Jonathan Xavier Weinert 2008

Dec 20, 2005: It's been over four months now that I've been observing Shanghai. The following are some of my conclusions from this initial phase of my research which has involved attending automotive and hydrogen related conferences, interviewing experts in fuels/auto sector and academia, and individual "on the road" conversations and observations.

Shanghai Conclusions:
1. Fuel transitions here and in the rest of China will likely follow a slow, step-wise process of evolution. A leapfrog scenario seems inconceivable. Shanghai doesn't even have hybrids yet.
2. Hydrogen for commercial use is a long way out in Shanghai and Beijing. Likely more than 15 years. Even longer for the rest of China.
3. Gasoline and, increasingly, diesel will power Shanghai's vehicles over the next 15 years.

4. Coal-based synfuel production is very important to China. It is not ready commercially yet but it is coming and coming fast.
5 . Shanghai's most serious problem is air pollution. It is ubiquitous, inescapable, and affects the health of around 17 million people daily.
6 . The wide income gap among Shanghai's residents causes a big problem in setting regulations because of the poor's inability to afford new/cleaner equipment and better fuel. Vehicle's are kept in circulation for a
loooooong time. Thus, old cars with low turnover = very bad air quality
7 . Weak enforcement of regulations is a problem (e.g. black market fuel; inspection/certification processes subject to "wining and dining"-type influences)

What Shanghai Needs (in my own opinion):
1. More concrete data on current fuels and vehicles (less prospective models)
2. An "early-retirement home" for old dirty vehicles
3. An institution responsible solely for the city's poor air quality, like CARB or the SCAQMD in Cali. Shanghai EPA is currently in charge of this.
Why: to speed the otherwise-natural process of fuel evolution
Shanghai's Biggest Advantages:
1. Fleet vehicle #'s are dominant: taxis, buses, company-owned trucks. Perhaps these can be more easily controlled/regulated/converted.
2. 2010 Expo coming soon: the city wants to put on a good show and dress to impress.
3. Gov't support for new clean & efficient auto technologies is strong.
This is not necessarily for environmental reasons; it is mostly for economic reasons. They want to grow their local auto industry.

Lessons from the Literature: (Some interesting selections from some of the books I've read)

1. Mowery and Rosenberg: Path of Innovation (1998):
- The key factors why America was so innovative in the 20th century was the country's rich natural resource base, it's egalitarian social structure, and the formal institutionalization of research (accomplished through universities in the first half of 1900s, national labs in second half).
- "The relatively even distribution of wealth in America created a wider market for strandardized, homogeneous products, thereby allowing companies to take advantage of scale economies for production of goods." (p.169) China doesn't have this distribution, though markets are much more global
now.
- "A sustained economy's growth reflects a continuous shift in the economy's product and industry mix". Thriving economies are continually re-inventing themselves and coming up with new industries to grow.
- Power plants gained steady improvements in efficiency between the time of invention until the 1960's, then they hit a wall and improvements leveled off. The reason isn't entirely understood but represents a case where projections based on past performance didn't pan out like expected.

2. Selected Papers from the Energy Workshop: Industry Perspectives on Pioneer Process Plants: (1981)
This collection of reports looks at the costs performance of commercially unproven advanced energy technologies (e.g. power plants). The conclusions from this report made over twenty years ago may have applicability to H2 and alternative fuel production plants today.
- Bigger plants do not always result in scale economies. In fact, in some cases, it's more profitable to build several smaller plants (if they're of the same design and at the same location) to capitalize on greater learning effects. This is largely due to the increased operating costs and decreased capacity factor of big plants due to increased maintenance.
- Power plants are becoming so large, that it becomes difficult for any single organization to fund them. If funded by several groups, it becomes more difficult to manage. Large plants, though they benefit from
economies of scale, also have to operate for a longer period of time to recoup the initial investment.
- The cost of power plants didn't change substantially over time because as designers learned to build plants better, regulators imposed stricter environmental regulations.