Element Energy used a component-based cost model to estimate the current and future costs of conventional and novel powertrains based on peer-reviewed data—e.g., on batteries and fuel cell costs trends and the costs of vehicle mass reduction. Interviews with van manufacturers and operators were used to define assumptions on other key inputs, such as the driving range of electric vans.

Total costs of ownership were calculated for the full range of powertrains and van sizes in 2011, 2020 and 2030, taking account of depreciation and financing costs, fuel costs, servicing and insurance. These ownership costs were combined with data on operators’ willingness to pay for low emission powertrains to predict the future consumer demand for ULEVs.

Other findings include:

• The current cost of ownership for pure electric large vans is more than 50% higher than their diesel-engine equivalents. (This is sensitive to assumptions on fuel price inflation and servicing costs.)

• 50% of respondents required ULEVs to offer total cost of ownership (TCO) parity with a diesel van before they would deploy them across their fleets (i.e. beyond small-scale trials). The remaining half was willing to pay a small premium of 10-15%, suggesting that substantial cost reductions are required before ULEVs will offer a compelling alternative to diesel vans beyond a limited number of early adopters.

• Pure electric vehicles remain the most expensive powertrains under the baseline assumptions in larger vans, although small electric vans are competitive with plug-in hybrids. The modeling suggests that even in the most favorable cases, a pure EV must have a range below 300 km (186 miles) in order to compete on ownership costs with other powertrains.

• A 45 kWh battery pack will decrease in cost from £30,000 (US$47,000) in 2011 to £16,000 (US$25,000) in 2020, a reduction of 47%.

• A 64 kW hydrogen fuel cell (suitable for use in a panel van) decreases in cost from £52,000 (US$82,000) in 2011 to £4,800 (US$7,600) in 2020, a reduction of more than 90%.

• Using government oil price projections, pure electric vans will still have a 10% cost of ownership premium over diesel in 2030.

• ICE and pure hybrids will continue to dominate sales of new vans in 2020, with a combined market share of 80%. Plug-in and hydrogen powertrains take a 10% market share each, though supply constraints for hydrogen infrastructure and vehicles may limit deployment in that year. The pure electric panel van is expected have negligible market share.

• Hydrogen fuel cell vans could reach TCO parity against diesel vans by 2030 (assuming untaxed hydrogen), although this requires aggressive reductions in fuel cell costs towards £50/kW (US$79/kW).

• Ultra low emission vehicles in the light commercial vehicle market have strong potential in the medium-term, as rising fuel costs and falling battery and fuel cell costs cause ownership costs to converge. They also highlight the short term cost challenge for ULEVs, where high battery costs (particularly in larger vans) are likely to restrict widespread deployment beyond fleet trials and early adopters without strong policy support.

Fuel cell system cost projections over time and volume. Source: Element Energy. Click to enlarge.

The report was carried out prior to the introduction of the Plug-in Grant for vans (earlier post) and its cost of ownership calculations also do not take into account incentives such as the London Congestion Charge exemption. However, the report’s authors warn the government that such incentives will need to be sustained in order to compensate for ultra-low emission van ownership costs remaining so much higher over the long term.

They also urge the government to introduce non-financial incentives. These include exclusive access to certain loading bays, extended delivery hours, use of bus lanes and relaxation of driver and vehicle licensing rules to take into account the lower payloads of these vans.

They also suggest that van manufacturers should provide guaranteed buy-backs and fixed-price servicing to help de-risk the investment required to run the vehicles.

British Vehicle Rental and Leasing Association (BVRLA) chief executive John Lewis called the report “a massive wake-up call for electric van makers and the government.”

The BVRLA is urging manufacturers to follow-up on the report’s suggestion that they investigate the business case for bringing more hybrid powertrains to market, particularly for smaller vans, where the economics are much more favorable.

The vehicle rental and leasing industry is ready and waiting to step in and help create a sustainable market for ultra-low emission vans, but fleets make decisions based on cost more than sentiment.

—John Lewis

Resources

• Ultra Low Emission Vans Study Final Report