December 20, 2023

Exploring the Impact of Utilities - Are Electric Fleet Vehicles the Key to Reducing Emissions?

9 Min. Read

As acceptance of battery-powered vehicles spreads beyond early adopters to vast parking lots filled with electric fleet vehicles, other commercial uses, and mass market consumers, utilities need to be ready to capitalize on the opportunity presented. While the shift to battery-powered automobiles and light-duty trucks seems inevitable, utilities can’t delay action and wait for the power demand to escalate.

They need to help eliminate barriers to widespread acceptance of EVs for personal utilization and electric fleet vehicles becoming the contemporary fleet driver expectation. This article examines ways utilities can support and drive conversion efforts.

The Shift Towards Electrification in Transportation

The first EVs appeared in the United States late in the 19th century, around the same time as electricity in residences and businesses. Then, Henry Ford introduced the automobile assembly line, resulting in lower-priced gasoline-powered vehicles taking over the nation’s roads and relegating EVs to a historical footnote. It wasn’t until the gasoline crisis in the 1970s raised concerns about unbridled fuel consumption that smaller, fuel-efficient automobiles became desirable over gas-guzzling options.

Fast forward three decades to the Toyota Prius’ success in demonstrating that a sedan with an electric motor and reduced gasoline usage can drastically reduce toxic emissions and be a marketing success. Hybrids are more eco-friendly than traditional internal combustion engine (ICE) autos and have become popular purchases with those looking to curb the usage of fossil fuels and greenhouse gas emissions.

In 2021, the U.S. Environmental Protection Agency reported that 28% of those emissions came from transportation, with road transportation making up over 80%. As signs of climate change became increasingly evident, interest in pure EVs and electric fleet vehicles escalated worldwide, as did the number of models on the market.

No longer a curiosity item, the quantity of EVs on U.S. highways and boulevards and electric fleet vehicles driving kids to school or delivering packages is rapidly growing and exceeding expectations. Experts estimated that EVs would comprise 10% of the new passenger vehicle market by 2025.

Automobile buyers’ interest was prodded by the elevated price of gasoline in recent years and enticed to action by the financial incentives offered through the federal Inflation Reduction Act, states, utilities, and local jurisdictions that significantly reduce the costs of purchasing vehicles and EV charging equipment. Parts of the U.S. have already surpassed that market penetration threshold. Now, analysts expect almost one-fourth of new car sales to be EVs nationally by 2025.

Benefits of Electric Fleet Vehicles

Commercial vehicle fleets represent about 4% of vehicles on American roadways, but their electrification is expected to be even faster than the burgeoning acceptance of EVs for private usage. Transitioning away from internal combustion engine vehicles makes compelling economic sense for businesses and organizations with fleets. The average age of passenger cars and light trucks on American streets is 12.5 years old, but light-duty vehicle fleets replace their automobiles and trucks, on average, approximately every four years or when reaching 100,000 miles on the odometer. The federal government’s tax credits currently reduce the purchase price for commercial EVs by 30%.

The incentives make capitalizing on the taxation advantages compelling. The bottom-line benefits are also enticing; EVs offer a significantly reduced total cost of ownership via fuel and maintenance savings. For many companies and municipalities, an additional benefit of purchasing electric fleet vehicles is meeting corporate responsibility goals and satisfying public and shareholder expectations.

Lower “Fuel” Costs

EV benefits vary based on the vehicle, battery power, driving conditions, and weather. Comparing mileage on gasoline versus mileage on electricity, light-duty EVs can surpass 130 miles per gallon equivalent (MPGE). Results for medium- and heavy-duty EVs vary based on the load carried but also provide a significant fuel-cost advantage over comparable-sized ICE options.

Maintenance Costs Reduced

All vehicles need regular maintenance, including filter changes, tire rotation, replacement, and other minor requirements. EVs require less maintenance overall than ICE vehicles, largely because they have fewer moving parts that require repairs or replacement. The electric vehicle batteries being used now also need little (if any) maintenance throughout their 12- to 15-year service life.

Public Image Benefits

Electrifying a fleet is currently a popular way for companies to meet their ESG goals and garner public relations kudos. Amazon, Unilever, and Walmart are just some of the major corporations modernizing their fleets with electric fleet vehicles.

How Utilities Play a Central Role

While many fleet managers are actively planning to migrate their rolling stock to EVs, utility support is imperative to encouraging those fleet managers who are hesitant to make the transition. The utilities that serve fleets will need to prepare for the impact fleet electrification will have on them. For utilities, working to support and power electric fleet vehicles, both at worksites and at drivers’ homes, is mutually beneficial to customers and their fiscal results.

There’s no doubt that transitioning to EVs will increase the utilization of electricity. One study found that a Chevy Bolt uses approximately 3,500 kilowatt-hours (kWh) annually. The researchers reported that a three-person household uses about 6,000 kWh annually. Additionally, EVs increase their electric use in households by an astounding 58%. That would reverse the trend toward less power usage while also significantly improving gas and oil consumption to reduce vehicle emissions.

In another example, the electricity requirements for a 150-vehicle fleet of electric delivery vans could reasonably demand 1 MW in increased load. Furthermore, fleets that share transport hubs can realistically pull multi-MW loads in locations that previously used minimal amounts of electricity.

EV fleets present a unique group of customers for utilities. Many have concentrated large loads and may realistically need to charge the whole fleet simultaneously in a company where every vehicle rolls out and returns at similar times each day. Utilities need to work with their fleet customers to achieve their sustainability goals. If not, fleets may look elsewhere to satisfy their charging requirements.

Fleet electrification heralds an opportunity for savvy utilities to foster new mutually beneficial relationships with businesses reliant on transportation to distribute goods. Accordingly, many utilities are aggressively supporting EV growth by developing new pricing methods, local incentives, and other innovations to help foster a smooth transition. Let’s examine ways utilities can help power the American EV revolution.

Challenges and How Utilities Can Assist

Utilities can positively mitigate two of the greatest impediments to the wider adoption of EVs: Frequently cited concerns include the ready availability of charging equipment, particularly Level 3 or Direct Current Fast Chargers (DCFCs) throughout the country, along with worries about the aging power grid meeting modern demands.

Encouraging fleet customers to install Level 2 charging stations at their residences or on commercial properties is important for their day-to-day commuter charging needs. However, a fast-charging infrastructure is critical for commercial trucking, vacationers, and those reliant on public charging and afraid of having a long wait for a charger and then waiting additional hours to add enough range to their vehicle. Much like gas stations, fast charging installations are vitally needed along major highways, in highly trafficked areas, at rural crossroads, and adjacent to other sites where people need to get back on the road quickly.

DCFC Requirements

The federal government offers incentives for purchasing and installing costly quick charging stations. However, in many areas, installation is dependent on utility infrastructure upgrades to support the higher-voltage equipment. Such upgrades will probably be critical in rural areas, where the grid infrastructure is likely to be less robust to begin with.

Distribution network upgrades, such as the installation of transformers or access to three-phase power at sites targeted for fast-charger installation, add considerable costs and time delays. Much like the fact that Level 3 chargers cannot be placed in most residential areas, the electrical demands required by DCFCs could limit options for installations in more rural areas.

Utilities need to conduct a site assessment to ascertain whether the distribution system feeding the location can accommodate the forecasted load. In some areas, off-grid power sources may be a viable option rather than expensive grid upgrades. Solar-power solutions may be possible in some areas. Utility expertise will help determine what is feasible.

Usage patterns need further study. Many drivers minimized travel during the pandemic, so studies of charger usage in the last few years may not be indicative. They do show patterns that could foretell grid demand for chargers installed in certain types of locations. A study found higher DCFC utilization on weekends, regardless of venue. Overall, they found peak utilization for Level 3 equipment occurs in the afternoon (2–6 p.m.), regardless of charger location or day of the week.

Rate Considerations

Understanding and developing a strategy for utility pricing is also a challenge for EV charging locations, worksite charging, and electric fleet vehicles on the road.

Even with government incentives, estimates are that revenue generated from public DCFC stations typically recoups only one-third of operating costs. Utility demand charges for electricity use if it exceeds thresholds during peak-rate times. These rate surges affect the business case for deploying more Level 3 chargers in many areas. Additionally, peak demand charges can deter drivers from using the faster EV chargers.

Utilities need to develop a wider range of rate options to facilitate more public charging and help those purchasing electric fleet vehicles understand what charging will cost locally and in the wild. Affordable charging rates to boost station utilization at all hours are essential to encouraging more investment in charging station facilities. Operators need to know they can earn enough revenue and recoup their initial outlay in a reasonable period.

Decentralized Production and Balancing Grid

Electrification is opening new possibilities for how power can be sourced and distributed, which will help address concerns about grid demands fostered by increasing numbers of vehicle batteries to charge. Once reliant primarily on energy produced by fossil-based plants, utilities are now incorporating power into the grid from solar panels or wind turbines from a variety of sources, vast energy storage systems, and new institutional power generators coming online.

Balancing the electrical grid during high demand and incorporating renewable energy sources is a critical requirement for utilities to support the transportation transformation. Utilities need to embrace new tools to manage the demand. Virtual power plants (VPPs) can help. VPPs incorporate artificial intelligence and sophisticated analytics to direct power assets and activities better. On a local level, VPPs can consolidate and coordinate the myriad generating sources seamlessly into grid operations, providing more flexibility in the use of renewables and greater reliability. On a macro level, they can also participate in the energy generation mix, play into the wholesale markets, and guide distribution to meet demand and potentially alleviate the need for additional generating plants, transformers, and other infrastructure improvements. The Rocky Mountain Institute estimates that VPPs could potentially reduce peak demand by 60 gigawatts by 2030, enough to power 50 million, or 40%, of U.S. households.

Partnering to Build Future

Utilities are being handed a golden business opportunity with the transformation to electric vehicles. After years of declining revenue with the advent of solar power, low-wattage LEDs, and energy-efficient appliances, electric utilities will undoubtedly realize an increase in customers’ electricity usage as they purchase and commence driving EVs.

California’s largest utilities have been the leaders in establishing charging infrastructure to support electric fleet vehicles, EVs for leisure or commuter use, and other electrification efforts. The effort has spread beyond the Golden State. Now, the majority of the 3,300+ American utilities are encouraging EV adoption.

Utilities have an opportunity to help build momentum and mitigate concerns fleet managers and regular car buyers may have about electric vehicles. Enabling the addition of fast-speed charging equipment on highways and rural roads, developing new rate strategies, and revamping their approach to managing generating and distribution with virtual power plants are some ways utilities can help.

As a national leader in the transportation electrification area, Qmerit has installed over 269,000 EV charging stations and can work with you to support electric fleet transitions, provide more charging-at-home options, and ensure the success of your region’s transition to fleet electrification and movement to join the energy transition.