Fleet managers who want to acquire electric vehicles should first decide on a long-term strategy before taking near-term actions, according to a recent research report from a global think tank dedicated to clean energy transition.
Although many fleet managers and operators have already started buying EVs and charging equipment as part of gradual pilot programs, electrifying a fleet involves a more organized and sweeping process that affects all functions of an organization, concludes a report from the independent, non-partisan Rocky Mountain Institute, titled “Steep Climb Ahead: How Fleet Managers Can Prepare for the Coming Wave of Electrified Vehicles.”
Fleet operations may comprise only 3% of all registered vehicles, but because of their economies of scale, these fleet operations will profoundly influence how the entire transportation sector eventually adopts and uses electric vehicles.
“Most large organizations with large fleets to electrify are not set up to understand the costs,” said Chris Nelder, manager of RMI’s Carbon Free Mobility Practice and author of the report, in an interview with Charged Fleet. “Their accounting is set up around gas and diesel vehicles.”
Calculating Electric Vehicle Costs
For example, Nelder cites how electric vehicles will not require fuel cards, so what would be the energy equivalent? Is there a master electric meter that tracks consumption and costs?
“You don’t have the telematics across enough vehicles to calculate how many kilowatt hours are consumed to charge back to a department,” he said.
EVs already may be cheaper to own on a total cost of ownership basis than their internal-combusion-engine equals, although they now cost more on a sticker-basis. To get the overall expense of an EV, you have to be able to accurately compare its energy and maintenance costs to those of an ICE vehicle, Nelder said.
That leads to a related challenge: If a fleet division or manager needs to make the case to buy more expensive EVs, how do they prove that the long-term operating costs make up for the higher upfront costs if they are under mandates to buy the cheapest ones? Nelder asked. “How do you roll up the costs into larger accounting to show how much owning an EV fleet is compared to an ICE one over 10 to 20 years?”
Charging Ahead With EV Infrastructure
Then there is the over-arching issue of charging infrastructure. Nelder poses a series of questions: How much is needed and what type? Who will build it? What entity pays for it — the fleet division or all departments within an organization using or benefitting from EVs? Does the cost to build and implement infrastructure come from an overhead budget or capital fund? How will the organization project the amortization or depreciation of assets?
A large fleet may need an extensive charging depot that requires its own sub-station, Nelder said. “Right now most large fleet operators and organizations are just not set up to figure this out and account for it properly. That makes it difficult to proceed with budget approval to build this and go buy EVs and to demonstrate the value of that investment.”
Experimenting With Electric Vehicles
One silver lining is that the EV transition is still early enough that it’s hard for fleets to make a mistake, since standards and procedures are still in flux, said Mike Roeth, executive director of the North American Council for Freight Efficiency, an advisor of the survey. “Fleets know it will be a bumpy ride.” That means studying the issue and preparing as best as possible to see what’s coming and to stay ahead of the game, he added.
One of key findings presented in this report, based on a survey of 91 large fleet managers nationwide and 18 in-depth follow up interviews, is to approach it from a long-term perspective, Nelder said.
“If you don’t, and you try to approach it incrementally, it will ultimately cost more in the long run. You miss out on the efficiency of scale and wind up making a lot of repetitive and redundant investments and end up with a less than optimal configuration of vehicles and chargers. That becomes harder to manage, will cost more, and will limit the ability to adopt more vehicles.”
Finding EV Energy Supply
An emerging macro-issue for widespread EV adoption is ensuring enough energy supply across the U.S. to sustain a mass migration to electric vehicles.
Energy needs are determined and regulated by the 50 states, each with their own hierarchy of regulatory commissions, utilities, and government departments overseeing transportation infrastructure, Nelder pointed out. These agencies and organizations would oversee the building of charging stations.
For example, “you would need significant investments to provide power for a truck stop in a rural area,” he said. “There is not a plan to do that now.”
More electric infrastructure will likely need more transmission lines but getting those approved and built could be complicated and politically challenging. “There are a lot of horror stories about people who have tried and failed,” Nelder said.
Building solar and wind farms and self-sustaining power stations takes significant capital formation, not to mention the acquisition of property and feasible locations, he added. Utility co-ops often lack the resources to pursue such options.
For inner city and urban areas, the challenges lie with the host utilities and regulatory relationships that govern the power grids. To supply enough electricity, cities and regions may need stronger substations, larger distribution transformers, and more feeders. Those costs likely would have to be covered by rate payers, which requires regulatory approval and public hearings.
“Rate cases can take a long time, possibly up to two years with long lead times needed to get the utility infrastructure beefed up,” Nelder said. “How realistic is the renewable component of this?”
Another challenge is how fleet managers can coordinate and balance electric vehicle charging loads with the power grid. Such bi-directional charging done right can save fleets on energy costs while not unduly stressing grids.
“Will fleet managers segment demand on the grid?” Nelder asked. “I’m not aware of any method or prospect of one to get fleet managers to do it voluntarily.”
Fleet managers could take advantage of time of use rates to help reduce their costs and those of local utilities, he said. Loads could be managed if EVs are connected at certain times or if someone is managing the charging.
The bottom line is more electricity will be needed.
“We’re talking about many decades of transformation here,” Noeth said. “It will take a while before you get electric trucks in place and the grids get cleaner. We will need more power and building efficiencies.”
Nelder has shared his research with staff members of Sen. Sheldon Whitehouse, D-R.I., related to the idea of national electricity infrastructure plan. Just like building a federal highway system, a national approach would be faster than pursuing additional power one state and one utility at a time, Nelder said.
The RMI report provides a summary checklist outlining some basic steps listed below for fleet managers pursuing electrification of fleets. A complete copy of the RMI report can be downloaded here: https://rmi.org/insight/steep-climb-ahead/