Every year, freight companies deliver four billion parcels containing online orders across the EU. With the ongoing pandemic, experts predict the market for express delivery will grow by more than $10bn by 2024. Freight and delivery volumes have been increasing for years and are responsible for a quarter of Europe’s transport emissions. Without a switch to low-carbon alternatives, these emissions could prevent the EU from meeting its climate targets.
Although small parcel delivery vehicles tend to be the visible face of city logistics, heavy-duty trucks above 12t are the main source of pollutants, CO2 and noise from city logistics.
The good news is that these carriers can more easily electrify their urban fleets than companies focused on long-haul transport. Logistics companies supplying retail stores, supermarkets, restaurants, construction sites and office buildings are the easiest win for cutting transport emissions.
Truck makers have developed new battery-electric models that can cover the companies’ daily routes, which are usually less than 300km a day, allowing drivers to return to the same depot to charge every night.
With increasing volumes and declining technology costs, electric trucks are on the way to becoming competitive with the cost of conventional diesel trucks by 2025–30, but uncertainty remains around the costs of the refuelling and recharging infrastructure.
New research on charging costs suggests logistics operators could soon be saving money by charging electric vehicles (EVs), rather than filling lorries with diesel, provided companies manage charging strategically.
‘Smart’ truck charging is paramount
Transport operators can already electrify their fleets today and keep costs in check by deploying optimal charging strategies, shows a new study by the Regulatory Assistance Project (RAP) and the International Council for Clean Transportation (ICCT).
Companies risk incurring unexpected costs and missing out on considerable savings if they don’t consider the energy requirements of electric trucks and seek opportunities to charge them at lowest cost, in particular as the fleet size grows.
However, achieving this is not easy as guidance is hard to find and research into the energy requirements and the cost of grid integration at the depot is discouragingly scarce. The RAP and ICCT have attempted to fill this gap by studying charging strategies based on real data from operators already using electric trucks.
Logistics companies would pay between €80,000 ($97,250) and €95,000 a year to charge ten electric trucks at a typical depot in Germany, including electricity consumption from the depot, finds the analysis.
The costs differ depending on charging times – the scenarios feature either overnight charging only or overnight charging plus supplemental daytime charging when trucks are back from a delivery. Adding daytime charging can help an operator save up to €15,000 a year, or about 10% of total energy costs.
That charging trucks only at night may be more expensive is surprising because electricity use by consumers is generally low during night-time hours, power prices are cheaper and power grids can absorb excess renewable energy; from wind, for example.
However, as is so often the case, the devil is in the detail.
Timing is everything
What makes all the difference, conclude the researchers, is the balance of electricity prices and network fees in total charging costs.
When charging trucks at the depot, the logistics operator pays not only for the electricity it uses, but also for the use of power networks to deliver that electricity to the depot (taxes and levies aside). While electricity costs reflect prices on the wholesale market, network charges are set by national energy regulators to remunerate grid operators for managing the power system.
In all charging scenarios, network fees drive up expenditure, accounting for 42–53% of overall charging costs. By comparison, network costs for small industrial consumers in Europe only account, on average, for 25% of total costs. This discrepancy is linked to network tariff design. In most European countries, network charges are based primarily on the maximum capacity the consumer needs, not on the amount of electricity they actually use.
A typical logistics depot will pay for the peak demand that occurs when the company charges all ten trucks at the same time. If the operator charges them all overnight, this may require a higher power level to fully charge the trucks in the limited number of hours during which they are idle. As a result, charging the entire fleet overnight can create higher peaks in the depot’s overall consumption, leading to higher network fees due to the need for higher capacity. In such a case, operators may lose the savings they gained from cheap electricity prices.
The key question for companies is, therefore, how to harmonise their operations schedule with the cost-saving opportunities inherent to an electric fleet.
There are several options they can use to optimise charging at the depot. It may make sense to charge vehicles for longer hours but at lower capacity, to avoid creating unnecessary peaks. Or companies can shift EV charging to times with lower prices and more renewable energy on the grid – if they are rewarded for doing so. Here is where energy regulation comes into play.
Policymakers can accelerate fleet electrification
A broader lesson on the importance of tariff design in motivating fleet operators to electrify can be learned from the RAP/ICCT study – revising policies to better align network charges with actual grid costs, meaning power is cheaper when there is more capacity and more renewables available on the grid – is sorely overdue.
Once network fees are aligned with grid costs, fleet operators could expect to pay less for charging, as the study indicates. This change would also lower costs for all electricity consumers, as fewer overall grid costs would have to be socialised.
Requiring grid operators to introduce time-varying network fees that reflect conditions on the power network would provide operators and other consumers with effective price signals about the best time to charge trucks or consume electricity. Cost-reflective pricing aligns individual consumption with system benefits.
Countries can accelerate this alignment process by setting ambitions high when implementing the electricity market reforms outlined in the ‘Clean Energy for All Europeans’ legislative package.
However, electrifying urban logistics operations is only the first, comparatively easy step to bring down emissions in the freight sector.
In the next five to ten years, Europe will need solutions to enable trucks with longer routes to charge at destination freight centres or charge while under way at a hub along the highway. To cut freight emissions further, governments will also need to build public truck charging infrastructure where it is cheapest – by tapping into existing mid-voltage lines or turning defunct but pre-wired industrial depots into logistic hubs.
European policymakers are currently deliberating on a revision of the legislative framework for charging, the Alternative Fuels Infrastructure Directive. Including requirements for electric truck charging would help accelerate decarbonisation. European logistics operators recently urged the European Commission to consider this when preparing the new legislative proposal.
Electrifying city logistics is a rare win for everyone. It is possible now and if policymakers implement cost-reflective pricing and more support infrastructure for smart truck charging, consumers, the grid and the environment will benefit.
Julia Hildermeier is an electro-mobility and transport expert at the Regulatory Assistance Project, an independent, global, non-governmental organisation advancing policy innovation and thought leadership within the energy community.