For some time now, leading fleet managers have identified the lack of adequate charging infrastructure as a looming barrier to the deployment and operation of EVs at scale. 2023 will likely be the year these infrastructure challenges – in particular, the five I’ve detailed here – cause real business impacts.
As EV rollouts accelerate, fleets’ charging infrastructure pain will become more acute.
Actual deliveries of EVs to fleets and other commercial customers fell far short of targets in 2022, and most of the actual deployments were smaller pilot programs that could leverage sub-scale charging installations or workarounds with existing infrastructure. Slow vehicle production volume may have been a blessing in disguise for fleet managers, as there are few things worse than taking delivery of vehicles with nowhere to charge them. As a whole, our industry remains underprepared on the infrastructure side, and now the breathing room we had is evaporating quickly. Deliveries appear to be ramping up and it's going to be a footrace to keep up with the charging demand that will result.
At Voltera, we’ve been planning for this sharp rise in demand for EV charging infrastructure by proactively acquiring and developing sites in key metros, near ports, and in industrial areas that benefit autonomous vehicle (AV) and goods movement companies, including last mile, middle mile, and short haul customers. Building from our first AV fleet site, which launched in 2021, and our acquisition of several sites for AV, drayage and other customers in 2022, Voltera is rapidly building a nationwide network of sites to support fleets as EV rollouts accelerate.
New regulations will accelerate the electrification demands placed on fleets. New regulations could also clear hurdles to rapid deployment of infrastructure at scale.
Several regulations coming into effect in 2023 will force many fleets to accelerate electrification plans. California’s Advanced Clean Fleets (ACF) regulation, which is expected to be approved this spring, builds on the Advanced Clean Trucks regulation that was approved in March, 2021. ACF aims to achieve a zero-emission truck and bus fleet in California by 2045 everywhere feasible and significantly earlier for certain market segments such as last mile delivery and drayage applications. In addition, South Coast Air Quality Management District (AQMD) is expanding its Warehouse Indirect Source Rule which requires large warehouses to track truck trips and pay a fee based on diesel emissions of those trucks; warehouses can offset those fees by adding EV charging and expanding use of zero emission trucks.
While most of the toughest regulations apply in California only, history in this industry and others suggests many other states will follow California’s lead. So fleets in other states are now preparing for similar regulatory pressures. There are federal regulations as well, such as new emission standards for heavy-duty vehicles adopted by the EPA in December, which is part of the broader federal Clean Trucks Plan.
At the same time as they boost demand for EVs, regulatory interventions can also help smooth and speed the deployment of charging infrastructure at scale, including by mitigating procedural barriers. For example, California’s AB970 adds new teeth to existing laws that require cities and counties to have expedited and streamlined permitting processes for EV charging stations.
At Voltera, we’re working to ease the burden of compliance for our customers by proactively developing the charging facilities they will need to fully electrify their fleets. To do this, we have – and will continue to – build deep relationships with authorities having jurisdiction (AHJs) in California and beyond, to speed permitting processes while continuing to protect community interests.
Tenant vs. Landlord tensions will reach a boiling point.
Most fleets lease the sites where they currently fuel, maintain, and park their vehicles. That poses two problems for electrification. First, it’s hard to justify underwriting the significant capital expense required to deploy EV charging infrastructure at scale (which will likely include power infrastructure upgrades) on a 5- or even 10-year lease. Second, most landlords balk at taking on such capital-intensive infrastructure upgrades themselves. These problems will become more acute in 2023.
One solution is dedicated third-party charging facilities like the ones Voltera is building (taking on the capital expense is a core part of our business model). This trend is akin to the transition enterprises made from self-managed on-premises IT infrastructure to third-party colocation providers and the cloud. And as with colocation and cloud, the benefits of a dedicated third-party charging facility include the simplicity that comes with not having to design, build, operate, and own the facility. Another benefit is the ability for a fleet to domicile vehicles at multiple locations, allowing for potentially lower-cost sites.
Certain types of fleets – such as AV and drayage – and smaller fleets across market segments have already adopted third-party charging solutions. In segments such as delivery and distribution, some larger fleets have begun building and operating their own charging facilities. For the reasons above, we expect that over the next two years many of these large fleet operators will also seek the benefits of third-party hosted charging. At Voltera, we are working closely with customers of all sizes across segments to ensure our solution provides the simplicity and flexibility that make a third-party solution a great fit for modern fleets.
Fleets will face perceived – and real – reliability challenges.
Public EV charger downtime is a well-reported issue. (A 2022 UC Berkeley study found that about 23 percent of examined public fast-charging stations in the San Francisco Bay area were nonfunctional.) Not only an issue of convenience, high reliability is critical for commercial fleets, where entire business operations depend on reliable charging. Unfortunately, the design of many first-generation charging facilities has exposed fleets to the same downtime challenges, with significant financial impacts.
The good news is that charging hardware and software continues to improve, and most importantly, we now have many more tools available to integrate reliability and resiliency into the overall system design. This is especially true of large-scale, purpose-built charger deployments with dedicated on-site service and maintenance personnel.
At Voltera, we architect our sites to ensure availability (uptime) at the site level, including through hardware redundancy. This allows us to ensure that customers can get charged up when they need, as fast as they need. At the same time, we are working with our hardware partners to ensure maximum charger-level reliability, and we are taking steps to ensure resiliency (how quickly a charger gets back up and running after downtime).
Fleets will continue to face difficulty in funding infrastructure deployment.
There have been massive increases in overall federal funding for charging infrastructure, but most of that capital has been earmarked for public charging and will be of limited benefit to fleets for the next few years. Many fleets are learning that the process to secure grants and other incentives can be very complicated and costly to administer and report on. Even with the available incentives for fleet infrastructure, most fleets still struggle to secure the up-front capital required for infrastructure deployment. In addition, the current interest rate and overall financial environment has made it increasingly difficult for many fleets to leverage the capital markets to secure debt and equity to pay for needed infrastructure investments.
Fortunately, there is a growing awareness of the long-term opportunity that fleet electrification represents. Companies like Voltera are stepping up to make the early investments on behalf of our customers, eliminating their need for up-front capital investments and removing the complexity of administering incentive programs.
As we look forward to 2023 and beyond, we believe that segments at the leading edge of electrification – such as AV and drayage – will continue to forge the path toward full electrification at scale, working with third parties that acquire, design, build, operate, and own dedicated charging facilities. We also believe that more and more customer segments will embrace third-party charging facilities as a way to escape the infrastructure pain that they’re currently experiencing.
At Voltera we’re excited for the significant expansion ahead of us this year, building on the sites we already have in operation and the ones under development. So if you’re facing infrastructure challenges as you pursue electrification, let’s talk.
Matt Horton is CEO of Voltera, where he guides and supports a strong team of thinkers and doers dedicated to building and operating the critical infrastructure necessary to support the rapidly accelerating transition to electric vehicles.