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Planning your transportation transition

Transportation transition considerations

For the last 75 years, the basis for transportation in the U.S. has been consistent: gasoline/diesel-powered vehicles with a well-established infrastructure that provides ubiquitous public and private refueling options for vehicles that deliver significant range and effective climate control. The comfort and predictability of that model is challenged by the transition to Alternative Fuel Vehicles (AFV), which is underway driven by concerns around decarbonization and enforced through regulation and legislation.

Transitioning a fleet takes time, planning, coordination and internal process work as companies adjust to embrace the differences between their existing transportation fleets and emerging alternatives. This can be an opportunity for companies to examine their costs and capital efficiency while exploring changes to their business model that improve operational profitability, increase customer satisfaction and decrease environmental impacts. The transition is not a single step; it is a progression likely through several technologies as regulations, technologies and infrastructures evolve.

New technology, new possibilities

Your AFV strategy will be based on your specific needs, the most fundamental of which is vehicle “class” and its use. But with AFVs, the challenges of new technologies, infrastructures and materials need to also be considered, including local weather (impacts heating and cooling) need for on-vehicle power (hydraulics, refrigeration, emergency lighting), static use (base for construction/repair crews) and how you currently depot (home at night or stored in the yard). It is also very dependent on your local utility and regional infrastructure investments, as well as local government permitting and safety requirements and your insurance company. Whether the issue is getting more power to your facility than your utility can currently provide or deploying new garage fire suppression to handle battery fires and meet fire codes and insurance requirements, the transition to alternative fuels will impact your people, your finances, your customers, and your bottom line.

So, what are the current and emerging AFV alternatives?

  • Hybrid electric: Focused on cars, hybrids combining both electric and ICE drive trains which can reduce their low-speed emissions and increase their realized MPG. These have been primarily targeted at cars but can be expensive to maintain and are being quickly replaced by Electric Vehicles (EVs).
  • Compressed natural gas: An alternative to diesel but quieter, cleaner and with lower maintenance costs and access to natural gas infrastructure. There are some issues with performance in mountainous environments. Emissions concerns (carbon and methane) are being addressed by purchase of “Renewable” Natural Gas (RNG). These are popular in urban bus fleets, but often being replaced by electric platforms.
  • Electric: “Plug in” charging and lots of batteries with charging times measured from minutes to hours. EVs are getting lots of attention and innovation from new startups like Hyliion, Rivian, BEV, Tesla and Workhorse, as well as industry names like Ford and Freightliner. The near-term personal vehicle winner, but issues with costs or batteries and concerns with recycling.
  • Renewable fuels: Compressed Renewable Natural Gas (CRNG) offers the same benefits of CNG, but with the added reward of having one of the lowest carbon intensities. This means the process of producing RNG results in a net carbon reduction. Renewable Diesel is a drop in fuel that meets ASTM D975 specification for petroleum diesel. Its carbon intensity is ~20 gCO2e/MJ versus “standard” diesel’s 100 gCO2e/MJ. There are concerns with renewable fuels like diesel and ethanol that use arable land and water, possibly displacing or consuming food crops,
  • Hydrogen: Hydrogen is considered in two forms, as an Internal Combustion fuel and as an input to fuel cells. Naturally occurring hydrogen is usually bound to something else like water or methane and requires energy to “split” and store, and in the case of methane, to sequester the associated carbon. This challenges hydrogen’s environmental, social and governance (ESG) credentials, since extracting it from water requires clean fresh water, of which there is scarcity in many places, or continued hydrocarbon drilling and extraction for natural gas. However, it is seen as a likely challenger to electric solutions for heavy trucking (class 7 and 8) and is being actively pursued in Europe and the U.S. for that purpose.

With so many options, how do you come up with a strategy that works for your business? Here is a quick checklist of questions to consider:

  • What does your jurisdiction require? California has different rules on vehicle emissions than Wyoming but the timelines for when certain standards must be met will affect your capital planning and vehicle investment strategies. You may have a “regional” strategy that includes replacing select vehicles based on type and location and transferring older vehicles to allowing jurisdictions.
  • What can your utility provide? Commercial EV charging solutions take a LOT of power, and many power utilities in the U.S. cannot broadly meet charging needs without significant construction and equipment deployment which can take years to fund, design, permit and construct. Similarly, your local gas utility may not be able to supply you with sufficient pressure/flow for CNG/RNG and may require infrastructure upgrades.
  • How could a vehicle change transform your business? Is this an opportunity to look at possible diversification of fleet vehicles to create a range of customer fulfillment solutions, or is it an opportunity to get rid of a diverse fleet and standardize to reduce costs? With the increasing scarcity of Commercial Driver Licenses (CDL) qualified drivers, many companies are refactoring their fleets to put more non-CDL trucks on the road, allowing them to tap a broader set of drivers. Any change needs to address a range of impacts including infrastructure, loading dock design, route optimization, pick/pack/ship modeling, etc.
  • Do your “routes” stay the same? Some technologies have shorter ranges than others, while others require longer “recharge/refuel” times that affect productivity/shift. Many delivery planning and route optimization algorithms need to be rethought/adjusted to reflect the new vehicle capabilities and factors like heat/cold that can affect duration.
  • What is your resiliency strategy? When the power is out, how do you power your facility and your delivery vehicles so you can continue operations? This can be EV chargers, natural gas compressors or other infrastructure that require power to operate.
  • Where do your trucks live at night? Sending vans/trucks home at night could require at-home charging infrastructure, which may not be readily available in your area or may be an option to consider if your utility cannot deliver sufficient high-capacity charging at your facility. This has impacts on routing, inventory management, replenishment, etc.
  • What vendor(s) are long term partners? There are established players and new entrants, some vendors provide vehicle management capabilities (telematics), some are continuing to innovate others are following. Which are committed to your market segments and bringing value to your strategy?

Understanding charging alternatives

Since Electric Vehicles are getting a lot of attention and will likely be the dominant alternative over the next three years in the Class 3-6 trucks, a quick discussion of EV charging infrastructure follows.

EV charging services are generally categorized in one of three “levels” that describe their input power needs and their rate of charge. The most important thing to note is that each level requires electric infrastructure which in many cases will exceed what’s available on your existing premise, and each has a different Miles of Range/Charging Hour (MOR/CH), which tells you how long you must stay plugged in to meet your range goals.

Depending on your market, utility companies are telling customers it can take 3 – 24 months to provision services suitable for the large-scale Level II or Level III charging needs of a fleet. Significant planning is needed to successfully engage and execute on a depot-charging strategy for many fleets.

EV charging infrastructure

Getting started

The transition to AFVs is happening now, and while you may not need to make a change immediately, if you are planning a purchase/lease program of new vehicles in the next 12 months, you will need to have a plan and you will need a range of capabilities including:

  • Program management: This is a series of investments and projects over time that need to be overseen and whose impacts (e.g., carbon reduction, economic costs/benefits) need to be closely monitored and reported to management and other stakeholders
  • Utility engagement: Folks who can interface with your utilities and drive your plan based on their capabilities, timelines, regulatory mandates and costs.
  • Capital and tax planning: The investment profile of many technologies can be changed by tax credits, accelerated depreciation and other local, state and federal incentives.
  • Process/technology innovation: Design of business processes and supporting technology that reflects the new and revised capabilities that your transportation strategy delivers
  • Industry advisors: Professionals who understand the industry, participants, regulations and fast-changing capabilities provided by the changing transportation ecosystem.

An effective transition strategy requires breaking down the “silos” between many of these groups and getting them to work together for your goals. A Transition Management Office provides the basis for that engagement and coordination and provides/sustains the momentum as the needs of your customers change and as the technology and regulatory contexts evolve.

Andy Roehr
Managing Director
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