New report: innovative financing will be needed to electrify truck and bus fleets

Broader collaboration among key stakeholders and a new generation of finance solutions will be needed to electrify trucks and buses at scale by 2050, according to a new report released by the Environmental Defense Fund (EDF), MJ Bradley and Vivid Economics.

The authors of “Financing the Transition” interviewed more than 30 fleet operators, as well as finance professionals and EV public policy experts.

“To ensure and accelerate the transition, we must move beyond the set of traditional mechanisms that have been used to assist one-to-one replacements of trucks and buses, such as grant programs providing basic buy-down payments,” reads the new report. “A new generation of solutions will be needed to electrify America’s fleet and achieve a zero-emissions future by 2050. These solutions must deploy limited public monies in a manner that will unlock private capital at an unprecedented scale.”

“This shift will require understanding and developing innovative financing approaches and non-financial support tools that overcome key hard and soft costs, risks and uncertainties, and market frictions. The summation of these barriers represents the Total Cost of Electrification (TCE), a new analytical framework that expands upon traditional analyses associated with fleet investment.”

Traditional government grant programs designed to help fleet owners replace diesel trucks typically focus on one-to-one vehicle replacements, rather than the system-wide investments needed to support the transformation of this sector, the authors say. They propose that policymakers, fleet owners, utilities and investors can use the TCE framework as a roadmap to accelerate demand for electric trucks and buses, while reducing barriers to investment.

“TCE highlights the need to be inclusive of the hard and soft costs, risks, uncertainties and frictions associated with a fleet transition. These often fall outside of a traditional TCO analysis. By bringing transparency to the range of issues that may be encountered, TCE can provide fleet owners with increased confidence to commit to and successfully realize fleet electrification efforts. When the full range of costs, risks, uncertainties and frictions are thoroughly inventoried, understood and evaluated, an array of tools available to policymakers and other stakeholders to overcome those barriers becomes apparent.”

“Many fleet electrification barriers—such as vehicle upfront costs—are known and accounted for in traditional Total Cost of Ownership (TCO) calculations. However, various softer costs, risks, uncertainties and market frictions, such as those that stem from emerging technologies, local permitting and changes to operational patterns must be considered.”

The TCE Toolkit matches the most significant barriers to innovative financing solutions (like green bonds) and non-financial support tools (like battery health programs) to overcome them.

Source: Environmental Defense Fund via Green Car Congress