E-Commerce Boom Will Speed Zero-Emission Truck Adoption

April 27, 2021 by Trucks.com, @trucksdotcom

Editor’s note: Written by Ben Mandel and Cristiano Façanha. This is one in a series of periodic guest columns by industry thought leaders.

All signs indicate the e-commerce boom – sparked by the global COVID pandemic – is permanently changing the way we shop. This shift from browsing the aisles to browsing online for everything from groceries to clothing to personal items comes at a serendipitous time.

Battery costs for certain classes of commercial vehicles are declining so rapidly that some applications already, or soon will, boast a better business case when compared to their diesel counterparts. Take, for example, a Class 6 battery-electric truck (BEV) that Amazon has purchased from, Lion Electric to complete its zero-emission deliveries. When compared to a comparable diesel Class 6 delivery truck, this BEV application can hypothetically cost considerably less to own and operate when fuel, maintenance and insurance costs are taken into account over the life of the delivery vehicle–even without purchase incentives or clean fuel credits.

Sample output from Calstart’s TCO Estimator for a high-mileage Class 6 BEV delivery truck compared to diesel – 120 miles/day, 312 days/year, 12 years in service, no purchase incentives or LCFS credits.

As battery prices decline, the selection of ZECVs on the market or soon to be available is making a rapid ascent. By the end of 2021, there will be more than 300 ZECV models commercially available for purchase in the United States, Canada and Europe.  Transit/school buses and medium-duty delivery formats are leading model availability growth in an already robust market.

 

Electric truck model availability is growing rapidly. (Calstart)

Despite the positive business case for these vehicles in many applications as well as the healthy and growing selection of models, upfront sticker price remains a threshold barrier – particularly for small and medium-sized businesses.

How can they bridge the gap?

Creative new models for financing these vehicles and their associated charging infrastructure would help, and so would an influx in capital. However, the new analysis Taking Financing Commercial Fleet Electrification to Scale: Financing Barriers and Solutions, from Calstart‘s Global Commercial Vehicle Drive to Zero program and campaign, shows that financiers and financial products are not keeping pace with the rapid growth of the zero-emission commercial vehicle (ZECV) segment. The analysis finds that uncertainty over the residual value of these new technologies – or how much they will be worth in the years to come – is the leading reason financiers are holding back. But uncertainty around the future value of these vehicles need not hamper the ability of small- and medium-sized businesses to purchase delivery trucks and vans that cost less to operate, keep their communities cleaner and that are just plain fun to drive.

There are several actions that governments can take to correct this market uncertainty:

  • First, state or federal government agencies should address residual value risk through a novel application of the “first loss protection” instrument. First loss protection financial products lower risks for financiers by insuring them against a pre-determined amount of potential financial loss. First loss protection products are commonplace in securitization and insurance industries for other asset classes, so adapting this form of credit enhancement to the ZECV market represents a fairly simple way to shore up uncertainties surrounding these deployments.
  • Second, governments should provide clear market direction for manufacturers through regional and federal-level policies like California’s groundbreaking Advanced Clean Trucks rule (ACT) and the corresponding fleet regulations to require zero-emission purchases now in development in California. ACT – the first such policy globally – calls on truck manufacturers to sell increasing percentages of zero-emission trucks beginning in 2024.
  • Third, governments must create and/or expand direct, multi-year public funding at the state and federal level to support point-of-sale incentives for ZECV purchases in the near term. What is more, those public dollars should explicitly support small-to-medium sized businesses and/or low-to-medium income and disadvantaged communities. This may require that states develop new aligned funding streams, like clean fuel standard and/or cap-and-invest structures, or through innovative models allowing commercial fleets to monetize the environmental attributes of using zero-emission technologies to power trucks and buses.
  • Finally, we must also reinforce ZECV deployments with robust infrastructure programs to facilitate ZECV adoption and utility rates that can accelerate payback time. And for applications where ZECV technology is less road-tested, innovation grants can encourage the types of demonstration support needed to expedite commercialization.

The Biden Administration’s new ‘American Jobs’ plan, which includes $174 billion in investments in the U.S. EV market, will help speed the drive to zero emissions. The plan proposes a number of market-driving measures including point-of-sale rebates and tax incentives to buy American-made EVs, as well as grant and incentive programs to build a national network of 500,000 EV chargers by the year 2030. It also calls for the electrification of 50,000 diesel transit vehicles and at least 20 percent of school buses across the nation. All of these actions would send clear market signals to manufacturers, investors, and fleets that zero-emission vehicles and their components will enjoy a growing market in the United States.

The private sector can also support small- and medium-businesses – by advancing several promising innovative “as a service” business models by animating third-party capital to close the upfront cost gap, which could also help grow the ZECV segment  as a whole . These models directly address key barriers to adopting and/or financing advanced technology vehicles like high up-front costs, infrastructure costs and availability, and how to plan and time a fleet transition. The new charging-as-a-service, infrastructure-as-a-service, and electrification-as-a-service models keep front-end costs low for new zero-emission truck and bus adopters and they allow fleets to grow at their own pace. Under the new “as a service” models, vehicle operators pay fees over a service period that are competitive with or lower than the cost of operating a conventional vehicle. Vehicle manufacturers, infrastructure and power providers, and independent service providers are exploring some versions of these tools specifically for ZECVs.

As of this writing, it is unclear how much of this proposed funding would be directed to support light- versus medium- and heavy-duty vehicles.

Editor’s note: Ben Mandel is northeast regional Director of Castart, a clean transportation accelerator. Cristiano Façanha, Ph.D., is global director of Calstart’s Global Commercial Vehicle Drive to Zero program and campaign, which aims to enable and accelerate the growth of global zero- and near-zero-emission commercial vehicles.

Trucks.com welcomes divergent thoughts and opinions on transport technology and trucking industry issues. Use the comments section to cite yours. Qualified opinion leaders are welcome to offer suggestions for opinion columns. Contact info@trucks.com.

Jerry Hirsch March 31, 2021
A series of recent deals involving Volvo, Aurora and Plus demonstrates how the journey to autonomous trucking is gaining speed. 

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