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Making the business case for transitioning to electric-powered fleets

March 25, 2022
Anthony Allard, executive vice president and head of North America at Hitachi Energy, shares his insight into the business case for transitioning to electric-powered fleets.

The transition to electric vehicles is coming sooner than you think. The Infrastructure Investment and Jobs Act, signed by the president last year, provides more than $7 billion of funding for electric vehicles, including the creation of a nationwide network of half a million electric vehicle chargers distributed along the country’s interstate highway system. This move, the single, largest U.S. investment in electric vehicle (EV) charging infrastructure to date, provides further evidence of the growing momentum behind the shift to EVs taking place across the country.  

This move also offers some additional encouragement for fleet owners that are considering making the transition away from gasoline- and diesel- powered vehicles. Why? Building and maintaining large-scale EV fleets is going to take more than just purchasing a bunch of vehicles and plugging them into a wall socket. The EV transition is going to require investment in new charging infrastructure, both private and public, to help manage energy supplies and consumption for a diverse array of vehicles, including medium- and heavy-duty trucks that dominate maintenance and delivery fleets. Fleet owners are going to need to work with utilities to upgrade the electrical grid at the connection point and in some cases contribute to needed upgrades in the grid backbone. The promise of some federal support for these needed investments can help ease that burden.

Why make a business case for EVs

The investment in EVs is one of the key priorities established by the Biden Administration to support carbon emission reduction targets outlined by the Paris Agreement and reinforced at the COP26 Summit in Glasgow. One of the Administration’s goals is to make half of all new U.S. passenger vehicles sold by 2030 EVs and for 100% of the vehicles on U.S. roads by 2050 to be zero-emission. Just making it to 50% of that 2050 goal would reduce carbon emissions by up to 1.5 gigatons per year—which is roughly equivalent to the total CO2 emissions of a medium-sized industrialized country. Similarly, President Biden has directed the federal government to acquire 100% zero-emission vehicles (ZEVs) by 2035, further accelerating the adoption of EVs.

It is clear that the environmental case for the transition to EVs is compelling. However, is there a strong business case as well? Hitachi Energy’s analysis suggests that there is. According to Consumer Reports, the total cost of ownership of an EV is significantly lower than that of a traditional internal combustion vehicle when you factor in fueling costs and maintenance expenses, which offset typically higher purchase prices. In fact, fuel savings alone approach nearly $5,000 per vehicle over seven years.

The likely savings for fleet vehicles is substantially greater, due to the utilization profile of the typical delivery or maintenance vehicle, which spends a far greater percentage of the day on the road. Scale those savings out to dozens, hundreds of even thousands of vehicles, and it’s clear that there is a very attractive business case for making the EV transition.

Three Steps in Preparing for Fleet Electrification

To successfully electrify private fleets at enterprise scale, fleet owners are going to have to arrange for the charging of dozens or even hundreds of vehicles in a way that doesn’t overwhelm the connection point or the overall grid. This will require close collaboration with a variety of relevant stakeholders, from local utilities to public utility commissions to infrastructure providers. In many cases there will also be the need for considerable investment both at the charging point and throughout the grid.

This process will require significant effort, but there are three steps that fleet managers can take to make the transition to EVs go more smoothly:

  1. Adding intelligence to charging systems. Organizations that operate large fleets should invest in smart grid technology that provides better understanding of load forecasting and planning. Valuable insights derived from fleet size and charging time can be used to optimize charging strategies in a way that minimizes impact to the grid. Of course, local utilities need to add intelligence to the delivery side as well. Remote monitoring and asset management solutions can allow them to monitor energy flows, shift between generation assets dynamically and ultimately help guarantee energy quality. Working together, grid management software and EV fleet energy management and optimization systems can exchange information and train themselves to meet the charging requirements of the EVs with clean energy from the grid.
  2. Thinking holistically about total power needs. Making better energy consumption decisions goes beyond fleet charging. Depots are typically co-located with facilities that use power in other ways–from warehouses and machine shops to office space. Gaining insights into how EV charging requirements impact overall energy consumption is a critical first step in optimizing energy usage across the entire site. Companies may also want to produce power to augment energy supplies through on-site solar, wind or geothermal plants, and add on-site storage to help manage EVCI demand. Managing these assets can benefit from the same intelligence and automation, in the form of a microgrid, that local utilities rely on to monitor and manage assets that make up the broader grid.
  3. Collaborate with local utilities and other stakeholders. Fleet managers need to work with local utilities, as well as suppliers, equipment manufacturers, policy makers and regulators to develop plans to support the electrification of their fleets. Since depots and charging stations tend to be clustered in specific areas, it makes sense to confer with utilities early in the development phase to help ensure the availability of an adequate supply of electricity. According to a recent study that investigated the long-term impacts of fleet electrification on the power grid, fleets tend to be clustered in specific areas and can place a considerable burden on the local distribution system. Bridging the gap between the charging needs of fleet owners and required grid upgrades on the part of utilities will require extensive collaboration involving regulators and policy makers. Proactive outreach well in advance of any rollout will help ensure that fleet operators aren’t left in the dark when the time comes to plug in their vehicles.

Fleet Electrification Makes Good Business Sense

Electrification represents an appealing opportunity for fleet owners and managers, especially when factoring in the enormous, anticipated investments by the federal government over the next decade that will help drive down costs. Businesses need to invest now in smart grid technology that helps them better manage energy demand and consumption, enabling them to charge their fleets in a sustainable way without overwhelming the grid. Working together with local utilities, regulators and suppliers, fleet operators can make important strides in meeting the nation’s climate goals through electrification of fleets, a strategy that can also yield considerable economic benefits.

Anthony Allard is executive vice president and head of North America at Hitachi Energy.

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