and brought to the attention of
      the board would be more effective in carrying out
      the purpose for which the action is proposed or
      would be as effective and less burdensome to
      affected private persons than the proposed
      action." We appreciate the Board's recognition
      that there may be alternative solutions; we
      propose the Board consider those we present.

      MEETING REQUIRE: that all the companies involved
      in conversions simply register with CARB,
      inventory their completed conversions, project
      their 2009 volume, and make themselves available
      for a more deliberative process. . CARB can then
      engage in a dialogue with all the stakeholders,
      just as it has for many years with automakers, to
      ensure a process that makes sense to all and
      takes into consideration the very different state
      and form of the conversion industry and its players.

      We appreciate your growing support for plug-in
      vehicle solutions, and hope that you can come up
      with a solution where all the players win. Now, one more point…

      CalCars' fallback position: if CARB must regulate now…

      We understand that CARB is concerned about the
      durability of warranties following conversions,
      either from vehicles requiring repairs that are
      not made, or conversions that are not engineered
      with sufficient rigor and testing. These are
      legitimate concerns, but so far we are talking
      about only several hundred conversions in the
      entire world. We support an approach that enables
      companies to improve their products and their
      support services. The benefits of encouraging
      this so-far-almost-exclusively-entrepreneurial
      conversion industry far exceed the risk.

      However, if CARB does go ahead, we present an
      example of a graduated regulation scheme could
      continue to allow grass roots innovation by
      holding compliance costs to around $500 per
      already-sold conversion -- a high but not insurmountable hurdle:

      * A company enters the conversion business by
      presenting CARB with an engineering proposal
      showing how it will avoid increased criteria
      pollutants; it then shows a running prototype.
      Each completed conversion is subject to an
      ordinary end-user smog test for that model of
      unconverted vehicle. Buyers sign a contract
      acknowledging the level of warranty accompanying
      the product, accepting a level of risk for an
      'experimental' conversion, and perhaps committing
      to periodic smog tests that are not otherwise
      immediately required of SULEV vehicles for several years.

      * After selling 10 conversions, the manufacturer
      explains how the now-current version(s) avoid
      mechanical, reliability, and emissions problems,
      and shows on paper how the system preserves known OEM OBD functionality.

      * After selling 100 systems, one vehicle
      undergoes the most basic manufacturer emissions
      testing, and the conversion manufacturer shows
      how known OEM On-Board Diagnostic System (OBD)
      functionality is both preserved and enhanced with
      similar capabilities warning of conversion components needing service.

      * After selling 1,000 systems, the company
      complies with CARB's whole set of production conversion rules

      Note: such a proposal would require some
      cooperation with auto manufacturers, who would
      need to provide aftermarket conversion companies
      with some proprietary information, or the
      conversion companies would need to collaborate on
      building a database of discovered OBD
      functionality for multiple vehicle models,
      similar to the reverse -engineered Prius and
      Escape CAN bus information currently available at www.eaa-phev.org.

      -- -- -- -- -- -- -- -- -- -- -- --
      Felix Kramer fkramer@...
      Founder California Cars Initiative
      -- -- -- -- -- -- -- -- -- -- -- --
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