Episode 18. Charging Ahead: How electric trucks can re-shape the freight and delivery industry.

Bernie Fette (host) (00:15):
Welcome. This is Thinking Transportation — conversations about how we get ourselves and what we need from one place to another, and what it takes to make that happen. I’m Bernie Fette with the Texas A&M Transportation Institute. This episode is a follow-up to our last show, which explored the growing presence of electric cars on the roadways. This time, we’re focused on electric trucks — from delivery vans to 18-wheelers — and how their numbers are growing, too. Changing the fuel source for millions of trucks is an enormous undertaking, but industry players have been busy. They’re determined to reach ambitious goals, like the projections that call for half of all new trucks sold a decade from now to be all-electric. Allan Rutter, a senior research scientist at TTI, spends a lot of time thinking about freight movement, including how electric trucks fit into that picture. He joins us now for a conversation about what’s developing on that front. Really glad that you could join us. Thank you for doing this.

Allan Rutter (01:30):
Happy to do it. I always like talking about freight stuff.

Bernie Fette (01:34):
Okay. To give us an idea of where we are with the development of big electric trucks, can you start by telling us what’s underway with the North American Council for Freight Efficiency? It looks like a pretty robust demonstration project that they have underway.

Allan Rutter (01:50):
So they, as a matter of fact, just yesterday on the 22nd of September, they completed their most recent annual, uh, what they call “Run On Less.” These guys are affiliated with the Rocky Mountain Institute, sort of an environmental, uh, think tank. But these guys are very practical. They’ve worked a great deal with actual both equipment manufacturers and trucking firms. And they’ve been focused on how to get better fuel efficiency out of a truck. A standard tractor trailer, what FHWA calls a Class 8 truck, what we would call an 18-wheeler, gets about eight miles a gallon and, you know, multiply that times how much they’re on the road. So anything that could find a way of getting more fuel efficiency out of the hundreds and millions of miles of trucking that’s out there is financially very interesting to the people who both pay for services and who operate motor carriers.

Bernie Fette (02:51):
That mention of the word efficiency, which is in their name, makes me recall what I’ve heard you and a few others say about the trucking industry for quite a long time now. And that’s that the industry operates on really thin profit margins. So whatever they do, especially with a huge change, like possibly shifting to a different fuel source from diesel to electric, they have to make sure that big steps like that make economic sense, right?

Allan Rutter (03:18):
Yeah, absolutely.

Bernie Fette (03:18):
Can you talk about that a little?

Allan Rutter (03:20):
In large part, because of those thin profit margins, in part because of how expensive these trucks are and the really sort of dis-aggregated nature of motor carriers to begin with, the fact that you’ve got private fleets and you’ve got some, you know, companies that own lots of trucks, and then you’ve got lots and lots of mom-and-pop people who operate 50 trucks and less, all of which get paid differently, all of which are in different sorts of slices of the industry. So again, if you can find a way of increasing fuel efficiency, if you can go from eight miles a gallon to ten miles a gallon. I guess what the math? That’s 25 percent better. That’s a huge difference to those thin profit margins. But when you’re talking about going from an internal combustion engine that uses diesel to electric, that’s a whole new kind of thing.

Allan Rutter (04:09):
So you’re thinking about what makes sense to invest in that kind of equipment. How available is that equipment going to be, and where does it make sense to have that kind of service where you have the ability to recharge those trucks on a regular basis? The interesting thing that these guys at The Council for Freight Efficiency have done is they’ve been looking at different segments of the industry. Not just over the road, long-distance trucking, but the kinds of things that happened with regional movements going from distribution centers, retail locations, less than truckload, partial delivery, and different kinds of sizes of trucks. I live in the north D-FW area and we have an Amazon warehouse that’s nearby our, our place. And every morning and every afternoon you can see the hoards of step vans, those little blue/gray Amazon vans that are just streaming out of that warehouse.

Allan Rutter (05:05):
Amazon is invested in it. It’s bought about a hundred thousand electric vehicles from Rivian, a new startup that’s designing these electric trucks. So it makes sense for that kind of thing, where you got this vehicle. It’s less heavy and it’s carrying parcels which are not really heavy. And they’re going back to a warehouse where they can be refueled or recharged on a regular basis. The thing that this most recent demonstration of electric vehicles has done is to look at different market segments and different kinds of sizes of truck. And I wouldn’t be surprised if we don’t see this sort of mid-size, single-unit or step van — FedEx, UPS, those kinds of folks — that’s going to be the kind of thing where adoption might happen sooner than later.

Bernie Fette (05:52):
We mentioned earlier that our last episode was on electric cars. And a lot of the discussion about electric cars ends up orbiting around the environmental aspect. But I think what you’re describing, what you’re explaining for us reminds us that when it comes to the trucking industry, the environmental benefits are great, but really they’re about staying in business. They’re about providing a service and making a profit. This is a business proposition.

Allan Rutter (06:17):
Uh, yes, and yes. A, it is important for it to have these decisions being made in a way that makes economic sense. And part of what the freight efficiency folks have been doing is trying to help motor carriers and the people who buy their services think practically about what the economic impacts of this are. The other thing that I point out though, is that many of these trucking companies are providing shipping services to big companies like Procter & Gamble and Target and all these guys. All of those folks at the corporate level have what’s called environmental social governance, sorts of things, ESG. And these companies are like, “we need to be making commitments to less carbon.” So they’re going to be talking to the guys who provide them trucking services and say, “Yes, I’d like for my stuff to get back when I need it. But I also like for you guys to be more carbon-sensitive in doing it.” So I think a trucking company is going to be a lot more motivated to think about some of these environmental concerns because their customers are asking them to.

Bernie Fette (07:22):
Staying on the economic aspect, the price that we pay for the stuff that we buy depends in part on how much it costs to transport that stuff. And most of it, of course, is transported by truck. When electric semis and delivery vans — I think you call them step vans — when those become more common, how might that affect the prices that everyday consumers pay?

Allan Rutter (07:49):
Well, one would hope that it doesn’t make them more expensive. And of course the carriers, the people who own these trucks and do these services, aren’t going to do it unless it can make economic sense for them. But one of the things I think they’re hoping for is that the actual operating costs on a per-mile basis is either at the same level they’re doing or less expensive. The other thing about it, an electric truck, which is the same thing for an electric car, there’s a lot less moving parts in that vehicle. And if you’re talking about a really heavy duty truck, that’s getting hundreds of thousands of miles a year on it. If you can find a way to make that vehicle operate in a way that it’s less expensive to maintain, and there’s fewer parts to go bad.

Bernie Fette (08:36):
And it lasts longer.

Allan Rutter (08:37):
It might last longer. We’re hoping that one of the things we can demonstrate is see what the long-term implications are, but just the practical under the hood, there’s a different kind of motor and a different kind of engine and a different kind of drive train. And there’s just a lot fewer parts that can go wrong or that don’t require as much maintenance. Uh, so I think the hope is that by some of these demonstration kinds of projects, you’ll be able to have, you know, nuts-and-bolts truckers, including drivers, understand what it’s like to drive one of these things and what that feels like. And then what it’s like to maintain that kind of vehicle.

Bernie Fette (09:16):
Right. To get people interested in electric cars, the federal government has used tax credits as an incentive. Are they using incentives to try and advance the deployment of electric trucks as well or anything like that?

Allan Rutter (09:33):
That I’m not really sure about, but because these decisions are being made at sort of an aggregate level at a corporate level, there’s a whole bunch of electric vehicle incentives in legislation that’s being considered by Congress right now, the infrastructure bill, the $1 trillion thing has a lot of electric vehicle encouragement and incentives in there. Hopefully those extend to folks in the motor carrier, the trucking business. I think the other thing to consider about the adoption of electric vehicles in trucking in a contrast to cars is the fleet is relatively small. I mean, if you’re thinking about automobiles and personally owned automobiles in the hundreds of millions across the country basis, there’s probably about eight or nine million trucks that are doing this kind of thing. Fleets are smaller adoption. You’re looking at a smaller universe of vehicles. And I think that has a lot to do with the acceleration of both automation at the trucking level, in a way that’s sort of outstripping cars. I think the same thing’s happening with electric vehicles. There’s a lot of trucking manufacturers and trucking companies going full force into electric vehicles and fuel cells, both.

Bernie Fette (10:46):
Beyond what we’ve already talked about, are the reasons for electrification of freight movement the same as they are for people movement, or are there other distinct motivations?

Allan Rutter (10:56):
I think there are probably some distinct motivations, and some go beyond the financial. One of the things the, the council has pointed out as part of this electric vehicle thing. If you happen to live in a part of the city that’s around a lot of distribution centers or around some industrial applications, I can think of some, uh, neighborhoods in different cities in Texas that are like that. And you have lots of trucks going by. There are some environmental justice issues that are associated with being in a neighborhood where you’re having both the noise and the emissions of lots and lots of trucks. If that could happen with electric vehicles, electric trucks — one, they’re quieter, and two, there’s a lot less emissions — that’s going to have some strong benefits for communities which have been sort of disenfranchised or disadvantaged by all of this freight activity.

Bernie Fette (11:51):
In the same way that some would say that they’ve been disenfranchised just in the original construction of the highways in, in the parts of the cities where that construction happened. Right?

Allan Rutter (12:01):
Yeah. So there’s zoning and there’s sort of a process of land use, but Texans have been a little more, “hey, it’s your property; do what you want to with it.” I think what electric trucking might provide is a little less NIMBY when it comes to truck parking or truck operations. It’s not going to be as noisy and unpleasant if you live next to it.

Bernie Fette (12:24):
Those are the, maybe the distinct motivations. Are there any distinct challenges or obstacles that you haven’t talked about? I mean, we know that concerns over price and availability of charging stations, for instance, might discourage us from buying electric cars. Are those the big issues for trucks as well? Or do we have a whole additional set of impediments there?

Allan Rutter (12:47):
I think there’s some similar things. There is a really interesting article in Politico at the end of August by Daniel Yergin, who is sort of nationally recognized economist who put together a really good book about the oil industry, about 10 or 15 years ago. He’s now with a company called IHS Markit who owns the Journal of Commerce and a lot of sort of freight data stuff. So Yergin penned this really great article in Politico at the end of August about here’s the sort of things that are the challenges in adoption of electric vehicles. He listed three big things. The first is the supply chains and manufacturing for the batteries and the critical, rare earth minerals and the things that go into batteries. You know, the United States has lithium and some of the things that go into making batteries, not so much a disposition to say, “yeah, I think having a mine next to my house would be a great thing.”

Allan Rutter (13:45):
So there’s a really interesting thing about supply chains for a lot of the stuff that goes into making batteries, not to mention the whole national security sorts of issues about who controls most of those rare earth minerals and who makes most of the batteries, and I’m not going to get into the whole China thing, but this whole battery supply chain is something that the Biden administration has identified as one of their critical supply chain issues. And to the extent that the new administration wants to make electric vehicles a big thing, they’ve got to figure out battery development and what goes into those batteries. So that’s one. Second thing is I think what you had mentioned on the charging infrastructure, I think there’s been a lot of attention, or at least some people trying to advocate for the government getting into the funding, charging infrastructure, you know, going into that.

Bernie Fette (14:34):
Yeah.

Allan Rutter (14:34):
Part of that is we have to understand that this whole thing where we go fuel up our combustion engines, that was a private deal. Most of that gas distribution rose up from a privately funded deal on the behalf of the people who are making that fuel to want to make it ubiquitous for lots of people to be able to use it. I think the same thing’s going to have to take place for what’s in the incentives or the encouragement to build out that charging infrastructure. I think what’s unique to the trucking business is the fact that for some of this operation where you’ve got sort of regional trips that are happening within a 150-mile radius within a urban area, a lot of that charging can happen at the place where those trucks spend the night. You have the private infrastructure there is owned by the people who run the trucks themselves, not the, uh, gas station or fueling station. But to the extent that you’ve got sort of range issues, part of that question is how do you get truck stops? At what point did they start investing in charging infrastructure? One of the offshoots of that is, what’s the sort of role of the federal government to come up with standards on what charging infrastructure actually looks like. Should there be a plug for a truck so that it’s not one plug for somebody’s manufacturer that it’s not the same plug for somebody else.

Bernie Fette (15:57):
Right. Right.

Allan Rutter (15:58):
And if you’re a truck, the notion that it’s going to take more than an hour to charge up your engine, well, you got a whole lot of people who have to deal with hours-of-service regulations and maybe a truck driver can take a break for an hour. And that actually makes some sense for them to do that in a way that if you’re a consumer and you don’t want to wait an hour just to fuel up your car, if you’re taking it across city or across state trip.

Allan Rutter (16:26):
So that’s second is charging infrastructure. Third, and the final thing is the adoption. How are consumers going to make those decisions? And in the trucking industry, you’ve got such a difference in who actually runs and operates that trucking service. You’ve got fleets like Walmart and HEB. Those guys own a lot of their own trucks. You’ve got people who provide that kind of service, either as a truck full of things or less than truck load. You got partial guys, FedEx and UPS and DHL and those kinds of folks. So part of the consumer adoption of this new technology is going to require a whole lot of targeted tailored approaches to the different kinds of business models that these folks have.

Bernie Fette (17:13):
I’m glad you got into some detail about the charging infrastructure, because one of the things I was wondering is should we expect to see a whole new breed of highway truck stops or retrofitting of the ones that we already see along the highways?

Allan Rutter (17:28):
I think there’s probably a little of both. One of the things the trucking industry is struggling with right now is how do you make long distance service? You know, taking trucks from say L.A. to Chicago. That’s going to take multiple amounts of days. Not everybody is into this sort of over-the-road mentality of being in a truck for weeks at a time. So I think there’s going to be some adoption of thinking about hubs and spokes for long distance travel, where if you’re a truck driver and you want to take an overnight in which you go to a hub, drop off your trailer, and then take another trailer back to where the city you came from. If it’s an overnight trip, as opposed to a you’re on the road for a week trip, that’s going to be a lot more attractive for some kinds of truck drivers than, than the other kind of thing.

Allan Rutter (18:21):
So on the one hand, there might be some business model adoption, which is going to start thinking about what do truck stops look like? And they are not simply going to be really large parking lots with showers and food. There might be some lodging at the same place.

Bernie Fette (18:40):
Yeah.

Allan Rutter (18:40):
It might be a nicer place to be because you’re going to want to be more attractive to your truck driving younger folks who might not be so attracted to what’s out there right now. So all of that is to say that the truck stop itself might be changing in a way that gives rise to the adoption of some of this charging infrastructure at the same time.

Bernie Fette (19:04):
It’s a little more complicated than you might experience with your electric sedan — just plugging it in at home, in the, in the garage, in other words.

Allan Rutter (19:12):
Right. But the other part of this is sort of understanding that in the same way that we’re concerned about the state’s ERCOT grid and the amount of electricity they were going to need, part of what the folks who are planning for electric capacity in the state, if we have this amount of truck traffic that happens within the state of Texas, starting to become lots more electric, and those loads happen at night, where you’re also powering a bunch of people’s houses to keep them cool. I think the folks at the PUC who were thinking about how to make sure that we have enough power are also thinking about what this has looked like, if we suddenly have a lot more trucks consuming electricity than we do consuming diesel.

Bernie Fette (20:00):
I’m glad you made that segue for us, because I wanted to eventually get around to the issue of power generation. In addition to the infrastructure, there’s also that issue of power generation. And as we need less diesel, we also need more electricity from a power plant. And fossil fuels are the main energy source in those plants, at least right now. What would you say to the people who might say we’re just trading one source of emissions for another one?

Allan Rutter (20:31):
One of the things to understand is because those trucks are getting eight miles a gallon and it’s diesel. If you think about the fact that, you know, transportation on a national basis is about 29 percent of greenhouse gas emissions and that’s everybody’s cars. Cars and trucks. And of the registered vehicles across the country, only about maybe three or four percent of that is trucks, but of that, trucks and trucking poses a disproportionate amount of emissions coming from that segment. The small segment of vehicles is producing a big percentage of that third of the national emissions that’s coming from transportation.

Bernie Fette (21:13):
I think I read that it’s about 24, 25 percent. Does that sound right?

Allan Rutter (21:17):
That sounds about right. If not more. So if that’s the case, the trade-off that you’re talking about also has to keep in mind the amount of increased freight activity that’s coming. Is everybody’s home ordering from Amazon, the amount of activity that’s coming from medium- and heavy-duty trucks is increasing. I think the freight efficiency guys have looked at between 1990 and 2019. That’s almost a hundred percent more greenhouse gases that are coming from medium- and heavy-duty trucks. So I think the trade-off is not so much about automobiles is if you’re thinking about trucks, who by their nature are producing more greenhouse gases, if you can find a way to have that becoming electric and it’s being generated by natural gas-powered electric plants, which are a whole lot more energy efficient and a lot less polluting than coal, which is where we were 20 years ago. Now there are a lot of people who don’t like fossil fuels at all. You know, God bless them. But if we can find a way of having a lot of this freight activity, which is fueling and responding to our consumer demands, and have that being fueled by cleaner, natural gas electric than by diesel in the truck itself, I think that’s a better environmental thing.

Bernie Fette (22:36):
So it may be a trade-off, but it’s a lot more favorable than it might appear on the surface.

Allan Rutter (22:40):
And I think in trucks, it’s probably more favorable than it might be for personal automobiles.

Bernie Fette (22:46):
As with electric cars. there’s the concern of how to dispose of batteries once they’re no longer rechargeable. Are the freight industry’s challenges any different with regard to that,

Allan Rutter (23:01):
That I have no idea. The one thing I’d probably say is it’s the same kind of problem. What are you going to do with all that stuff? If anything, the batteries that are being used to power, a larger heavier vehicle, they’re going to be bigger and those same sort of disposal recycling, what do you do with all the rare earth minerals that are in that battery? The recycling thing is going to be an issue for trucks on a larger scale than it might be for cars.

Bernie Fette (23:26):
What’s the biggest question that we need to answer right now. The biggest research need.

Allan Rutter (23:31):
I think part of the research need is, um, to help people understand what’s it like to actually have one of these trucks? And I think without beating the horse too much about the freight efficiency demonstration that just happened, the more people can see real-world applications of these trucks being used and talk to actual truck drivers who have been behind the wheel of them to say, “what’s it like being on the road with one of these things?” What’s been interesting to hear from some of the drivers involved is how excited they are to be the guy or be the woman who’s behind the wheel of one of these things. And when they roll up into a distribution center and everybody goes, “what’s that?” in the same way that when, you know, somebody rolls up in a Tesla or one of these new F-150 Lightning things from Ford, people are going to be, “what is that?” That sounds cool.

Bernie Fette (24:26):
Not unlike what people might’ve said whenever the first model T’s rolled up over a century ago, right?

Allan Rutter (24:30):
I think in both “what in the world is that, why would you want one of those?” to “I gotta have one of those.” So I think that there’s going to be a little bit of a sort of wow factor that comes from some of this. But I think the challenge back to the research question is how do you help people have the data in front of them to say, this is what that looks like. If I am going to be asked to make a financial decision to buy this type of truck, what does that do on an ongoing basis? How does that make some return on investment sense for us? The good news is that there’s lots of activity in this space that’s being fueled, generated (use all those kinds of words and verbs) by electric utilities who would like no more than anything to power more stuff by the manufacturers of these vehicles and by people who are consuming this shipping service, who want to see it being done on a more sustainable basis.

Bernie Fette (25:29):
Any glance at your resume would show that you’ve been in a combination of public service and transportation for quite a few years.

Allan Rutter (25:38):
I’m an old guy.

Bernie Fette (25:39):
Yeah. And very consistent guy, at least in career terms. With that kind of a record, I’m curious what makes you get up in the morning and stay at this?

Allan Rutter (25:51):
Um — Particularly being an older guy. I think one of the things that’s made transportation attractive for me and it certainly, it wasn’t the thing that I went to school for. When I had my first interview to be the Federal Railroad Administrator with Secretary Norm Mineta, who looked at my resume and said, “okay, how does a guy who writes his master’s thesis on public arts funding in the depression, how do you end up in transportation?” And there’s, there’s a whole long backstory behind that. But the point is what’s kept me in transportation is it’s a part of public life, which affects everybody. Everybody is out on the road, that’s how they live their lives. And so it can make a difference to a whole bunch of people, one. Two, the other thing that’s been really motivating for me is when we suggest some different ways of doing something for our public sector sponsors, you know, the folks at the DOT or at, uh, uh, MPO at a regional level.

Allan Rutter (26:49):
More often than not, you can say “if you did things this way, it would result in this better outcome.” Well, I can point to a whole lot of projects where I can go drive on the road that I had something to do with. I sold the bonds for the expansion of the North Texas Tollway Authority from 121 up to 380 and Frisco. I drive on that road. I was there when we helped make that happen. So for me, transportation is an endeavor or an activity where things actually get built. And that’s for me, that’s a joy to know that something happens and is going to happen with the kinds of things that we do.

Bernie Fette (27:30):
I’m going to close with putting you on the spot a little bit. In what year will electric trucks outnumber those that run on gas or diesel?

Allan Rutter (27:40):
Ahhhh, I have a feeling that this is one of those things where if you look at those adoption graphs for technology improvements, that they’re sort of a, a gradual curve, and then there’s a sudden influx of activity when you sort of have a collective critical mass where stuff happens.

Bernie Fette (28:01):
What Malcolm Gladwell would call a tipping point, maybe?

Allan Rutter (28:03):
Yes, he would. He has a book on that. So what I’d probably see is with the kind of activity that’s happening right now, uh, at culminating at the sort of corporate level and, and by the folks in the business, I don’t think I would be as aggressive as Mary Barra at GM saying “by 2035, I’m not building an internal combustion engine.” You know, it’s as a consumer, I’m not sure I want her to say that kind of thing, because I might not be in the, in the market to buy that. But I’d say by maybe 2040, we’re seeing a similar amount of stuff, just because of the fact that, of the trucks that are in that business, given the sort of distribution of the different kinds of vehicles, more of them are going to be in this 150 miles a day or less, or 150-mile trips or less. And that’s the sweet spot for electric vehicles.

Bernie Fette (28:58):
Allan Rutter, senior research scientist at TTI. This has been informative and fun. Allan, thanks very much for sharing your time with us.

Allan Rutter (29:08):
Bernie, thanks for the opportunity. It’s always fun to talk about the stuff I like talking about.

Bernie Fette (29:13):
That truck that delivered your last overnight package probably wasn’t powered by an electric motor. And the same is true for the truck that hauled away last week’s garbage. But that could change relatively soon. The electrification of the truck fleet is driven by a mix of practical business interests and environmental concerns with rapid advancements in battery and charging technology, the transformation of what powers the freight industry could come sooner than many of us ever thought possible. Thanks for listening. We hope you’ll be back next time for a conversation with Tina Geiselbrecht about how meaningful dialogues with everyday travelers can make new road and bridge projects more likely to gain public support. Thinking Transportation is a production of the Texas A&M Transportation Institute, a member of the Texas A&M University System. The show is edited and produced by Chris Pourteau. I’m your writer and host, Bernie Fette. Thanks again for listening. See you next time