Consider Fleet Carbon Lock-in
On this Earth Day, we’ve been reflecting on how decisions we make today have an impact for years to come. We work with fleet managers every day who face the question: should I replace this internal combustion engine (ICE) vehicle with a new ICE or with a new electric vehicle (EV)? Fleet managers are in a difficult spot, trying to balance budgetary limitations, operational needs, and sustainability targets. For these reasons, many find themselves stuck using ICE vehicles—a dilemma known as carbon lock-in.
First and foremost, we believe that an EV should only be put in applications where it meets the drivers’ daily needs. This is why we base our ezEV Suitability Assessments on high-fidelity, sub-minute driving data to really understand the daily driving requirements for each vehicle. Putting an EV in a duty cycle where it doesn’t meet the drivers’ needs is a failure all around and certainly not a win for sustainability.
The Financial and Environmental Impact of Carbon Lock-in
Once an EV has met that fundamental standard, however, it really comes down to economics and sustainability. Comparing the total cost of ownership (TCO) of an EV and an ICE seems relatively straightforward, right? You calculate the purchase price and lifetime operational costs, figure in any residual value, and that’s about it. Well, yes and no. Yes, that will give you the TCO based on today’s assumptions. But what if gas prices, which are notoriously volatile, rise? What about fuel use due to idling? If you decide to purchase an ICE today, you’re locking yourself in to paying those fueling costs, no matter how high gas prices go. You’re also locking yourself into higher greenhouse gas (GHG) emissions for as long as that vehicle is in your fleet.
Rising Gas Prices and TCO Analysis
For this reason, let’s take a look at the impact that rising gas prices would have on a vehicle we analyzed in 2020. This 2013 Toyota Camry drove about 11,000 miles per year and its daily energy needs required a longer-range sedan. The Chevy Bolt was identified to be the best operational fit for this vehicle, it would meet the daily driving needs without requiring any midday charging. Looking at the TCO, however, the Bolt would have a TCO 3% higher than the comparable ICE sedan. At the time we did this analysis, the fleet was purchasing gas at $2/gallon. So, the economics just didn’t pencil out.
Scenario: Gas at $2/Gallon
Re-evaluating Outcomes Under New Economic Scenarios
Gas prices have risen substantially this year, so I re-ran the analysis. At $3/gallon, the Bolt would now have a TCO 2% lower than the comparable ICE. However, the fleet is locked into the ICE they purchased. If gas prices remain at or above $3/gallon, they will end up paying more over the lifetime for the ICE than they would have for the EV. Additionally, their fleet GHG emissions will be about 20 metric tonnes higher.*
Scenario: Gas at $3/Gallon
This one vehicle is a great example of the importance of running scenario analyses for decisions that you will be locked into for many years. We recommend all fleets consider multiple scenarios so that they can be making decisions today with an eye on the future. In honor of Earth Day, we are now offering up to three scenario analyses in our ezEV Suitability Assessments at no additional cost. We want to make sure we’re doing our part to help fleets make the tough decisions with additional insight.
Carbon lock-in has been discussed in the utility generation sector for years, it’s time we start incorporating it into our thinking in the fleet world, too.
*We consider the GHG intensity for the generation from their local electric utility. This utility, like many, is rapidly greening their generation mix, so the potential GHG emissions reductions would likely be even higher.
