Place Vehicle Electrification at the Vanguard of Your Sustainability Transformation

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Doug McMahon Managing Director - Sustainability Solutions - Americas
Vehicle Electrification
Electric Vehicles
Zero Emission Vehicles
Sustainability Transformation

Like solar energy in the 2000s and battery storage in the 2010s, the 2020s (i.e., The Climate Decade) will be defined by the rise of low- or zero-emission transportation, with vehicle electrification playing a critical role. According to BloombergNEF’s Electric Vehicle Outlook 2020, strong indicators include:

  • Maturing technologies: Battery energy density is rising at 4-5% per year, and lithium-ion battery prices have dropped 87% from 2010 to 2019.
  • Policy pressure: 13 countries and 31 cities & regions have announced plans to phase out sales of internal combustion vehicles.
  • Improved economics: By 2022 EVs will start to reach price parity without subsidies vs. internal combustion vehicles in certain segments, although prices will vary by region.

Despite the social, political and economic challenges the world is facing in 2020, there is still a growing groundswell of commitment to vehicle electrification.

In the U.S., New York’s Public Service Commission recently approved a $700M program, funded by electric bills, to help build more than 55,000 chargers, and in August, California approved a $437 million utility-based program that will add 38,000 new electric-car charging stations over five years. In late September, California Governor Gavin Newsom signed an executive order banning sales of all gasoline-powered vehicles in the state by 2035.

This announcement follows 14 countries in Europe and Asia that have recently pledged to ban diesel and gasoline-powered vehicles over the next 10 to 20 years. Each year, major OEMs are announcing new EV models with 500 EV models expected to be available globally by 2022, increasing competition and driving down price.

With Ford recently announcing commencement on construction of an electric F150 pickup manufacturing facility, and Amazon committing to adding 100,000 EVs to its fleet in the next ten years, we can expect these game-changing investments to further animate consumer and corporate engagement in the journey to transportation decarbonization.

Yet a tremendous amount of uncertainty and risk remains in this emerging industry. Startup companies are manufacturing electric vehicles, building charging infrastructure and critical software – much of which is still in its infancy.

Furthermore, the longer-term health of the EV ecosystem relies on a complex marriage of regulators, vehicle manufacturers, electric utilities and software/hardware companies that have never worked together before.

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So if you are a business with a fleet of vehicles, or an OEM or utility trying to best support your customers in their vehicle decarbonization journey, you might want to consider carefully the following elements at the outset of your journey.

1. Plan for a marathon and not a sprint

It’s critical to involve company leaders early in your planning process - to assess what sustainability goals your business needs to achieve by when and create a steady, phased-based approach to transitioning your vehicle fleet. Successful transformation starts with solid data analysis and quantifying outcomes. Compare your current vehicle stock to functional capabilities, maturity and projected cost curves of comparable EV models, and make sure you understand the full cost implications of transitioning to electric within your local geography and regulatory environment. Careful phasing of your fleet transition will not only help you better manage some of the operational implications of moving from combustion engine vehicles to battery enabled vehicles, but also enable you to do so in the most affordable way possible.

2. Build your initial test projects around strong commercial principles

Demonstration projects in the utility industry typically focus on testing the technical ability of the solution; i.e., does it work, can it integrate into the grid, etc. However, it is also important to build economic and scale-based outcomes to test out in your initial projects. At a minimum, include in your demonstration a hypothesis to test cost optimization integration within the local electric utility environment and how that might change if the number of electric vehicles in your fleet increased by 10- or 100-fold. Not only will this encourage your vendors to think about the long-term outcomes of your investments rather than their short-term objectives, but it will ensure your business makes educated initial investments that provide a solid foundation from which to scale over time.

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In the summer of 2020, Audi and Hager Group announced a partnership to test electric vehicles’ bidirectional charging, also known as “Vehicle to Home (VF2H),” with the aim of increasing outcomes valued by consumers such as network stability, lowering electricity costs and contribution to climate protection. Expect other vehicle manufacturers across all vehicle classes to engage in similar activities with greater urgency over the next few years that could benefit both residential and commercial consumers.

3. Do not forget the importance of O&M

Operations & maintenance is often an underappreciated afterthought in today’s electric vehicle vendor landscape. Unfortunately, it is also key to lowering the total cost of ownership of a zero emissions fleet. Too often, vendors continue to focus their efforts and outcomes on technology implementation, without consideration for the significant reliability, user engagement and cost variability challenges that exist when operating the vehicles day to day. The true economic value of transitioning to an electrified fleet comes from how it is optimally integrated into your business operations and, when not being driven, how to ensure the batteries in those vehicles are being utilized in ways that create value for the electric grid.

For example, research shows the cost delta between a diesel transit bus and an equivalent electric model can be up to $300,000 – that delta therefore needs to be addressed through effective operation of the vehicle over its lifetime if the investment is to reach total cost of ownership parity for the business. With bus batteries holding up to 650kWh of electricity in one charge (in comparison the average home consumes 30kWh a day), that presents a significant opportunity to benefit from local electric utility time of use charging rates, energy arbitrage and potential balancing services to the wider electric grid – as well as local resilience for the business.

4. Getting to zero emissions doesn’t necessarily mean all electric

The reality for most organizations is that their fleets are diverse – with different vehicle types providing specific functionality to the business. Some functions carried out by your business may be more suitable to a non-electric vehicle solution such as natural gas or hydrogen. This could include forklift trucks in warehouses that operate 20+ hours a day leaving very short periods of downtime to refuel, or heavy-duty long-haul trucks that require battery capacity that the industry simply cannot yet deliver.

Earlier this year, New York-based hydrogen fuel cell manufacturer Plug Power announced a $172 million, two-year deal with an unnamed Fortune 100 company for hydrogen fuel cell units, storage and dispensing infrastructure across their distribution network. Furthermore, they expect their business to grow to $1 billion by 2024, in no small part due to key customers such as Amazon and Walmart.

Despite the current wave of vehicle electrification, opportunities for application of non-electric solutions will likely continue in electric grid constrained areas or within specific functions of your business.

With careful planning and analysis, there are many advantages of being an early adopter in the transition to zero emission vehicles.

Whether it be grants for electric vehicles, software and hardware companies offering heavily discounted products, or utilities offering funding to cover upgrade costs to your local electric grid infrastructure, understanding how these market enabling aids can support your vehicle, and overall, decarbonization journey will both help offset early adopter operational and financial risk while positioning your business as a leader in sustainability.


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