At UPS, we’ve learned many lessons on our journey to building the fleet of tomorrow. Here’s what stands out.
Here’s what stands out.
Fleet electrification is an exciting component in UPS’s use of emerging technologies and an important element in helping the company achieve its ambitious sustainability goals.
A “rolling laboratory” of approximately 9,300 alternative fuel and advanced technology vehicles driving more than 1 million cleaner miles each business day fuels our journey toward a less carbon-intensive future. This includes more than 1,000 electric and hybrid/electric vehicles.
We also practice fuel reduction strategies across our entire fleet of 119,000 ground vehicles, including technology-powered route planning with customized algorithms and predictive analytics that help to reduce fuel and emissions, along with diligent maintenance to help vehicles run efficiently.
One of the people at the center of those efforts is Peter Harris, UPS Europe Director of Sustainability. As part of our recent research study with GreenBiz Group, Paul Carp, GreenBiz Senior Analyst and Director of Research, interviewed Harris about the future of fleet electrification.
Read their interview below:
Carp: What are the primary motivators for electrifying your fleet?
Harris: In Europe, because of concerns over air quality pollution, cities are progressively restricting access to more and more diesel vehicles. So the initial thrust toward alternative fuels – and particularly, electrification – comes from that shift.
What we found, though, is that once we started down the electrification road, the other advantages became more apparent. It’s not only about risk mitigation. Getting ahead of the risk starts to expose advantages and opportunities that we didn’t necessarily expect – such as innovation, leadership and the ability to connect more effectively with regulators and customers.
Carp: What are some of the barriers to moving faster and electrifying your fleet at scale?
Harris: The first thing is it just makes an awful lot of sense on paper to do this because it’s a zero-tailpipe-emission solution, which is what cities want. We have very controlled, relatively low-distance routes, which are compatible with electrification technology. We have back-at-base operations, which suit overnight recharging.
So it all looks good. And those advantages remain. But there are two big hurdles, and the first is that for a whole variety of interesting commercial reasons, there just isn’t a strong enough pipeline of electric trucks available at the moment to actually deploy at scale.
We’ve overcome that challenge by developing a bridging technology around converting diesel to electric mid-life. That’s been quite an interesting exercise, and we’re now in the process of replacing that with a new technology partnership with a company here to build a new EV from the ground up. And we’re partnering with others to do the same while encouraging larger vehicle manufacturers to build the EVs we need in our fleet.
And then No. 2 – there’s an enormous power supply challenge as well, and it’s not really around the availability of the power in terms of the amount that’s generated. It’s a distribution problem.
It turns out that the network has a series of pinch points – particularly if you’re trying to operate from an older legacy building. You just can’t get enough power into the building without then getting involved in expensive upgrade procedures. And the market for those upgrades is archaic. It doesn’t work effectively for fleets.
Carp: How do you make the business case for this shift?
Harris: We identify a building where we want to go ahead. Then we identify all the costs associated with making that investment, including the necessary infrastructure upgrade cost. And then all of that gets factored into a life-cost model using what’s called a net-present value analysis. It’s effectively a model that looks over the lifetime of the assets involved and then brings all the costs back to today’s money.
There’s a comparison done at that point between the proposed investment and doing nothing at all. And in the ideal world, you’re in a position where the proposed investment makes financial sense compared to doing nothing at all.
What we’ve observed with our EVs is that even though they do cost more money up front, they save on maintenance, they save on fuel – electricity’s cheaper than diesel. They save on taxation costs. They can save on some fees associated with cities that restrict access to commercial vehicles.
So when you put it all together, there can be a payback, except if the infrastructure upgrade costs are particularly high in the way that we’ve been discussing. And then the only way we can make it work in those circumstances is with some government support.
On a couple of occasions, we’ve had that support to help us get over those hurdles – either from national or regional government. And part of that support has been about developing the new technologies to find new ways of attacking those problems.
Carp: Looking out into the future a little bit, do you see a time when fleet electrification will hit a turning point?
Harris: It’s definitely coming. What’s happening now in the market is that battery costs per unit of energy – cost per kilowatt hour – are steadily dropping, combined with new vehicle technologies around light weighting, which are reducing the need for those big batteries in the first place. And also, new power supply technologies like smart grids are starting to get around some of the upgrade complexities.
We’re getting closer and closer to the point where it’s going to be possible to do this at increasing scale. We’re already at the point now where if there are not big power supply upgrade challenges, then we can deploy an EV for roughly the same life cost as a diesel.
And I think that within about five years – maybe even less with all the new work that’s going on – it will be possible to deploy an EV at similar capital costs up front to the equivalent diesel, including power supply infrastructure.
We’re a few years away from that, but it’s getting closer all the time. It’s definitely going to happen. It’s a similar trajectory to what we’ve seen over the past decade or so with renewable technologies like wind and solar.
Carp: Do you see electric as the future of vehicles? And if it’s not electric, what other technologies do you see coming into the market?
Harris: I think we’re heading from a world of really just two technologies – petrol and diesel – toward a multi-technology world where electric will have a role, hybrids will have a role, gas will have a role, diesel and petrol will retain a role. So it’s going to be a multi-technology world. I think electrification is particularly suited to urban transportation, which is really what we’ve just been discussing here.
It is a zero tailpipe emission solution and because there is such a problem in Europe with urban pollutants, this would dramatically assist with that challenge.
When it comes to other types of transportation – heavy trucks, for example, at the 40-plus metric ton scale – maybe electrification will go there, but we think for the foreseeable future, probably another 10 or 20 years, renewable gas is much more suited to that sector.
Not all urban transport is suited to electrification because in some cases what cities want is to eliminate the vehicle all together. So even if it’s electric, it’s not good enough because the problem is around congestion and wanting to provide green, pedestrianized space. For this we’re developing cycle-based solutions.
If you look at other areas outside of what we do as a business – for example, the private car market – electrification is definitely making inroads there, but I think there will be users that need cars that go further than a pure EV can go, and that’s where hybrids can play a key role.
Carp: UPS has been at this for a long time. What would you recommend to companies just starting to go down this path?
Harris: We’ve identified three solutions we think are particularly suited to us: the cycles, the EVs and the long-haul gas. We really focus on those instead of trying to do everything at the same time because if you try to go down every road simultaneously, you’ll just end up spreading your efforts too broadly and achieving nothing. My recommendation would be to try to agree on a road map for the most effective technologies and then focus on the ones that make sense.
We’ve made a lot of progress by building partnerships with other organizations – whether it’s in cycle logistics or in EVs, vehicle manufacturers, power supply, grid operators, city and local authorities or collaborative bodies operating between cities – and also with governments, particularly in terms of policy partnerships.
There’s no doubt that along the road there will be bumps, and you just have to be prepared to weather those. Nobody’s going to get it right first time around.
We found with all of our projects that we’ve learned things as we’ve gone along, and you just have to be prepared to accept that you won’t have all the answers out of the gate. You’ve got to be ready to learn, to help each other.
KEYWORDS: UPS, Rolling Laboratory, NYSE:UPS