TCO for Electric Fleets

© Maciej Kaniewski – All rights reserved

(This paper was written as an assignment for the Electric Vehicles Course offered by TU Delft. It shows some considerations for calculating the total cost of ownership for electric fleets based on a fictitious use case. No liability shall be taken for the correctness of the data or facts quoted.)

1.    Expectations

HeavenComp[1], based in Warsaw, Poland, provides advanced emergency door-to-door computer repair and data recovery services for commercial and private customers. 75% of the company’s customers are located in the Warsaw metropolitan area[2], with the remaining ones to be found in an area roughly corresponding to the Mazowsze province[3]. In 90% of cases, repairs are carried out on-site during the same business day. Only 10% of the cases require additional visits.

HeavenComp has a partly leased and partly owned fleet of 100 passenger cars, 88% of which are Renault Megane and Scenic, manufactured between 2012 and 2014. Facing the need to replace the fleet entirely by the end of 2019, HeavenComp’s management is looking for the optimum solution for its employees’ mobility needs that would maximally reduce its greenhouse gas emission footprint.

Service engineers represent 70% HeavenComp’s work force of 100 FTEs[4]. At any given time, 60% of the engineers are out in the field handling customer cases, usually one case per day (with few exceptions). For an average working day, this corresponds to the following mobility profile:

Office commutes only Warsaw Metropolitan Area trips Mazowsze Province trips Long-distance car trips

(e.g. conferences)

Total trips

(all destinations)

Engineers 25 32 10 3 70
Back office 16 3 1 2 25
Management 3 1 0 1 5
Average trip distance [km] 24 60 160 250
Maximum trip distance [km] 47 120 250 600
Total average daily travel distance

[FTE * km]

1056 2160 1760 1500 6476

Table 1     HeavenComp’s mobility profile (2017)

With 253 working days in Poland in 2020[5], a fleet composed of BEVs[6] would reduce tailpipe CO2 emissions from around 767.41 kg[7] to zero. This meets HeavenComp’s strategic environmental goal.

2.    Range and charging

As can be inferred from the mobility profile, the average daily trip range can be easily covered by the travel range of many existing passenger car BEV models. Exceptions could be handled by the choosing a different mode of transport (train or plane, as is already the case already for international trips), renting a larger electric car with a sufficient range, or fast-charging along the way.

Maintaining the cars fully charged presents a more complex problem. Home charging is restricted by the fact that most employees park in the public space, as shown below.

Domicile type Parking slot Garage Street parking Total
Apartment flat 11% 4% 56% 71%
Semi-detached house 15% 4% 19%
Fully detached house 0% 10% 0% 10%

Table 2     Employee domicile

Employees with garages (29 FTEs) could charge at home from using three-phased or one-phased wallboxes. Thee could be installed within days of purchasing the vehicle. However, in the case of employees with dedicated parking slots (11 FTEs), installing wallboxes would require consent from the whole housing community. In some cases, it would also mean swapping a parking slot located in the middle of the garage with a neighbor who has a parking slot close to the wall. This would be a cumbersome and complicated process, requiring mutual consent, legal agreements and additional cooperation from the local DSO. Providing home charging opportunities for employees parking on the streets (60 FTEs) is not realistic owing to the poor public charging infrastructure in Warsaw, with only 29 public charging stations available in the city in July 2018[8], even if additional charging stations are built.

In consequence, 61% of the vehicles would require charging at the office on a regular basis. Assuming that 50% of the vehicles were charging at any given time, this would mean the need for ca. 30 charging points. From a technical point of view, HeavenComp has enough parking space to install the necessary charging infrastructure. However, this solution would require rigorous and transparent fleet management, ensuring that enough charged cars would always be available for the 53 daily non-commuting trips. Here are some example solutions:

  • Cars would no longer be allocated individually to employees, but would be pooled, in particular meaning that the cars driven by the back-office and possibly management could be used for the trips.
  • Employees living nearby could be incentivized to commute to the office using alternative means (public transport, bikes) so that cars could be charged overnight at the office.
  • Cars would have the same standard so that no employee would feel discriminated against.

Charging cars mostly at the office would have the advantage of easily and transparently implementing smart charging (centralized infrastructure, single DSO[9], single aggregator), and possibly also a vehicle-to-grid solution in the future. HeavenComp is located in a detached office building with direct sunlight impact, which means that solar panels could be installed to provide additional charging power.

As seen from the mobility profile, DC fast charging would only be required for longer-range trips, most which take place along the A1 and A2 highways. In 2019, Orlen will build a network of 50 kW fast chargers along these corridors[10]. Another network of fast charging stations is being planned by Greenway[11]. If these plans are carried out, a fully electric fleet for HeavenComp will be viable in 2020. However, HeavenComp should have a contingency plan for using other means of transport if this target is not reached.

3.    Fleet economics

The financial analysis is based on a TCO[12] of 3 years, assuming prices as of July/August 2018. The reference cars chosen for the analysis are Renault ZOE R90 (BEV) and Renault Megane Energy TCe 130 Business Line (ICEV), which is roughly the basis the current fleet. (The reasons for choosing Renault ZOE are described in chapter 4.) The residual value of the cars after the three-year period (and thus potential income from selling the cars) has not been taken into account. All figures are in PLN (Polish złoty) and the results have been rounded to the nearest digit.

Model parameters:

  • Fuel price:                                            5,10 PLN/l[13]
  • Fuel consumption (Megane, mixed cycle): 5,30 l/100 km[14]
  • Price per km (ICEV): 0,27 PLN/km
  • Electricity price:                                            0,55 PLN/kWh[15]
  • Electricity consumption (ZOE): 0,133 kWh/km
  • Price per km (BEV): 0,07 PLN/km
  • Travel per car/year (253 days * 75 km[16]) 18 975 km
Megane[17] ZOE[18]
Car purchase

(one-time, incl. 3,1% excise tax and 23% VAT)

70 900 100 500
Battery rental (3 years, no km limit)[19] 0 19 764
Office charging infrastructure (per car)[20] 0 600
Fuel or electricity (3 years) 15 370 3 985
Insurance (2,9%/year, 3 years)[21] 6 169 11 528
Service and maintenance (3 years)[22] 2 436 812
Total cost of ownership 94 875 137 189

Table 3     Total cost of ownership calculation

It can be seen that, without additional tax incentives and with the current travel profile, the 3-year TCO of a BEV fleet based on Renault ZOE is 44% higher than that of an ICEV fleet based on Renault Megane. If the Polish government carries out its promise of subsidizing EVs by about 25 000 PLN per year[23], the difference will decrease to 18%. Further calculations are required for other scenarios, such as maintaining the fleet for more than 3 years or increasing the yearly mileage. A simple calculation shows that the 3-year TCO break-even point will be reached without subsidies if the average mileage increases by ca. 4,2 times.

No reliable forecasts can be made about the prices of fossil fuel. It is assumed that the prices of electric vehicles should drop by 8-10% until 2020. It should also be noted that the calculation has been based on list prices. Nevertheless, Renault Polska is anxious to promote sales of electric vehicles, and as HeavenComp could be one of the first large customers for an electric fleet, it might count on additional discounts of at least 5-7%.

4.    Fleet operations

HeavenComp’s business does not require any significant cargo, therefore its mobility needs can be best met by compact passenger cars. As far as electric cars are concerned, the first decision should be made between incumbents and startups. The cars should be manufactured by OEMs with an established service network in Poland, which automatically rules out Tesla and any startups. HeavenComp has a long-standing partnership with Renault, which leads to the natural choice of Renault ZOE. (Another realistic possibility would be Nissan LEAF, but the company does not have a business relationship with Nissan.) As described before, the fleet operation model should be pool-based, and ways should be found for a significant increase of the yearly mileage per car.

5.    Advanced business models

Assuming that the primary charging operation will be carried out in the office, smart charging across the entire fleet could be implemented immediately. However, vehicle-to-grid solutions would have to wait until the local DSO would be capable of implementing them, both from a technical perspective as well as from a legal one.

One area that offers great potential for HeavenComp’s business is autonomous vehicles. The company’s door-to-door service model means that technicians spend a significant portion of their time driving cars to the customers’ destinations, which prevents them from carrying out the actual job that they were hired for, and increases their frustration. Autonomous cars would allow technicians to fulfill other tasks, such as remote support, while they are being transported, and would also allow better route planning with a more intensive use of the cars.

6.    Conclusion

Currently available data does not support purely economic arguments for the replacement of the current ICEV fleet with a fleet of BEVs. Nevertheless, it is likely the following factors will influence the BEV business case in a positive way before 2020:

  • A further drop in BEV prices, due to decreasing battery costs and increasing competition.
  • A further increase in fossil fuel prices compared to electricity prices.
  • High percentage residual values of BEVs compared to ICEVs, which would allow the business case to include sale prices of used BEVs compared to used ICEVs.
  • Introduction of government subsidies and other incentives, such as free parking in Warsaw or the use of bus lanes, thus improving transport efficiency.
  • Introduction of government bans on ICEVs in inner-city zones.
  • A modified fleet policy targeting an increased average mileage per car.
  • Successful price negotiations with Renault Polska.

 

It is therefore recommended to repeat to this analysis in Q2 2019, based on new facts and data, especially including the residual value parameter.

[1] The company name and profile is fictitious. Any resemblance to a real entity is purely coincidental.

[2] Source: https://en.wikipedia.org/wiki/Warsaw_metropolitan_area

[3] Source: https://en.wikipedia.org/wiki/Masovian_Voivodeship

[4] Full-time employees

[5] Source: http://kalendarz.livecity.pl/czas-pracy/2020

[6] Battery electric vehicles

[7] Assuming average emissions for an internal combustion engine vehicle at 118.5 g CO2/km, source: https://ec.europa.eu/clima/policies/transport/vehicles/cars_en

[8] Source: https://chargemap.com/cities/warszawa-PL

[9] Electrical energy distribution system operator, cf. definition: http://www.energynetworks.org/assets/files/electricity/futures/Open_Networks/DSO%20Definition%20and%20RR_v7.0.pdf

[10] Source: https://www.orlen.pl/EN/News/Pages/PKN-ORLEN-to-construct-its-own-network-of-electric-vehicle-chargers-in-Poland.aspx

[11] Source: https://cleantechnica.com/2018/03/18/superfast-charging-heats-poland-greenway-lands-locations-stations

[12] Total cost of ownership.

[13] Source: https://www.e-petrol.pl/notowania/rynek-krajowy/ceny-stacje-paliw

[14] Source: https://www.renault.pl/content/dam/Renault/PL/pdf/brochures/megane-brochure.pdf

[15] Source: http://cena-pradu.pl/

[16] Increase from the current 64,76 km/year calculated based on historical data.

[17] Source: https://www.renault.pl/content/dam/Renault/PL/pdf/pricelists/megane-price.pdf

[18] Source: https://www.renault.pl/content/dam/Renault/PL/pdf/pricelists/zoe-price.pdf

[19] Renault also offers the option of battery purchase. This has not been considered here.

[20] Average cost assuming 30 charging three-phase stations at the office headquarters, at 2000 PLN / car (own estimate)

[21] Promotional Renault insurance premium rate (see price lists), calculated for simplicity based on list price. It is assumed that the negotiated fleet rate will be similar or lower, due to HeavenComp’s low damage rate.

[22] Assumption: EUR 0,01/km for BEV, EUR 0,03/km for ICEV; to be verified. Exchange rate PLN/EUR = 4.28.

[23] Source: http://moto.pl/MotoPL/7,88389,23396132,to-moze-byc-przelom-rzad-zapowiada-az-25-tys-zl-doplaty-do.html