Take yourself back to 2008: President-Elect Barack Obama pledges to reinvigorate the American economy after the Great Recession. Buoyed by a groundswell of support for a better and brighter future, President Obama signs the American Recovery and Reinvestment Act (ARRA) in February 2009. The $831 billion stimulus package injected cash and created opportunities across a myriad of sectors, including transportation.
The U.S. Department of Energy (DOE) and the Environmental Protection Agency (EPA) funded $600 million worth of projects across the country. To help pave the way for key developments in alternative fuel and clean diesel projects, GNA implemented a comprehensive and targeted multi-state strategy for the nation’s leading truck builder. The approach was successful, with GNA helping to secure $54 million in incentive funding. This funding resulted in the OEM selling 860 medium- and heavy-duty alternative fuel and advanced hybrid diesel trucks, and its customers constructing 15 alternative fuel stations.
President Joe Biden has proposed a sweeping $2 trillion climate plan with an emphasis on economic recovery and climate change.
Now, fast-forward to the present — as painful as that is. Following a pandemic-induced recession, President Joe Biden has proposed a sweeping $2 trillion climate plan that emphasizes an inextricable link between economic recovery and climate change. Built into the Biden plan is a focus on zero emission vehicles — both battery-electric and fuel cell electric — and the potential they bring to helping Americans recover jobs, income, and clean air.
While the goals and the technology in the Biden Plan may be new, the strategies for fleets to take advantage of these funding opportunities may not be. Rather, this may just be 2008 all over again. And that is not such a bad thing, if you know where to look.
Biden pledges an Electrified Federal Fleet
From a new to-be-proposed slate of fuel economy standards to a reinvigorated electric vehicle tax credit, the incoming Biden Administration is pledging to accelerate the deployment of electric vehicles. Notably though is that the focus is now on both Joe Public and Joe Biden — the incoming administration wants electric vehicles in the hands of both the public and its own fleet. Indeed, of the top 10 things President Biden has committed to acting upon during his first days in office is leveraging the federal government procurement system to work towards 100% clean energy and zero emission vehicles in the federal fleet.
The Biden Administration is pledging to accelerate the deployment of electric vehicles for both the public and its own fleet.
This is no small order. The General Services Administration reports that the federal fleet amounts to over 600,000 vehicles across civilian and military agencies, including the U.S. Postal Service. Combined, these vehicles run 4.5 trillion miles annually and cost the taxpayers $4.4 trillion each year. At a cost of nearly $1 dollar per mile to operate a conventionally fueled vehicle, it is no wonder that the new administration is looking to reduce both fuel and vehicle operating costs.
Paired with a focus on zero emission vehicles, comes its dance partner — electric vehicle charging and hydrogen refueling infrastructure. The U.S. Department of Transportation (DOT) will likely play a critical role in addressing the need for charging infrastructure as the agency is responsible for supporting clean transportation corridor projects in conjunction with its nationwide network of Clean Cities teams.
While there is clear momentum mounting in support of electrified fleets by the incoming administration, the commercial maturity for zero emission vehicle technologies is still developing, leaving CapEx costs higher than conventionally fueled vehicles. Therefore, a diverse portfolio that leverages other low emission vehicles and renewable fuels — such as renewable natural gas, propane, and biofuels — should also be considered to provide immediate and cost-effective emissions reductions.
The Incentives Horizon
As fleets look to future incentive program, flexibility is key. Many marquis incentive programs across the U.S. will see modifications in the coming year that will affect eligibility, deployment windows, and financing. Chief among them is the Volkswagen Settlement and its $2.925 billion in potential funding.
Incentive programs across the U.S. will see modifications that will affect eligibility, deployment windows, and financing.
To date, fleets have secured $240 million of these funds to deploy nearly 3,000 medium- and heavy-duty trucks and buses and non-road vehicles and equipment. These figures do not account for awards that have not yet been publicly announced and funding programs that are currently open. Regardless, the runway on these funds is still of considerable length.
While the results show promise, the Volkswagen Settlement funds are limited by a requirement prescribed in the original settlement documents — engine model year eligibility. To be eligible to secure Volkswagen Settlement funds, applications must operate an existing diesel vehicle that has an engine model year of 2009 or older (in California, it can be 2012 or older).
While this requirement was much more feasible when the original settlement was being drafted in 2016, it is now functionally antiquated. Fleets that have the interest, capital, and motivation to pursue Volkswagen Settlement funds do not have the now 12-year-old diesel vehicles required — in the vast majority of cases, these vehicles have already been replaced. Thus, the program is ironically hamstrung by its own requirements, muting its potential effectiveness to achieve widespread proliferation of clean medium- and heavy-duty vehicles.
Until the Volkswagen Settlement is amended to better reflect the reality of today’s transportation sector, these funds will be constrained by outdated and outmoded thinking.
Companies are adopting robust corporate sustainability strategies, looking to their transportation arms to reduce emissions.
The Environmental Justice Angle
More and more companies are adopting robust corporate sustainability strategies. Sysco Corporation’s pledge to power 20% of its heavy-duty trucking fleet with alternative fuels, NFI’s integration of alternative and zero emission technologies across its business, and Amazon’s plan to meet net zero carbon by 2040 are shining examples. These companies and more will continue to look to their transportation arms as a pathway to meaningfully target emission reductions.
While the environmental, and potential financial motivations for implementing zero emission technologies are obvious, it may be easy to forget that sustainability has a third, and equally important, pillar. The social justice impact of clean vehicle technology is not an entirely new trend. California’s Carl Moyer Program has long carried requirements that a certain portion of funds go to projects in disadvantaged communities — the communities most impacted by air pollution and with access to the least amount of resources to help mitigate its negative health effects. Funding opportunities are now taking a more holistic approach. Clean transportation projects must now carry the triple burden of ensuring financial viability, air quality improvement, and environmental justice.
Environmental justice will play a critical role in clean transportation’s future. Limited will be those opportunities of funding new projects just for the sake of innovation. Rather, funds will likely be programmed to projects that generate measurable public health benefits in communities most burdened by both environmental and social factors.
Navigating a New Funding Future
A new dawn beckons. Funding opportunities will arise quickly and from diversified sources.
The incentives puzzle includes more pieces than ever before. The likely prospect of federal stimulus funding, over $2 billion in Volkswagen Settlement funding still to come, and modifications to long-running state programs will leave fleets with more options—and questions—than ever before. And with increased pressure to prove measurable social benefits, threading the needle to secure those funds will become even more challenging.
A new dawn beckons. Funding opportunities will arise quickly and from diversified sources—federal funding, lawsuits and settlements, state budgets, carbon auctions, and more. Businesses and organizations that put themselves in the best position for success will find they have an advantage over the growing pool of applicants. There is also the element of timing. Remember, the ARRA stimulus package came to pass less than 30 days after President Obama took office. The looming Biden Plan and its various offshoots stand to follow a similar runout—time will most certainly be of the essence.
Biden’s Clean Tech Team
With the start of President Joe Biden’s administration comes a new team of cabinet members and agency heads that will help define the next four years in terms of clean tech, as well as the federal government’s game plan for this continuously evolving industry. All but one of his choices will have to be confirmed by the U.S. Senate before these positions are made official.
Pete Buttigieg — Secretary of Transportation
This new role for the former South Bend, Indiana, mayor will be Buttigieg’s first federal position. During his time as mayor, he created the Office of Sustainability within the city’s Energy Office to find ways to reduce the city’s carbon footprint and urged utility companies to supply 100% clean energy to the state. In 2019, his administration was given the green light to develop a city climate plan, which set the goal of meeting the Paris Agreement’s emission targets by 2025, and for a further reduction of 45% by 2035.
Jennifer Granholm — Secretary of Energy
After serving as Michigan’s first female governor from 2003 to 2011, Granholm has held the position of senior research fellow at the Berkeley Energy and Climate Institute, as well as serving on the boards of both EV infrastructure provider ChargePoint and electric bus manufacturer Proterra. During her time as governor, she pushed through the $2 billion 21st Century Jobs Fund, which worked to attract jobs to the state in a number of different sectors, including alternative energy.
John Kerry — Special Presidential Envoy for Climate
During his time as Secretary of State under President Obama’s second term, Kerry signed the Paris Climate Accords on behalf of the U.S., which the Trump Administration withdrew from in 2019. As Special Presidential Envoy for Climate, Kerry will have authority over both energy and climate policy, but, unlike the other positions, he does not require a Senate confirmation. Kerry has been retired since 2017.
Michael Regan — Administrator, Environmental Protection Agency
Regan most recently served as the secretary of North Carolina’s Department of Environmental Quality (DEQ), previously working as an air quality specialist in the agency he will soon lead. During his time with the state agency, he helped develop North Carolina’s Clean Energy Plan, which pushes to cut private sector greenhouse gas emissions by 2030 and move towards carbon neutrality by 2050. If confirmed, Regan will be the first African-American to head the EPA.
Tom Vilsack — Secretary of Agriculture
Vilsack previously served as President Barack Obama’s Secretary of Agriculture, after throwing his hat in the ring for the Democratic nomination for president the previous year. During his campaign, Vilsack stressed the need to reduce the country’s reliance on foreign energy to cut emissions, as well as suggesting that the Department of Energy be replaced with the Department of Energy Security, which would oversee and redefine the federal government’s role in energy policy. Since ending his term as Secretary in 2017, he served as president and CEO of the U.S. Dairy Export Council.