‘Green bank’ launches $250M effort to electrify California’s port trucks

Electric trucks, which are cleaner and cheaper to operate than diesel options, could be a win for both the planet and trucking companies.

The only problem? Smaller trucking companies still face steep upfront barriers to going electric, including high price tags, uncertain charging access, and few financing options.

On Tuesday, Climate United, one of the country’s newly established nonprofit ​“green banks,” unveiled a $250 million plan with electric truck-charging startup Forum Mobility aimed at overcoming those barriers. The money will help secure low-cost financing for up to 500 U.S.-built Class 8 electric trucks — the largest such order of electric trucks in the country — for small freight companies and independent truckers serving California’s busiest and most heavily polluted seaports.

The ports of Long Beach and Los Angeles handle about 30 percent of U.S. container imports, and about 80 percent of the ​“drayage” trucks that haul those containers to inland distribution centers are owned by small fleet operators and independent drivers, said Beth Bafford, CEO of Climate United.

Under California’s ambitious clean-truck and clean-fleet mandates, all of the roughly 33,000 drayage trucks in the state must become entirely emissions-free by 2035.

“If we don’t create the right financing and charging package for them, we know what happens,” she said. ​“The big guys will transition and get the benefits, and the last guys driving the diesel trucks will be the small guys.”

Zero-emissions trucks make up about 500 of the roughly 22,000 drayage trucks serving the Port of Long Beach, the vast majority of them battery-electric trucks, said Jacqueline Torres, vice president at Forum Mobility.

Bafford hopes that Climate United’s $250 million order — along with Forum’s commitment to make its growing network of charging depots available to the truckers who work with the green bank — will help jump-start a broader shift in the U.S. freight industry. Climate United’s order would roughly double the number of electric trucks serving Southern California’s ports.

“We’re prioritizing fleets between five and 20 trucks — they will be first in line,” Bafford said. ​“We want to get small fleet owners into electric trucks. That’s really letting them lead this transition in a way that shows it’s feasible, so we can transition not just the tens of thousands of trucks in ports in California, but then take it across the country.”

The Harbor Trucking Association, which represents drayage truckers up and down the West Coast, praised the new program. The organization last fall signed on to a lawsuit challenging California’s clean-trucking rules, saying that they could threaten its members’ livelihoods.

In a statement accompanying Climate United’s announcement, the association’s CEO, Matt Schrap, said that the Climate United program ​“reduces upfront costs by pairing both infrastructure and the truck together.”

“They are inexorably intertwined,” Schrap said. ​“You can’t have one without the other. And when the two are combined, it solves a lot of challenges for carriers.”

How a big electric truck order could transform the market

This kind of ​“market transformation” is part of the mission of Climate United and other recipients of the $20 billion in federal funding created by the Inflation Reduction Act to launch a national green-bank program.

The law calls for at least 70 percent of green-bank funds to go to low-income and disadvantaged communities. That certainly includes the heavily polluted and predominantly low-income communities of color living near Southern California’s ports, where public health data indicates that ​“extremely high levels of air pollution lead to higher levels of health conditions, asthma, a lot of conditions that affect the health of families and children,” Bafford said.

The Greenhouse Gas Reduction Fund — the official name for the green bank program — also asks the nonprofit entities involved to use their money in ways that can ​“de-risk” private-sector lending for underinvested and largely untested markets. Financing electric trucks fits well into that mission as well, Bafford said.

Electric Class 8 trucks — the ​“big rigs” that carry trailers and cargo containers — cost about three times as much as their diesel-fueled cousins. In California, state and regional incentives can make up for a significant portion of that extra upfront cost. Federal tax incentives can return another $40,000 per vehicle.

But those incentives and tax credits can be complicated to secure, and they take time to flow back to the purchasers. That’s limited their use to port districts or larger freight companies that can afford to absorb the higher upfront costs and wait for the payback.

What’s more, truck manufacturers don’t just build new trucks and wait for customers to buy them, as is the case with passenger cars. Instead, trucks are built in response to customer orders — and small-scale operators lack the deep pockets to commit to those orders.

Climate United’s 500-truck order will short-circuit these barriers, Bafford said. In fact, by placing such a large order, it’s hoping to establish favorable terms from truck manufacturers to ​“deliver the trucks and work with us to do the leasing to the fleet owners and operators.”

That in and of itself could be transformational, she noted. Right now, ​“there is very little or no leasing activity in this space due to the unknown residual value for the vehicles and their batteries,” she said. That’s a problem, because most trucks are leased or financed today.

Decades of market data on diesel trucks give leasing and financing companies plenty of historical information to establish secondary value. Electric trucks should theoretically be worth as much, if not more, than diesel trucks on secondary markets, largely due to the potential to use their partly depleted batteries for other tasks, according to clean transportation nonprofit Calstart — but they lack the track record required to confirm that value.

“No one knows the residual value of these zero-emissions vehicles,” said Rick Mihelic, director of emerging technologies at the North American Council for Freight Efficiency, a nonprofit research group focused on clean trucking. ​“Everyone can speculate, but until there is a larger volume of zero-emissions trucks in the market, no one will know for sure what the used market will look like.”

Getting large numbers of leased vehicles on the road could create that track record, Bafford said. ​“That means we can get those vehicles sold over time, establish secondary market values, and start to establish that residual value data, so that a few years down the road we’re not needed,” she said. At that point, ​“traditional capital can come in and take it from there.”

Closing the charging gap 

Upfront cost is a primary barrier, Bafford said — but lack of access to charging is a close second. That’s where the partnership with Forum Mobility comes in. The startup is one of several companies building charging-as-a-service depots for electric drayage trucks operating out of California’s major ports.

Trucking companies and independent drivers that get their fleets through Climate United will have guaranteed access to Forum Mobility’s chargers at a cost that will make electric trucks competitive with diesel trucks, Torres said. In other words, owners of trucks purchased or leased through Climate United will ​“know that the charger is yours, and you’ll have access to that charger,” she said.

Electric trucking and charging present something of a chicken-and-egg problem, Mihalec said. His organization has run a series of tests that indicate that the latest Class 8 electric trucks are quite capable of handling the majority of U.S. truck routes on a single charge.

But it’s hard for freight companies to commit to buying much larger numbers of electric trucks without knowing that the charging depots are being built to serve them. Conversely, it’s hard for developers to commit to building charging depots without clear evidence that the trucks will be there to use them.

In other words, the growth of the electric trucking and truck-charging markets ​“are tied together and will expand in lockstep as the market wants more vehicles,” Mihalec said. ​“The key is getting the market to want more vehicles.”