Building the business case for fleet electrification
The business case for commercial fleets to go electric is getting stronger as technology advances reduce costs and companies search for viable solutions to growing urbanization and environmental challenges. While significant barriers remain, fleet operators around the world are evaluating their needs to determine where electrification can fit into their business strategy.
A shift to electric can drive business value in many ways. A new study by UPS and GreenBiz, "Curve Ahead: The Future of Fleet Electrification" (PDF), revealed that 83 percent of large company fleet operators cite environmental benefits and 64 percent cite lower total cost of ownership as top motivations for electrifying fleets.
It makes business sense to adopt fleet electrification to reduce environmental impact for reasons beyond well-being. In the long term, it can lead to reduced risk from potential future regulation, and in the short term, the possibility of lower maintenance and fueling costs. Tax breaks, grants and other financial incentives also may be available to companies that convert to a zero-emissions fleet.
Barriers and accelerators
The shift to cleaner transportation options is significant as the transportation sector contributes the largest portion of U.S. greenhouse gas emissions at 28 percent, according to the U.S. EPA. In Europe, air quality concerns are prompting some cities such as Hamburg and London to restrict the use of diesel vehicles.
The study also found that while commercial fleet owners increasingly consider electric vehicles, charging infrastructure and initial investment costs are the leading barriers to adoption. Just 8 percent of large organizations believe their organization is well equipped for on-site commercial vehicle charging.
This is a critical challenge given that a fleet of 200 to 300 electric trucks can require up to four times the power needed compared to a facility designed for diesel trucks. Delivering that power requires fleet operators to plan and collaborate with utilities. New facilities can be positioned near power stations to maximize charging ability, but existing facilities may require creative solutions to prepare the facility for the increased electricity requirements.
To accelerate the market, flexible and innovative funding options can help overcome both the vehicle’s initial purchase price and charging infrastructure upgrades. Many fleet managers are starting small to capture learnings, prioritizing electric options when replacing vehicles, considering electric leasing options and investing in infrastructure options.
Availability — especially among the medium- and heavy-duty segment — is still a challenge as electric vehicle manufacturers are largely still in the development and testing phases. But technology advances are continuing to reduce costs, which means we soon may be able to deploy an electric medium- or heavy-duty vehicle at an acquisition cost much closer to that of a traditional diesel-fueled vehicle.
Progress through innovation
In fact, UPS has placed the largest order to date for 125 Tesla electric trucks, and committed to purchasing 85 electric-powered delivery trucks comparable in acquisition cost to conventional-fueled vehicles — without any subsidies. This is an industry first, and the economics will help overcome the barrier to large-scale fleet adoption. However, subsidies are still proving helpful in accelerating progress toward electrification, for both infrastructure and innovation advancements.
Large companies around the world are signaling demand for clean transportation technology. Today, UPS has over 1,000 electric and hybrid electric vehicles, as part of its "Rolling Laboratory" of about 9,300 alternative fuel and advanced technology vehicles deployed around the world.
Delivery conditions in the more than 220 countries and territories we serve are incredibly diverse. So we match our vehicles and fuel types with the highly localized needs of each service area. In each community, we assess the conditions to ensure we deploy the right technology, and work with local governments and other stakeholders such as utility providers to determine how to best support that transport approach.
For example, in the United Kingdom, a deregulated electricity market, a fleet operator that needs more facility power is responsible for the equipment upgrade costs. To help address this issue, UPS is working with partners to help reform the market and make it easier for companies and utilities to share the costs of these infrastructure upgrades.
Despite this progress, the UPS-GreenBiz study found that less than half of the large companies surveyed are collaborating with utilities and governments to advance electrification. We see this as an opportunity to foster more connectivity.
Stakeholders such as utilities and governments — along with suppliers, NGOs and academic and community groups — are allies in the race to widespread fleet electrification.
Whether it’s collaborating with vehicle manufacturers to test and share experiences or working with cities and energy companies to increase the number of EVs on the road, transformation requires a systems approach.
All of us working together can create a more sustainable, livable future.
This article originally appeared on UPS’s thought leadership blog, Longitudes, and was republished with permission.