The Roemer Report: November 2018

Electrifying News! World Continues to Spin; of diesel engines and electric motors.

When it comes to operating a fleet of commercial of trucks, seeking ever-greater fuel efficiency has been a financial and operational imperative since the Saudi’s squeezed off the oil supply in the 1970s. That energy shock commenced the economic malaise of Jimmy Carter’s America and sent a galvanizing message to oil “gluttons” in the U.S. And just like that the entire globe started trying to think up ways get more from a drop of fossil fuel than ever before. For America’s trucking industry, this impelled a wave of innovation that continues to this day.

Alternatives and Otherwise

The Oil Crisis jump-started the green revolution and prompted governments to compel vehicle and engine manufacturers to accelerate the adoption of technologies that would both reduce fuel consumption and reduce harmful tailpipe emissions. The list starts with electronic engine controls for better fuel delivery and more efficient combustion using reduced Sulphur fuels; engineers further busied themselves trying to reduce wind resistance and friction from the roadways and voila: today’s vehicles are lighter, and with much-improved aerodynamics.

Since soon after Rudolph Diesel exclaimed, “Mein Got, look at it go!” commercial vehicles have been powered by pressure-ignited diesel reciprocating engines. These piston-powered pack horses have been converting the stored energy of fossil fuels into the mechanical energy required to turn the wheels of industry. Today, their central role of primarily powering America’s trucks is being challenged in a big way as practical advances in Electric Vehicle (EV) and electro-motive drivetrain technologies are burgeoning.

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McKinsey&Company Says

The industry’s watchers and analysts have become increasingly bullish on the uptake of EV tech by fleet operators, and McKinsey&Company’s Automotive and Assembly group is too. In a 2017 article, “What’s sparking electric-vehicle adoption in the truck industry?” McKinsey said the time for the technology was ripe and that three drivers would support a growing “eTruck” market through 2030.

According to McKinsey, number one is money. The first driver is based on total cost of ownership (TCO) say their analysts and “These trucks could be on par with diesels and alternative powertrains in the relative near term.”

Second, McKinsey points out how the robust electric-vehicle (EV) technology and infrastructure is and that is fast becoming increasingly cost competitive and accessible.

Third is the regulatory environment, which will continue to tighten and prompt the uptake of alternatives to fossil fueled transportation.

A Deloitte report from a year earlier offers similar insight. “Tighter exhaust gas regulations and access restrictions for diesel vehicles, especially in large cities, demand major investment in alternative drive systems.”

Although barriers to adopting what Deloitte dubs “eTrucks” do exist, they are less onerous than ever before. Especially considering the advancing commercialization of reliable EV tech by manufacturers. It’s apparent the trucking industry and its energy-supplying partners are accelerating efforts to put a workable, viable and sustainable infrastructure in place to keep these vehicles working and on the road.

Under a proposal submitted to the California Public Utilities Commission (CPUC), utility SDG&E recently sought approval to build an EV charging infrastructure to enable about 3,000 medium/heavy-duty vehicles to go electric. The utility said to clean up the air in areas suffering from the highest levels of tailpipe emissions, 40% of the installations would be targeted for vehicles and equipment that are based in or travel through disadvantaged communities.

McKinsey says its research revealed a strong potential uptake of battery electric commercial vehicles or BECVs, especially in the light- and medium-duty segments. “Unlike decision criteria to purchase passenger cars, commercial vehicle purchasing decisions place greater emphasis on economic calculations and reflect a greater sensitivity to regulation.”

There is some speculation, projects McKinsey, that the uptake of light and medium-duty electric trucks might lag passenger cars “due to a lack of eTruck model availability and fleets that are risk averse.” However, their analysis indicates that in an “early adoption” scenario, the BECV share in light and medium duty could surpass car EV sales mix in some markets by 2030 due to undeniable TCO advantages [emphasis, author] for BECVs over diesel trucks.”

Comparing the weight classes, McKinsey scenarios suggest low uptake in the Heavy-Duty Truck (HDT) segment mainly because of high battery costs and TCO parity. “In the Middle Duty (MDT) and Light-duty LDT segments, our “late adoption” scenario suggests that BECVs could reach 8- 27% sales penetration by 2030, depending on region and application.”

A similar market model developed by Deloitte shows that for medium-duty vehicles there is a trend toward plug-in hybrids. On long distances, nearly 80% of heavy duty trucks with alternative drive systems will be running on natural gas (LNG + CNG). Regardless, according to Deloitte data, 67% vehicles will have alternative drive systems vehicles by 2026.

Oil Industry: Not so Fast Energizer Bunny

Although the electrification of commercial fleets is on like, well Donkey Kong, don’t start selling your stake in fossil fuel equities quite yet. Notice that the predictors predict a lot of adoption by 2030 in light and medium segments, but not so much with the heavies.

In a recent report covering the company’s major economic study, T.J. Wojnar, vice president for Corporate Strategic Planning at ExxonMobil had this to say: “Our in-depth analysis shows that even if every light-duty vehicle in the world was fully electric by 2040, the demand for liquids could still be similar to levels seen in 2013. This is because of growing demand from commercial transportation and the chemical sector.”

ExxonMobil offered these Fossil Fuel and Energy statistics:

  • In 2040, oil and natural gas continue to supply about 55% of the world’s energy needs; oil continues to provide the largest share of the energy mix with demand rising about 20% driven by commercial transportation and chemicals.
  • Nuclear and renewable energy sources are likely to account for nearly 40% of the growth in global energy demand to 2040.
  • The share of the world’s electricity generated by coal is expected to fall to less than 30% in 2040 from approximately 40% in 2016.

ExxonMobil finds heavy-duty vehicle growth is the largest sector by volume and predicts growth in transportation energy demand will account for about 60% of the growth in liquids fuel demand. Their analysts’ project continued growth in economic activity and personal income will drive increasing trade of goods and services which leads to higher energy demand in the commercial transportation sector.

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OEMs Pushing the Envelope

What’s exciting is the continuing introduction of commercially viable vehicles and electromotive drivetrain technologies by OEMs. Reuters just published a list of “who’s developing what, and when,” and the list is growing; here is a list of the top suppliers accelerating their offerings to the market:

  • Tesla
  • Volvo
  • Hyundai
  • Navistar/VW
  • Nicola
  • Daimler
  • Toyota/PACAAR

Cummins, for example is staking a real claim for this territory. In September Cummins unveiled the PowerDrive, its advanced suite of plug-in hybrid electric drivetrain solutions spanning light, medium and heavy-duty applications. Unveiled at the 2018 IAA Commercial Vehicle Show, PowerDrive expands Cummins’ portfolio of fuel-efficient, low-emissions power solutions that include clean diesel, near-zero natural gas and fully electric drivetrains.

Their unique hybrid system, says Cummins (which was displayed in electric hybrid utility Kenworth T370) “is the most versatile hybrid system on the market today.” According to Cummins PowerDrive offers both parallel and series capabilities and switches in real time between two hybrid and two pure electric modes for the best fuel economics in any driving situation.

Cummins paired its PowerDrive 6000 in a US Class 6 truck which it commissioned to support EV and PHEV vehicle field tests and pilot routes. The vehicle is also configured with exportable grid quality electric power to recharge other EVs and a recovery crane operating on either electric or engine power take-off.

The World Keeps Spinning ‘Round

The soothsayers at McKinsey, Deloitte and Exxon Mobile offer a measure of comfort to us Earthlings, predicting that we likely have quite a few more spins around the solar system. Although certainly, climate alarmists will decry the likelihood that along the way we will be happily consuming more energy - not less. Exxon Mobile predicts that by 2040 commercial transportation will use a smaller proportion of overall consumption because truckers will be deploying more highly-efficient vehicles including increasing numbers of electrics and hybrids. Shocking? Maybe; but it does kind of give you a little jolt, if you think about it.

Bobtails:

Wellington Roemer, Publisher

Wellington Roemer, Publisher

The Roemer Report

Since 1978, The Roemer Report has been giving trucking executives the information you need to run your business. We research the industry's metrics, politics, developments, technological and operational trends so you don't have to. Our Report saves you time by digesting key industry news into short, clear stories - avoiding information overload. Thank you for giving the Roemer Report your attention today, we work hard to be worth your time.

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