The trucks we rely on today are running out of road. The government is consulting on phasing out the sale of HGVs with internal combustion engines by 2040. As we speed along the on-ramp to this electrified future, fleet operators need to ask themselves which business model they’ll adopt for charging their electric HGVs (eHGVs).
A key decision they face is what balance to strike when it comes to investing in chargers at their own depots and buying energy from public sites.
The business model they arrive at will be determined by cost, operational needs, depot tenure and the feasibility of installing charging infrastructure.
Let’s look at each in turn.
Installing charging infrastructure can be costly and time-consuming. Operators will have to tackle groundworks, installation and grid connection upgrades.
Fleet operators who invest in their own infrastructure will face a large capital outlay or regular payments to a service provider, depending on the business model they choose. This means they’ll generally need to use the charging infrastructure for a long period of time to see a return on investment.
On the plus side, refuelling at their own depot will typically be cheaper than using a public site where providers will add a premium for each unit of energy bought. This is to pay for the service and recover the costs of building the infrastructure.
Public charging can be paid for using a subscription model, providing ongoing access for a regular fee, or on a pay-as-you-go basis where fleet operators only pay when charging is needed. Whilst this can remove a fleet operator’s upfront capital costs, the lack of ownership means that some fleet operators could end up paying more money for their charging needs in the long-term.
Depot-based charging provides guaranteed access to charging infrastructure. This can reduce anxiety about trucks being delayed at over-crowded public sites and ensure more reliable timekeeping.
Depot-based charging also boosts confidence in the charging infrastructure because fleet operators control its repair and maintenance.
Round-the-clock access opens the door to off-peak charging, allowing operators to potentially take advantage of cheaper energy prices when the electricity grid has low demand.
By integrating renewables and energy storage assets such as solar panels and batteries to reduce costs, fleet operators could also tap into new revenue streams or increase the resilience of their energy supply.
Public charging helps fleet operators cope with long-distance journeys and routes where they don’t have a depot, or where a route is not used enough to justify investing in their own charging infrastructure.
Additional benefits include greater route flexibility and, once deployed at scale, convenient en route access to charging. This helps avoid the long lead times of installing infrastructure at their own depots.
Short depot lease lengths can make installing charging infrastructure unviable. The high installation costs mean fleet operators will need to use the infrastructure for long periods of time to get a return on investment. If a depot contract between the landlord and fleet operator is too short, it might not be worth doing. Furthermore, landlords will need to approve any installation of large assets at leased depots. Operators could face lengthy approval processes from landlords or a flat refusal.
Site feasibility is also essential when considering depot-based charging. Some sites could lack the space needed to install the infrastructure or require large grid connection upgrades, which could scupper infrastructure installation plans.
At the Catapult we’ve carried out research which shows that this could be a significant challenge for depot-based charging, and so should be explored early in the process of transitioning to eHGVs.
Fleet operators will generally benefit from using both depot and public charging business models, as the combination provides operational resilience.
Understanding the specific needs of a fleet operator is therefore essential for getting this balance right. This is especially important as the government consults on how to phase out HGVs using internal combustion engines.
Take the time to read our reports about the key business model decisions that the sector faces in the transition to eHGVs. They provide much more detail about the ways in which innovative business models can be used to maximise the operational and cost benefits for specific fleet needs. Also keep an eye out for our cost assessment tool which can assess some of the cost trade-offs that fleet operators may experience.
You can learn more about the eFREIGHT 2030 consortium and register to receive our coming reports here.
Find out more about how Energy Systems Catapult can help you and your teams
Find out more about how Energy Systems Catapult can help you and your teams