Green Fleet

Can Green Fleets Survive Without Government Funding?

March 2014, Government Fleet - Cover Story

by Thi Dao - Also by this author

At a Glance

Many fleets rely on government funding for fleet greening projects:

  • Tax incentives provide between 50 cents and $1 per gallon for alternative fuels
  • Fueling infrastructure funding can affect a fleet’s decision to move forward with a particular fuel type
  • Fleets and retail consumers can get large incentives to purchase alternative-fuel vehicles

Many public fleets, and the alternative-­fuel industry as a whole, rejoice at the news of incentives that benefit their businesses or greening objectives. Fleets use grants and tax incentives to acquire vehicles, install fueling or charging infrastructure, or purchase lower-priced fuel. Vehicle manufacturers advertise tax incentives as a way to lower acquisition cost and also benefit from research and development (R&D) funds. Blenders may use it to lower fuel costs. And there are a host of jobs created as a result of the alt-fuel industry and the nation’s commitment to reduce petroleum consumption.

Financial help from the government has undoubtedly advanced the green transportation industry and continues to do so. But can government funding continue, and will it?

At the same levels — probably not. That’s according to Kipp Coddington, who heads the Washington D.C. office of Kazmarek Mowrey Cloud Laseter LLP, a Virginia law firm that specializes in energy and environmental law.

On Oct. 1, 2013, the first day of the federal shutdown, Coddington delivered a speech at the Green Fleet Conference predicting this decrease in federal funding for the alternative-fuel space. As of the end of January, he said at least some of his prediction has come true.

“There were a whole series of vehicle- and fuel-related government tax incentives that expired on Dec. 31, 2013,” Coddington said. “Congress may retroactively extend those. But it may not.”

There are three main reasons why he thinks government funding will slow down. One is that the United States is out of the Great Recession, and as a result, large funding projects such as the American Recovery & Reinvestment Act stimulus funding that has overall supported green energies is less likely to be enacted.

Another is the $17 trillion debt that needs to be paid down. “People are worried about paying down that debt gradually over the coming decades, and there’s less appetite for bigger and bigger programs to support green initiatives, generally,” Coddington said. “I think the pot of money available for these programs won’t be as big in the future as they were in the immediate past.”

Lastly, he thinks some alternative fuels have already received the push they need, such as compressed natural gas (CNG).

“Some of these technologies are already standing on their own two feet and arguably don’t need government support,” Coddington said.

This doesn’t mean an end to funding. “There will be a continuation of moderate support for R&D for certain technologies, or grants, but I don’t think we’ll see the creation of whole new programs to support particular green fuels,” he said.

Does It Pencil Out?

Kelly Reagan gets enthusiastic when he talks about fleet greening. Known for his commitment to CNG, the City of Columbus, Ohio’s fleet administrator will very  gladly tell you how many gallons of CNG the fleet uses, how much the city has saved in fuel costs, and why the city is now making significant investments in CNG fueling infrastructure without any outside funding.

“CNG pencils [out],” he explained.

Reagan said the payback for the higher upfront cost of a tandem axle refuse truck is five years based on fuel cost savings. Since these vehicles have a lifecycle of seven to eight years, any refuse truck older than five years is saving the city money.

“We pay $1.80 for CNG and the average cost of diesel is $3.84,” he said. “It’s half the cost.”

The City of Columbus’ initial investment in CNG got some help from ARRA funding, Reagan admits. That initial funding, which totaled $1.2 million, paid for one-third of the cost of the first fueling station and helped pay for the first 23 vehicles. However, after that first monetary infusion, the city didn’t receive any other financial assistance because there wasn’t any, Reagan said. And yet, it’s set to open its second fueling station at a cost of $5.4 million in April and is working to open two more by 2016.

There is growing CNG fueling infrastructure in the area, including the neighboring City of Dublin’s public access station.

“As infrastructure is built across the Midwest, not having the availability of federal and state incentives is not going to slow down the continuance of alt fuels because the cost of diesel fuels will do nothing but continue to go up,” Reagan said.

COMMENTS

  1. 1. Bob Stanton [ March 03, 2014 @ 01:08PM ]

    Although not mentioned in your story, one of the roadblocks to securing alt fuel grant funding sometimes lies in the language of the grant itself. In San Antonio, we explored alt-fuel grants for diesel vehicle acquisition on two recent occasions only to scrub both projects because the grant required destruction of the engines in the vehicles being replaced. The acquisition business case is impossible to make if the retired vehicle has a destroyed engine and cannot be sold for market value. When asked if an alternative to destruction, such as exporting the retired vehicle to Mexico would be acceptable, the granting agency (DOE) said no. This is purely a case where the grantee lacks an understanding of business realities which we cannot ignore in order to favor political will or bias towards green initiatives.

  2. 2. Kelly Reagan [ March 07, 2014 @ 08:24AM ]

    Bob - you make a great point for the DERG Grant - I too believe it is poorly written with little to no concen for the loss of residual value in an asset - we have reviewed this grant many times over and in every instance this particular grant simply does not work for us - however in the past there have been a number of other grants that we were eligible for and took advantage of like CMAQ, ARRA. At this time there is little to NO grant support for alt fuel vehicles (I do not consider an EV alt fuel).

    The "grantee" for the under performing DERG is in fact the EPA! Our CNG program pencils on most units without grant support. The bias toward green should also take inot consideration the "social cost" of going green - and yes there is a value that has been placed on each carbon ton of reduction reduced from our enviornment - it is SCC Reduction @$35/metric ton

    Great points Bob!

 

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