The Car and Truck Fleet and Leasing Management Magazine

The Hybrid & Alt-Fuel Revolution

October 2006, by Chad Simon

Ever-fluctuating fuel prices at a national average hovering close to $3/gallon combined with environmental awareness in regards to global warming have given birth to the latest fleet vehicular trend — hybrid-electric vehicles.

In recent times, the Toyota Prius was the first mass-produced hybrid vehicle to hit the Japanese market in 1997, while the Honda Insight was the first hybrid to be sold in the U.S. in 1999.

Available with either four-cylinder or V-6 engines, hybrids are powered by an internal combustion engine coupled with an electric motor and are ideal for stop-and-start city driving because they operate solely on electricity at low speeds.

Why Go Hybrid?
In the wake of recent fuel price spikes in which fuel is rapidly gaining on depreciation as fleet’s No. 1 expense, both government and commercial fleet managers alike are scrambling to find ways to control fuel consumption. Some are adopting hedging programs; others, including Iowa Glass Depot, are urging drivers to proactively conserve fuel by regularly checking tire pressure, changing oil and filters, and driving the posted speed limit, etc.

Manufacturers are increasingly building conventional cars able to achieve greater than 30 mpg and flex-fuel vehicles (FFV), which can run on either gasoline or ethanol or a combination of both. Some fleets, including LabCorp, are transitioning from SUVs to smaller, more fuel-efficient vehicles, while others are evaluating the practicality of implementing a hybrid/alt-fuel pilot program.

Common reasons for considering the shift to hybrids and alt fuels cited by fleet managers include promoting fuel efficiency, a positive corporate image, environmental awareness and global warming, expanding fueling options, and curbing dependence on foreign oil.

“Taking steps to conserve fuel is the responsible thing to do for corporate America,” said Scott Huiras, senior vice president of claims, SECURA Insurance.

Other hybrid perks include tax breaks and HOV lane access in some states. But, there are still many questions yet to be answered. Because hybrid-electric vehicles still consume gasoline, dependency and emissions are dramatically reduced, but not eliminated.

“Hybrids are not the end game in this effort. They do reduce dependence on oil, but we need to get to a point where we’re not burning any fossil fuels,” said Patrick Pineau, manager, government and equipment compliance, Exelon Corp.

In other words, are hybrids merely a stepping stone to the future — a temporary solution — or are they here to stay? And, is the future depending on hydrogen fuel cells — zero-emission test vehicles already produced by carmakers in limited quantities and still under development for at least the next 10 years?

Hybrids are priced as much as $5,000 more than their gasoline counterparts, meaning it may take several years to recoup the extra cost of the vehicle in fuel expense, depending on how often and where it is driven, vehicle lifecycle, and cost of fuel.

“Current hybrid technology actually offers worse fuel economy at high speeds than a comparable gasoline vehicle because, unlike the hybrid, it doesn’t have to carry around a heavy battery,” said Nick Cappa, manager, advanced technology, communications, DaimlerChrysler.

Scott Singsank, account manager for Wheels Inc., a fleet management company based in Des Plaines. Ill., has found hybrid implementation more common in publicsector fleets than commercial fleets. “Hybrids do promote fuel savings; however, unless you keep them for eight years and drive a lot of city miles, savings don’t offset the extra cost of the vehicle, particularly on the commercial side in which vehicles are only kept three or four years,” he said.

So, with all this in mind, are hybrids a practical solution for offsetting increased fleet expenses?

SECURA to Become a Hybrid Fleet
By next year, SECURA Insurance, based in Appleton, Wis., will replace its existing fleet of 70 field vehicles with Ford Escape hybrids in response to fuel costs and environmental issues. SECURA is currently evaluating two Ford Escape hybrids and has found a 10-mpg improvement over the conventional Escape.

Financially, the hybrid conversion will cost the company more; however, if the cost of gasoline continues to increase, SECURA will reach its break-even point quicker, causing resale value to increase, said Huiras of SECURA. As an incentive, the government reimburses the company $1,950 on each vehicle.

An advantage to hybrids, as noted by Huiras, is that engine noise is greatly reduced. “When driving around town and the vehicle reverts to the battery, sometimes you have to check to see if the vehicle’s even running because it’s so quiet,” said Huiras.

One of the hybrid’s drawbacks is current vehicle choice, said Huiras. SECURA’s drivers work in claims and carry equipment; therefore, a sedan wouldn’t be practical. The Escape hybrid SUVs offer more room and collapsible seats, and down the road, larger offerings will be made available, according to Huiras.

Upfront cost is another concern. SECURA’s average vehicle lifecycle is 60,000 miles and Huiras believes the company can eventually recoup that expense in fuel. At resale, he estimates hybrids will go for $1,000 more than conventional vehicles, depending on gas price volatility.

“If we sold our vehicles at 90,000 miles, battery life could affect resale value, but hybrids have been around for a while, and I’ve seen nothing in the media that would indicate the batteries have had any problems,” said Huiras.

PepsiCo/Frito-Lay Stress Conservation
Since launching its energy management program in 1999, PepsiCo/Frito-Lay has reduced its energy consumption annually, resulting in an overall reduction of 21 percent across its 34 U.S manufacturing facilities. Based on 2005 energy pricing, the company has saved more than $40 million in energy costs since 1999 as a result of its comprehensive approach to sustainability and conservation.

PepsiCo/Frito-Lay’s fleet consists of more than 18,000 vehicles, including cars, delivery trucks, and over-the-road tractors. The company began purchasing Toyota Priuses in 2005 to learn whether operating costs would improve.

“As part of the company’s commitment to sustainability, we are continuing to find ways to conserve water, fuels, and electricity through the people, processes, and technology employed throughout daily operations,” explained Pete Silva, director, fleet procurement, PepsiCo.

According to Silva, challenges of implementing hybrids into fleet include limited vehicle availability, long lead-times, and lack of available options.

Initial driver response to the Prius was positive, said Silva. Drivers can attain up to 43 mpg and the vehicle appears to meet driver needs in terms of performance and cargo capacity.

The Grass is Greener at Exelon Corp.
Exelon Corp., an energy provider and parent company to PECO and Commonwealth Edison (ComEd), with a combined fleet of 6,000 units based in Chicago, began purchasing hybrids to save fuel, promote the technology, reduce emissions, and meet its commitment to become a completely green fleet by 2010, said Pineau of Exelon Corp.

Of its total fleet, Exelon has 100 Ford Escape Hybrids, 200 E-85 vehicles, and 30 CNG vehicles. Since replacing its conventional Escapes with hybrid versions, Exelon has witnessed a 20-27-percent improvement in fuel efficiency over the non-hybrid Escapes, averaging 30 mpg, according to Pineau.

Increased maintenance costs due to the complexity of the hybrid system have not been an issue. “We’ve had less brake wear because of the vehicle’s regenerative braking, less friction material replacement, and fewer oil changes because of the electric propulsion,” said Pineau.

Drivers welcomed the addition of the Escape Hybrids. The SUVs serve their purpose, allowing drivers enough room to carry equipment. Performance differences are subtle and acceleration rate is actually faster. The downside is the initial cost of the vehicles, said Pineau.

Weyerhauser to Cut its Greenhouse Emissions by 40%
Robin Robinson, manager of corporate procurement and supply management for Federal Way, Wash.-based Weyerhauser, a forest products company, oversees a total fleet of 2,500 vehicles, 10 of which are Ford Escape Hybrids. Weyerhauser’s hybrids have 48-month lifecycles and are used in two applications: first, by security personnel who patrol the company’s headquarters at low speeds and, secondly, by couriers in the company’s real estate division located in Southern California.

Weyerhauser first purchased hybrids in 2005 to project a positive corporate image, reduce dependence on oil, and save fuel. The company has pledged to reduce its greenhouse emissions by 40 percent by the year 2020.

“Both groups have seen improved fuel economy over the standard Escape and haven’t experienced maintenance problems, so they’re very happy with the vehicles,” said Robinson. “The rest of our fleet vehicles are used by sales and marketing employees who drive highway miles and hybrids just aren’t conducive to that type of driving. In this case, we’re focusing on other alternative fuels, such as E-85.”

Driver Habits Dictate Fuel Savings in Palm Beach County
In 2005, Palm Beach County, Fla., purchased 18 GM hybrid pickups, which the automaker discontinued after the 2007-model year. Prior to the purchase, the hybrids were estimated to provide a 10-percent increase in fuel efficiency.

“With a purchase price of almost $5,000 more then a conventional-powered vehicle and, at best, a slight increase in mpg, purchasing more hybrid pickups is not worth it to us,” said Doug Weichman, CAFM, director, fleet management division, Palm Beach County. “Of our 18 vehicles, we have six that are four-wheel drive and average about 15.76 mpg, which is about two mpg better than a similar conventional truck in our fleet. Our 12 two-wheel-drive trucks average 14.97 mpg, which is about the same as our similar conventional trucks.”

The ability to achieve maximum fuel efficiency depends on the driver’s habits, said Weichman. His 2x4 drivers are assigned to inspectors of the building division and compliance sections. The trucks are their mobile offices and, because of Florida’s heat, they work in their vehicles sitting at idle. Turning off the overdrive disables the hybrid function allowing the engine to idle and air conditioning to run when the vehicle is stopped.

Environmental resource management employees drive the four-wheel-drivepickups and, as such, they tend to be more environmentally friendly. They don’t idle or shut off the overdrive function to bypass the idle shut-off system, thus obtaining better mpg.

Weichman’s fleet also consists of 61 Toyota Prius and Ford Escape hybrids with another 57 2007 models on the way.

UCLA Strives for Fuel Efficiency
Sherry Lewis, associate director of transportation at UCLA, manages a fleet of 1,030 vehicles, of which 10 are hybrid Toyota Priuses and Camrys and 28 percent are alt fuel. The hybrids are used for motor pool operations and lifecycles run four years. Overall, drivers responded well to the Priuses, but desired a heavier vehicle with more power, which led to the purchase of the Camrys. Lewis is also evaluating the possible acquisition of the new Saturn Vue Green Line hybrid SUV.

“We purchased hybrids in 2001 for their fuel efficiency and range and because they fit our application for on-campus driving,” said Lewis.

At current fuel prices and vehicle usage, Lewis calculated that it would take up to eight years to regain the extra cost of the hybrids, “but we feel it’s the right thing to do; we want to offer fuel-efficient vehicles.”

Prius drivers accumulate around 15,000 miles per year, but attain 10-20-percent lower fuel efficiency than the EPA rating because of lack of driver consistency in the rental fleet.

SCAQMD Clears the Air
South Coast Air Quality Management District’s (SCAQMD) purpose is to ensure Southern California maintains compliance with federal air quality standards and fund and accelerate commercialization of cleaner technologies.

“We need to lead by example; that’s why we’ve always purchased the cleanest vehicles possible,” said Matt Miyasato, technology demonstration manager, SCAQMD, based in Diamond Bar, Calif.

SCAQMD has a 204-vehicle fleet, of which 14 are hybrid Toyota Priuses, Ford Escapes, and Honda Civics and Insights. Eighty-six percent of the fleet is CNG vehicles, and the rest is a smattering of electric, propane, and fuel cells. The hybrids are employed for outreach programs to demonstrate to fleet managers the availability of clean technology vehicles.

“Part of our outreach program is to show that air quality, greenhouse gas emissions, and energy diversity are intertwined. Hybrids and alternative fuels can address all of these issues,” said Miyasato.

Lack of infrastructure to support alt-fuels has sparked SCAQMD’s interest in plug-in hybrid technology. Fuel cells, comprised of a battery and an electric motor, are actually hybrid technology, said Miyasato. “It’s not a stretch to imagine that hybrids can lead to fuel cells. Hybridization will increase fuel economy, reduce greenhouse gas emissions, and prolong our use of petroleum while we search for an alternative.”

Looking to the Future of Clean Vehicle Transportation
In pondering the future of clean vehicle transportation, most fleet managers seem to agree that hybrids are a stepping stone, or bridge, to future technologies, possibly fuel cells. However, once the technology is harnessed and made commercially available, it’s vital that we not limit ourselves to depending on just one resource.

There are many factors that will influence how hybrids play out in the future. “As the price of gasoline increases, investments in alternative fuels will increase because there will be a price point that makes sense,” said Huiras of SECURA Insurance. “Hybrids are a bridge to future technologies, possibly hydrogen. From the global warming and energy independence standpoints, this will be a very different country in the next 10 years or so.”

For Silva of PepsiCo, when looking at the whole picture, hybrid vehicles represent just one option. “Alternative technologies and options continue to be developed. Most likely it will take different alternatives to make environmentally friendly transportation the norm.”

Exelon Corp. plans to implement hybrids in certain applications as long as the vehicles are commercially available. “We’re looking at all kinds of alternative fuels, including plug-in electric hybrids and CNG and propane-powered medium-duty chassis,” said Pineau. “We see hybrids as a stepping stone to other technologies, particularly fuel cells,” said Pineau.

Miyasato of SCAQMD doesn’t see reliance on one dominant fuel like we have today with gasoline. “User expectations are high in terms of availability. Consumers want it to be convenient to go to any corner and purchase fuel for their vehicle at a reasonable price and they don’t want to sacrifice performance. These are all huge obstacles to introducing alternative fuels.”

Lewis of UCLA believes fuel prices must continue to significantly increase before more fleets make the transition to hybrids and alt fuels.

Robinson of Weyerhauser offers a different perspective. He foresees alt fuels, primarily E-85, as the answer to ending dependence on oil. Fuel cells may become a viable alternative, he said, but there’s not enough data to determine its practicality. “I don’t see hybrids as a bridge to future technologies. Hybrids are a niche application ideal for inner-city driving.”

Only time will tell the role hybrids and alt fuels will play in developing a reliable and commercially viable alternative to petroleum, thereby influencing the future of clean vehicle transportation.

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