Electrifying Medium to Heavy Vehicles

Electric and energy utilities across the nation will need to make large investments in the electric grid in part to support accelerated electric vehicle sales. That means many factors will have to be considered to forecast and plan for necessary infrastructure to support medium- and heavy-duty vehicle charging.

It is important because most in the industry worry about affordability, especially the regulators. A timely report, Pro-Active Grid Investment Assessment: Medium- and Heavy-Duty Vehicle Transportation Electrification, is helpful in planning for the future of vehicle charging infrastructure needs.

The report is the work of the Environmental Defense Fund, Black & Veatch, and Energeia. Here, EDF's Michael Zimmerman explains the findings in the report. The report is viewable here at the Environmental Defense Fund’s website.

PUF's Steve Mitnick: What do you do at EDF and how did your background lead you there?

Michael Zimmerman: The study suggests, for the utility service territories we modeled, that this risk is low. The bigger risk is building too small or too late, particularly once you layer in other sources of future load growth like building electrification.

Michael Zimmerman: I'm Senior Attorney for Electrification at EDF. I've been doing utility regulatory law for about ten years, including as in-house counsel and as a utility consumer advocate. Working in the non-profit or public service space was always the plan.

EDF is a multinational non-profit that links science, economics, law, and private-sector partnerships to tackle the most serious environmental problems.

I'm on a team that works on how to build out clean infrastructure. This includes transportation, where we focus specifically on medium- and heavy-duty vehicles, because of their outsized impact on the climate and public health.

Transportation has overtaken electricity generation as chief emitter of greenhouse gases in the United States. Trucks and buses make up a large share of those emissions, as well as other pollutants like nitrogen oxides and particulates that directly harm human health. 

There're a lot of use cases for the electrification of trucks. I and a few of my colleagues work primarily on utility-side policies and solutions to make truck charging more accessible and affordable.

In the past, that has tended to mean programmatic initiatives like specialty rates, demand-charge discounts, and incentive programs. All of those remain important, but we're hearing from truck operators in the leading-edge areas that the main bottleneck they're running up against is grid preparedness. They order trucks and order chargers on a six-month lead time, but it frequently takes utilities years to deliver electric capacity to those sites.

We're looking at what utilities and regulators can be doing to get the grid ready now so when those loads want to come online, they can do so quickly and affordably. That is the genesis of this report we commissioned from Black & Veatch to evaluate the relative costs of proactive grid deployment. 

PUF: Those heavy vehicles need a lot of power. When charging, one truck puts a lot of demand on the electric system. How can the utility industry and the grid respond to this? 

Michael Zimmerman: I am bullish on utilities' abilities to execute. Utilities have dealt with load growth before.

The aggregate load growth that electric vehicles are going to add to the grid is significantly less on a year-over-year basis than with the air conditioning revolution or compared to data centers. It's meaningful, but you've got to put it in perspective.

PUF: It's large, but relative to the data centers, it's not that scale.

Michael Zimmerman: That's right. From the thirty-thousand-foot view, the International Council on Clean Transportation did a study last year suggesting that by 2030, electric trucks would make up about one percent of total U.S. electric consumption. That's consumption, not demand. The issue becomes geographic; those loads are lumpy on a local level. 

PUF: Yes, like the truck stops on the highway that will have large loads to charge the big trucks.

Michael Zimmerman: Yes, but truck stops aren't everything when it comes to truck charging. The long-haul big trucks, the class sevens and eights, will need en-route charging at truck stops. They're going to electrify because the economics are going to drive them there, but that's going to take a little longer than some other use cases. 

A lot of the fleets that are going to convert to electric first are the smaller applications �" not the long haul. The first fleets to electrify are going to be your short- and medium-haul vehicles that have return-to-base operations.

They do the same circuit every day and can charge on a set schedule, like Amazon delivery vans. That's happening now, because the economics are driving it. Those initial use cases are a lot easier for utilities to plan for, and at least now are somewhat less lumpy than the big hundred-truck stops.

Those are going to be big loads, but you know where they are going to be. You can start developing infrastructure to deliver electricity to those locations, and truck stops as well, now. The study I mentioned suggests that doing that may be cheaper in the long run.

PUF: The report has a lot of analysis and solutions. Talk about some of the solutions in the report.

Michael Zimmerman: There's not any one silver bullet here. It's going to be a suite of approaches, so I'll use the word approach instead of solution.

First, some background on the study. We retained scientists at Black & Veatch and Energeia to model distribution system upgrades for Con Edison's and CenterPoint Energy Houston's service territories, at the area substation or distribution substation level, using data provided by the utilities. The main approach we were testing is building bigger, specifically at higher voltages sooner, in lieu of incremental or sequential distribution system upgrades. 

We looked at when projected loads are approaching the capacity of a substation and something needs to be done. It's upgrading the substation or transferring the load somewhere. What's the optimal intervention at that point? 

We modeled the utilities' system expansion plans and the alternative proactive intervention of upgrading the voltage of those substations. You end up building more headroom at that substation than you would under a business-as-usual approach.

In other words, you're going a bit bigger a bit sooner than you would otherwise. In general, that's what I mean by proactive approach.

PUF: There is much in the report about being proactive and using planning as valuable to handle this, but also to do it cost-efficiently.

Michael Zimmerman: We were trying to do cost optimizing, asking, what's going to be cheaper? On average, does it make sense to build a substation bigger or sooner than you would otherwise? Or does it make sense to build it later?

A lot of folks are asking this question. We hear regulators and consumer advocates say they're seeing big price tags on utility capital projects. They're seeing utility CapEx go up every year, and they're worried that if we changed to a more proactive investment approach, we might be stranding more assets.

We asked, "How many assets we will be stranding? How much money is involved?" Let's put this in context. The study suggests, for the utility service territories we modeled, that this risk is low. The bigger risk is building too small or too late, particularly once you layer in other sources of future load growth like building electrification.

When building at a higher voltage, because the unit costs of higher voltage construction are lower, higher voltage facilities are more efficient, and money ends up being saved in the long run on a net present value basis. More headroom is being built into your facilities, but it ends up being cheaper.

PUF: It's tough on the regulatory side because it's overbuilding and then having that load grow into it.

Michael Zimmerman: Utilities have been building headroom into their equipment forever. If a substation is built and energized, and it's at one-hundred-percent utilization on day one, it's underbuilt.

So, what's the optimal amount of headroom? A couple of takeaways from this analysis. One is that if there is a line crossing into gold plating or building too big, our study didn't find it. I'm sure there are ways to drastically overbuild a substation, but they weren't reflected in the scenarios we modeled. Again, building too small appears to be the bigger risk.

The other question we asked is also on regulators' minds, what if you're wrong about the load? What if you build the substation with the extra headroom and the load doesn't show up?

PUF: It's less of a problem than data centers, because the data centers could be there for four years and decide to close up or move that load. Once trucking goes electrified, it's not going back.

Michael Zimmerman: Right. It's going to be there for good. Because those depots where fleets charge are going to be so tightly tied to where the roads are, they can't move. 

Getting back to the load question. For the study, we took EPRI's electric vehicle load forecast. They have tremendous modeling tools and have forecasts out to 2030. We used those as a baseline scaled out to 2050 on a logistical S curve. 

But then we said, "What if we're wrong? What if electric vehicles are not adopted at that point? If they're adopted at a lower rate, does it still make sense to invest proactively versus sequentially?" 

The answer is yes, it does. The cost optimal mix of which substations you should do proactively versus which you should do sequentially does change based on the rate of electric vehicle adoption. But overall, if you had to err on the side of being proactive or sequential, it's better to be proactive, even under a slow electric vehicle adoption rate. You're still going to save money.

PUF: For rate impacts and affordability, isn't this good as there is new load and revenue?

Michael Zimmerman: Yes. I would love for readers to take from this study the value of asking, "compared to what?" You must know what your frame of comparison is when evaluating an approach.

The costs of building out this infrastructure under a proactive model must be compared to the costs of the status quo. This study suggests that in comparing proactive to status quo, proactive tends to be cheaper. 

Also, compare the costs to the revenues. This study did not attempt to do a customer bill impact or rate impact. We were looking at the cost side not the incremental revenue side.

But a lot of people have done it. There have been half a dozen studies in the last six months that looked at this, including one by the California Consumer Advocate. Time and again, these studies find that the incremental revenues from electric vehicles are likely to exceed the utility's incremental cost to serve them, meaning they'll put downward pressure on rates.

That's a long way of saying, if we're trying to drive value for the ratepayers, regulators should prioritize getting electric vehicles online as quickly as possible. Even if that means spending a bit more on infrastructure than theoretically might be needed, it still ends up being a better deal for the ratepayers.

PUF: If you're a leader at a utility or a commissioner or are elsewhere in industry, what's the call to action?

Michael Zimmerman: Do the type of analysis that Black & Veatch did here for your own service territory. Every company's going to be different. They're all going to have different engineering and construction options available for falling under the general umbrella of proactive.

Those numbers should be crunched at the local level. I'm not going to tell you that what we found for CenterPoint is going to apply to APS or PG&E. The regulator should be directing utilities to do this.

PUF: Commissions could be proactive instead of waiting for utilities to come forward.

Michael Zimmerman: Yes. I'm not going to call for generic proceedings in this conversation, but when utilities are proposing capital investments in a distribution system plan or a general rate case, it's reasonable to ask whether these investments were analyzed as cost-optimal under different future load scenarios. 

PUF: Where's this going? In three years, what can we expect to see in the medium- and heavy-duty trucks?

Michael Zimmerman: We are in a period of tremendous growth for the zero-emission truck market, which is being driven by technology advancements and reductions in battery costs. Electric fleet deployments grew five hundred percent last year.

In three to five years, we're going to have more evidence on what this means for utility customers. We're going to know whether these vehicles are delivering incremental revenues more than cost. We'll be close to consensus.

I believe the consensus will show that these vehicles are good for ratepayers and will have led many regulators to push utilities to make proactive investments to realize those benefits sooner. That's going to become a recurring theme in general rate cases and proactive distribution planning dockets.

I also expect that the shift from flat to growing electric loads, which is just now underway, will reorient how utilities and regulators think about investment risk. There will be a consensus in five years that the risk attributable to utility capital investment in a load growth environment is asymmetric. 

Some already intuit that the risk of being a bit too early is less than the risk of being too late. This study supports that intuition.