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Cost-Effectively Transitioning Fleets to EVs without Disrupting Operations
As fleets purchase more electric vehicles, the most important factor for fleet managers is that the transition to EVs cannot disrupt current operations, as our recent report Steep Climb Ahead found. Given this constraint, as fleet managers navigate the complexities of installing charging infrastructure, they may quickly find that minimizing operating costs can also be a challenge (especially if their fleet requires DC fast charging).
Regardless of charging speed, charging 100 or more vehicles simultaneously puts a significant demand on the distribution grid. Beyond knowing their electricity demand, fleet managers must take care to understand their utility’s rate structure and how demand charges are assessed to avoid utility bill surprises and unanticipated costs. They must also determine how much of their electricity demand they will use over the course of a day based on their vehicles’ operations.
In this blog, the final in a series written with our partner The Mobility House, we look at how fleets can ensure a disruption-free transition to EVs while also optimizing fleet charging to reduce costs. In particular, this post covers:
- Minimizing the total cost of EV ownership by optimizing charging around fleet operations and utility rate structure
- The potential of energy as a service (EaaS) to guarantee uptime and maximize cost savings while transferring risk away from the fleet manager
Optimizing Charging around Utility Rate Structure
To realize the benefits of electric vehicles, fleet managers must effectively manage vehicle charging. This means planning where and when vehicles will be charged, considering both the operations of the vehicles and the cost and availability of electricity. For utilities that offer time-of-use rates, this means planning to charge during off-peak hours to take advantage of lower electricity rates and staggering vehicle charging to smooth out electricity demand and avoid demand charges. Because of the additional constraints that EVs can place on a fleet, this is a serious but necessary planning exercise to realize projected operational savings for EVs while ensuring reliable operations.
Fleet owners are generally unfamiliar with the requirements of electric vehicle “fueling” as it relates to their local utility provider’s peak demand load schedule and electricity costs. Without proper management, charging loads can result in large demand spikes, especially for depots with high-powered chargers and/or fleet vehicles that all return around the same time. Customers then face expensive demand charges on their monthly electricity bills, while often also needing to increase their utility service connection.
Fortunately there is an alternative: managed charging. Charging and energy management solutions can help customers avoid these large demand spikes and associated costs. For utilities that offer time-of-use rates, these solutions control charging times for each vehicle based on the lowest-cost time-of-use periods while still meeting the vehicle’s energy requirements for upcoming trips.
Charging management prevents the fleet from charging at high-cost times (Exhibit 1) and shifts charging to lower-cost times. By shifting charging to the most cost-effective times, fleet managers can on average reduce their bill by 30 to 50 percent annually.
A public transit fleet operator with more than 50 buses was able to save over 39 percent annually on charging costs, equal to nearly $40,000 per month (Exhibit 2). For this fleet, The Mobility House used its charging and energy management software, ChargePilot, to reduce peak demand from almost 5 MW to under 1.5 MW daily, bringing overall operational costs of the electric fleet below those of a traditional diesel fleet.
Charging management can also be incorporated into planning long before vehicles and infrastructure are purchased, during feasibility analysis or initial planning. As an example, The Mobility House recently provided a total cost of ownership (TCO) analysis for a customer interested in electrifying a fleet of 14 diesel buses and 6 gasoline shuttle vans. Taking into account vehicle costs, available incentives, Low Carbon Fuel Standard (LCFS) credits, and charging optimized around local utility tariffs, the analysis concluded that the EV fleet breaks even with internal combustion engine vehicles after just 6 years and saves money over the 13-year lifetime. Such analysis early on in planning can demonstrate the importance of managed charging and ensure that operations will continue without disruption.
Energy as a Service to the Rescue
Once charging management is in place, charging costs may not be visible to management in many organizations if utility bills are paid out of a general overhead account. Similarly, the total cost of ownership for EVs will be poorly understood if capital expenses and operating costs are paid from different department budgets. One way for organizations to approach the transition to electric vehicles, then, is to overhaul their internal budgetary processes. An alternative, though, is for organizations to consider a third-party provider of charging or energy as a service.
These novel “as a service” business models come under a variety of different names including “miles as a service” and “transportation as a service.” But they all mean mostly the same thing for a fleet manager: eliminating upfront costs of installing and upgrading electric infrastructure, while providing some level of risk transfer for the ongoing operation and delivery of those assets. The most inclusive business model, energy as a service (EaaS), provides everything—up to the vehicles themselves—as a turnkey solution to the fleet.
An EaaS operator takes on the risks of ensuring electricity availability, issuing the fleet a single (typically monthly) bill. Of particular interest for fleet managers, the EaaS operator can combine the capital costs for the EV charging infrastructure with the fleet’s operational expenses in a single bill, eliminating upfront capital costs completely. This relatively new solution allows organizations with distributed budgets a streamlined way to ensure operational efficiency without having to significantly reorganize internal processes.
One example of an EaaS provider is AlphaStruxure, a joint venture of Schneider Electric and The Carlyle Group, which collaborates with The Mobility House. AlphaStruxure installs on-site energy systems—including distributed energy resources (e.g., rooftop solar), microgrid controls, and charging infrastructure—at its own expense and risk. In exchange, the customer commits to purchasing energy and charging services from the on-site system over a specified term length. In this arrangement, the EaaS provider designs, builds, finances, owns, operates, and maintains the energy system and charging infrastructure, backed by a comprehensive management strategy leveraging on-site energy resources.
Many fleet managers who were interviewed or surveyed for our Steep Climb Ahead report were particularly concerned about the resilience of their fleet. These fleets must be able to operate even during blackouts or natural disasters. An EaaS approach paired with on-site energy resources can offer tremendous value to these fleet owners by ensuring that EVs can meet their service obligation, regardless of whether the utility can provide power. Fleet managers will, however, want to fully assess the overall system cost and balance this against the risk of blackouts and the need for uptime. The structure of an EaaS contract can also be written to provide an “uptime” guarantee for the EVs in the fleet.
For fleet managers, EaaS can provide a seamless and cost-effective transition from gasoline- or diesel-powered vehicles to a fully electrified fleet, with minimal disruption to internal operations. These services can ensure lower costs, eliminate capital expenses, and increase operating flexibility while reducing risk and complexity. Importantly, these solutions can also address a key concern by enhancing the reliability and resilience of an EV fleet. We encourage fleet managers to begin planning today for how they will manage charging and to consider how they can leverage “as a service” providers to ensure that the transition to electric proceeds without disruption to current operations.