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UPS Likes Its Clean Trucks Just Fine, but Says Brown Can't Afford More Green

UPS operates one of the largest private fleets of alternative-powered delivery trucks -- more than 1,900 vehicles. But the clean trucks are so expensive the company wants federal dough before it'll buy more. Even with much lower operating costs, commercial green trucks still aren't competitive with diesel.

That's not good news for companies that probably would prefer to run only clean vehicles -- or for the eco-conscious who'd like to see Corporate America take a leading role in reducing automotive emissions.

UPS fields 69,000 delivery trucks in the U.S., so its 1,914 green ones are nice but aren't yet doing much to reduce fleet-wide emissions. According to Mike Britt, UPS chief alternative fuel engineer, the company operates natural gas, hybrid and battery electric trucks, which together have covered 200 million miles delivering packages. That's a nice soundbite, but what the green trucks have in common is a price premium that can reach $30,000.

Alternative fuel is nice, but doesn't save money
Britt put it this way to me:

None of these [alternative fuel] technologies makes economic sense on its own merits right now.... We want to offer support and help get these vehicles to the point where economies of scale bring the cost of the equipment down. And that's why we need the federal programs to help us by accelerating adoption of the technologies and reducing costs.
Britt said that even if, battery-pack prices drop 50 percent over current costs in three to five years, as expected, the economics are still daunting. "A drop of 50 percent on the whole vehicle would be more like it," he said.

Liquified natural-gas vehicles cost twice what traditional diesel trucks do. Hybrid electrics cost $30,000 more in fuel, maintenance and engine changes over the lifetime of the vehicle, and compressed natural gas $20,000 more.

Federal support isn't enough for a jump-start
Unfortunately, federal grants can't possibly be big enough to push green trucks into the commercialization phase. A $1 million subsidy might purchase 10 trucks, or cut the cost of 20 in half. Available options for fleet operators include federal tax credits for vehicle purchases, excise tax credits that reduce the cost of CNG or LNG, and federal grants.

The high cost of green is a problem throughout the industry, where many big companies, from Walmart (WMT) to Coca-Cola and FedEx, have clean truck fleets, but relatively small ones. Walmart, with one of the world's largest private truck fleets (7,200 big tractors and 53,000 trailers), has a goal of doubling fuel efficiency by 2015. And in 2009 it added... 25 clean trucks (including hybrids and 15 running on reclaimed restaurant grease). It's improving fuel efficiency in the existing fleet with little changes, including more aerodynamic trailers and low rolling resistance tires.

"Our most recent compressed natural gas and hybrid purchases also use state and federal grants," said UPS' Michael French. "These incentives are necessary...." He's sure right about that -- without the federal money, they wouldn't be moving many green trucks. And they're not even moving many with them.


Photo: UPS
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