As we recently discussed, numerous regulatory actions are currently under consideration in the United States transportation industry to help reduce emissions. Today, the transportation industry is the largest source of greenhouse gas emissions (GHG) at 29%, followed by electricity generation at 25%, but following the introduction of the Clean Power Plan in 2015, significant progress has been made in sustainable electricity generation. In turn, the focus for both proposed and enacted emissions regulations has shifted to transportation.
Large trucks and buses represent only about 5% of vehicles on US roads, but in 2020 they accounted for 26% of the sector’s GHG, as their energy is sourced almost entirely from fossil fuels, mostly oil and natural gas. In response to regulations, consumer sentiment and environmental concerns, recent years have seen a shift in the industry toward sustainability. Many commercial transportation companies are now considering how they can enhance their fleets to reduce emissions and increase operational sustainability.
This effort to decarbonize trucks and buses to reduce greenhouse gasses and pollution has spurred interest in zero-emission vehicles (ZEV) and electrifying fleets. In a relatively short period of time, what many in the trucking industry had viewed as a somewhat nascent and slow growing market has been rapidly accelerating. But how do transportation companies get started with ZEVs? What do they need to know about sustainability and the regulations that encourage it? Read on to learn more.
How Companies can Adapt to Changing Regulations
Big drivers of the growing interest in ZEVs have been two major pieces of legislation passed at the federal level—the Bipartisan Infrastructure Law (2021) and the Inflation Reduction Act (2022)—as well as initiatives by the California Air Resources Board (CARB). In addition, the US is a part of the Global Memorandum of Understanding (MOU) on Zero-Emission Medium- and Heavy-Duty Vehicles, which commits participating countries to achieve net-zero carbon emissions by 2050.
They’ll do this, in part, by setting the goal that 100% of new trucks and buses sold are ZEVs by 2040, with an interim goal of 30% ZEV sales by 2030. There still is some question, however, as to how fast this transition to zero-emission trucks (ZET) will occur and whether these targets can be met, as there are significant headwinds to achieving the return on investment that commercial transportation and logistics companies would expect.
The market penetration of ZETs to date has been slow. At the end of 2021, there were 1,215 ZETs in use in the United States, which is a very small portion of the 23 million internal combustion engine (ICE) trucks on the roads today. However, adoption has increased in the last year. CALSTART reported that by the end of 2022 ZET had a cumulative deployed sales of 5,483 units from 2017-2022. The chart below indicates where these sales have occurred across the United States.
There are several options for fleets to choose from when it comes to vehicle propulsion solutions to drive lower emissions, to include battery electric, fuel cell electric, hydrogen, natural gas, renewable diesel, renewable natural gas, biofuels, compressed natural gas and liquified natural gas. Each of these options have advantages and disadvantages depending on their application, and some can be used in combination with existing internal combustion engines (ICE) to offer immediate and near-term emissions reductions. The chart below offers qualitative measures of some of these options when it comes to their emissions levels, maturity in the market and total cost of ownership.
As fleets consider these various options, there are many variables to consider:
- Ensuring the economics of adoption work for total cost of ownership
- Accounting for the logistical shift in operating ZETs versus diesel
- ZET manufacturing processes and demands and their impacts on costs
- Investing in the infrastructure needed to make ZETs viable
- Making the transition equitable across different fleet sizes
- Buying new versus secondary market purchases
- Examining social, reputational and environmental costs of transitioning
The pace of transformation from traditional ICE trucks to ZET will be impacted by several key factors: regulation and policy, technology advancement, cost, sourcing of materials, market dynamics and infrastructure.
From a regulatory and policy standpoint, as mentioned previously, governments are introducing regulatory changes and controls on emissions requirements, sales bans, procurement requirements and entry bans on ICE trucks. They also are introducing various tax credits, grants and incentives to truck manufacturers and motor carriers to lower the cost of entry and to encourage and accelerate the adoption of ZET through vehicle sales, as well as to governments, utilities, and private industry for infrastructure development.
How Electric Trucks Are Evolving
With respect to technology development, advancements are focused on batteries, fuel cell systems and hydrogen, as well as charging hardware and infrastructure. While there has been significant progress, it will be some time before the technologies can be mainstreamed and competitive with diesel-powered trucks and other alternative fueling options such as natural gas, particularly in the over-the-road segment of trucking. This gap is closing more each day as the technology advances and the industry reaches scale. As an example, business and financial analysis juggernaut McKinsey & Company reports that in the last 5 years there has been a 50% cost reduction for high-powered DC fast chargers.
While progress is being made in reducing costs, certain elements of the equation for ZETs currently are still significant. A new Class 8 diesel truck costs approximately $135,000-$150,000, whereas battery electric and fuel cell trucks can range from $200,000 to $600,000, with 30-50% of the cost related to the battery. On the charging front, the installation of charging stations for medium and heavy-duty trucks can exceed $100,000, and vehicle charging times currently are significantly longer (in some cases up to 5 hours) with battery powered trucks vs fueling of diesel trucks.
In addition, electrification of the entire US vehicle fleet would consume 40.3% of the current electricity demand, while the aging electrical grid is already having a tough time keeping up with current demand. While the overall recharging and maintenance costs can be lower, depending on the charging location and type of ZET, a lot depends on the electricity tariffs, which vary by location. Public-private partnerships are also on the table to help with the cost and pace of the transition needed to support the charging infrastructure. With respect to maintenance, ZETs have specialized components that require specialized training.
Other key factors that impact costs are the sourcing of materials for battery production, battery weight, range, performance, and life. As fleets contemplate their shift to ZETs, it is critically important they consider the Total Cost of Ownership. To this point, the American Transportation Research Institute has concluded that for CO2 emissions over the full truck life cycle, a battery electric truck would have 30% lower emissions and a fuel cell electric truck would have 44.6% lower emissions, compared to a diesel-powered vehicle.
By 2030, McKinsey & Company anticipates that 90% of the medium and heavy-duty truck segment will still run on ICEs. In the longer term, 2040 and beyond, as indicated by the chart below, the projection of market share of battery electric and fuel cell powertrains globally will be much larger and will vary by application and length of haul.
The bottom line is there are a plethora of options and fleets need to take time to do their research, make sure they are using credible and unbiased information, match it with their operational needs and test out different options to measure ROI. There are many variables to consider, and everyone in the energy sector is jockeying for position and market share. In the next article in this series, we will talk more about some of these variables, as well as short- and longer-term factors and solutions for fleets and governments to consider when planning for a transition to ZETs.
At Trimble, we’re dedicated to providing our customers and partners the tools they need to meet their environmental sustainability objectives. To talk to our team about how we might help, please contact us.
About the Author
Stephen A. Keppler - Co-Director, Scopelitis
This piece was produced in collaboration with Stephen Keppler, Co-Director of Scopelitis Transportation Consulting LLC. Stephen has more than 30 years of transportation industry experience, including time as an investigator, inspector and policymaker for the Federal Highway Administration’s Office of Motor Carriers (predecessor to the FMCSA). He has also held executive leadership positions at the Intelligent Transportation Society of America, the Commercial Vehicle Safety Alliance and the Intermodal Association of North America. Follow him on LinkedIn or get in touch at firstname.lastname@example.org.