How a Fleet-as-a-Service Model Will Propel Electrification

In an empty lot in an industrial area next to LAX in Los Angeles, Paul Gioupis motioned across a trench of chewed up concrete. It’s where the rows of EV chargers will go, eventually. “You start digging up the ground, you start finding stuff,” he said. “Artifacts.”

“When the contractor came in to cut that first layer of concrete, and then the second layer, they found an old railroad track. That was not in the original planning,” he said, but that’s not all. “On the other side, it was gas lines and unidentified piping. We didn’t know if they were still connected to something or not.”

The city came in to investigate, which held up the project while workers were on the clock. But that’s to be expected in commercial construction, perhaps more so when the project is setting up electric vehicle charging infrastructure of this magnitude. The site we’re standing on will deliver 10 megawatts of power to support the charging of 220 commercial electric vehicles overnight and more than 500 vehicles throughout the day. That’s enough power for eight or nine Walmart’s or a thousand homes.

Gioupis is co-founder and CEO of Zeem Solutions, which serves the commercial fleet market. To define Zeem’s mandate succinctly, choose transportation, energy, truck, depot, charging, EV, or fleet and add “as a Service.” The word you choose defines your exact needs.

The SaaS model emerged in software some 20 years ago but has recently exploded into full-service offerings on a subscription basis for many industries. For fleet electrification, the as-a-Service model might be ready for the moment.  

There are multiple pressures facing organizations to electrify their fleets, including meeting ESG mandates and regulatory requirements, satisfying executive leadership’s motivation to reduce local carbon emissions, and the need to get ahead of a movement that is coming. (*The potential consequences of the latter will be examined).

For California fleets in particular, the pressures are acute: Under the Advanced Clean Fleets (ACF) regulation, private fleets of over 50 vehicles and the federal government must fleet zero emission vehicles (ZEVs) on a percentage basis starting on Jan. 1, 2025, with increasing penetration to 100% in the next decade. For drayage fleets serving ports, only ZEVs can be added into service starting in 2024 with a similar ramp up to 100% ZEVs in the next decade.

But as electrification moves from theory to reality, the on-the-ground challenges loom large — these organizations don’t have the knowledge, bandwidth of time and personnel, nor the considerable budget required for a full rollout of charging infrastructure and commercial EVs. Enter Zeem Solutions.

“We give (fleets) a way to incrementally get into EVs and learn as they go without a huge capital outlay,” said Bruce Shalett, Zeem Solution’s president and co-founder, back in Zeem’s LAX office two blocks from the future charging site. “It's literally everything you would need if it was at your own site. We just do it remotely for you.”

Consolidating EV Services

Zeem’s goal is to consolidate EV services for fleets across the country in commerce hubs such as airports, ports, and distribution centers with constant fleet activity. In choosing the initial LAX location, Gioupis and Shalett estimated that about 400 operations in a five-mile radius run about 10,000 fleet vehicles, a mix of buses, shuttles, and tractors that move cargo and people.

At the time of the site visit in September 2022, the Zeem Solutions fleet stood at 77 electric vehicles. Models run from Class 1 to Class 8 — Tesla passenger cars, medium-duty passenger vans by Green Power, Phoenix Motorcars, and Maxwell, SEA Electric Hino M5 box trucks, and Lightning eMotors XD 6500s, as well as Volvo VNR and Nikola Tre tractors. Clients include Kaptyn, a premium rideshare service, an LAX shuttle service, and Kuehne+Nagle, an air cargo freight forwarder.

For fleets, a monthly payment offers a menu of services that starts with a lease for the electric vehicles, procured and managed by Zeem. From there, fleets can opt for overnight and daytime charging, routine maintenance, cleaning, and inspections for the EVs, as well as take advantage of secure parking and a lounge for drivers.

Another way to use Zeem is as a satellite facility, Gioupis said. To start the day, fleets would reorganize drivers’ schedules around accessing vehicles at a Zeem location instead of a headquarters depot. In this way, fleets can expand operations beyond their ICE fleet. With the ability to brand the trucks with their company logos, Kuehne+Nagle is already getting more calls to haul goods as a green operator, Gioupis said.

Back at the Zeem office, we walked past a couple of porters. The job of this “pit crew for the electric age” is to jockey vehicles to get them plugged and unplugged based on a complex matrix of battery capacity, daily duty cycles, and utility rates, as well as unexpected power outages.

The porters also inspect the vehicles. “Fleets need somebody to say there's a dent on the quarter panel before the next driver picks up (the truck),” Gioupis said. “It's these little services that are typically done on your site. Here, it’s at a remote fleet operation.”

Lessons Learned

Smith Electric was making commercial EVs in the U.K. before fleet electrification was even a concept. The 100-year-old commercial EV maker was known for its electric “milk float” delivery truck back in the ‘50s; the trucks’ silent operation was a benefit for early morning routes.

Emerging from Wall Street careers in the 1990s, Gioupis and Shalettt were involved with mergers and acquisitions for Smith Electric. They oversaw the company’s headquarters move from England to Kansas City, Mo. in 2010 to produce commercial EVs for the U.S. market. In the early days of Electrification 1.0, Smith Electric managed to get a few hundred of its Class 5 and 6 Newton delivery trucks on the road with clients such as Frito-Lay, Staples, and Duane Reade.

The company was preparing to go public — but the market wasn’t ready, according to Gioupis, with infrastructure, supply chains, and astronomical battery prices squelching the plan. Smith Electric ultimately ceased production in 2017, yet the lessons of its failure became the foundation for Zeem Solutions.

In trying to nurse the Smith back into financial health, Gioupis and Shalett contacted its customers to learn their specific pain points as well as their operational game plans.

After Smith Electric folded, the pair undertook a massive, multi-year outreach to organizations to ascertain where and how fleeting EVs would make sense. “What we did with institutional sales on Wall Street we transferred to fleet operators around electric trucks,” Gioupis said. “We came up with a qualification process.”

They engaged fleet operators to understand duty cycles, vehicle acquisition structures, depot footprints, and available power, while getting a handle on larger issues around charging, maintenance, and supply chains.

“All the ingredients that were gained from those phone calls and scraping the data helped us to understand how to become more predictive and helpful and to begin actually electrifying,” Gioupis said. “It led us to this model.”

The emerging EV community also took notice of Gioupis and Shalett, who became known as a potential funding source for EV startups. “They came to us for capital,” Gioupis said. “That helped us judge who we should be doing business with, what OEMs are reliable; can we see (their products) in the marketplace?”

They then began buying and operating electric vehicles themselves, while vetting locations for Zeem’s first facility. “I would call our VP of sales (Don Peer, employee no. 2) at 5 o’clock in the morning out of LAX, going site to site asking him how many fleets are qualified in this area and trying to figure out if we’d have enough power,” Gioupis said.

Regarding getting behind the wheel of the vehicles, “We’re fancy boys from Wall Street,” he said. “We wanted to know what happens when a truck goes down. We needed to understand firsthand the impediments to electrification.”

Then they started to give the EVs to fleets to test. With real-world experience from fleets themselves, they were able to give hypercritical, yet needed feedback to the OEMs. “The fleets would come back with a laundry list of issues that we’d take back to the OEM and say, ‘This is what the operator tells me,’” Gioupis said.

The nascent company cut its teeth on fleet operations, battery charging, and vehicle-to-grid interaction. “That's how we started to get our chops,” he said. “I took off my suit and never put it back on.”

This process put them knee-deep in fleet, an experience differentiator from others in electrification who come from distributed energy, wind, solar, and various digital technologies.

“We’re coming to this business from the vehicle side,” Gioupis said. “Everybody’s out there either producing infrastructure, making a truck, or trying to connect those pieces. But they’re not really covering the entire fleet management spectrum, which is where we come in.”

Massive Power

The first essential step of electrification is for fleets to understand their power requirements at present and as the EV fleet expands. Each of Zeem’s depots will be designed for a minimum of five- to 10-megawatt loads. For the LAX location, Zeem negotiated Southern California Edison to be able to pull those 10 megawatts of power, which is the maximum allocation. To upgrade to more power, Gioupis estimates a three- to five-year process.

Here’s where the potential consequences for late-adopter fleets arise.* With such massive pipelines, it’s not a given that utilities will be able to distribute adequate power to all entities that need it. Gioupis and Shalett’s advice to fleets looking to electrify: Get a grasp of this power equation with their utilities as soon as possible. 

Building resiliency into the plan, along with grid independence, is also vital.

Zeem is planning on solar as one of their potential renewable, off-grid energy sources. Out of the 10 megawatts of available grid power at the LAX facility today, an array of solar canopies could provide a half to three quarters of a megawatt of juice to charge vehicles — a fraction of the total and incentive-dependent, but meaningful. The canopies will provide an equally important benefit of protecting the vehicles from airplane fuel and the weather, Gioupis said.

Grid resiliency depends on creating microgrids through battery storage, and Zeem is planning for that too. With the ability to store energy from solar, Zeem will be able offer a better rate for fleets that need to charge at peak times such as 4 p.m. to 9 p.m. on weekdays.

Industry Maturation

Zeem has eight new locations planned for 2023 and 50 are in the pipeline across the U.S. over the next five years.

Gioupis and Shalett understand that as the industry matures, fleets won’t not need to have their hands held on every aspect of electrification. Eventually, they’ll be able to acquire their own EVs and inevitably bring much of the needed fleet electrification expertise that Zeem offers into their own organizations.

When that time comes, Zeem’s model will evolve to “Depot as a Service,” in which the company is contracted as an outsourced expert to plan, implement, and manage charging infrastructure.

In the meantime, fleets will endure the same process Zeem has already gone through, in various forms. This includes sourcing the charging equipment, trenching concrete, acquiring the vehicles, and connecting them all. Yet in today’s ongoing supply-constrained environment, it’s no secret that it will take much longer, and more capital, than originally anticipated.

The larger play, at some point, involves distributable power from the massive amount of energy Zeem is pulling from the grid — and then arbitraged back to the grid opportunistically.

The current fleet at LAX can provide about 12 megawatt hours of distributable power, Gioupis said. Expanding to 200 EVs could increase power back to the grid by up to 30 megawatt hours. “That's incredibly meaningful, like lighting up part of the city,” he said. “That’s utility scale, a virtual power plant.”

Zeem’s vehicles and charging infrastructure are already capable of bidirectional vehicle-to-grid (V2G) charging, and the company has memorandums of understanding with the Department of Energy, California Energy Commission, and SoCal Edison to test V2G. However, there are plenty of logistics challenges to determine the amount of power that could be supplied back to the grid.

While the initiative will take time to fruition, “That, to me, is where the microgrid vehicle-to-everything market needs to go down the road,” Gioupis said. “And I think we're defining it from a commercial perspective.”

Coda

Since the September meeting at the Zeem Solutions LAX depot to this article’s publishing, the charging site that was under construction is now up and running and serving customers. Across both sites comprising Zeem’s LAX footprint, the company has 77 DC fast chargers and 55 AC ports.

The fleet is growing too, with 100 units ready to roll by the end of April, Gioupis estimates.

Planning for the construction of charging infrastructure while procuring electric vehicles — with the goal to complete both in tandem and get those EVs generating revenue — is a financial balancing act that all electrified fleets will face but aren’t likely yet considering.

“We’re fortunate enough that we have a good financial backer who understands that there's a process to get these (sites) done, and there's a time gap,” he said. “It’s all part of the art of getting these depots up and running.”