Technology has infiltrated nearly all aspects of the world we live in and blazed a trail toward change that many remain unsure of. Its broad reach has found a home at the consumer, business, and industry levels, making its constant change equally – if not more – relevant to the transportation sector. While this technological shift may come with a sense of uncertainty, one thing that is certain is the transportation industry’s vulnerability to it.
This is particularly true of alternative transportation energy. While 2018 data shows that diesel still had 93 percent share of the U.S. fuel portfolio, new fuel and energy types are becoming more widely available and mobilized in real-world scenarios. From electric vehicles to natural gas, advancements in more sustainable transportation technology are on the horizon, and the industry is incredibly optimistic about this diversification.
For examples of the current state of these alternatives, read about Nikola’s stance on the use of Electric Vehicles in transportation, the viability of CNG transport, and an overview of biodiesel and renewable diesel.
Amidst the excitement of alternative energies, however, challenges do exist and those challenges tend to be consistent regardless of which alternative is being assessed. These are large-scale challenges that must be scaled collectively by the transportation industry to proliferate the adoption of diverse energy types.
The four main challenges that create barriers for the proliferation and wide adoption of alternative energies include:
- High Cost of Entry
- Infrastructure Constraints
- Issues of Standardization
HIGH COST OF ENTRY
New technologies almost always require a high level of front end capital investment. As research and development iterates, the cost to make both the alternative energy itself and the technology required to utilize it viably is incredibly hard to surmount. It often requires capital investment from a diverse array of stakeholders that are wholeheartedly committed to the goal.
Once final versions of the technology are reached, additional funding is necessary to permeate the market. This first occurs with pilots, then the introduction of it within sample conditions. Only once the demand is generated by way of real-world proof points can these alternatives begin to reach mass production.
For example, BYD has Class 8 heavy-duty trucks on the road, but the payback period compared to a diesel truck is significantly more. Only with the help of state-incentives and funding to better the equipment, will electric vehicles be able to penetrate the market and compete with conventional energies, like diesel.
At a high level, economic viablility comes in the ability to reduce the on-going cost of energy to recoup the equipment premium costs of alternative vehicles. The simple model above shows the overall cost for equipment, maintenance, and energy per miles traveled. (Equipment residue value not included. The diesel maintenance cost of $0.17/mi included. CNG maintenance = Diesel +$0.02/mi, BEV maintenance= Diesel – $0.01/mi).
Even after finding wider use, these fresh technologies remain expensive until enough adoption occurs in the marketplace to balance supply and demand.
This process creates a positive feedback loop—high costs keep investors at bay, waiting for early adopters to initiate the movement. But without early adopters costs remain high. Even in the case of the most widely used alternatives, early applications come from a few first movers, and widespread use is yet to be seen when considered within the scope of the entire transportation landscape.
New CNG station builds peaked in 2014 at 163. Since that time, the number of new stations declines each consecutive year. There are only 30 new stations registered through 2018 and 11 new stations in 2019. Infrastructure in the hydrogen fuel cell and electric spaces has yet to develop.
Because the adoption of new transportation energy technology proves to be a relatively slow process, developing adequate infrastructure to support it, in turn, takes time. To date, infrastructure remains one of the largest challenges the transportation industry must scale to fully adopt battery-electric, hydrogen fuel cell, CNG, RNG, and other fuel types.
It can be difficult to motivate the development of fueling stations on a large scale when vehicles that leverage the technology are not widely in use. Conversely, convincing either shippers or carriers to purchase drivetrains that do not have wider access to the energy needed to operate is also a tough sell.
This leads back to the issue of cost where a game theory-esque dance over who will first invest in infrastructure occurs. If the industry can collectively commit to developing infrastructure, the benefit for all parties stands to be highest. This is not to say infrastructure is stagnant.
Some organizations are working to mitigate this chicken-or-the-egg scenario, like Nikola who is striving to provide not only the vehicle but also build out the infrastructure.
Year over year new advancements in both fuel and equipment are making the alternative energy landscape more efficient and more ideal for implementation in real-world applications. This does, however, pose different challenges—how do corporations keep up? It seems the newest model is released before the prior technology even has a chance to take hold in the market.
To combat the short lifecycles of new technology, collaboration around standardization is essential. The industry needs to decide, “to what are we plugging into?” and “how can we plug and play with the equipment and hardware that currently exists?”
Manufacturers need to find solutions that don’t require consumers – be that shippers, carriers, or otherwise – to reinvest from the bottom up every time technology changes.
For example, many telematics software and much of today’s connected vehicle technology have shifted away from the equipment itself and into the cloud so that updates can be made via air-wave technology—eliminating the need to reinvest in the next model year-over-year.
This issue is particularly challenging for electric vehicles. Companies like Tesla, BYD, and Daimler all have models with unique capabilities, but each offers different charging requirements and, therefore, requires different energy infrastructure. If these were standardized, the issue of infrastructure would be minimized.
LACK OF AWARENESS
While the financials, economics, and policies are easy to point to as challenges because of their quantitative nature, simple awareness of how each technology works, plans of action, and their effect on the industry need to be a priority. If investors and key players in the alternative energy landscape do not have appropriate information and education, they are far less likely—if at all—to enter the game.
As Elizabeth Fretheim, head of business development for Nikola Motor Company stated in a previous interview about electric vehicles, “the technology will be viable from a business standpoint,” rather than simply a sustainability measure.
But shifting that narrative in the minds of shippers and carriers is challenging.
Further, educating the public to foster acceptance and reduce unfounded fears is necessary to facilitate engagement with new programs. Because these are technologies that the public will directly interact with on the road, their support has huge staying power when it comes to taking on risk and investing in new technology.
Without the demand for transparency into sustainable supply chains from the consumers of goods, it is difficult to motivate organizations to overcome the challenges laid out here.
OVERCOMING CHALLENGES FOR THE NEW WAVE OF ENERGY
While these challenges are very real and affect the transportation industry at large, it is not impossible to overcome them. Many organizations are committed to confronting each one head-on. Investment is growing, and individual companies have pledged their commitment by ordering new equipment, announcing go-forward plans, and scaling back the current use of fossil-fuel-based fuel types.