Cutting the ‘Total Cost of Electrification’ for EV Bus and Truck Fleets

Electric trucks and buses may be approaching cost parity with
their fossil-fueled counterparts, and they’re certainly cheaper
to fuel over the long run — and that’s not counting their
carbon and pollution emissions benefits.�

But that’s just a slice of the costs of switching bus and
truck fleets from fossil fuels to batteries. Unexpected costs and
bottlenecks in charging infrastructure, fleet operations and
maintenance, and permitting and financing weigh on cities and
states mandating electric bus fleets, or private companies with
large-scale delivery truck electrification goals. 

Solving for this “total cost of electrification†equation
will be a critical step in pushing EV trucks and buses from the
margins to the mainstream in the coming decade, according to a

report
released Wednesday by Environmental Defense Fund, MJ
Bradley and Vivid Economics. 

“We’re seeing the technology increasingly ready, and capital
increasingly eager to invest in sustainability†via fleet
electrification, Andy Darrell, EDF’s chief of global energy and
finance strategy, said in an interview. “And yet the deployment,
especially in the medium and heavy-duty sector, might not be moving
as quickly as we’d like to achieve big climate goals.†

Estimates on the global market for electric
trucks
 and buses
range
 into the tens of billions of dollars over the coming
decade, he noted. Cities including Los Angeles, Seattle, New York
and Houston have set aggressive zero-emissions goals for bus
fleets. California has mandated a completely zero-emissions
heavy-duty
 vehicle fleet by 2045, and other states may follow
suit. Companies including Amazon, FedEx, Pepsi and Anheuser-Busch
are piloting tens of thousands of electric trucks.

But “a pretty wide set of barriers†lay between pilots and
full-scale deployments, Darrell said. Beyond the costs of equipping
depots with the EV chargers and grid infrastructure to support
them, drivers and mechanics need training to ensure they’re run
efficiently and avoid expensive downtime. And uncertainties over
the long-term value and reliability of EVs “may be hard to
quantify, but may still make it hard to get to yes†for fleet
operators with tight budgets and margins, he said. 

These findings are backed up by similar studies from groups
including the Union of Concerned
Scientists
and the
Rocky Mountain Institute
. They’re also based on extensive
interviews with industry players familiar with the challenges of
buildin an electric fleet infrastructure from the ground up. 

The growing pains of electrifying public bus fleets 

Take the 5,000-plus electric bus fleet the New York City
Metropolitan Transportation Authority wants to deploy by 2040. To
prepare for the first tranche of 500 buses by 2025, “they had to
solve problems they didn’t know upfront even existed,†Darrell
said, including finding space for chargers in their crowded bus
depots — “they had to put them on the roof†eventually —
and training drivers in the subtleties of using the buses’
regenerative braking to maximize their range. 

Los Angeles, which wants to electrify its bus fleet by 2030,
also experienced
growing pains
 in its early electric bus rollouts, including
lower-than-expected range and battery charge and mechanical
problems. Denver’s transit agency charged its EV bus fleet all at
once at times of peak grid demand, leading to demand charges that
drove operating costs to 60
percent more per mile
 than diesel buses. 

These kinds of mixups can be solved by “working with the
utility, understanding the rates, putting in some software to make
decisions,†said Simon Lonsdale, head of sales and strategy for
Amply. The startup offers charging-as-a-service
contracts
 to reduce up-front costs for bus electrification and
delivers significant
savings
 by staggering charging to avoid demand spikes and tap
off-peak pricing.  

Amply recently partnered
with AECOM
 to tap the engineering firm’s experience designing
and building transit systems for big customers like the Los Angeles
Department of Transportation, which needs multiple charging sites
in multiple utility territories to charge electric buses on their
daily routes.  

“They don’t have the luxury of trying to solve these
problems on the fly,†said Andrew Bui, AECOM’s national
transportation innovation lead. “They need to feel comfortable
the infrastructure is going to be there, and the rate structures
will be cohesive.â€

Financing such large-scale projects is challenging for cities
and agencies, particularly amid the COVID-19 pandemic, said Victor
Rojas, EDF’s senior manager for clean energy finance. Grant
funds
 are being directed to bus electrification in many states,
and state green banks can be another source of low-cost
finance.

Utilities are another funding source, he noted. U.S. utilities
are investing billions
 of dollars in grid infrastructure to
support EV charging, providing incentives for EV purchases, and
making arrangements to waive or reduce demand charges at fleet
vehicle charging depots. 

Utilities have a major stake in coordinating EV fleets to
maintain grid reliability and integrate their growing demand into
increasingly renewable-powered grids, making them a natural partner
with fleet operators, Bui noted.  

Finding ways to ease up-front costs through
charging-as-a-service programs like Amply’s, or through repayment
mechanisms like utility on-bill payments, will be important steps
in driving the “significant infusion of private capital to make
this happen,†Rojas said. “Public capital won’t be enough to
get there.†

Risk management, financing models for private-sector EV fleet
investments 

Private-sector fleet electrification faces different challenges,
Darrell said. Major companies like Amazon, UPS, FedEx and Walmart
are testing electric trucks in the tens of thousands. But expanding
from pilot projects to full-scale deployment remains a risky
proposition for companies that rely on massive fleets for
just-in-time delivery, and control operating costs on tight
margins. 

Risk management is a major part of the total cost of
electrification calculations being made by corporate fleet
operators, said Matt O’Leary, CEO of electric
truck startup Motiv
. “These customers have very long
memories,†he said — and some have been burned before by
electric truck makers that went out of business like Smith
Electric Vehicles
. “If you make a mistake, it takes a long,
long time for you to win them back.†

Motiv integrates its electric truck drivetrains and control
systems into industry-standard chassis and uses batteries and other
components certified by tier-one manufacturers like Ford Motor Co.
and BMW, he said. It also has a “very high-touch customer support
model,†working in advance to assure vehicles with the range
needed for daily routes, charging infrastructure to support them,
and training for drivers and maintenance staff, with a typical
deployment from a handful of test vehicles to hundreds of working
trucks taking about two years. 

“If you look at total cost of ownership, it’s clear that
electric vehicles are lower,†he said. But public grants and
incentives like California’s HVIP program have been
critical for Motiv’s early customers to drive down the payback
for up-front capital costs to the 2 to 3 years most customers are
looking for. “The payback without any type of incentives tends to
be 5 to 6 years today. That’s a bridge too far for most of
today’s fleets.†

New financing models to bridge this gap will be important for
scaling up private-sector truck electrification, Darrell said. That
could include guarantees of vehicle performance, long-term asset
value or financing risks, or bundling smaller fleet investments
into larger investment vehicles. It could also include leasing
structures that shift risk from fleet operators, ranging from
the battery
leases offered
 by electric bus maker Proterra, to all-inclusive
“wet leases†that encompass vehicles, operations, maintenance
and asset retirement.  

Public-private partnerships to electrify fleets like drayage
trucks that haul cargo from ports to distribution centers could
also help reduce diesel emissions in low-income communities
disproportionately harmed by their pollution, he said. A recently
launched request for information (RFI),
seeking private-sector proposals to zero out emissions from Port of
Los Angeles drayage vehicles by 2035, could yield useful models for
this economically challenging target. 

Source: FS – GreenTech Media
Cutting the ‘Total Cost of Electrification’ for EV Bus and
Truck Fleets