1. Not the only corporate to embrace EVs, but the biggest
On September 19, Amazon announced its order for 100,000 Rivian electric delivery vans. These vehicles are planned to enter service by 2024, with the initial units shipped in 2021. They will likely serve the 80 Amazon fulfillment centers in North America and potentially more than 500 Whole Foods Markets (in addition to any additional facilities that Amazon brings online in the coming half-decade).
Amazon is not the only Fortune 500 company to go all-in on replacing their fleets with electric or hydrogen vehicles to advance their sustainability goals, but the 100,000-truck order is significantly larger than those made to date by other leaders. For example, earlier this year Anheuser-Busch InBev announced orders for 840 electric and hydrogen semitrailers from Tesla and Nikola as part of its commitment to power 100 percent of its directly operated delivery vehicles with renewable energy by 2025.
2. Big promises from Rivian
Rivian has been generating buzz for 10 years, while raising $1.55 billion from strategic investors — Ford, Cox Automotive and now-customer Amazon across three rounds.
Rivian only showcased its first production vehicle design early this year and has yet to deliver a production vehicle. If delivered in 2024, the Amazon order alone will give Rivian a 1.7 percent market share among passenger EVs across North America.
Delivery may pose a challenge for this 10-year-old EV manufacturer. However, there are some interesting possibilities that could enable the company to scale operations more rapidly, as it still remains to be seen how much of the production process will remain in-house versus outsourced.
For example, Rivian has announced a plan to develop a "next-generation battery
electric vehicle" with Ford based on Rivian's battery
platform. Could Ford step in as a potential manufacturing partner for some portion of what Rivian has sold to Amazon or seeks to sell to private consumers?
3. Market moving beyond e-buses
Innovation is leading to greater energy density and lower-cost batteries. In turn, these advances are enabling auto manufacturers to increase range without having to equally scale the size and weight of the battery or the cost of the vehicle. This is bringing EVs closer to the range and total cost of ownership of traditional ICE vehicles.
To date, e-buses have been the leading commercial vehicle segment for non-rail transport electrification in the top EV markets of China, the U.S. and the EU. There are 400,000 e-buses on the road today.
However, e-bus dominance may falter as energy density continues to grow, battery prices continue to fall (Wood Mackenzie forecasts a 49 percent drop between 2017 and 2025), and new electric light, medium- and heavy-duty commercial vehicle models become available for intracity and intercity travel.
This in turn is leading auto manufacturers to develop new models for various medium- and heavy-duty applications, including various light- and medium-duty trucks, semitrailers, buses and even garbage trucks — enabling orders like the Amazon/Rivian deal.
Despite the continued growth of the e-bus market, Wood Mackenzie expects a new era of diversification of EVs on the road around the globe. Amazon’s fleet is a sign of things to come.
4. Utilities: The promise and complexity of fleet electrification
The coming era of EV fleets is fantastic news for electric utilities in the medium to long term, as it will provide a boost to electricity demand.
However, it does raise some major questions that are not easy to answer for regulated utility operating companies — namely, how will these fleets charge? After we heard the news, the WoodMac team did some back-of-the-napkin modeling about impact on the grid.
Isaac Maze-Rothstein with our Grid Edge
team posited that with battery
sizes that could easily range from 105 kilowatt-hours (230 miles) to 185 kilowatt-hours (400 miles), high-power Level 2 chargers (around 20 kilowatts) could work for Amazon's delivery application.
Assuming charging occurs at a rate of only 20 kilowatts, this single fleet could hypothetically lead to a nationwide increase in demand of up to 2 gigawatts, if all of these vehicles had a corresponding charging outlet and charged at the same time. This is a severe and unlikely scenario that would only occur under conditions such as a rate structure that incentivized simultaneous charging.
Even if this scenario were to occur, an additional 2 gigawatts during peak periods would not create significant strain on wholesale markets across the U.S., especially as these vehicles would likely do most of their charging at night, when wind power is more abundant and power demand is typically at its lowest.
Yet while the wholesale market can accommodate 2 gigawatts of additional demand, even a fraction of that demand could exceed the local capacity available to individual sites (i.e., the distribution grid near fleet depots). Increased demand at depot facilities could necessitate extensive electrical service upgrades for the local network.
The severity of this challenge could range from a head-scratcher — a warehouse next to a underloaded substation taking on 10 vehicles (or 200 kilowatts of potential demand) — to a migraine — a fulfillment center in an urban center requiring 200 vehicles or 4 megawatts of worst-case scenario load in an already-congested location.
The seriousness of the problem will hinge on the density of local development, local electricity headroom (i.e., spare infrastructure capacity), vehicle charging and operating patterns, and surprisingly enough, how the distribution grid is planned.
One idea is to simply rate-base the additional service costs (bigger transformers, potentially, larger feeders, etc.). While this might ultimately be the business model that a utility employs, the share and type of equipment a utility uses to address this e-mobility need is not so simple.
Today, utilities need to juggle potential traditional infrastructure upgrades with rate reform, large fleet owners’ transportation operations and strategies, and incentives for investment in local distributed energy resources. DERs will be key for fleet depots, but scalable depot models and winning companies remain uncertain.
The value of electricity resilience changes for companies as their fleets electrify. Distributed generation and/or on-site storage may become standard at depots to reduce the risk that entire fleets are without power for multihour or multiday periods.
This creates new opportunities that many vendors and several utilities are already seeking to capitalize on for developing, building, operating, maintaining and maybe owning the on-site EV and distributed energy resource infrastructure. No dominant model exists today for how to design or calculate the value of resilience for depot facilities, something that may never fully be standardized due to the variance in facility operations.
What is clear is that the construction and operation of EV and DER facilities for depots will cost billions of dollars over the next decade, an infrastructure opportunity that many companies see as opening up a path for strategic growth.
The five-year wait for Amazon’s Rivian order to be fulfilled may seem like an eternity for cleantech enthusiasts. But it's a blink of an eye for the utility industry that makes planning and operations changes over the span of decades.
This order is a wake-up call for companies with large vehicle fleets, electric utility executives and state and national regulators alike.