As equipment manufacturers look toward the future and consider what’s ahead for the industry and the markets they serve, one question – perhaps above all others – should weigh heavily on their minds: Because of the effects climate change is having on the world, how will OEMs power the equipment of tomorrow?
More than a century ago, the question of what would succeed steam as the primary means for powering automobiles and equipment led to the rise of diesel engine technology. Now, as environmental regulations become more and more stringent with time, it’s becoming increasingly clear OEMs will have to look beyond diesel.
“There is a continued need for transportation,” said Hubertus M. Mühlhäuser, CEO of AEM member company CNH Industrial. “It’s going to be different transportation, clean transportation, and highly automated. But it’s going to be transportation.”
Mühlhäuser outlined his vision for the future of the industry and stated his case for biogas, natural gas and – eventually – electrification as the means by which the equipment manufacturing industry will power the machines of tomorrow at AEM’s most recent Annual Conference, held in November of last year in Marco Island, Florida.
INDUSTRY AND TECHNOLOGY MEGATRENDS DRIVE CHANGE
According to Mühlhäuser, four industry and technology megatrends are poised to dramatically impact the future of equipment manufacturing and shape the ways in which manufacturers will approach that future. They are:
1. Digitalization – Broad diffusion of digital and connected operations
The ever-burgeoning trend of digitalization is already a driving force behind the equipment manufacturing industry today. And, as digital connectedness becomes “the new normal,” it’s becoming more and more important for organizations of all types and sizes to understand what to do with the data coming off of their machines.
“That’s the challenge right now,” said Mühlhäuser. “How do we conduct data mining and become better at both predictive and preventative maintenance?”
2. Autonomy – Automation enabled by digitalization and robotics
The future is merging with the present. The technology exists to make autonomous vehicles useful in certain scenarios – and it’s already being employed today.
“Autonomy is a reality,” said Mühlhäuser. “If you look at farm machinery today, we are already at autonomy levels of 3,4 and sometimes even 5. So machinery is already fully autonomous... And (it's) going to be on and off-highway alike.”
3. Servitization – Rise of “as a service” offerings in capital goods
According to Dr. Howard Lightfoot, manager of the Operations Excellence Institute at Cranfield University, servitization can be defined as a "conscious and explicit strategy for manufacturers, with the provision of product-centric services providing a main differentiating factor in the marketplace."
As manufacturers become more effective at dealing with the data coming off of their equipment, and grow in their ability to mine the data they collect, a whole host of services will become viable options for companies looking to gain a competitive advantage over their industry peers.
4. Alternative Propulsion – Tightening emission rules and awareness of climate change
The impact of climate change is forcing OEMs and automakers to reconsider the ways in which they will power vehicles and equipment in the not-too-distant future. And it’s not a question for the industry to tackle tomorrow. In fact, it's something many OEMs are wrestling with already.
“I can tell you (CNH Industrial is) the largest regulated diesel manufacturer on the planet,” said Mühlhäuser. “And I do know that – at some point in time – the 750,000 diesel engines we produce will become 500,000, 300,000, 200,000 and 100,000. At some point, there won’t be any left in the world. So with that in mind, what does alternative propulsion mean for an OEM such as CNH Industrial?”
THE IMPACT OF GREENHOUSE GAS EMISSIONS
If one thing’s for certain, it’s equipment in the future will be subject to regulations designed to reduce the amount of greenhouse gas emissions and fuel consumption. These regulations will have a transformative impact on the manufacturing industry, and their long-term effects can't be overstated.
“If you look at the on-highway side, there will continue to be discussions around CO2 (carbon dioxide),” said Mühlhäuser. “By 2030, in Europe, we have to see a reduction of 30 percent. If as a manufacturer, you don’t do it, you get fined... For us, as CNH Industrial, it would mean fines of around $500 million per year if we don’t do anything right now. That’s significant.”
According to the CNH Industrial CEO, he sees a 40% reduction in CO2 as a requirement for on-highway applications in the United States and Canada by 2030. As a result, it will become increasingly important for OEMs to look for alternative power sources.
“If you replace diesel today with compressed natural gas (CNG) and liquefied natural gas (LNG), you're already reducing CO2 by 10%,” said Mühlhäuser. “And honestly, it doesn’t really cost you more, and the technology is already available.”
Whether a piece of equipment runs on natural gas or biogas, it’s essentially the same engine. The source of power is different, but either away it’s burning gas. However, utilizing biogas would have a tremendously impactful – and positive – effect on the environment.
“If you take biogas from a municipal waste incinerator, you’re reducing – out of the gate – 80% of CO2,” said Mühlhäuser. “And if you use it from biomass-like liquid manure, then you’re actually decarbonizing the environment.”
WHAT TO EXPECT
So what does the future hold for vehicle transportation? According to Mühlhäuser, OEMs should expect to see several technologies rise to prominence and – depending on the vehicle class and power demand – being used to address different applications. More specifically, he said:
- Light duty applications will likely rely on CNG and battery electric for power.
- In mixed applications, CNG, LNG and, eventually, fuel cell technology will be the primary sources of power.
- In heavy-duty applications, LNG and eventually fuel cell technology will be the preferred options.
Mühlhäuser pointed out that, in a declining or stable truck market, the LNG segment is currently doubling every year in Europe. While it’s occurring on a small level, industry volumes of LNG trucks in Europe were 1% in 2018. In 2019, volumes rose to 2.5%. By comparison, China currently sits at 6%.
“That means we are making millions of trucks in Europe based on LNG technology, taking CO2 out of the atmosphere as we speak,” he said.
ELECTRIFICATION IS THE FUTURE
Ultimately, the CNH Industrial CEO said he sees the move to biogas and natural gas as “an intermediate step” toward electrification.
“There are two distinctions: battery-powered and fuel-cell-powered,” he explained. “If you switch from battery to fuel cell, in the architecture of the product, you don’t actually change too much. The drivetrain is the same. The only thing that’s different is you change the source of power.”
Battery power currently works well in passenger cars transporting a few people and a marginal amount of goods a couple of hundred miles, but fuel cell technology will be the key to powering vehicles and equipment in a wider number of applications in the future.
“A fuel cell is like a small power plant,” said Mühlhäuser. “However, it creates electricity, but it needs hydrogen (H2). Hydrogen goes into the fuel tank and into the fuel cell, there’s a chemical reaction with oxygen (O2), and then that creates the power. You then just have a smaller buffer battery.”
It’s not new, cutting-edge technology. In fact, the concept of fuel cell technology has been around for decades. However, the cost to produce hydrogen is very high, and the infrastructure needed to produce hydrogen – in the right quantities and at the proper price – is not yet in place. According to Mühlhäuser, though, since hydrogen is essentially the same substance as liquefied natural gas, it’s critical for OEMs like CNH Industrial to invest in LNG.
“We believe at CNH green hydrogen is going to be the carrier of energy in the future,” he said. “And green hydrogen will be ideally produced by using solar energy."
The transportation of hydrogen into the fuel cells of the mobile equipment is exactly the same as with LNG, Mühlhäuser continued.
“Once we have installed capacity for C02-neutral production of H2, once we bring the cost to produce H2 down... then there’s going to be a complete hydrogen revolution, and there will be fuel cell application in both on and off-highway,” he added.
THE BOTTOM LINE
The rise of diesel engine technology in the 20th century paved the way for the automobiles and equipment of today. However, current and future regulations associated with greenhouse gas emissions and fuel consumption will ensure the status quo will not remain so for long. And while the question of how OEMs will power the equipment of tomorrow has yet to be definitively answered, a move toward biogas, natural gas and – eventually – natural gas seems to be the most likely outcome.