Human beings have a very strong tendency to visualize the future as a near-linear projection of the present and recent past. This approach works well most of the time, at least until it encounters a so-called “Black Swan” event that sends society careening off on an entirely different path.
As popularized in a recent international best-seller and defined in various modern reference books, a Black Swan is “a large-impact, hard-to-predict, and rare event beyond the realm of normal expectations.” I am not prescient, so Black Swans are as much a surprise to me as to anyone and I am not going to attempt to predict what or when the next one may be.
But as I contemplate what the next decade may bring, I do see a few things that are not being discussed as much as they should be and that have the potential to significantly impact the shape of our industry in 2020. These swans are not exactly black, since they are quite foreseeable, nor are they white, since they are not receiving much attention at present. Let’s call them gray swans for sake of discussion.
Today the industry is focused on meeting a series of legislative mandates aimed at reducing exhaust emissions of particulates and certain gasses in particular oxides of nitrogen. When fully in force, these Tier 4/Stage IV requirements will reduce exhaust emissions by around 98% compared to unregulated diesel engines.
Meeting these has required virtually every aspect of our engines to be re-thought, re-engineered, and re-built. We at Perkins have optimized the combustion process, created highly effective particulate filtration systems, incorporated sophisticated NOx-reduction technologies, and integrated electronics to control many engine functions.
An underlying principle in everything we do is to provide solutions to our customers that provide them with real value and helps them be successful and prosper in what they do. This will continue to be a guiding principle going forward and while we don’t yet know the ultimate shape of all the solutions required, we can be reasonably confident that we will investigate and understand a range of technologies to ensure those that provide the optimum customer value are selected.
All of those swans are shades of white at this point.
There is, however, a gray one that is just beginning to emerge from the regulatory process. I think it is safe to predict that in 2020 the industry won’t be talking about NOx and particulates nearly as much as it will be talking about CO2 and carbon footprints.
We need to be ready to help our customers meet a complex new challenge that will take shape as the price of oil continues to climb at the same time people begin to demand reductions in CO2 emissions. Meeting this challenge is going to require at least as much effort as the industry has expended to meet current emissions requirements.
It’s also going to change the way we all do business, because engine manufacturers alone cannot meet this challenge. The key to CO2 reductions is increased fuel efficiency and this is going to require re-engineering of the whole system. Efficiency gains will need to be achieved through improvements to the engine and its subsystems; to the powertrain including advanced transmissions and hybrid powertrains that will include energy recovery systems; through the way the whole powertrain is integrated into the machine; and, finally, how the machine is operated to minimize the amount of fuel burned to perform a given task. In all cases, the high-efficiency diesel engine will be the key building block.
As well as the efficiency improvements, low-carbon fuels will be required. In particular, biofuels will be a big part of the changes engine builders and engine users will be dealing with in the next decades.
By 2020 we need to have the successful introduction of second- and third-generation biofuels. These will be synthetic products built from biomass obtained from various sustainable sources. The emphasis will be on sustainability and overall CO2 reductions. Support for these fuels by industry and regulators is critical.
The good news here is that these biofuels can be engineered to perform in ways that will synergistically enhance the combustion processes that will be developed to meet CO2 legislation. Co-development of engines and fuels is going to be a very important part of the industry’s ability to provide the best solutions in 2020.
All in all, CO2 and biofuel issues are very gray swans indeed.
I have no doubt that we will find solutions. I have no doubt that the diesel engine will be a vital part of any future one can envision. The diesel engine has the combined benefits of being more cost-effective, compact, and durable compared to other alternatives.
That today’s diesels are both cleaner and more efficient than their predecessors only serves to reinforce their pre-eminence. But, meeting future demand for diesel engines is going to be tricky. The challenge to the industry will be to have manufacturing capacity in place to meet the demand with products tailored to the needs of individual regional and national markets.
There is another gray swan lurking here, because emissions regulations are far from uniform around the world. Customers in regions with lower requirements are not going to be willing to pay the price of meeting first-world requirements. That means engine builders will have to provide a range of emissions reduction technologies from which customers can select.
One solution is to invest in manufacturing capacity that is located in, or close to, major markets. This both shortens supply lines and permits a reasonable degree of product specialization for local or regional requirements. It also avoids the need to invest in the highly flexible scheduling and manufacturing systems that would be necessary to support these customers from a single centralized facility.
Perkins, for example, operates a facility in China that currently manufactures our 400 Series engines for Chinese consumption. We are adding a new four-cylinder line in October 2010 to produce 1100 Series engines and a third line for six-cylinder engines in 2011.
Chinese OEMs are manufacturing increasingly sophisticated off-highway machinery, and we intend to support that effort with engineering, technical, and application expertise based in China. Since many of the machines they produce are intended for export, we have to be able to supply engines that meet both end-user expectations and national emissions regimes. Local presence makes it much easier to coordinate our product development and production capacity with our customer’s present and future needs.
We have a similar plant in Brazil to serve the Latin American market and plan to pursue this approach in other countries as part of our global manufacturing strategy.
I have no doubt that emissions regulations will become truly global sometime in the future. Not, perhaps, by 2020 but probably not too long after that. In the meantime, however, balancing manufacturing capacity with the demands of different markets will represent an ongoing challenge to the industry.
Tomorrow’s engines will be built in a global network of plants optimized to deliver products that meet the needs of regional or national markets, while supporting export to customers with varying requirements for fuel efficiency and emissions.
That is the future for which Perkins is positioning itself, and I believe most of our competitors have a similar vision. One never knows, of course, when a Black Swan will appear to alter the course of history, but until it does I am confident we can handle all the gray ones in the road ahead.
Gwenne Henricks, President, Perkins Engines, wrote this article for SAE Off-Highway Engineering.