Zero-Emission Fleets: ‘The Transition is Happening’
A rising tide of regulatory mandates limiting the use of gasoline- and diesel-powered vehicles is making the internal combustion engine an endangered species. Federal and state environmental agencies in jurisdictions such as California are leaving businesses, including linen, uniform and facility services companies, with little choice but to begin converting their fleets to alternative-fuel vehicles.
The shift either to electric, hydrogen-powered or other types of zero-emission vehicles that don’t rely on fossil fuels is likely to begin happening in a big way in the next 5-7 years. That was the consensus view expressed by a panel of McKinsey & Co. fleet experts who spoke during the recent NAFA 2023 Institute & Expo in Baltimore. Speaking on April 17 during the kickoff of the three-day program titled “Steering Toward Success,” one panelist noted the planned phaseout of the sale of gasoline and diesel vehicles by 2036 under federal and California regulations. Given that deadline, it’s past time for fleet managers to begin converting their trucks to renewable fuels such as electric-powered vehicles. “Lots of fleets that we work with are actually trying to be the early movers, or fast followers, as opposed to waiting on the sidelines,” said Saral Chauhan, fleet electrification leader for McKinsey. Speaking of the transition to electric-vehicle (EV) transportation, he added that, “This is very real,” he said. “The transition is happening. It may actually even have happened faster than many of us in the industry expect.”
Joining the panel discussion, titled “Realizing the Promise of Fleet Electrification – How to De-Risk the Transition” were two other McKinsey fleet analysts, Shivika Sahdev, a partner in the firm who leads the McKinsey Center for Future Mobility and EV Charging Service Line; and Adam Seifert, a former fleet operator and adviser who moderated the discussion. TRSA partnered with NAFA on the program and held its TRSA Fleet Summit concurrently with NAFA’s program for fleet executives from both the public and private sectors.
Sahdev kicked off the 11:15 a.m. presentation with a review of “true-or-false” questions about “common EV ‘myths.’” These addressed a range of concerns voiced by fleet managers as to the feasibility of organizations such as linen, uniform and facility services companies, that are considering a move to alt-fuel vehicles. For example:
“EV range can decrease significantly in winter.” Sahdev confirmed that this is a common assumption, adding that that is “absolutely true.” She noted that cold weather can trigger a range of variables, depending on the types of battery chemistry used and route requirements. Fleet managers must deal with these issues. Otherwise, these factors could “meaningfully change your cost of operations, the range of the vehicle on a given day, and therefore, the types of charging infrastructure that you might have to install.” She added that, “You have to install infrastructure for the worst-case day, right? You can’t say, ‘Sorry, I couldn’t get the vehicle to where it needed to be.’”
Sahdev cited a second common “myth” by stating “There are not enough charging stations to power EVs.”
“True,” she said. “In general, the infrastructure in public is not anywhere close to where it would need to be to service our fleets.” Sahdev added that, “This problem is aggravated in a fleet setting.” Currently, there’s a shortage of the higher kilowatt hours needed for “fast-charging” systems that can recharge a truck battery in as little as half an hour vs. slower Level 2 chargers that can take up to eight hours, she said.
A third true-or-false “myth” featured this statement: “There’s not enough raw materials to make all the EV batteries that we need.” A number of hands went up when Sahdev asked if they agreed with this view. Sahdev disputed it. “Overall, there is actually sufficient supply,” she said. “But the challenge with raw materials centers on supply-chain issues. The logistics of delivering it in the right timeframe et cetera may be a problem.” Still she said the supply of raw materials themselves is not a “meaningful problem.”
Amid these concerns, other than meeting regulatory mandates, what benefits are there for fleet managers to begin converting to alt-fuel vehicles? The answer, according to the panelists, is, 1) fuel and maintenance costs are lower than with conventional engines; and 2) government aid through the Inflation Reduction Act and other federal and state programs can help smooth the transition for businesses moving to a post fossil-fuel fleet era.
While the focus of transitioning fleets away from gasoline and diesel has centered mainly on EV programs, the panelists pointed out that advances in hydrogen technology for vehicles could pose a better alternative, especially for large, long-haul trucks. “We’ve shown the hydrogen fuel combustion in the heavy-duty truck segment is likely to be very meaningful in the long term,” Chauhan said. “This is actually a heavy-duty long-haul-use case where we see application for hydrogen being more pronounced.” He added that the total cost of ownership (TCO) is more competitive.
Alternatively, EV trucks running 400 miles a day or more could require a very large battery pack that could limit the cargo payload on the truck. This may not be an issue for a step van hauling light goods, but if it’s carrying cement or bulk goods (or soiled laundry), the weight could pose a “very meaningful obstacle,” he said. “That’s where a hydrogen fuel cell could potentially have a bigger role to play.”