Leon Rooke, commercial sales manager at Centrica Business Solutions
The announcement earlier this year that the sale of internal-combustion-engine cars would be banned from 2035 – five years earlier than previously expected – was a powerful reminder to fleet operators that a transition to electric vehicles (EV) is not just a moral imperative, but a business one too.
The outbreak of Covid-19 has no doubt caused many companies to put their emissions programmes on the back burner, EV adoption included. But the Government’s position on this is unlikely to change in the long-term and deadlines like the 2035 petrol and diesel ban and the 2050 net-zero carbon emissions target are still on the horizon for businesses.
With this in mind, the transformation to EV, and the significant investment it entails, should still be firmly on the agenda for fleet managers, even if it’s a lower priority than it was pre-COVID-19.
What is the true cost of electrification?
Industries where large fleets are common, such as logistics and e-commerce, will face the biggest cost as they adopt EVs.
In early 2020, Centrica Business Solutions surveyed 200 UK firms to see how far along the road to electrification they were and to understand what challenges they faced. Cost was a key concern for many, with almost half (44%) saying it was a worry. Respondents also cited investment in charging infrastructure (38%) and managing the increased energy consumption caused by on-site charging (37%) as potential cost challenges too.
Some of these costs can be mitigated with relative ease – leasing instead of buying vehicles outright, for example, would remove much of the upfront expenditure on vehicles.
Facilitating on-site charging is another step many have taken or plan to in future. It addresses concerns over the ability of public infrastructure to support commercial operations and it may be more cost-effective in the long-term than paying for employees to use external charging stations. As such, nearly half (48%) of the businesses in our survey said they intended to install them.
However, it creates another one of the issues flagged by our survey panel – the impact on electricity consumption of employees regularly charging vehicles at work.
Effectively managing energy will become an increasingly important concern for businesses as larger portions of their fleets become electric. Not only will they need to control cost, but to ensure energy supply is generated as sustainably as possible to ensure that they don’t increase their carbon emissions.
Many of the businesses in our survey had already recognised this, but still a third (28%) hadn’t considered what energy technology they would need to support on-site vehicle charging.
Buying electricity from the national energy network to support a sizeable electric fleet will very quickly start to add up. For larger fleets in particular, the grid might not even be able to guarantee supply at the volume and consistency needed to charge vehicles at speed.
Instead, modern energy technology that facilitates on-site generation – such as solar panels and battery storage alongside smart charging – will be key to enabling businesses can meet the additional power demands of new charging points. It enables firms to generate and store power on-site, independently of the grid.
For example, a business could install solar panels and battery storage on its premises, link these to its EV infrastructure and monitor the entire chain though the use of smart sensors that measure how much energy equipment uses and display it in real-time on a virtual dashboard.
Electricity generated through the solar panels would be used to power charging points directly, and any surplus that isn’t needed right away can be stored in the battery to cater for peaks in demand or when supply is low – cloudy weather limiting what can be produced through solar, for example.
This end-to-end approach puts the business in command of supply, insulating it against any drops in what can be delivered by the National Grid, and removing excessive energy bills from the equation. It also creates a surplus of stored energy that will help manage peaks in demand caused by, say, a large number of delivery drivers charging vehicles at warehouses or distribution centres overnight.
But the true cost benefit of modern energy technology is how it can be used to generate additional revenue.
Turning cost into gains
Energy generated and stored on-site can be turned into new revenue through the participation in Demand Side Response (DSR) schemes and the Capacity Market.
Businesses that sign up to DSR commit to reducing or shifting their energy consumption when demand on the grid threatens to exceed supply. The aim of these schemes is to ensure that the grid always has more energy coming in than it does going out by supplementing what it produces with energy created elsewhere.
Firms can access financial incentives for participating in DSR through the Government’s Capacity Market, which pays out for the energy it receives from private enterprises. The market also rewards businesses that can switch off their demand on the grid when asked, normally for no longer than half an hour at time – something that a firm storing energy in a battery would be able to do without affecting its own supply.
In the future it’s likely that businesses will be able to use EVs themselves as storage batteries. Unused electricity sitting in fleet vehicles could be extracted and sold to the grid for profit or used to support other power needs. This would be managed through parameters, so for instance the battery would only discharge to a level that would allow the fleet to operate normally the following day.
Fleet operators face an exciting but significant challenge in guiding their businesses through the transition to EVs. As our research showed, there will be some unavoidable costs along the way. However, by adopting on-site energy technology, firms can better manage the increased energy demand of on-site charging and, when utilising renewable energy sources, make serious strides towards reducing their emissions.
What’s more, greater control of your energy supply puts your business in a position not just to reduce cost, but to turn the process of generating and storing power into an actual revenue stream.