Energy Efficiency Assignment

No. 4

Assignment Title:

POTENTIAL INCREASE IN FUEL

ECONOMY AND RELATED
PRICE INCREASE FOR CARS

Edited by:
SAJJAD NAGHAVI
(KGH070032)

Lecturer:
T.M.I. Mahlia

Academic Year-(Semester):
Session 2007/2008-(Sem. 2)
Content

List of Tables 2
List of Figures 3
Abstract 4
Nomenclature 5
1. Introduction 6
2. Survey Data 7
3. Methodology 9
3.1. Introduction 9
3.2. Study Procedure 9
3.3. Summery 12
4. Results and Discussions 13
4.1. Introduction 13
4.2. Results 13
4.3. Summery 15
5. Conclusions 16
Reference 17

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List of Tables

Table 1, Potential design options improvement 7

Table 2, the baseline input value 8
Table 3, Design option, potential EER improvement and additional cost 9
Table 4, the options that elect to improve engine system 13
Table 5, Life-cycle cost and payback period 13

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List of Figures

Figure 1, Impact of design options changes on appliance price and FES 14

Figure 2, Payback period and life cycle cost 15

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Abstract

Implementation of fuel economy standards in the world has become a compulsory for
most of countries in order to increase the efficiency in fuel consumption, financial, and the
emission reduction. This emission reduction has become an international issue regarding of
the green house effect of industrial and transportation sector’s emission. The number of cars
in Malaysia increase from 1,356,678 in 1987 to 6,473,261 in 2005 it is predictable that it
grow up to about 16660638 in 2020. Therefore, efficiency improvement of this appliance will
give a significant impact in the future of fuel consumption in this country. This survey
illustrates the application of cost efficiency analysis techniques for energy efficiency ratio
(EER) improvement in support of energy efficiency standards for cars. The least efficient
model from market survey is chosen for this analysis. The study is to generate a set of energy
efficient design option, life cycle cost (LCC) analysis and payback period of the appliance
due to the improvement. LCC is analyzed as a function of seven design options and five
variables, namely discount rate, fuel price, appliance lifetime, incremental cost and potential
efficiency improvement. Furthermore, it has been found that implementing an energy
efficiency standard for cars is economically justified.

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 Nomenclature

Baseline fuel consumption in the year of standards enacted for vehicle

BFC sv
(RM)
AFC Annual fuel cost (RM)
Annual efficiency improvement
AEI iv
C Annual maintenance cost (RM)
C,k Constant value
D Annual distance travel (km)
F Fuel consumption (Litre/100km)
d Discount rate (%)
Incremental cost for the more efficient vehicle (RM)
IC v
LCC Life Cycle Cost (RM)
N Life time of the vehicle (year)
OC Annual operating expenses (RM)
P Fuel price (RM)
PAY Payback period (year)
PC Investment cost (RM)
PWF Present worth factor
R Fuel price (RM)

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 1. Introduction

Engineering economy deals with justification and selection of projects. Many

engineers work on projects which address a specified activity or a problem. Any decision
regarding the project must be justified. In business environments, many if not all, decisions
are justified using monetary criteria such as “profit”. Such decisions are made at the
managerial level and many engineers become managers in manufacturing environment.
Therefore, all engineers, regardless of their employment, should know methods and tools
used in evaluation of projects. The purpose of engineering economy is to expose all
engineering students to the methods which are widely used for evaluation of projects.

Increasing the rate of development in the all countries grow up using various type and
models of cars rapidly. It causes raise the need of fuels and in order of that cost and emission
make greater. Malaysia is one of the developing countries that because of grows in
economical level of people, using own car increase too many. By car efficiency improvement
a lot of energy and investment will be saved. This improvement can be done by replacing
some portions of cars in low efficiency with higher efficiency equipments models. To do
these improvements first we should have a cost benefit analyse. This cost efficiency analysis
is using similar methodology namely engineering/economic analysis use for setting energy

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efficiency standards in US [1]. The further EER improvement is determined based on
information given by manufacturer, survey data and Technical committee for Performance of
vehicles, in Malaysia.

There are two categories of design options for calculating a cost efficiency analysis.
First is a set of design that reflects existing and emerging technological options. The second
consists of design options that will require additional research and development. However,
only selected existing proven technology improvement and their cost impact that are potential
to be implemented for the product are considered in the present analysis.

The simulated design options are usually to be used to calculate potential energy
savings and to determine LCC at particular savings value. Design option serve to indicate
technical feasibility of achieving the optimum level of efficiency and it is not necessary the
manufacturers have to follows only the 122 particular proposed design options in order to
achieve the optimum level of efficiency.

The scope of this study is the data of potential design options improvement that is
shown in Tables 1, 2 and 3. So we evaluate the reduction of fuel consumption by annual
efficiency improvement and the effect of that in cost and emission decline.

2. Survey Data

The design options are changes to the design of the baseline model that will improve
energy efficiency of the product. The baseline model selected is the least efficient model in
Malaysian market. The potential improved design options are determined based on input and
suggestion by manufacturers of the least efficient model. Some of the design options are
already adopted by existing products and others are being developed in Malaysia or in other
countries manufacturer. The lists of potential design options selected by manufacturers of the
least efficient model are tabulated in Table 1 and the baseline input value is tabulated in Table
2.

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 (Table 1, Potential design options improvement)

POTENTIAL POTENTIAL
FUEL AVERAGE
NO. TECHNOLOGY EFFICIENCY
IMPROVEMENT
RETAIL PRICE
INCREASE
(%) (RM)

ENGINE TECHNOLOGIES PRODUCTION-INTENT ENGINE

A
TECHNOLOGIES
A.1 Engine friction and other mechanical/hydrodynamic loss reduction 1-5 133-532
A.2 Application of advanced low friction lubricants 1 30-42
A.3 Multi-valve, overhead camshaft valve trains 2-5 399-532
A.4 Variable valve timing 2-3 133-532
A.5 Variable valve lift and timing 1-2 266-798
A.6 Cylinder deactivation 5-7 426-958
A.7 Engine accessory improvement 5-10 319-426
1330-
A.8 Engine downsizing and supercharging 2-6
2128
TRANSMISSION TECHNOLOGIES PRODUCTION-INTENT TRANSMISSION
B
TECHNOLOGIES
532-
B.1 Continuous variable transmission(CVT) 4-8
1330
B.2 Five speed automatic 2-3 266-585
TRANSMISSION VEHICLE TECHNOLOGIES PRODUCTIONINTENT VEHICLE
C
TECHNOLOGIES
C.1 Aerodynamic drag reduction on vehicle designs 1-2 0-532
C.2 Improved rolling resistance 1-1.5 53-213
798-
C.3 Vehicle weight reduction (5%) 3-4
1330

(Table 3, the baseline input value)

Description Value
7.8 liter/100
Fuel Economy (Baseline Unit)
km
Vehicle Price RM 44500
Discount rate 7%
RM
Fuel Price
1.92/liter
Vehicle lifespan 10 years

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 19320
Average mileage use
km/year
RM
Average maintenance cost
245/year

Another data required for this analysis are potential EER improvement and the
additional cost for these improvements. Some of these data are collected from manufacturer
and other is calculated from several sources of previous study and the results are presented in
Table 3.

(Table 2, Design option, potential EER improvement and additional cost)

POTENTIAL POTENTIAL
NO FUEL EFFICIENCY AVERAGE
TECHNOLOGY
. IMPROVEMENT RETAIL PRICE
(%) INCREASE(RM)
A.3 Multi-valve, overhead camshaft valve trains 5 540
A.5 Variable valve lift and timing 1.5 500
A.6 Cylinder deactivation 5 430
A.7 Engine accessory improvement 7 350
B.1 Continuous variable transmission(CVT) 6 850
B.2 Five speed automatic 2.8 500
C.3 Vehicle weight reduction (5%) 3 800

3. Methodology

3.1. Introduction

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 In order to evaluate the performance and improvement for the vehicles fuel economy
standard in the study, there are several methods that have been considered and the most
important approach is to include the fuel consumption effect, engineering economy analysis.
The cost-efficiency or the engineering/economic analysis is carried out to analyze potential
efficiency improvement of new design that are already included in existing models in the
market or some other combination of design that has higher efficiency. The steps of
conducting this analysis are: (i) selection of baseline units (ii) selection of design options (iii)
efficiency improvement of each design option (iv) efficiency improvements of combination
design options (v) cost for each design option (vi) cost-efficiency curves. Each step is
discussed in the following section.

3.2. Selection of baseline units

The baseline unit of appliance serves to provide basic design features for this analysis.
For product without any standards, a baseline models are the one that has efficiency equal to
the minimum or the average of the existing models in the market. Selecting the least efficient
model as the baseline is recommended since this is permits analysis of trial at all possible
levels of efficiency, starting from this least efficient model. Therefore, the least efficient
model from the market is selected as a baseline for the cost efficiency analysis.

3.3. Selection of design options

Design options are changes to the design of a baseline model that improve its energy
efficiency. The potential design options selected are depend on the substitution of the more
efficient component to the baseline product. The data of potential design improvement is
collected from manufacturers of the baseline unit (least efficient model).

3.4. Efficiency improvement of each design option

Efficiency improvement of each design option is determined through calculating

potential improvement from component substitutions to the baseline models. For room air
conditioner, the efficiency improvement is calculated based on the potential design options
(component substitution) for improving EER. The design options are selected base on input
from manufacturer of the baseline models and other possible improvement from published
references.

3.5. Efficiency improvements of combination design options

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 The combination design option is the cumulative changes to the design that improve
energy efficiency of the baseline model. Calculations are performed for the various
components substitution for the baseline product in accordance with the input from
manufacturers of the baseline models and published references. For combination design
options, energy savings, efficiency or EER are determined through cumulative improvement
of each design option.

3.6. Cost estimates for each design option

The increment cost for each design option is the cost of producing products with the
improved design options. The expected cost of manufacturing each design option is obtained
from manufacturer. When manufacturer costs unavailable, the costs is estimated based on
retail price, or from the designs option that already exists in market place.

3.7. Cost-efficiency curves

There are 2 types of units that represent the fuel consumption or the fuel economy
standards. Miles per gallon is the unit that is in use in the United States of America. Most of
the European countries use litre per 100 kilometres as the unit for fuel consumption and FES
indication. In order to convert from one unit to the other, it is calculated with the following
equation:

(1)
a
( L / km) = 100  4.5192 ( miles / gallon)
100 a  1.614 

The cost efficiency curve is determined by calculating life cycle cost (LCC) for the
vehicle due to the fuel consumption or fuel economy standard improvement based on each
design option, and combination design options. The LCC is the sum of investment cost and
the annual operating cost discounted over the lifetime of the appliance. LCC is calculated by
the following equation:

(2)
N
OCt
LCC = PC + ∑
1 (1 − r ) t

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 If operating expenses are constant over time, the LCC is simplified to the following
equation:

LCC = PC + (PWF)*(OC) (3)

To calculate the life cycle cost, the annual operating cost for the baseline unit should
be identified. The annual operating cost (OC) of vehicle is the sum of annual fuel cost (AFC)
and annual maintenance cost (C). It can be calculated as follows:

OC = AFC + C (4)

The driving habits, the type of vehicle and the conditions which it is driven under
determines the vehicle’s fuel consumption and fuel cost. The annual fuel cost can be
estimated using the following equation:

AFC (RM) = (5)

[ R × F × D]
100

The annual fuel cost of a vehicle is given in Eq. (2), for now the annual maintenance
cost is the total cost of the components being replaced and the labour cost when the vehicle is
being serviced. The components are lubricant, oil filter, spark plug and gasket. Meanwhile, to
determine the present worth factor, it is calculated by the following equation:

(6)
N
1 1 1 
PWF = ∑ = 1 −
1 (1 + r ) t r  (1 + r ) N 


The payback period (PAY) measures the amount of time that needed to recover the
additional investment (increment cost) as a result of increased fuel consumption through
lower operating cost. PAY is calculated by solving the following equation:

(7)
PAY
∆PC + ∑ ∆OC t = 0
1

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 In general, PAY is found by interpolating the results between two years when the
above expression changes sign. If OC is constant, the equation has the solution as given
below:
(8)
∆PC
PAY = −
∆OC

The PAY is the ratio of incremental cost (from the baseline to the more efficient
vehicle) to the decrease in annual operating expenses. If PAY is greater than the lifetime of the
vehicle, it means that the increment in purchase price is not recovered by the reduced
operating expenses.

3.8. Summery

In this chapter we described the cost-efficiency analyze of new design that are already
included in existing models in the market. By these equations we can determine
the cost-benefits of improving efficiency of vehicles. So in continue easily
we can obtain the results of improving efficiency of cars.

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 4. Result & Discussion

4.1. Introduction

This chapter contains results on fuel economy standards for vehicles. The
engineering/economic approach is applied to examine potential fuel economy improvement
of the least efficient model of motor vehicles in Malaysia. By applying new device or
changing some portion of engine system of vehicle,

4.2. Results

From the analysis, it was observed that significant FES improvement could be made
for engine system if manufacturers are willing to adopt more efficient design options. This
can be achieved by having improved engine accessory improvement, cylender deactivation,
variable value lift and timing (design options 1 to 3 in Table 4) in engine technologies
production-intent engine technologies, while the fuel consuming by engine decrease from 7.8
to 6.79 litre in each 100 kilometer. But if we include the other improvements in transmission
technologies production-intent transmission technologies and transmission vehicle
technologies productionintent vehicle technologies the fuel consumption decrease till 5.76
(liter/100 kilometer). The analysis shows that the investment is quite low comparing to FES
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improvement. However, in the future, the more efficient engine systems should be considered
as main priority due to environmental consciousness in some countries. The impact of design
changes on engine systems price and FES are presented in Fig. 1. The calculation results of
cumulative payback period and life cycle cost for typical engine system is tabulated in Table
5 and presented in Fig. 2.

(Table 4, the options that elect to improve engine system)

Price
Des.N Design options FES (%) Priority
(%)
0 Fuel Economy (Baseline Unit) 0% 0.00% 0%
A.7 Engine accessory improvement 7% 0.79% 8.90%
A.6 Cylinder deactivation 5% 0.97% 5.17%
A.5 Variable valve lift and timing 2% 1.12% 1.34%
B.2 Five speed automatic 3% 1.12% 2.49%
A.2 Application of advanced low friction lubricants 5% 1.21% 4.12%
C.3 Vehicle weight reduction (5%) 3% 1.80% 1.67%
B.1 Continuous variable transmission(CVT) 6% 1.91% 3.14%

(Fig. 1. Impact of design options changes on appliance price and FES)

(Table 5, Life-cycle cost and payback period)

(RM)
FES Fuel OC LCC PAY
Design options Increas
(%) decrease (RM) (RM) (Year)
e
Fuel Economy (Baseline Unit) 7.8 7.8 44500 3138.36 66543 0.00

Engine accessory improvement 7.25 7.25 44850 2935.83 65470 1.73

Cylinder deactivation 7.41 6.89 45280 2801.29 64955 2.31

Variable valve lift and timing 7.68 6.79 45780 2762.94 65186 3.41

Five speed automatic 7.58 6.60 46280 2692.44 65191 3.99

Application of advanced low
7.41 6.27 46820 2570.07 64871 4.08
friction lubricants
Vehicle weight reduction (5%) 7.57 6.08 47620 2500.32 65181 4.89

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 Continuous variable
7.33 5.72 48470 2365.00 65081 5.13
transmission(CVT)

Fig. 2 shown that the fuel consumption improvement for engine systems can
reach maximum, which is at 5.72 if all seven design options are adopted. The life cycle cost
and payback period are calculated using equations 3.3 to 3.8 and input data discussed in the
previous section. At the same time, some input values such as discount rate, fuel price,
vehicle lifespan, average mileage, baseline data and least efficient model are required. The
input data are tabulated in Table 5 for vehicles.

(Fig. 2. Payback period and life cycle cost)

4.3. Summery
In chapter 4 we analyse the effect of each option of improvement in performance of
engine system. After that we continue by determining the cost changing of 6 type of
improvement in whole of vehicle life cycle to compare it with baseline condition. In next
chapter we will conclude from the results.

5. Conclusion

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 This study has proved that the introduction of fuel economy standard for motor
vehicle offer great benefits in some aspect for consumers, governments as well as the
environment, which is not considered in this study.

Due to the increasing number of vehicles in Malaysia, the fuel consumption will grow
rapidly in the future if there is no government intervention. In order to reduce the growth,
fuel economy standards should be implemented in Malaysia. Apart from reducing fuel
consumption, the program also indirectly reduces emissions.

The result of the study has proven that the consumer, manufacturers, government and
the environment will receive tremendous benefit from implementing the fuel economy
standards. Although now the consumers have to pay a higher price for purchasing vehicle,
they will save from the lower annual fuel cost.

In brief, this study presents the importance to propose the fuel economy standards in
Malaysia and shows that the fuel consumption improvement is an effective method to reduce
fuel energy consumption growth in the transportation sector.

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References

[1] Lawrence Berkeley National Laboratory. Technical support document for energy
conservation standards for room air conditioners, Energy and Environment Division,
Technology and Market Assessment Group, Berkeley, 1997.

[2] Energy use in the transportation sector of Malaysia, a report prepared under the
Malaysian - Danish environmental cooperation programme renewable energy and energy
efficiency component

[3] Engineering-economic analysis, chapter 12, Mahlia TMI, 2007

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