If you manage a fleet of vehicles, chances are, you’re under increasing pressure to report on and reduce your scope 1 carbon emissions. That pressure could come from your organization and investors, or it could be driven by customers looking to their supply chain partners to reduce their scope 3 value chain emissions.
Regardless, here’s what to consider when transitioning to a cleaner, more sustainable fleet:
Determine your fleet’s carbon profile
Step one in the EV fleet management process is to evaluate your current fleet and measure its present day emissions. That means understanding your fleet composition. To do that, you’ll need to calculate the annual emissions for each vehicle based on the total miles traveled, current fuel efficiencies, and the resulting carbon intensity of the fuels you use—typically gasoline or diesel (with an estimated 19.37 and 22.46 pounds of CO2 per gallon respectively).
You’ll also want to understand your current vehicle turnover rate and identify vehicles set to be retired over the next few years—they’re good candidates to replace with electric vehicles. Regional incentives, rebates, and fuel costs may sway your decision-making process toward certain areas of the country and impact the order of retirement and conversions, so pay attention to those opportunities. The northeastern U.S. and California tend to have the most generous incentives, and California has relatively high gasoline and diesel costs, so they will be some of the first markets to focus on.
Develop an estimated value for avoided carbon
The key issue here is to understand how your organization values carbon. To help guide their decision-making processes, many companies have assigned internal carbon prices (i.e., putting a price on every metric ton of carbon produced as a way of benchmarking). In fact, a 2021 CDP report indicated that 2,000 companies with a market capitalization exceeding $27 trillion either used or plan to use an internal carbon price, with most of that assigned to direct scope 1 emissions (including fleets). Having an actual cost associated with your carbon footprint makes the exercise a bit more complex but also very clear with respect to the inherent trade-offs. If you can put a price on reduced emissions, you can factor that into a vehicle’s cost and operating expenses.
Of course, since EVs run on electricity, there are relevant grid carbon intensities to consider. A grid’s energy mix can vary considerably based on regional generation, but EVs powering up in even the most carbon-intensive grids still result in lower overall emissions than their combustion counterparts. In your calculations, you will need to identify your EV-related electricity emissions (scope 2), to determine your net carbon benefit. The DOE has a website that allows one to calculate these values or Sustain.Life automatically calculates electricity-related emissions from your grid mix.
Upfront capital costs – vehicles
Today, EVs have a higher upfront premium, owing largely to the cost of the batteries (and the larger the battery capacity, the higher the up-front cost). One recent review suggests that the sticker price of a passenger EV is about $10,000 more than its internal combustion engine counterpart. While the cost differential for larger vehicles is more challenging to estimate, an analysis from the International Council on Clean Transportation indicated that an electric truck might cost as much as two to three times its diesel counterpart today. However, the premium is expected to fall over time. The U.S. Department of Energy has a database of currently available electric vehicles for all fleet applications that can help buyers evaluate potential options.
Fortunately, many states are actively working to meet their emissions targets, so they offer incentives to help accelerate electric vehicle adoption. The National Conference of State Legislatures reports that 45 states provide some type of incentive for EVs, but they can vary considerably. California offers up to $120,000 for eight different versions of Class 8 electric trucks, while Massachusetts provides up to $90,000 for a similar vehicle.
There is some federal support as well. For example, for an EV fleet of light-duty pick-up trucks, federal tax incentives range from zero to as much as $7,500, depending on the manufacturer and their eligibility for tax credits. (Each automaker’s applicable subsidy drops to zero once they have sold 200,000 vehicles, so early adopters beware.) If capital costs are too big a hurdle, various solutions providers now offer rental opportunities or even electric trucking-as-a-service.
Upfront capital costs – EV charging infrastructure
If you own and operate an electric fleet, you’ll need to charge it with on-site charging points. In other words, you’ll need to install chargers. Unfortunately, the cost of charging stations is not cheap, and prices depend on charger capacity. These can range from under 100 kW for a pick-up and passenger car fleet. On the trucking side, they can be enormous. How big? Well, in early June 2022, a consortium of EV manufacturers and charging companies developing international standards launched its Megawatt Charging System (MCS), sized to accommodate up to 3.75 MW of peak power! That capacity level—about ten times as much as an average grocery store’s peak demand—would allow a big truck to charge in 15-20 minutes.
Prices will vary considerably based on several factors, including the size (capacity) and charging speed.
Chargers for trucks come in at an entirely different level. As noted above, these can be enormous and quite costly. It’s still early days for the deployment of large chargers for trucks. Tesla, for example, started building its first semi-tractor trailer fast-charging station in Nevada in late 2021, with charger capacity expected to exceed 1 MW. Some charging companies also offer turnkey installation solutions, fleet charging hubs, and charging-as-a-service.
If you decide to finance installation costs, a number of states offer sizeable. Massachusetts, for example, offers up to $50,000 to commercial customers putting in more than 10 EV chargers at a workplace, and numerous utilities also have their own programs.
While your initial capital outlay may be considerably higher, the longer-term operational cost savings of EVs can make for a compelling ROI in many cases, especially since fuel and maintenance costs can be far less. When it comes to the total cost of ownership, EVs were less expensive to fuel than their internal combustion counterparts even before the recent volatile fuel market. That differential has increased considerably in recent months (although electricity prices are also creeping up), so fuel savings may add up for fleets that rack up high mileage numbers.
The other issue to consider is the cost of maintenance. Electric vehicles have far fewer moving parts—that means less equipment that can break or needs maintenance. There are no belts to check, oil filters to replace, or combustion engines to maintain. According to the U.S. Government, the cost to maintain a full battery-electric vehicle comes in at $.061 per mile versus $.101 for a typical fuel vehicle. Four cents doesn’t sound like much, but it is if your fleet covers many miles. The U.S. Government offers a Vehicle Cost Calculator that allows you to compare total costs of ownership across as many as eight alternatives.
There are a lot of moving parts to consider when deciding to convert your fleet vehicles from internal combustion to electric engines. As technologies continue to improve, manufacturers offer more models, and charging networks open up, the option of conversion fleet conversion becomes increasingly viable and attractive for more organizations. The most critical factors include your company’s approach to carbon management, fleet miles traveled, available incentives, and fuel and electricity costs.
Fleet operators take note—early adopters are already forging ahead, and a growing body of evidence suggests that migrating from the hydrocarbon to the electron (read: zero emissions from the tailpipe) is the wave of the future.