Last week, GE announced it would purchase 25,000 electric vehicles by 2015 -- the largest purchase in electric vehicle history. Will fleet sales give the electric vehicle industry the boost it needs? During today's OnPoint, Sam Ori, director of policy at the Electrification Coalition, discusses a new report that lays out a road map for fleet electrification. He explains why electrification of fleets is cost-competitive and discusses how short-term government subsidies will help the industry significantly expand its reach.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Sam Ori, Director of Policy at the Electrification Coalition. Sam, thanks for coming back on the show.
Sam Ori: Thanks for having me back.
Monica Trauzzi: Sam, the Electrification Coalition is releasing a fleet electrification roadmap today and you find that electric drive vehicles are cost competitive in a number of applications. Explain that, because the general thinking is that electric is expensive.
Sam Ori: That's right. So, the report is about fleets and about electrification in fleets and it's not, I guess, an inherently sexy subject. But it's actually, I think, could have a significant impact on the development of the industry. You know, the fact is that fleets use their vehicles a little bit differently than the typical consumer. They tend to have higher mileage driven, more predictable routing, and they tend to be often essentially parked and that's an opportunity for central charging. And so there are significant opportunities to reduce the costs and to actually benefit from the cost savings of electricity as a fuel versus gasoline as a fuel when you're driving all those extra miles. And so the report does find that actually today without government subsidies, in most of the segments we analyzed, traditional hybrids are extremely cost competitive. But sort of between the period 2015 to 2018, again, assuming no government incentives, PHEVs and EVs become extremely competitive. When you layer on some additional sort of targeted subsidies, you know, medium and heavy duty plug-in hybrids for example and electric vehicles, you assume that fleet managers will have the ability to sort of optimize the vehicles for their needs, the attractiveness of PHEVs and EVs in a lot of these segments becomes extremely compelling. And, actually, you know, you're looking at between 2012 and 2013 EVs and PHEVs being a very competitive option for fleet managers, commercial and government. And so -- oh, sorry ...
Monica Trauzzi: But if the vehicles are competitive without these subsidies, why do we need the subsidies?
Sam Ori: Right.
Monica Trauzzi: Why does the government need to put money out?
Sam Ori: So, the traditional hybrids are competitive in many cases with low subsidies or no subsidies. Over time, the targeted subsidies can make PHEVs and EVs much more competitive actually today. And I think that the reason we, as an organization have focused on PHEVs and EVs on electric vehicles is because they offer this sort of fundamental break from oil consumption that HEVs just don't offer, right? And so when electric vehicles and PHEVs are operating and charge to a depleting mode you're potentially using gasoline. And so from an energy security standpoint, that's just a much more significant step forward. And so, you know, I think hybrids have a really important role to play in helping the battery industry kind of scale up. But from our perspective, over time, the most important move you can make is to PHEVs and EVs and electrification.
Monica Trauzzi: We can't ignore the fact that infrastructure remains one of the biggest hurdles here in the U.S. to being able to handle all of these electric vehicles that may be coming on the market. So what steps do we need to see taken in the short term to get infrastructure up to date?
Sam Ori: So, I would sort of separate the infrastructure into two buckets, right? You have your charging infrastructure and kind of the distribution level stuff that the customer will deal with on a daily basis and then let's say like the generation, you know, power sector infrastructure. You know, at the local level fleets in particular may represent a little bit more of a challenge than consumer vehicles because you'll have, in some cases, lots of vehicles charging together, you know, in a cluster at a central depot. And that can stress local distribution assets. And so we think it's important that fleet operators have the ability to access tax credits and that cities can potentially access low-cost government loans or renewable energy bonds to help build out some of that infrastructure. At the generation level actually, you know, a significant portion of fleet vehicles will be parked overnight and so the amount of generation that would need to be added for this or in general for electrification for consumers actually can be pretty minimal if the right incentives are in place to have people charging off peak. And, in fact, we're seeing pilot programs being introduced around the country today that are driving at just that. PG&E in California and Detroit Edison in Michigan have both just recently introduced pilot programs for electric vehicle rates that significantly should provide an incentive for people to charge off peak.
Monica Trauzzi: What does the political climate look like surrounding the expansion of electric vehicle use and does the shift in power in the 112th Congress change anything?
Sam Ori: Well, I think that's one of the things we have going for us. Who would have thought that just a few weeks ago if you would've told me that coming out of the election one of the few things that Republican leaders, Senator McConnell for example and President Obama on the Democratic side would agree on is actually electrification. And I think that at the end of the day, from my perspective and I think really in reality this is truly a national security issue. Electrification is about improving American energy security and national security and I think that really appeals to Republicans. They understand that the cost of the status quo is extremely high. And so I think there will be an emphasis on reduced government spending and that's absolutely laudable. The fact is that today, in the system that we're operating in, the status quo is not free. Just for example, on average now petroleum imports are accounting for about half of the U.S. trade deficit at a monthly basis. And so, you know, we're exporting a significant amount of wealth abroad and we're actually not getting much in return for that in many cases. And so, again, I think this is an issue that Republicans understand why it's important for the country and Democrats understand it as well.
Monica Trauzzi: So where does electrification sit on the agenda right now? I mean it doesn't look like much will happen during the lame duck. Are you expecting that legislation will come up at some point next year?
Sam Ori: Yeah, so I mean, you know, it's impossible to predict what will happen in a lame-duck session. I think that it's not totally impossible. There is going to be a cloture vote I believe next week and, you know, anything is possible. I think that where it stands on the agenda, again, you know, you had earlier I guess last month Senator McConnell emerged from meetings at the White House with the president saying there were three things that the White House - or that the Republicans could work on with the White House and electrification was one of the three things. And so I think it's, you know, potentially in the areas where there's compromise, it's very high on the agenda.
Monica Trauzzi: How do you drive the production of batteries here in the U.S. and how key is that to this overall push?
Sam Ori: It's really key and that is actually really the central thesis and the focus of the fleet roadmap in some ways, is that, you know, our analysis I think shows that by 2015 in commercial and government fleets you could have about 200,000 PHEVs and EVs on the road in the United States. And from a macro perspective, from an energy security perspective, that might not sound like a lot, but in terms of the initial development and the scaling up of the battery industry, it's hugely significant. And so you look at what's happening in the country today in terms of fleets and electrification, you know, GE just announced an order for 25,000 grid-enabled vehicles. Hertz Enterprise, you know, five, 600 or a thousand between, you know, those different companies. What's happening is it's providing a significant amount of certainty for the industry. And so if the industry knows they have orders for 25,000 or 30,000 vehicles you can start to scale up your production, increase the utilization of your facilities and really start to drive down costs and that benefits the broader consumer market. And so we're focusing, in this report, on fleets for the next five years, but it's really with an eye toward driving volume and scale in the battery industry so that as costs come down eventually you start to benefit the broader consumer market and facilitate wider adoption.
Monica Trauzzi: OK, interesting stuff. Thanks for coming on the show.
Sam Ori: Thanks for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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