California is currently offering some generous spiffs to those making the transition to electric trucks, but be aware, these incentives won’t last forever. The state will begin to phase these offers out as the new regulations go into effect.

“You typically can’t take an incentive to perform a regulated action, something you would have to do under a mandate,” said Joe Annotti, senior vice president of programs at Gladstein, Neandross & Associates (GNA). It is a Santa Monica, California, consultancy that works with fleets to prepare them for electric trucks.

The discontinuation of incentives for electric truck components such as chargers and infrastructure is a frequently overlooked drawback. We’ve seen a similar situation occur with energy-efficiency improvements in buildings where once-incentivized actions are now expected without any financial reward. It’s essential to be aware of these changes and plan accordingly.

“Once regulation takes effect, all of these perks and bennies start going away,” said Liana Rios, electric vehicle customer solutions manager at San Diego Gas & Electric (SDG&E).

Many Incentives Still Out There

Of course, there will be other ways to reduce costs when making the transition to electric vehicles.

“This is not a coatrack with one prong that we need to hang our hat on,” Annotti said. “There’s plenty of opportunities out there to chase, and we’ll continue to see those persist.”

Currently there are between 600-650 incentive program which apply to clean transportation between California and other state and federal programs.

“The theory behind incentives is that it’s a bridge between now and then,” Annotti said, adding that electric trucks cost three to four times as much as a diesel-powered model. “How do we get a Class 8 electric truck that costs $450,000 down to a Class 8 diesel truck? The answer is incentives.”

Overcompliance as a Strategy

At least for now, fleet owners can enjoy the benefits of vouchers and grants when they invest in enough electric vehicles to meet the required percentage of their operations. With an eye on the future, California aims to eliminate diesel trucks from its roadways by 2040.

“Where the opportunity exists right now is what we call overcompliance,” Annotti said. “If I’m a fleet today, I can get myself above what I will eventually be required to do. Once those regulations hit, I can keep myself above, or over-compliant.”

Some larger companies like Penske Truck Leasing, Schneider, Sysco, U.S. Foods, and NFI Industries have already taken steps to comply with California’s new Clean Fleets Rule. However, smaller fleets may need to take action soon. Starting in 2024, some fleets operating in the state will be required to have at least 9% of their vehicles be zero-tailpipe emission vehicles. This new rule is causing quite a stir in the industry and will continue to increase percentages over time.

“Having 12,000 people talking about what happened a couple of days before was a really enlightening experience for a lot of folks,” Annotti said.

Just What is Available?

California’s publicly owned utilities are offering cost-saving incentives for electric trucks. Vouchers worth hundreds of thousands of dollars are up for grabs, as well as tens of thousands for charging equipment. On top of that, there’s the opportunity for essentially cost-free power-to-the-door infrastructure.

Take advantage of these benefits, but don’t let grant applications and filing deadlines stand in your way. Although the process can seem daunting, it’s worth the effort. Charger incentives of $25,000 to $50,000 each are available through the Carl Moyer Memorial Air Quality Standards Attainment Program. This program has already allocated $1 billion towards cleaning up engines and other sources of mobile pollution since 1998. Named after the late scientist who helped shape California’s air quality policies, this program offers an opportunity for your fleet to go green, save money, and breathe cleaner air.

“We have a team of 20 that day in, day out tracks these funding opportunities across the U.S. and Canada,” Annotti said. “California is very good at being both comprehensive and outright confusing. They do both very well. There’s a lot of hands in this particular cookie jar.”

HVIP Gains Attention

The Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) is a leading program in the equipment industry, well-known and widely publicized. Manufacturers often share exciting news releases when their products become eligible for the program, with some, such as Nikola electric truck maker, proudly announcing the number of voucher purchases by customers.

OEMs also provide helpful grant-writing assistance and consultative services to fleets. Additionally, they are eager to promote a $40,000 federal incentive, included in the Inflation Reduction Act, to further encourage green technology adoption.

“When the market started, it was very much driven by an OEM perspective,” Annotti said. “Now the fleets are the ones applying for the funds.”

The High Volume Incentive Program (HVIP) has granted a whopping $1.7 billion, with $417 million allocated for qualifying trucks. Vouchers for clean trucks range from $7,500 for Class 2b trucks to $288,000 for a Class 8 hydrogen fuel cell model. The bulk of the remaining funds are reserved for school and transit buses, which must meet earlier zero-emission compliance targets.

According to Calstart, the organization responsible for administering HVIP funds, these vouchers have already motivated the purchase of more than 15,000 clean vehicles and equipment. Remarkably, over 60% of these purchases were zero-emission.

Low-Carbon Fuel Standard Boon

California utilizes pollution fines collected from oil companies to fund incentive programs such as the HVIP, via the state’s cap and trade program. The Low Carbon Fuel Standard (LCFS) is the source of funds for this program, which monetizes the carbon intensity of fuels. Each credit represents the gap between the carbon intensity of electric-powered vehicles versus diesel-fueled ones, creating a new market for credits that can be traded openly.

The typical LCFS credit for an electric truck generates roughly $15,000 to $20,000 based on current prices. This amount is expected to rise as the value of credits increases over time. When a charger passes electricity to an electric vehicle, whoever owns the credit can sell it, as long as the revenue goes towards future electrification purchases and not general purposes.

This is the strategy Tesla implemented in its early years, before selling cars generated most of its income. The company’s primary revenue stream came from selling the credits earned from producing electric cars.

“That’s why you see these charging-as-a-service providers want to own your charger because [they can] monetize the value of that credit,” Annotti said.

Public Utility Ratepayers Paying for Incentives

The California Public Utilities Commission (CPUC) has launched the Power Your Drive for Fleets program to offer incentives to medium- and heavy-duty fleets. To create make-ready infrastructure, CPUC will be charging ratepayers for five years.

This infrastructure will be provided from power lines up to the charging conduit where the vehicle is plugged in. SDG&E, Southern California Edison and Pacific Gas and Electric have received approval to utilize hundreds of millions of dollars of ratepayer funds to build this infrastructure. This will essentially provide free infrastructure for medium- and heavy-duty fleets.

“That can range anywhere from a couple hundred thousand dollars to over a million depending on the complexity of the installation and the extent of the juice that a fleet operator needs,” SDG&E’s Rios said.

SDG&E has devoted a portion of their $107 million funds to create a charging facility accessible to the public. Located in Otay Mesa near a busy commercial truck crossing, the 250-kilowatt site features four chargers operating at 62.5kW each and can help address industry concerns over charging infrastructure.

Despite the average installation period taking 12-24 months, SDG&E managed to complete this project in just 15 months. Furthermore, the CPUC approved $1 billion to promote electric charging last November, but this initiative is being financed by ratepayers and is not in the form of incentives.

Can the Electric Grid Handle This Transition?

According to Rios, the issue of the electric grid’s readiness is no issue at all.

“Fleet operators are not turning over entire fleets to zero emission right out of the gate,” she said. “They’re turning over a couple vehicles at a time and adapting and learning. If their needs over a 10-year period are substantial and require substation upgrades, we will absolutely serve them.”

This may take a significant amount of time.

“I can get you a Class 8 eCascadia in five months,” Rakesh Aneja, vice president of eMobility at Daimler Truck North America, is reported saying during an interview with Freightwaves in April. “If you need a substation put in to get the power, it could take five years.”

Rios acknowledged infrastructure delays are part of the transition.

“If you’re even thinking about electrifying your fleet, contact your utility early and often, because we need to share this information with our grid planning team,” she said.

Source: FreightWaves