Getting to “Yes” on fleet electrification
Electric trucks, buses are gearing up for mass deployment
By Richard Kauffman, Chair of the Board of Directors at Generate Capital and former New York “energy czar.“
We’ve all seen the signs in hotel rooms urging us to hang up towels to save the planet. According to researchers, that sign is much less effective than a sign that asks you to join other guests who hang up their towels.
This mirrors what we’ve learned about clean energy. In the case of fleet electrification, we have long assumed that fleet owners will invest in a solution that will save the planet or save them money. But, just like understanding what’s needed to move hotel room occupants to act, getting to “Yes” on any fleet electrification initiative demands that we first get our hands around both the barriers that stand in the way and the tools that can overcome those barriers.
The time is right for taking on this challenge in the transportation sector. Electric trucks and buses are gearing up for mass deployment. The technology is proven. Critical stakeholders, from policymakers to fleet owners to utilities to private financiers are ready to move forward. There is an urgent need to reduce transportation emissions in communities that suffer a disproportionate burden from air pollution. At the same time, record amounts of capital is being deployed through impact investing and other means to drive societal outcomes. However, just because all of these pieces are in place, a market will not spontaneously materialize. Several remaining barriers stand in the way of animating the vast sums of private capital necessary to catalyze the transition to a zero-emission national fleet.
A new report, and the companion research presentation co-developed and written by Environmental Defense Fund, M.J. Bradley & Associates and Vivid Economics, examine these barriers and provide recommendations on how to more effectively leverage public dollars and engage private capital than what has been tried in years past. As the report demonstrates, achieving the environmental, health and financial benefits of this emerging technology will require thinking in new ways about when and how to deploy public and private resources. It will also require more collaboration between policymakers, fleet owners, utilities and private financiers, facilitated by a common framework that these parties can use to understand the full range of challenges and the means by which to move forward.
The framework presented in the report is the Total Cost of Electrification (TCE). It builds upon and augments the traditional Total Cost of Ownership (TCO), which has long been a core metric for fleets. Fleet electrification as understood through TCE includes hard costs, soft costs, risks, uncertainties and frictions that are difficult to capture in a traditional TCO analysis. These factors, though, can serve to slow or even block fleet transition efforts. TCE brings these challenges into the discussion, providing a common language that also helps highlight opportunities to overcome them.
The report matches the most significant barriers to existing and emerging financing approaches and non-financial support tools that can mitigate, eliminate and/or shift the costs, risks and frictions that hold back fleet transitions. Using this “toolkit” will help policymakers and other stakeholders design and deploy solutions that can unleash private capital in electrification markets.
However, frameworks and tools will not spark an electric transformation on their own. It will take people, working in collaboration with one another, to make the transition happen. The financial sector must move off of the sidelines and directly engage with players across the industry to communicate the risk-return needs that will ultimately allow private capital to engage at scale.
The opportunity for cleaner fleets, cleaner cities and cleaner investments is before us. With the convergence of climate change, environmental justice and post-COVID recovery, the importance and urgency of jumpstarting fleet electrification have never been greater. We are at a critical juncture to enable the enormous potential of a high-growth, green-jobs industry that can create unprecedented economic and national security benefits. Now is the right time to rebuild better by building clean.
With the report, we now have a framework, a toolkit and a path toward collaborative action to catalyze markets and realize our collective ambitions. So let’s hang up those towels and get to work.