By Lynn Daniels
Fleet electrification at pilot scale is relatively simple: buy a vehicle, buy an inexpensive Level 2 charger, and you’re done. But as fleet managers start electrifying a large share of their fleet vehicles, a more difficult set of challenges awaits and they will need to begin planning now.
Next week, Rocky Mountain Institute will publish a new report, Steep Climb Ahead: How Fleet Managers Can Prepare for the Coming Wave of Electrified Vehicles, offering the first comprehensive assessment of how major US fleet managers are approaching the electrification of their fleets. This report is based on a survey of 91 fleet managers operating large fleets and 18 in-depth interviews with fleet managers representing a cross-section of fleet types.
In this and two subsequent blogs, we summarize our findings and dig more deeply into the biggest challenge ahead. This challenge is one that fleet managers are ill-prepared for: how procuring charging infrastructure and managing EV charging become increasingly complex as fleets scale up their electrification.
Fleet vehicles in the United States comprise only 3 percent of all registered vehicles, but fleets are an important market segment to lead the successful electrification of the entire transportation sector. Large fleet purchases can drive scale, resulting in reduced costs of vehicle technology and infrastructure. Additionally, because of their central control, corporate sustainability goals, and rational economic view, they are well positioned to move further faster.
With transportation now the largest contributor to greenhouse gas emissions in the United States, the nation needs to rapidly scale adoption of electric vehicles in order to align with 1.5oC global climate goals. Our own internal analysis asserts that well more than 20 percent of all US vehicles need to be electric by 2030.
Start Planning Now for Fleet Electrification
For this blog series, we are partnering with The Mobility House, who we worked closely with in 2019 to assess the US market for managed charging. We leveraged insights from our work with The Mobility House for our new report and we discussed the challenges for fleet EV charging at scale in sections 4 and 5 of the report. For this blog series, The Mobility House provides case studies and simulation results from their extensive experience working directly with fleets to provide insight into the challenge of charging electric fleets at scale.
The bottom line from our research is that fleet managers need to begin planning immediately for how they will electrify their fleets. Most fleet managers expect to adopt electric models for the majority of their light-duty cars, trucks, and SUVs over the next decade and many fleets have already implemented pilot programs. However, electrifying a fleet at scale involves much more than just adding more EVs and chargers incrementally each year. For many organizations, it will mean restructuring their internal business processes, collaborating proactively with their local utilities and city and county officials, and developing a cohesive, integrated strategy across the organization.
One of the first decisions a fleet manager must make is whether a vehicle in their fleet is suitable to electrify, in terms of the duty cycle for that vehicle as well as its cost and availability. Our interviews revealed a wide variety in requirements for how fleet vehicles are used including the need for significant towing capabilities, performance in all types of weather, operating 24/7, and powering external equipment. Today, most EVs available are light-duty vehicles but we expect that over the next five years, EVs will become available in nearly all vehicle classes and will be able to meet fleet requirements.
Although EVs are generally cheaper to own and operate than internal combustion engine vehicles, this is not automatically the case and depends on the local utility tariff and when the EV is recharged. The main challenge today is that EVs have a higher upfront cost and are sold by a limited number of manufacturers and dealers. This poses a challenge for many organizations’ procurement processes which rely on bid lists (where multiple dealers and manufacturers must submit cost-competitive bids), replacement budgets that anticipate that a replacement vehicle will cost the same as a current vehicle, and no way to apply operational savings against capital cost.
Charging infrastructure is frequently an afterthought for fleet managers as they electrify, often purchased after vehicle procurement and without a long-term plan for how many and what types of chargers the fleet will need. This approach works today when fleets only have a handful of EVs but developing a long-term plan for charging infrastructure will become critical to controlling costs and managing overall charging load. This challenge is discussed in greater depth in the two blogs that follow this one.
Learning the Ropes
Once fleet managers grapple with both vehicle and infrastructure procurement, EVs still pose a great deal of uncertainty due to the newness of the technology. Critical knowledge that is well-known for internal combustion engine (ICE) vehicles is still being learned for EVs. This is particularly true for understanding vehicle longevity, residual value, and maintenance costs.
Because EVs are such a new technology, there is a risk of technology obsolescence as vehicles age and the secondary EV market is still in the early stages of development. Lifetime maintenance costs are also uncertain because so few EVs have reached old age where major repairs might be needed. Many fleets are addressing these risks with short-term leasing of new EV models (even if they typically prefer to own) or instrumenting their vehicles with telematics to collect the wealth of data needed to better understand these uncertainties.
The report dives into these issues in greater detail but what is clear is that fleet managers today are just beginning to move beyond pilot programs in electrifying their fleets. Today’s approach (e.g., buy a vehicle, buy an inexpensive Level 2 charger, and you’re done) will quickly result in excess costs and underutilized assets as fleet managers electrify a larger share of their fleet vehicles.
Other challenges await including the complexity of managing charging, preparing for grid disruptions, and streamlining legacy internal processes that were designed for ICE vehicles. Fleet electrification will be worth this effort and we urge fleet managers and their organizations to begin the work of planning for a successful electrification strategy now in order to reap the rewards later: a reduced carbon footprint, more efficient energy use, and reduced costs.