Trucks Have to Go Electric in California, But at What Cost?

 In export, exporters, import, importers, importing, International Shipping, shippers, shipping, Supply Chain, trucking

Expect trucking to become even more expensive in California. Since about 40% of U.S. containerized imports and approximately 30% of all U.S. exports go through the Golden State’s ports, this impacts a large portion of national supply chains and businesses. As of January 1st, 2024, California will only allow companies to register zero-emission vehicles (ZEV) into the state’s drayage registry. Of course, such trucks are significantly more expensive than traditional ones and put more strain on California’s electric grid, which is already in crisis. So, yeah, happy New Year.

No New Gas-Engine Trucks from 2024 Forward

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California is utilizing the power of law to remove all trucks with internal combustion (or gas-powered) engines from the supply chain in the state. Actually, they’re coming for residents’ cars, lawnmowers, generators… basically anything powered by gas. But that’s big picture over several years. We’re all about international shipping and the supply chain in this blog, so let’s focus on the trucks. And January 1st. In less than two weeks, we hit the first big, big date of California’s Advanced Clean Fleets (ACF) rule.

Truck companies have until the end of the year to register new trucks with internal combustion engines. Afterward, only ZEVs can be added. Then, a year after that, companies must remove “legacy trucks” from the California fleet when the vehicles “reach the end of their minimum useful life.” Don’t worry, the state has defined that. Senate Bill 1 (Beall, Statutes 2017, Chapter 5) puts the end of a truck’s minimum useful life at 18 years or 800,000 miles, whichever comes first.

While buying traditional trucks for drayage in California to replace previous ones now makes little sense, eventually, it won’t even be legal. By 2036, manufacturers will only be allowed to sell medium- and heavy-duty vehicles that are zero emissions.

Milestones to 100% ZEV

Ultimately, businesses in California as well as federal, state, or local governments must eventually phase out traditional trucks to get to 100% zero-emission vehicle fleets in California. CARB gives an option of, instead of using the minimum useful life rule (or Model Year Schedule) of when a truck has to be retired and replaced by a ZEV, using a set of ACF milestones. Then fleets must have a high enough percentage of ZEVs by given dates:

Percentage of vehicles that must be
Milestone Group 1: Box trucks, vans, buses with two axles, yard tractors, light-duty package delivery vehicles20252028203120332035 and beyond
Milestone Group 2: Work trucks, day cab tractors, buses with three axles20272030203320362039 and beyond
Milestone Group 3: Sleeper cab tractors and specialty vehicles20302033203620392042 and beyond

Fleet owners can pick their poison for staying in ACF compliance.

Cost of Doing Business

ZEVs are much more expensive than traditional vehicles. In 2019, according to Statistica, “Heavy-duty [internal combustion engine] commercial vehicles had an average selling price of 126,000 U.S. dollars, 29,000 U.S. dollars less than electric heavy-duty trucks.”

The costs of zero-emission trucks, as with everything else, seem to have skyrocketed from its 2019 average price ($155,000).

According to a 2021 International Council on Clean Transportation (ICCT) study by Ben Sharpe and Hussein Basma, “battery-electric tractor truck up-front costs range from about $200,000 to $800,000, and generally costs increase with increased driving range as a function of total battery capacity.” But don’t worry. They expect battery pack and fuel cell system costs to reduce significantly over the next decade, making the cost of these trucks lower. I’m sure that cheery outlook, and reversal of the current cost trend, isn’t tinted by ICCT’s goal of decarbonizing transport.

Hopefully, a study the ICCT commissioned from Ricardo Strategic Consulting is correct in “that battery-electric tractor truck costs will be reduced by 23% in 2025 and 40% in 2030.” Even still, ZEVs are very expensive. But don’t worry, California taxpayers will help fleet owners. Some fleet owners.

California’s 2021 and 2022 state budgets “invest” $10 billion over 6 years to reduce CO2 emissions from the transportation sector by supporting ZEVs and ZEV infrastructure. To no one’s surprise, the funding will be administered by CARB as well as the California Energy Commission, the California State Transportation Agency, and the Governor’s Office of Economic and Business Development.

There will be programs to help fund early-adapting companies on a combination of first-come, first served and “equity” bases. CARB says:

These investments will focus on an equitable ZEV transition by continuing to find ways to support disproportionately impacted communities.

Several funding programs are available to support the use of advanced technologies, and because funding programs only pay for early adoption not for compliance, more funding opportunities exist for those fleets that act early. These programs are administered by State agencies, federal agencies, and local air districts.

CARB also points to lower costs in maintenance and electricity over gasoline to offset the initial costs of ZEVs. Still, shippers should expect trucking companies to pass some of those initial costs on to them. Hundreds of thousands of trucks will have to be replaced with ZEVs thanks to the ACF regulation alone. And there’s other California regulation pushing out combustion for electric engines too.

“CARB staff estimate that, of the 1.8 million medium- and heavy-duty vehicles operating daily in California, 532,000 will be subject to ACF,” CARB reported. How that cost will spread out through the next several years is unclear. CARB expects the ACF regulation with California’s Advanced Clean Trucks regulation will result in about 510,000, 1,350,000 and 1,690,000 ZEVs in the state in 2035, 2045, and 2050, respectively.

What shippers pay for trucking should be expected to pay a portion of the costs for that.

Zero-Emissions Is a Misnomer

It should be pointed out that zero-emission vehicles don’t actually produce zero emissions.

First, there are greater CO2 emissions in the creation of ZEVs than that of traditional internal combustion engine vehicles. According to Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions, and Energy use in Technologies Model, sponsored by the U.S. Department of Energy, building a ZEV can create 80% more CO2 emissions than building a new traditional vehicle creates.

While the vehicle itself doesn’t emit CO2, the power plants required to produce the electricity ZEVs draw from do. Over the life of the vehicles, ZEVs should be responsible for less CO2 emission, but it is extremely far from zero.

Speaking of electricity…

California’s Power Grid Can’t Handle ZEV Legislation

California doesn’t produce enough electricity for all the mandates its lawmakers have created to switch gas-powered vehicles to electric ones. In fact, California doesn’t have enough electricity for its needs without adding ZEV mandates into the mix. The state doesn’t generate close to enough electricity for its needs.

In 2022, 30% of California’s electricity had to be imported from other states, according to the California Energy Commission. And this isn’t an issue that has seen improvement.

Indeed, it’s getting worse. According to the U.S. Energy Information Administration, California imported “only” 25% of its total electricity supply in 2019. And California’s net electricity imports then were already the largest of any state in the union.

California residents already experience rolling brownouts and blackouts because of the state’s inability to manage its electrical grid. Plus, laughably, only days after CARB announced all cars sold in California will have to be ZEVs by 2035, Governor Newsom asked residents not to charge their electric vehicles because the power grid wouldn’t be able to handle it with an expected heat wave likely to cause more electricity usage for air conditioning.

California might have to do something like embrace <GASP> nuclear power in order to solve its electricity problems. If things get worse, power issues could also create disruptions to shippers’ supply chains.

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