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New report showcases innovative finance tools to electrify truck, bus fleets; TCE Toolkit

Broader collaboration among key stakeholders and a new generation of finance solutions will be needed to electrify trucks and buses at scale by 2050, according to a report released today by Environmental Defense Fund (EDF), MJ Bradley and Vivid Economics.

To ensure and accelerate the transition, we must move beyond the set of traditional mechanisms that have been used to assist one-to-one replacements of trucks and buses, such as grant programs providing basic buy-down payments. A new generation of solutions will be needed to electrify America’s fleet and achieve a zero-emissions future by 2050. These solutions must deploy limited public monies in a manner that will unlock private capital at an unprecedented scale.

This shift will require understanding and developing innovative financing approaches and non-financial support tools that overcome key hard and soft costs, risks and uncertainties, and market frictions. The summation of these barriers represents the Total Cost of Electrification (TCE), a new analytical framework that expands upon traditional analyses associated with fleet investment.

—“Financing the Transition”

TCE

The authors proposed that policymakers, fleet owners, utilities and investors can use the TCE framework as a roadmap to accelerate demand for electric trucks and buses, while reducing barriers to investment.

To date, traditional government grant programs have helped fleet owners replace diesel trucks with cleaner ones. But these programs typically focus on one-to-one vehicle replacements, rather than the system-wide investments needed to support the transformation of this sector, the authors said.

The TCE framework builds upon and complements traditional Total Cost of Ownership (TCO) analyses. TCE highlights the need to be inclusive of the hard and soft costs, risks, uncertainties and frictions associated with a fleet transition. These often fall outside of a traditional TCO analysis. By bringing transparency to the range of issues that may be encountered, TCE can provide fleet owners with increased confidence to commit to and successfully realize fleet electrification efforts.

Further, when the full range of costs, risks, uncertainties and frictions are thoroughly inventoried, understood and evaluated, an array of tools available to policymakers and other stakeholders to overcome those barriers becomes apparent.

—“Financing the Transition”

This new report provides technical details about these challenges, as well as solutions that can help policymakers, fleet owners, utilities and investors overcome the financial barriers to electrification.

  • Many fleet electrification barriers—such as vehicle upfront costs—are known and accounted for in traditional Total Cost of Ownership (TCO) calculations. However, various softer costs, risks, uncertainties and market frictions, such as those that stem from emerging technologies, local permitting and changes to operational patterns must be considered.

  • The TCE Toolkit matches the most significant barriers to innovative financing solutions (like green bonds) and non-financial support tools (like battery health programs) to overcome them.

  • The authors interviewed more than 30 fleet operators, public and private finance professionals, as well as EV public policy experts to inform these resources.

The electrification of trucks and buses offers a massive investment opportunity, especially at a time when cities, counties, states and the federal government are exploring ways to merge economic stimulus initiatives with a commitment to build back better. Success will take focused collaboration among policymakers, fleet owners, utilities and a wide range of capital providers each doing their part to accelerate the transition. The solutions featured in this report will help catalyze the electric vehicle transformation.

—Richard Kauffman, Chair of the Board of Directors at Generate Capital and former New York “energy czar”

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