Public and private fleet owners are under increasing environmental and government pressure to reduce carbon emissions by switching to electric vehicles (EVs). The drive to fleet electrification includes all classifications of vehicles, from passenger EVs and light commercial vehicles to municipal and school buses to medium- and heavy-duty trucks.
EVs of all classes offer fleet owners significant advantages over internal combustion engine (ICE) vehicles. They are quieter, cleaner, have better acceleration, and cost less to keep running because electricity is cheaper than diesel and EVs require less maintenance than their ICE counterparts. However, achieving the leading metric for fleet owners, lower total cost of ownership (TCO), is dependent on more electric vehicle models on the market at lower prices, particularly for medium- and heavy-duty trucks.
Upfront cost remains an obstacle to fleet electrification
According to a recent survey, upfront cost is the most significant obstacle to adopting EVs in fleets. Fleet operators have to purchase EVs, purchase, install and manage depot EV charging infrastructure, retrain drivers, and transition maintenance staff. All these costs must be factored into achieving TCO targets.
On the plus side, the purchase price of EVs and EV charging equipment continues to come down as new models come on the market. Incentives from governments and utilities, along with declining battery prices and increasing battery efficiency and supply, also contribute to reductions in upfront costs. McKinsey asserts that on a TCO basis, light commercial vehicles are at parity now with ICE alternatives in the U.S. Medium-duty trucks will achieve TCO parity by 2025 and heavy-duty trucks by the end of the decade.
These trends should encourage early adopters to venture forth with fleet electrification. However, they must guard against getting stuck with stranded assets or insufficient charging infrastructure as the market matures.
Smart energy management can improve the economics of fleet electrification
The majority of light commercial EVs and medium-duty EV trucks will operate as “return to base” vehicles, parking at the fleet depot overnight and recharging their batteries to be ready for the next day’s work. Fleet managers should use smart energy management software to optimize charging operations and minimize electricity costs, ensuring TCO by monitoring, managing, and adjusting energy consumption.
Smart algorithms automatically shift charging loads based on business requirements of the fleet while balancing dynamic electricity grid and renewable supplies, dynamic energy costs, preconfigured policies, and the needs of fleet vehicles. For example, time-of-use pricing increases the cost of electricity during peak usage periods, like 4 p.m. to 9 p.m. and can include penalties for exceeding peak demand limits.
Fleet operators using smart energy management can reduce energy costs by deferring all but the most necessary charging to non-peak times when prices are lower and adjusting power going to vehicles to avoid penalties. Or they can generate revenue by opting out of charging altogether during peak times or in response to signals from the electricity supplier (demand response programs) and receive money for doing so.
As the makeup of a fleet shifts more to EVs, smart energy management can ensure that your depot has the energy required for charging by integrating onsite battery storage and renewables like onsite solar panels. During low-demand/low-cost periods you can use grid energy to charge onsite batteries cheaply, or direct energy from solar panels to your batteries when the sun is shining. Then use that stored energy to charge EVs during peak times. These practices enable you to lower costs and maximize local grid infrastructure to support a large fleet of EVs in the most cost-effective way.
V2G can generate new revenues for fleets by returning energy to the grid
By having large numbers of EVs connected simultaneously to EV chargers, fleet operators are ideally positioned to leverage bi-directional charging, or vehicle-to-grid (V2G), for new sources of revenue. As the term implies, V2G-enabled EVs paired with V2G-enabled EV chargers can both receive energy from and send energy to the grid.
This emerging technology uses EV batteries for distributed energy storage as well as power for transportation, allowing charging operators to participate in utility programs that reduce energy costs and generate net new revenue. These programs range from backup capacity to rate optimization to grid services that stabilize the grid by providing additional power for use by the utility during unexpected peak times.
How much revenue? According to a recent analysis by McKinsey, the answer depends on many factors, ranging from the utility and grid provider serving your fleet to the capacity of EV batteries to the capacity of your V2G-enabled EV chargers. For example, the study found that the potential revenue generated by an EV school bus could range “from $1,000 to $2,000 per EV annually in Georgia and from $15,000 to $16,000 in Virginia.”
Incorporating V2G into fleet electrification planning
Although it is early times in maturation of V2G, it’s not too soon to evaluate the potential as you make decisions on the buildout of your EV charging infrastructure. For example, saving upfront costs by buying low-capacity Level 2 chargers today can severely limit your ability to participate in V2G programs down the road.
Over the next few years, we will see industry standards for V2G extend from the EV charging industry to encompass utilities and charger manufacturers as well. At the same time, more EV charger manufacturers will bring V2G-capable equipment to market, helping to lower costs. And although utility rate structures and V2G compensation levels are uncertain, utilities are interested and are providing incentives to help EV fleet operators build out charging infrastructure.
One thing that is certain today is that choosing an EV charging management platform that incorporates smart energy management and can scale as you grow will provide returns from the beginning of your fleet electrification journey.