by Matt Smith7 minute read
Across the UK, hundreds of local authorities have declared a climate emergency, and are committed to reducing their CO2 dramatically. Many are aiming to achieve net zero, or similar targets, barely a decade from now. One inevitable consequence is that such authorities will need to move away from fossil fuel reliant vehicles – and luckily, technology is advancing quickly, making a switch to electric powertrains for many different types of vehicle feasible.
One of the most visible types of local authority vehicle is the humble refuse collection vehicle (RCV), and electric options (eRCVs) are starting to come into use. Eunomia recently published a cost-benefit analysis of purchasing and operating an eRCV compared to a diesel-fuelled RCV. This report highlighted how the total cost of owning and operating an eRCV is becoming comparable to a standard RCV, over the life of the vehicle, once we take into account the monetised environmental impacts. Benefits of eRCVS include reduced particulate emissions, helping to improve local air quality, and reduced noise pollution – for example, when idling, an eRCV is produces around a 16th of the noise of a diesel vehicle.
However, around half of UK local authorities outsource their waste collection services, and if they want to switch to eRCVs, they will need to design tender processes that encourage, or require, contractors to offer this as part of their service. In this article, I examine the challenges that collection contractors face in submitting competitive bids that feature eRCVs and how authorities can make it easier for them.
Business as usual?
Waste contractors are certainly interested in how they can meet the aims of clients that want to introduce eRCVs. However, they have several concerns that mean they are unlikely to offer eRCVs as the default option:
- Capital cost. The capital cost of eRCVs is greater than a diesel. Even if lower operating costs offset this, it adds to the perceived risk of an eRCV solution.
- Range. While manufacturers are claiming ranges that would meet the needs of most waste collectors, there is understandable caution to adopt new technology in advance of extensive testing. Until there is the confidence that a single battery charge can deliver a full collection round in non-urban settings, a collector may well take the view that they need to provide more electric vehicles than they would diesel ones, increasing the cost of their offer.
- Reliability. Although the drivetrain of an electric vehicle has fewer moving parts than a diesel vehicle, there are concerns about the reliability of the technology – particularly around the lifespan of the battery. If it turns out that batteries need to be replaced before the end of the vehicle’s expected life, this would be a large additional cost.
- Resilience. Authorities expect vehicles to be available every day. Collectors are concerned about how to cover contingencies, such as what happens in the event of an overnight power outage, and how such incidents might impact on their compliance with their contractual obligations.
- Charging infrastructure. Charging a full fleet of eRCVs requires some pretty significant power infrastructure at the depot, including charging stations and potentially a new sub-station and additional cabling. If the authority doesn’t have the facilities in place, it means the collector is undertaking a significant capital project, with the concomitant capital costs and risks. In contrast, diesel will usually be the incumbent solution on site.
- Maintenance. Maintenance is critical to any RCV. While many parts (hydraulics, lifts etc) will be common, regardless of the powertrain, there is a cost in upskilling maintenance teams to be able to service electric vehicles.
- End of life value. As no eRCV has yet reached its ‘end of life’, one has never been sold or reconditioned. This forces a risk-based price on the sale of the vehicle, which again leads to higher assumed lifetime costs.
The combined effect of these concerns and uncertainties is likely to lead to a bid involving eRCVs to currently be rather more costly than a diesel alternative, impacting on financial competitiveness, and potentially on contract performance. Where is the incentive to provide a more expensive solution at the bidding stage – and if there is none, why would a contractor risk losing to a competitor who offers a standard RCV?
Better by design
Local authorities are in a great position to enable the industry to overcome these challenges, through the way they design their procurements. The big question is… what can a local authority do to encourage the implementation of an eRCV fleet?
- Specifying eRCVs. If an authority is determined to move to eRCVs, the simplest solution is to write the output into the service specification, which forces all bidders to offer the vehicles. This way, no single bidder can gain advantage by not using eRCVs. It creates a level playing field for all bidders and ensures the authority gets the outcome they are trying to achieve. Further, authorities could specify how electricity is to be sourced, e.g. requiring that it be procured from a low carbon source, whether through a private wire or – if location-based greenhouse gas accounting is used, by buying from a low carbon energy supplier. However, due to budgetary constraints, many authorities will, at this point, want to make sure that they have made a value for money comparison with diesel. Simply specifying eRCVs may not be the preferred option. This comparison can be achieved either through allowing variant bids or by setting the award criteria differently from normal.
- Contract award criteria. If eRCVs and diesel vehicles are to compete on an even footing, we need to address the contract award criteria. A local authority can set the price:quality split at a level that rewards innovative solutions, by giving price a lower weighting than might typically be the case – a 40:60 split might be sufficient to send the right signals. Social value considerations can also be included in the tender, which can be designed to help favour eRCVs.
- Pricing-in emissions. Eunomia’s research indicates that, once emissions costs are monetised, eRCVs’ costs are broadly on a par with diesel. An authority could recognise this by requiring bidders to estimate the emissions from their vehicles and specifying a cost that will be added for each tonne of the specified pollutant, in line with Green Book principles (though it is debatable whether the damage costs it lists for CO2 are high enough to deliver a ‘net zero’ outcome). For CO2 in particular, this reflects the fact that authorities aiming for net zero will need to either offset vehicle emissions or make savings elsewhere to achieve their goals – which will have a cost. It is reasonable for these costs to be priced into the contract; and for authorities to decide that eRCVs are not a priority if emissions can be cut more cheaply elsewhere. Such practices can be embedded in the contract award process, linking to the previous point.
- Reducing capital risks. If the authority wishes to reduce the cost of eRCV options, it can do so by bearing more of the capital risk itself, using the cheaper borrowing rates that are available to it. If the authority itself agrees to finance the purchase of the vehicles, this can often save 1-3 per cent of the contract value. If the authority itself purchases the vehicles, this also takes the risk element out of the resale value at the ‘end of life’ for the contractor. If the authority agrees to make the necessary changes to its depot, this again reduces capital costs and levels the playing field for all bidders, encouraging them to use eRCVs.
It is increasingly apparent that the days of diesel RCVs are, and must be, numbered. eRCVs are an exciting development in waste collection technology and offer a range of environmental benefits. It is likely that over the next 10 years, as the technology continues to develop, battery-powered eRCVs – and perhaps hydrogen-powered alternatives – will come to the forefront. However, for authorities that want to achieve net zero by 2030, decisions about going electric will likely need to be made in the next procurement cycle. Fortunately, there is a good deal that can already be done to design procurements in such a way that they ensure that the vehicles already hitting the market, which are consistent with a net zero objective, can compete with diesel.
Featured image: JCT 600 (CC BY-SA 2.0), via Flickr