As the transition to electric trucks gains momentum, many fleets are taking advantage of generous incentives offered by states such as California to offset the high costs associated with electric vehicles. It’s important to understand that these incentives are not indefinite, and as regulations go into effect, they will gradually phase out. This lesser-known downside could catch some fleets off guard, especially those who have not prepared for the eventual decrease in now-existing incentives.
According to an interview conducted by Freight Waves, Joe Annotti, Senior Vice President of Programs at Gladstein, Neandross & Associates (GNA), a consultancy working with fleets to prepare them for electric trucks, explained that incentives cannot be expected to continue once a regulated action, such as transitioning to electric trucks, becomes mandatory. This has been observed in the case of energy-efficiency improvements in buildings, where incentives were provided initially but phased out once energy efficiency became the norm.
With all that said, at present, there are still ample opportunities to reduce the cost of transitioning to electric trucks. In fact, there are around 600 to 650 incentive programs that apply to clean transportation, providing a bridge between the current high costs of electric trucks and the eventual goal of making them more affordable. Annotti highlighted the significance of incentives in bridging the gap between the cost of a Class 8 electric truck, which can be around $450,000, and a Class 8 diesel truck, which is much less of an investment
One strategy that fleets can employ is overcompliance, which involves purchasing more electric vehicles than the required percentages for their specific operations. By exceeding the regulatory requirements, fleets can continue to redeem vouchers and claim grants for the near future. California aims to remove diesel trucks from its roads by 2040, and fleets like Penske Truck Leasing, Schneider, Sysco, U.S. Foods, and NFI Industries are already adopting this overcompliance approach.
However, smaller fleets that are not prepared for the upcoming regulations might face challenges. The recently passed California Clean Fleets Rule, for instance, mandates that certain fleets must have at least 9% of their vehicles operating in the state as zero-tailpipe emission vehicles starting in 2024, with increasing percentages in the future. It is crucial for these fleets to understand the available incentives and funding opportunities and to gain expertise in writing grant applications and meeting filing deadlines.
When it comes to charging infrastructure, there are additional incentives and funding options available. Programs such as the Carl Moyer Memorial Air Quality Standards Attainment Program offer charger incentives ranging from $25,000 to $50,000. The Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) is also well-known in the industry and has provided substantial grants for clean vehicles and equipment. Additionally, California’s Low Carbon Fuel Standard (LCFS) creates a market for credits generated by electric trucks, which can be sold to help fund future electrification purchases.
The California Public Utilities Commission (CPUC) has also entered the incentives space through programs like Power Your Drive for Fleets. This program allows ratepayers to fund the creation of make-ready infrastructure for medium and heavy-duty fleets.
Despite the availability of incentives, it is essential to consider the readiness of the electric grid to handle the increased demand from truck charging. Fleet operators typically replace vehicles over time, allowing for a controlled adaptation and learning process. If significant upgrades to substations or other infrastructure are required, utilities are committed to serving the needs of their customers, even if it might take several years to complete the necessary upgrades.
While the eventual phaseout of incentives for electric trucks is a reality, there are still numerous opportunities available for fleets to reduce the cost of transitioning. By staying informed about the incentives, grants, and funding programs offered by California, other states, and federal initiatives, fleets can navigate the changing landscape of electric truck incentives. It is essential for fleets to plan ahead, explore overcompliance strategies, and establish early communication with utilities to ensure a smooth transition to electrification.