How do you create green fleets without going into the red?
Exploring three key areas, Michael Hurwitz of PA Consulting looks at how smart infrastructure, smart operations and smart financing are the pillars of a commercially sound fleet decarbonisation process.
Making fleets go green is crucial – it’s also complicated and costly. But it is possible to drive positive change without crashing your finances.
The transport industry is under pressure to clean up its act. Worldwide, road transport accounts for over 20 per cent of CO2 emissions and is still a way off reaching net zero. Fleets are a major contributor to this but are also seen as potentials leaders of the transition to sustainable mobility.
But if you are responsible for turning fleets green you have probably got a few major headaches right now. Do you shift to electric or choose another alternative fuel? How do you maintain a good level of service for your customers while you are making such a disruptive switch? And critically, how do you manage the inevitable costs that will be incurred?
There is an answer. To green our fleets, we need to look at the ecosystem – spreading cost, risk, and complexity. This means looking at how the transport and energy systems interact and how they operate in the places we use them. With a focus on smart infrastructure, smart operations and smart financing, it is possible to make the step change.
Smart infrastructure: creating the power hubs of the future
Site upgrades for clean fuels can be costly and time-consuming. But there are some positive trends supporting a switch to new infrastructure.
Upgrading power supply is often a major hurdle for fleets: situations vary across the world and some regulators are better than others at supporting this shift. Grid capacity and speed of implementation also depends on national, as well as regional, actions and priorities. The Netherlands is generally seen to be ahead of the game whereas the US has patchy and varied options. In the UK, up to now getting an upgraded power supply from a Distribution Network Operator (DNO) has been a major undertaking, but Ofgem, the energy regulator, has recently introduced reforms to help. Whilst connection charges remain, the charge for wider distribution network reinforcement has been removed altogether (with limited exceptions), meaning the overall cost of installation will be significantly reduced. That’s a huge step forward for sites that need a lot of energy, and hopefully other nations will follow suit.
Developing and maintaining good relationships with utilities and regulators is key, but you shouldn’t stop there. No fleet operator moving to electric should miss the opportunity of exploring optimization. For example, smart planning software can optimise site upgrades by minimising length of wires and optimising space, reducing overall spend. Dynamic load balancing can reduce the spend on substation upgrades, by monitoring changes in energy use on a circuit and automatically allocates the available capacity to different appliances.
Adding energy storage to a depot and fleet can be one way to reduce the burden on the grid and reduce implementation times. Utilising the emerging flexibility market for electricity, for example by working with the electricity supplier to balance demands on the grid by choosing when and how to charge, is another way that charging in the right way can save, or even make you money. If done right, these can reduce grid reinforcement requirements and drive down operational costs. As these solutions mature and scale over time, the outlook for driving down total cost of ownership (TCO) for fleets looks increasingly positive.
And finally, remember to think beyond your own fleet. If you are doing upgrades on your side of the fence, who else could use the power on the other side? Shared depots are a great solution where the cost of installation can be shared between parties. The mix of government incentives, improved technology and increased collaboration opens up new opportunities to put the right infrastructure in place.
Smart operations: new data, new decisions, new skills
New fuels call for new operational requirements, new behaviours, and new skills. That might not always be a comfortable switch. Let’s be real: most fleets are running on very tight margins, tight budgets and extreme pressure to optimise operations. So, fleets can’t simply make transitions to clean fuels the single organising principle; they need to balance the change with keeping day-to-day operations effective. We believe that’s possible by staying focused on customer experience and user-centric design while managing existing assets in a new way. Data powers the complex decisions that will need to be looked at.
For example, we supported one of our clients to build a time-based charging model for a 5,000+ vehicle site. We were able to give recommendations for site staff on how, when, and which vehicles to charge to meet operational demands. Key to success was having data, so we built a digital architecture to support charging schedules, including performing sensitivity forecasts of costing against utilisation.
In making any new operation work for low carbon fleets, the people and skills who run it must be considered and supported from the outset. Organisations need a well thought-through plan of the skills and capabilities they need at every phase of the journey to net zero. There’s likely to be a period of multi-skilling when the work force may need to keep a range of technologies on the go during transition. This learning plan must account for the balance of people and skills needed at every step of the way – a journey as important as the technology choices themselves.
Smart financing: service options can save money in the short and long-term
Most businesses don’t have lots of capital to invest. Even when capital is more available, financial investments are rightfully scrutinised. Whilst green fleets have the potential to offer potential savings in operations, through lower fuel costs or lower maintenance, there’s a common issue that up-front costs can be prohibitively high.
New models are emerging that offer the potential to spread costs over a more manageable timeframe. ‘As a service’ options are becoming more common. But it’s complex. Some offer an all-in-one service for the fleet – including vehicles, charging infrastructure and SMR – for one price. Others offer just elements of fleet requirements, such as ‘battery as a service’ or ‘charging as a service’.
Which to choose and how to take an optimum position in any such deal requires caution. You need to have a focus on which areas of the value chain fit best for you as a business. Consider where you have expertise in-house that you can use and where it’s more advantageous to look for partnership. And of course, you decide whether to invest in charging infrastructure or fleet for yourself, you can offer these services elsewhere to lower the total cost of ownership.
Making fleets green isn’t the simplest challenge. And electrification isn’t the only answer. But teams need to be asking the right questions to even make a start. To get traction on this, greening fleets needs to move beyond an innovation or CSR project – the ‘nice to have.’ It needs to be embedded into business as usual. Smart infrastructure, operations and finances can unlock the possibilities of making it happen, at pace and without breaking the bank. The opportunity is there to be grabbed.
Michael Hurwitz is a future mobility, energy and innovation expert at PA Consulting.
