Can Diesel Trump Ethanol as America's Future Fuel?

Implications: High fuel prices, Greenhouse Gas emissions, and pending CAFE mpg increases are increasing focus on advanced powertrains and fuels for the US light vehicle market.   While Ethanol fuel [E85] is a step in the right direction it may not be cost-effective vs. other options including hybrids and diesel engines.  Hybrids may be the most efficient in certain conditions but lower cost and better performance may tip the scales in favor of advanced light duty diesel engines.

Analysis: RAND Corp. has recently published a new study comparing and contrasting the cost/benefit tradeoffs of Ethanol, Gas-electric Hybrids, and Diesels as solutions for the current energy and emissions crisis in the US automotive sector.  Conclusions are that while hybrids may enjoy slight advantages of maximum fuel efficiency, diesels should capture significant market share growth due to lower costs and better performance [ie engine torque.]  Corn-based Ethanol E85 showed lower overall value than either the hybrids or diesel.  It should also be noted that using a diesel engine in a hybrid drive system would further improve the efficiency, also in highway driving over longer trips the hybrid approach is actually less efficient than a conventional engine.

Diesels already enjoy over 50% market share in Europe due to fuel tax structure; the advanced technologies on Mercedes, Audi, BMW, and other OEM vehicles will soon be available in the US for initial sale to American consumers.  Lower end models from Nissan, Honda, and VW will also be on sale in 2008-2009 here.  Diesel engines are fundamentally more fuel efficient than gas, consuming 20% - 30% less fuel per mile driven and producing 15% - 20% less CO2 emissions.  The advanced pollution control systems on modern diesels make them as clean as a comparable gas vehicle under strict EPA certification guidelines.

The drawback to diesel cars in the additional cost to manufacture the engine and emission control system; estimates are an extra $2000 - $3000 per car or SUV respectively.  As fuel prices remain high the payback period for this extra purchase cost shortens and the resale value of the diesel vehicle increases, both of which should help alleviate the pain of the higher sticker price.

While the US market may never see the 50% diesel penetration that the European automotive industry has today 15% is certainly a reasonable expectation long term, especially in SUVs and light trucks.