Innovation in the trucking industry - fuels:

Interesting analysis of different fuel options being explored in the bid to find cleaner engines. Think about the impact on the crude oil sector:

Yesterday we explained how there’s a coming contest in the crucial world of lorries.

On the one hand is Tesla, with its disruptive-but-familiar batteries. On the other is Nikola Motor, a smaller firm, which sees a future in hydrogen.

Today, we’re going to be trying to tease out a winner. It’s fair to say that it’s a tough call. History shows Elon Musk is a fairly dangerous guy to disagree with – because he’s got a long track record of being right about things. But in this particular instance, I can see a range of problems with his argument.

It’s fair to point out that current hydrogen production is barking mad. It may be zero emissions at the tailpipe, but the pollution still comes out somewhere. So, over the next five or ten years, I’d say that Musk is probably backing the right horse. At the very least, there’s a significant role for battery-powered trucks. That’s certainly true for the less demanding applications – shorter haul distances and lighter loads.

But, what about the longer term – and the trickier loads and runs?

Dare I say it, I think Musk may have made a bad call. I can’t see the impracticalities of batteries being easily overcome. Nobody wants to sit around, waiting for their rig to charge. If you’re on a trans-European run, that’s a real issue. Furthermore, the weight of batteries eats into the payload – requiring more trips, trucks and drivers. These issues will certainly delay wholesale rollout of electric trucks. They might not leave the door open for hydrogen, though. We could all stick to diesel for those trickier tasks – at least for the near term (notwithstanding the pressure on diesel’s role in air pollution).

There is, of course, a fairly obvious fix. Tesla may design trucks with swappable batteries. The presence of palletised facilities at many depots makes this an easy win. Just fork-lift out a dead battery and drop in a new one. Simples!

Another approach is to have on-road charging. This could use overhead wires, like trams (Siemens); or charging plates in the roadway (Highways England is testing these). They’re both possible, but they require expensive infrastructure. Slow battery charging means miles of roads to be upgraded. Accordingly, this is unlikely to happen without large-scale state support.

Even if electricity can be made to work practically, there’s still a catch. In the long run, this glitch might pose serious problems for Musk’s logic. As we move to a renewables-dominated economy, we’ll need to store energy for the winter. It’s difficult to imagine how we’ll do this without hydrogen. Sure, you can then turn hydrogen into a range of fuels (formic acid, DME, methane) – but you can’t escape the first step. Even if we don’t store energy for months as hydrogen, we have little choice but to make it in the first place. And, if you’ve got a hydrogen factory, then a bunch of passing truckers makes a pretty handy market. No need to build an expensive chemical plant on top.

So, I’m calling a draw on this one. Tesla, I suspect, may win in the short term. Nikola potentially has a better long-term vision, but whether it’ll be around long enough to fulfil it is an entirely different matter. Nikola may have significant long-run advantages over diesel (lower fuel costs, lower pollution), but this won’t translate into widespread adoption, without a decent fuelling network.

A complication for the above argument is that Tesla’s technology may be radically improved over time. One approach that I’m holding out for is ultracapacitors – the dark horse of energy storage. We’ll shortly be covering these in depth in Exponential Investor. In short, capacitors tend to have pretty rubbish capacity, but charge lightning-fast. If trucks could charge in a few seconds, then it might make the whole hydrogen hassle much less attractive. What’s more, the capacity constraints of capacitors may be solved in coming years. If that happens, we’d probably still need hydrogen in the economy, but there would be no need to put it anywhere near a truck.

But what of the incumbents?

Volvo is trying to push a fuel called dimethyl ether (DME). It’s not alone, and the fuel even has a trade association to fight its corner. DME is basically two molecules of methane, stuck together with an oxygen atom. On the plus side: it’s cleaner-burning than diesel; and better behaved than hydrogen in transport and storage. In fact, it’s not unlike liquefied petroleum gas (LPG). However, it currently relies on fossils for its manufacture. Ultimately, it could be made from renewably-produced hydrogen – but that’s comparably-costly to other power-to-fuels technology. I still remain to be convinced that it’s desirable to take one viable fuel (ie, hydrogen), and then make it into a variety of others. If you’re looking for a comparator, there’s some early work from the Delft University of Technology at using formic acid. This could be a simpler process, but it’s hard to tell where the challenges may lie.

Walmart is showing another vision of the future, with its 2014 WAVE concept truck. This is a battery-electric hybrid, with a gas turbine from Capstone to provide primary power. That’s a neat setup, as the response of the electric motor gets around one of the key problems with gas turbines: lag. Decades ago, manufacturers (eg, Rover) experimented with jet engines in cars. But the laggy throttle made them impractical. Beyond this, there were a host of other problems, such as a risk of debris intake. However, the WAVE turbine isn’t fuel-fussy, and it can use diesel or natural gas (you can even use tequila in a gas turbine car). Natural gas is a clean(ish) burning fuel – one that is already used in conventional engines, such as dustcarts. Further, “natural” gas can be synthesised from hydrogen – giving a route to low-cost sustainability, using existing distribution infrastructure. However, attempts to move turbine technology into land vehicles have been made many times, over recent decades. Whether in trains or cars, none has proved to be a winning combination. I can’t see much changing now.

So, in conclusion, I’d have to say that I’d expect Tesla’s tech to win this battle – at least in the short to medium term. Whether it’s actually Tesla that leads in electric trucks, I’m not sure. But the firm’s track record of early success makes that very likely.

In the longer term, however, it’s a different story. If ultracapacitors don’t arrive, then chemically-fuelled trucks will be here for a long time – and they won’t run on diesel forever. Nikola is making a reasonable play with hydrogen, but I think that the field is pretty wide open at present. Hydrogen is a good bet, in theory. However, current infrastructure is much more suited to fuels like natural gas or DME/formic acid. Picking winners here is hard. If you want a safe bet, back the growth of electric trucks. They won’t easily take the whole market, but they’ll find a role readily.