Aligning supply and demand a strengthening value proposition for heavy-duty zero-emission vehicles

Canada’s heavy-duty commercial vehicle sector is projected to become the largest source of transportation emissions by 2030. The current heavy-duty inventory is growing on average of two per cent per year and includes more than two million local delivery vehicles, garbage trucks, buses, long-haul tractor trailers, and other vocational vehicles. The adverse climate and urban air quality impacts of increasing numbers of medium-and heavy-duty vehicles will only be exacerbated with time and inaction. The barriers to the greater uptake of zero-emission heavy-duty vehicles, however, are being alleviated in real-time. These obstacles include high up-front capital costs, lack of vehicle choice, limited fueling or charging infrastructure, and uncertainty of the residual value of vehicles in a secondary market. With industry ambition matching government leadership, the transition is well underway. For early beachhead market segments like transit, urban delivery, and regional haul, the major challenges of range and operational feasibility have largely been overcome with vehicles that can meet or exceed the standard drive cycle for those applications at a lower total cost of ownership. Adding to this momentum, Transport Canada launched the Incentives for Medium- and Heavy-Duty Zero-Emission Vehicles program in July 2022 which offers point-of-sale incentives of up to $200,000 for the purchase or lease of an eligible vehicle. The passage of the Inflation Reduction Act in the United States introduces another North American market accelerant. The Qualified Commercial Clean Vehicle tax credit provides a $40,000 tax credit for vehicles greater than 14,000 lb. that operate on batteries alone. And the Alternative Refueling Infrastructure Credit provides 30 per cent of the cost of installing chargers, up to a lifetime benefit of $100,000 per site. Deployment experience in leading markets like California, Germany, and the United Kingdom has shown that incentives are only one element of a coherent commercial ecosystem. Zero-emission vehicle supply and demand are critical in the early stages of market development. The complexity of a multi-fuel transportation economy means that we cannot delay action because of either/or technology choices. Original equipment manufacturer announcements at the world’s largest commercial vehicle truck show in September included new battery electric vehicle models, hydrogen fuel cells, and advanced internal combustion engine technology compatible with hydrogen. But focusing exclusively on manufacturers, while neglecting the role of fleet operators and the wider transport and logistics value chain is detrimental to the deep sectoral emission reductions needed. The rate of transition will also be determined by fleet attributes and preference. The International Council on Clean Transportation reports 90 per cent of registered trucking companies in both Canada and the U.S. operate 10 or fewer trucks. Over 60 per cent of U.S.-based fleets and over 40 per cent of Canada-based fleets operate a single truck. Most of these are classified as “for hire” or owner-operators who own and drive their own trucks, contracting their services to larger logistics companies. Current policies and programs do not give enough consideration to fleet size and equity in accessing financial and institutional resources and the widespread accessibility of public charging and fueling infrastructure. For every flagship fleet making early investments, there are many more smaller fleets that are not yet evaluating their options for zero-emission vehicles. And finally, the build-out of fueling or charging infrastructure is the critical enabling condition that must keep pace with and anticipate growth or risk slowing the market. The more rapid expansion of this network can be achieved through a regulatory structure that directs utility investment in infrastructure, establishes a competitive price rate structures for fuel used for commercial transport, and creates road maps to project and anticipate demand. An accelerated transition that is also commercially viable for industry requires a continued focus on the framework conditions that enable greater market uptake. North American manufacturers, utilities, and regulators must ensure that fleets that want zero-emission vehicles can buy them. Utilities must prepare for an unprecedented amount of new electric load. Heavy-duty transport is a hard-to-abate market segment, not an impossible one. Karen Hamberg is a partner and national clean technology leader, Deloitte Canada LLP, a member of the Government of Canada’s Industry Strategy Council, and chair emeritus CALSTART. The Hill Times