Fleets hoping to identify and apply for some of the numerous financial incentives available for purchasing alternative fuel vehicles may feel a little like explorers Richard Burton and John Speke setting out to find the source of the Nile. It should have been obvious, but it was not.
The good news for modern explorers of the funding landscape is that there are expert guides available to help smooth the way and improve the chances for success.
“A lot of people just don't have the fortitude to go through the qualification, application and reporting process and handle all the follow-through required,” says long-time grant-writing consultant Jeff Fisher. “Fleets understandably want to focus on their core missions, uptime and productivity, instead of dealing with the grant process. We work directly with fleets or with truck OEMs that want to help their customers apply for relevant funding. With the right help, it can be virtually painless.”
One of your best allies when it comes to navigating the grant application process may indeed be your local dealership or truck manufacturer. Truck OEMs and their dealers were generally quick to see the potential financial benefits for their customers from the new incentive programs, as well as the opportunities to boost sales of alternative fuel vehicles. It did not take long to realize the particular challenges of grant application processes, either, however.
“When the ARRA [American Recovery and Reinvestment Act] was signed, Paccar put together a task force to see if there were ways to benefit our customers, dealers and Paccar,” says Jason Skoog, marketing manager for Kenworth Truck Co. “We had people who read the entire bill [more than 700 pages].”
“With DERA [Diesel Emissions Reduction Act] funding, for instance, there was $300 million available; $88 million that went straight to state programs and $156 million for things like truck replacements and retrofits,” says Skoog. “We sent letters to 20,000 to 25,000 customers who might benefit from the funding for alternative fuel vehicles, which includes hybrids and 2007 diesels, and we got an overwhelming response. At one point, we had eight people helping with the grants program.
“When the DERA application period ended for the first round of funding, we had written $121 million in grants for financing 4,215 replacement units,” Skoog says. “The EPA administers the program, but the grants have to be made through qualified nonprofit organizations. We worked through seven different nonprofits that consolidated requests into a total of 61 grant applications to ten EPA regions. Each region had a maximum grant amount.”
DON'T GET INTIMIDATED
“Some people get flustered by paperwork more than others do,” says Jim Thor, senior vp-retail sales for Rush Truck Centers, which recently sponsored a special event with Peterbilt Motors to help Peterbilt customers learn more about alternative power vehicles and the funding programs available to support their purchase. “We are a service organization. We feel like it is our job to help walk customers through the grant process. We need some data from customers; some reporting has to take place. We break it down into a manageable, step-by-step process.
“We helped more than 140 customers apply for DERA funds for new truck purchases,” Thor adds, “and more than 600 customers applied for retrofit dollars. We should begin hearing back concerning those applications [by the end of this month].”
Daimler Trucks North America (DTNA) has also launched initiatives to help their dealers and customers negotiate the grant application process, according to Michael D. Jackson, general manager-marketing for DTNA's truck product lines. “We have been trying to recruit outside experts to help us identify the various funding programs and who they are each geared to serve,” he says. “We have also been working to educate our dealers and customers concerning these programs. To help avoid setting false expectations, for instance, we set up a web site where dealers could go in with their customers, enter a project and get a high, medium or low rating of their probability of a funding fit.
“Customers are really excited about this new opportunity to add alternative fuel vehicles to their fleets,” Jackson adds. “They are looking for truck OEMs that can make it a reality. They just need to find a way to make the start-up work for them.”
“When it comes to selling alternative fuel vehicles, helping find funding has just become a part of the selling process,” notes Bob Carrick, western region vocational manager/natural gas for DTNA. “You need three things to make alternative fuel vehicles work for a customer: the right product for their application, a fueling infrastructure and some sort of funding support.”
“The federal stimulus package was what really got us going when it comes to pursuing grant money for our customers,” says Debbie Shust, director of product planning and strategy for Navistar Corp. “We had done some grant writing in the past, but the stimulus package multiplied the amount of funding available by ten times. Because application deadlines for this first round of DERA funding were so tight, we did informational webcasts for our dealers and assigned point people here at corporate to help dealers put grant applications together for their customers.
“It is not necessarily easy to navigate the process alone,” she adds. “While the deadline for Round 1 DERA funds was April 30, for instance, some DERA dollars went to the states, which may not necessarily have opened up their individual grant offerings yet. Within guidelines, each state can use the DERA funding as it sees fit — to support whatever initiatives it thinks will best serve the environment in the area. So states represent a second funding opportunity. Then there are still funds to support the normal annual budget for DERA programs, which is typically refinanced in the fall every year.”
Like other truck makers, Mack has also been working with its dealers to help customers identify and capitalize on stimulus-related funding opportunities, notes Mack spokesperson John Walsh. “Incentives are necessary to generate the critical mass of sales and economies of scale required to establish a viable commercial market,” he says.
THE WELL IS NOT DRY YET
The gigantic, one-time DERA windfall is by no means the only choice for fleets hoping to find financial support for green initiatives. Another program, this time from the Dept. of Energy through the Clean Cities Coalitions, is called the “Petroleum Reduction Technologies Projects for the Transportation Sector.” It has four Areas of Interest (AOIs). AOI-2, to help fund the incremental cost of purchasing new alternative fuel vehicles or retrofitting or repowering older trucks, closed on March 31 of this year.
Another part of the package, however, AOI-4, is being funded in two rounds; the first closed on May 29. If the available funds ($300 million) are not exhausted in the first round, there will be a second, with a closing date for grant applications of Sept. 30. Called the “Alternative Fuel and Advanced Technology Vehicles Pilot Program,” AOI-4 is intended to support projects that “expand the use of alternative fuel vehicles and advanced technology vehicles,” such as fuel cell vehicles, electric hybrids and plug-in hybrids.
While the actual grant applicants must be state or local governments or a metropolitan transit authority and a designated Clean Cities Coalition, public/private partnerships are eligible, and that is good news for fleets.
There is also $30 million earmarked for the EPA's SmartWay Clean Diesel Finance Program to continue support for the creation of national, state or local clean diesel financing programs. Information is available at www.epa.gov/smartway.
An Alternative Fuel Motor Vehicle Tax Credit, available from the Internal Revenue Service (IRS), is likewise still in effect, which provides fleets with up to $6,000 in tax credits for qualifying Class 6 trucks, up to $12,000 for Class 7 vehicles, and up to $28,800 for qualifying Class 8 trucks. More information is available at www.irs.gov and at www.epa.gov/otaq/eparecovery/index.htm.
“These federal tax credits can be taken by the customer, they can be put into a lease agreement to reduce payments, or they can be assigned to the vehicle-selling dealer and used to reduce the initial purchase price,” says Andy Douglas, sales manager-specialty markets for Kenworth Truck Co. “What is more, these credits can be combined with some other incentive funds to increase the total level of support.
“The tax credit and grant application processes can be a lot of work; it's true. It is just a part of buying and selling alternative fuel and hybrid trucks today,” Douglas notes. “Truck OEMs and their dealers have to sell the net price, not the gross today. We have to help our customers navigate the tax credits and grant programs. It is new, but you have to be committed; it is just what you have to do today.”
FOLLOWING THE MONEY
The winding flow of funding dollars from various federal entities through a series of ever-smaller “tributary” organizations to the companies that will actually spend them is often complex and can keep fleets from spotting opportunities right in their own backyards. The American Recovery and Reinvestment Act, for instance, provided $88 million in new funding directly to states to support clean diesel grant and loan programs administered by the states and the District of Columbia. According to EPA, these programs are “designed to achieve significant reductions in diesel emissions and maximize job creation and preservation.”
At the time of this writing, every state (except Alaska) had been awarded its $1.73 million Clean Diesel State Program Recovery grants. Programs vary from state to state. Some states are targeting transit or school bus fleets only, for example, while others have funding available for truck fleets as well. The grantees also vary from state to state. In some cases, the state Dept. of Environmental Quality is awarding the grants; in others, it may be the Dept. of Natural Resources, the Pollution Control Agency or a Dept. of Public Health and Environment. A complete list by state is available at www.epa.gov/otaq/eparecovery/progstate.htm.
“There are very few states that don't have some sort of incentive program today to help encourage the use of alternative fuel vehicles,” says Barbara Johnson, assistant vp-grants, risk management and human resources for Clean Energy. “A lot of the programs are sustainable; that is, they are funded every year, although the amounts and the timing can vary. It takes a lot of research and networking to keep up, to keep linked in. Thank goodness for the Internet; it is a huge help.”
“Today, there are a variety of federal, state and local incentives, but the diversity of the offerings, the processes in securing them, and the fact that they tend to be shorter term all present challenges in terms of identifying and capitalizing upon them,” notes John Walsh. “Longer term, more uniform incentives would be preferable.”
IS FUNDING SUPPORT HERE TO STAY?
With many of the major funding opportunities for 2009 already closed or winding down, the questions being asked are, “Will this continue on into the future? Will there be similar programs in 2010 and beyond?”
According to Jeff Fisher, the high level of funding in 2009 for alternative fuel vehicles and other clean energy projects is destined to taper off over the next year or two. “I think that funding programs were always intended to help ramp technologies up to the point where there are some economies of scale, and pricing can be competitive,” he says. “I don't think this current level of funding is sustainable in any way, shape or form. This is a once-in-a-lifetime opportunity.”
“The stimulus funds provide a reason for fleets to change now instead of waiting a few more years,” says Johnson. “It is just amazing what we can do now to create a cleaner and more secure energy future.”