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When electrifying their fleet, many operators run cost calculations for EV trucks and vans, only to be left with sticker shock on charging infrastructure.
But there are plenty of funding options that are available for fleet operators to offset the costs of both electrified vehicles and the corresponding charging infrastructure. One example includes low carbon fuel standard (LCFS) credits.
LCFS credits help offset upfront infrastructure costs, while promoting clean transportation.
What Are Low Carbon Fuel Credits?
Low carbon fuel credits are part of state-run programs designed to reduce the carbon intensity (CI) of transportation fuels. These programs encourage the use of cleaner alternatives like biofuels, hydrogen, and electricity by assigning a carbon score to different fuel types.
LCFS programs require companies that produce high-carbon fuels (think: large oil companies) to offset their emissions by purchasing low-carbon credits. These credits are generated by entities using clean technologies like EVs or renewable fuels. The credits are then bought and sold on a private market, with transactions occurring directly between the credit generators (i.e. EV fleet operators) and the buyers (i.e. oil companies).
Electricity has one of the lowest CIs, making EV charging infrastructure an advantageous option for generating credits. The revenue collected from the credits can be used at the company’s discretion, but many fleet operators reinvest it into the purchase of more electrified vehicles or to offset the costs of charging infrastructure.
Which States Have Low Carbon Fuel Credits?
Three states currently have fully implemented LCFS programs:
- California
- Oregon
- Washington
Other states, including Minnesota, Michigan, and New York, are exploring similar programs but are not yet operational.
Within each state, the cost of the LCFS credit will fluctuate, sometimes as frequently as daily. You can view historic and future credit price predictions from our partners at FuSE here.
How LCFS Credit Programs Offer Fleet Operators a New Revenue Stream
Fleet operators often face higher upfront costs when electrifying their fleet compared to Internal Combustion Engines (ICE) vehicles. ICE refers to a collection of vehicles that are powered by internal combustion engines, meaning they run on gasoline or diesel fuel. The EVs themselves are typically more expensive to purchase, and the additional need for charging infrastructure adds another layer of expense.
However, LCFS credits offer a compelling way to justify these investments. By generating credits through charging infrastructure, fleet operators can unlock a recurring revenue stream that helps to offset these initial or ongoing costs —revenue that simply isn’t possible with all-ICE fleets.
The process is as follows:
- Earn credits for charging the electrified fleet.
- Sell credits to high-carbon generators.
- Reinvest revenue generated from credits in upfront or ongoing infrastructure costs.
While this process can seem straightforward, keep in mind that buying and selling the credits on a private market isn’t quite as simple. High-carbon generators are required by the state to purchase credits, and they typically prefer to buy credits in bulk to meet compliance without ongoing management. The buying and selling process is often cumbersome and can result in a major administrative burden. Having a partner that facilitates these transactions helps to simplify the process and ensures you’re unlocking the full revenue potential of credits.
Offsetting EV Infrastructure Costs with LCFS Credit Program: Real-World Example
Here’s an example of how your company could benefit from generating and selling LCFS credits from an electrified fleet:
Using today’s credit price of approximately $75, a class-2B vehicle would earn $536/year assuming they drive 100 miles per day (251 days/year). A class-8 vehicle driving 300 miles/day (251 days/year) would generate $15,340/year.
Because LCFS credits are long-term programs, they often cover a significant portion (if not all) of the costs of the electrical infrastructure.
What Other Funding Options Exist to Offset EV Infrastructure Costs?
In addition to LCFS credits, or if you operate a fleet in a state that does not have a LCFS program, there are other funding options that exist to offset upfront infrastructure costs. Federal tax incentives, state-level rebates and grants, and local utility programs offer reduced installation costs or charging rate subsidiaries. There are also plenty of financing options like leasing or loans, or lesser-known strategies including Charging-as-a-Service (CaaS).
Check out this clip from our webinar about funding a fleet electrification strategy:
Interested in listening to the full webinar? Click here to get access to an on-demand recording of the presentation.
Your One-Stop Partner for the Full Electrification Process
At SitelogIQ, we help you forecast and monetize LCFS credits with our vetted intermediary partners that support on both the buying and selling side.
We’re also your one-stop partner for all phases of electrification infrastructure projects, including funding strategy and incentive management. Our team works hands-on with you from design through installation to warranty management and results tracking. We tailor a solution based on your current layout, charging capacity, number of charging ports needed, utility requirements, state and local mandates, accessibility requirements, financial needs, and more—both for right now and for future planning.
Let us help you navigate the low carbon fuel credits and other funding options. Let’s chat about your fleet electrification needs.
