E&MU: Financial Aid Offsets Hybrid Costs
By Mindy Long, Contributing Writer
This story appears in the July/August 2009 issue of Equipment & Maintenance Update, a supplement to the July 6 print edition of Transport Topics. Click here to subscribe today.
The streets surrounding the U.S. Capitol were lined with hybrid-powered trucks as manufacturers pitched lawmakers on the vehicles’ fuel-saving potential, and lobbied for tax breaks to encourage potential buyers who may flinch at the models’ price premiums.
Transport carriers are under pressure to reduce greenhouse gas emissions, but the long-term fuel savings a hybrid truck could deliver are out of sync with fiscal reality for companies forced by the recessionary economy to pinch every penny.
Major players such as Wal-Mart, UPS and FedEx have invested in aerodynamic devices and alternative-powered trucks, but smaller fleets often lack the resources that enable the big boys to add numerous “green” vehicles to their fleets all at once.
However, suppliers whose own customers are voicing concerns about ecological responsibility are turning up the heat on carriers of all sizes, leaving fleets to scramble for affordable ways to go green.
Manufacturers of hybrid vehicles and systems descended on Washington June 11 for an event designed to showcase hybrid truck technology, and encourage Congress to pass legislation to help get more hybrids on the road. Lawmakers say that help is on the way.
In 2008, the Environmental Protection Agency awarded $50 million in grants for deploying hybrids, and more funding will become available, EPA spokeswoman Enesta Jones said. The money comes from the Diesel Emission Reduction Act.
The American Recovery and Reinvestment Act — the February stimulus plan — added another $156 million for cleaner diesel technology. The application window for almost $90 million through state programs closed at the end of April, but EPA said assistance from a new $60 million appropriation is on the way.
Under DERA, private and public fleets may apply for funding in partnership with regional, state or local agencies with jurisdiction over transportation or air quality, such as a department of natural resources or air pollution control. Fleets also may partner with nonprofit organizations that provide pollution-reduction programs or education, such as the Environmental Defense Fund.
This funding covers up to 25% of the cost of a new hybrid truck, and fleets may purchase several trucks.
Because government red tape can seem daunting, industry supplier Eaton Corp. established a program to help fleet owners apply for DERA grants. Dontia Warren, market development manager for Eaton’s Hybrid Power business unit, said fleets have shown significant interest in the most recent round of DERA grants.
“We are seeing a mix of current and new customers, as well as large and smaller fleets,” she said.
Eaton builds hybrid powertrains and claims up to 60% reduction in fuel consumption, depending on application, and up to 87% fuel savings in idling mode.
EPA has estimated the average urban delivery truck could save more than 1,000 gallons of diesel fuel a year.
States also are getting involved. In California, the Port of Los Angeles’ Clean Truck initiative provides incentives for buyers of drayage trucks that run on liquefied or compressed natural gas or all-electric lithium battery power. Electric-powered trucks operated in marine terminals also qualify.
The Los Angeles Harbor Commission has approved up to $44.2 million in funding with a goal of getting 900 natural-gas and 100 electric trucks in service at the L.A. and Long Beach ports by year’s end.
Incentives of as much as $80,000 per truck are available for natural gas-powered trucks, and up to 80% of the negotiated purchase price of an electric truck.
In May, California launched a separate $48 million loan guarantee program to help truckers comply with the state’s new diesel emission regulations. The program was developed through a partnership between the California Air Resources Board and a division of the state’s pollution control finance authority.
The Environmental Defense Fund also is working directly with fleets. “We know fleet managers are busy folks, so we’ve hired an additional consultant who is aggregating fleet [requests], and we will help with the application process,” said Rachel Beckhardt, EDF project manager for corporate partnerships in the transportation sector. She added that this is a perfect opportunity for smaller fleets. “It seems very complicated, but it’s not,” Beckhardt said.
DERA funding does have requirements. Grant recipients file quarterly mileage and fuel reports with EPA for several years. They must take one conventionally powered truck out of service for each grant they receive, and they must destroy its engine.
“Fleets can sell the chassis, they can sell the scrap metal, but they have to scrap the engine,” Beckhardt said. “The point is to reduce diesel emissions, not to export them somewhere else.”
Mark Duvall, director of electric transportation at the Electric Power Research Institute, told Scientific American magazine that buyers typically pay 30% to 60% more for the hybrid version of a conventional truck. However, Eaton’s Warren said the difference evens out over time.
Combining the DERA funding with an IRS tax credit, plus the expected fuel savings, the purchase and operational cost of a diesel hybrid could be about the same as a conventional new truck over five years, Warren said.
Through the IRS’ Alternative Motor Vehicle Credit program, fleets receive tax credits for qualified hybrid and alternative-fuel motor vehicles and heavy hybrids. Tax credits range from $3,000 to $12,000, depending on the vehicle, and are available until Dec. 31.
Eligible vehicles are new, original equipment and used vehicles that are repowered to burn an alternative fuel.
Several manufactures’ vehicles are eligible for the tax credit, including those from Azure Dynamics, Freightliner Trucks, International Truck & Engine Corp., Kenworth Truck, Navistar, Peterbilt Motors Co. and Workhorse Custom Chassis.
Beckhardt said EDF has been working to extend the tax credit and would like to see Congress establish a fixed credit that eventually would phase out as more hybrids are produced, just as it did with passenger vehicles.
IRS Smiles on Hybrids
In buying or leasing hybrid commercial vehicles, fleets may receive a federal tax credit based on their fuel economy gains.
Credits are available for a portion of the cost above a comparable, nonhybrid model and according to the truck’s fuel- economy improvement.
• Fuel-economy improvement of 30% to 40% is eligible for a tax credit of 20% of the incremental cost.
• Improvement of 40% to 50% is eligible for a tax credit of 30% of incremental cost.
• Improvement greater than 50% is eligible for a tax credit of 40% of incremental cost.
Incremental cost is capped at $7,500 for vehicles weighing between 8,501 and 14,000 pounds GVW; $15,000 for vehicles weighing between 14,001 and 26,000 pounds; and $30,000 for vehicles heavier than 26,000 pounds.
To qualify, the truck also must obtain at least 15% of its “maximum available power” from the energy storage system.
Source: Environmental Defense Fund
