1. Introduction
1.1. Problem statement
1. Introduction
This section starts with the description of the problem statement and the aim of this research. It is then followed by the description of the case that is the interest of this project. The literature study on intermodal transport and environmental sustainability in transports are then discussed, which leads to the identification of research gaps and the associated research questions.
Following that, this chapter is concluded by the description of the methodology used in this research.
1.1.
Problem statement
The issues related to the deplete on of fossil fuel and increased greenhouse gasses (GHG) emissions have become a worldwide concern. To address emissions problems, The International Energy Agency set a goal to reduce CO2 emissions by 2050 to half the emissions of 2005 (IEA, 2011). As the continuation of this goal, in 2015, the 21st Conference of Parties of IEA (COP21) in Paris resulted in another goal to limit the increase of the global average temperature bellow 2°C during a century (UNFCCC, 2017).
To achieve these goals, the transportation sector needs to reduce emission because transportation sector alone generates 25% of total worldwide GHG emissions (IEA, 2012). If the current trends do not change, the transportation sector's energy demand and emissions are predicted to keep increasing and are expected to double by 2050 (IEA, 2012). One way to achieve such a reduction of emissions in the transportation sector is through the use of electric vehicles (EVs) substitution of internal combustion engine (ICE) vehicles. This idea is also relevant for the deplete on of fossil fuel problem, given that the energy demand of transportation is otherwise predicted to be doubled by 2050 (IEA, 2012).
Based on this idea, IEA set an objective in the Paris Declaration of Electro-Mobility and Climate Change and Call to Action to sell more than 100 million electric vehicles and 400 million 2-and-3-wheelers electric by 2030 (IEA, 2016). Furthermore, IEA also made BLUE Maps scenario as a strategy roadmap for increasing the adoption of Battery Electric Vehicles (BEVs) and Plug-In Electric Vehicles (PHEVs). BLUE Map Scenario emphasizes that three aspects need to be considered to increase the adoption of Electric Vehicles. Those aspects are R&D in battery technology, infrastructure, and government policy in term of tax and incentives.
These actions have made an electric vehicle to receive much interest in automotive market and research (Pelletier, Jabali, and Laportie, 2016). This interest and effort successed to increase the adoption of EVs that lead to increase the numbers of electric vehicle on the road every year, which can be seen in Figure 5. Nevertheless, the number of electric vehicles on the road, which consists of Battery Electric Vehicles (BEVs), Plug-In Hybrid Electric Vehicles (PHEVs), and Fuel Cell Electric Vehicles (FCEVs), were only 1.26 million units in 2015 (IEA, 2016). These numbers were very far from a 100-million-target of electric cars on the road by 2030. Therefore, based on this condition, the current pace will not ensure the success of IEA goal.
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Figure 1. Global Market Shares of BEVs and PHEVs (EVVolumes, 2017)
One way to increase EV adoption is by encouraging companies or organization to use EVs as commercial vehicles. This is because most of the electric vehicle sold are private cars, and the adoption of an electric vehicle for heavy and medium duty vehicle is still lower compared to light duty vehicle, except for electric bus (IEA, 2016). This is because electric vans and trucks as commercial distribution vehicles are still not widely accepted (Pelletier, Jabali, and Laportie, 2016). Furthermore, logically, organizations or companies can be considered as good candidates for adopting EVs because organizations use transportation in high frequency. This means, if organizations are willing to adopt EVs, there is also a good chance to reduce high emissions and fossil fuel demand.
The lack of acceptance of electric vehicle as a company’s commercial vehicle is due to several factors, and one of these factors is the “range anxiety” as EVs has limited energy storage. To address this issue, companies that use EVs as distribution vehicles need to prepare the infrastructure or stations to recharge EVs’ battery.
There are three types of recharging stations; those are standard charging stations, rapid charging stations, and battery switching stations. At the standard charging station, BEVs need to be charged for six until eight hours to have a fully charged battery while at the rapid charging station, it needs 20 until 30 minutes to be charged, and at a switching station, it only needs three minutes to get the fully charged battery (Liu, 2012).
Battery switching station (BSS) allows electric vehicle does not need to be idle while charging process happens and reduce waiting time for the electric vehicle to get a fully charged battery.
This BSS’s characteristic makes the battery switching station seems to be the most suitable charging system for commercial vehicles since it needs to get fully charged battery fast while doing the delivery.
A company that wants to adopt electric vehicle needs to plan well since the investment cost to adopt electric vehicle is expensive, especially, if the company needs to provide the charging infrastructure as there are not many charging infrastructure available right now. This investment problem becomes even more challenging when we consider that the electric truck is a new development in automotive industry. The new product development often has several issues related to rapid technological development, which affects long term planning decision. This is
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because the rapid development can change several important characteristics, such as distance range, and vehicle purchasing cost, in unpredictable time.
Based on the high investment cost and the rapid technology development, changing all of the vehicles to the electric truck at the same time seems not to be a reasonable decision. Therefore, there is a need for a distribution company to plan its electric truck adoption strategy that includes the decisions of when and how many electric trucks should be purchased by the company while considering the charging infrastructure investment. Based on this motivation, this thesis project aims at getting insights regarding:
1. The time and capacity-wise planning of vehicle replacement decision of diesel trucks by electric trucks while considering the investment of battery switching stations
2. Finding out the factors that affect the adoption of electric vehicle in the company 1.2.
Case description
The case study analysis is developed to fulfill the aims of this project. The analysis of this case study is limited for a distribution company that has delivery route inside the Netherlands. Due to limited information and source, several assumptions regarding the company’s information are developed. Those assumptions are:
- The company is a logistic company type that delivers variety demand type. For this project, weight of demand (kg) is the only thing that is considered without taking into account the demand type
- The company has the interest to reduce its transportation emission by substituting its diesel trucks with electric trucks that only have power source from electric grid
- The company uses medium duty vehicle type to deliver the demand
- Company has a policy to use all of the vehicles owned to deliver demand everyday
More detailed assumptions regarding transportation operation activity, such as the daily transportation activity hours, and frequency to visit BSS are explained in chapter 2.
Because this research is a research desk type, which means the research done not in the company, the data needed for this research is found out through public information, such as journal, newspaper, report, and news. This data is presented in chapter 4.
This research focuses on economics analysis to plan the vehicle replacement from diesel truck to electric truck as a delivery vehicle while considering the needs for the company to build its charging infrastructure, which is battery switching stations. The company should come up with the decision when and how many electric vehicles should be bought, when and how many electric vehicle’s batteries should be purchased, and battery switching stations should be built.
1.3.
Literature review
This section has three parts. In the first part, the literature regarding electric vehicle topic such as its technology development. After that, the second part discusses the battery switching station literature. Following that, the literature about vehicle replacement takes place.
1.3.1. Electric Vehicle
Electric vehicles are not new. They exist since the 1900s, nearly 40% of vehicles sold in 1900 were electric (Hidrue, Parsons, Kempton, & Gardner, 2011). However, they lost the market to ICE vehicles in the decades following. EVs started to gain attention again since an oil crisis in the
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1970s, which made people consider alternative vehicles that do not use fossil fuel as its power.
At around that period, several countries, such as Japan and US, identified EVs as a promising solution, and have started to support the development of EV.
However, this did not translate into adoption of EV in the 1970s because of several technology barriers from the electric vehicles, such as a high price and limited driving distance because of battery capacity. Moreover, during the 1970s until 1980s, people considered cutting oil dependency was not urgent (Ahmad, 2006). Following years, as the concern for reducing oil dependency and emissions became bigger and the electric vehicle’s technology has advanced, the automotive manufacturers started to see the prospect of electric vehicle market and decided mass produce EV. The first mass-production of the hybrid electric vehicle, Toyota Prius, launched in 1997 (Chan, 2007).
Now days, there are four types of electric vehicles; those are Battery Electric Vehicle (BEV), Hybrid Electric Vehicle (HEV), Fuel Cell Electric Vehicle (FCEV) and Plug-in Hybrid Electric Vehicle (PHEV) as the fourth type. Battery Electric Vehicle (BEV) is a vehicle that gets energy for mechanical propulsion from a rechargeable electric power storage device, which is a battery (EC, 2007). This device gets energy from external energy sources, which is the electric grid; therefore, BEV is considered in the plug-in vehicle cluster. To have a fully charged battery, a BEV needs to be charged for six until eight hours with standard charging (Burke, 2007). There are several advantages of BEV compare to internal combustion engine (ICE) vehicle as general; those advantages are the ability of a BEV to generate less emission, requires less operational cost and maintenance cost (MITElectricVehicleTeam, 2017; GreenOptions, 2017; Lee, Thomas, and Brown, 2013).
Hybrid-Electric Vehicles (HEVs) combine ICE vehicle's operation system and electric motor operation system. An ICE vehicle is powered by gasoline, and the electric motor is powered by a storage battery, which is charged from the regenerative braking system. This operation system implies that, in contrast with BEVs, HEVs do not need to get energy from the electric grid or external electric energy source.
HEVs are considered to be to be less clean compared to BEVs since HEVs are still very depend on gasoline. To reduce oil dependence on HEVs, PHEVs were developed. PHEV has the main system of HEV, but PHEV can recharge its battery from an external power source, such as electric grid (Weiss, et al., 2012). This condition implies that PHEV can get energy from both gasoline and the electric grid. Therefore similar with BEV, PHEV is also considered in the plug-in vehicles (PEV) cluster.
FCEV uses hydrogen as a power source. FCEV is considered as zero pollutant technology because it does not generate emissions but water as a result of the isothermal reaction of hydrogen (Chan, 2007). Therefore, FCEV is considered as one of the good solutions for the long-term vehicle and is predicted to be the future interest of the European research in the horizon of 2020-2040 (Mierlo, Maggetto, and Lataire,2006). Nevertheless, FCEV is less accepted compared to BEV and HEV right now because the technology of FCEV is still less mature and much more expensive compared to those of BEV and HEV. For a more in -depth explanation of each electric vehicle types, the reader is recommended to explore the literature study by Sari (2016).
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1.3.1.4. Factor Affecting Electric Vehicle Adoption As A Company Vehicle
Some studies have been conducted for analysing EVs adoption by a company as a commercial vehicle. Sierzchula et al. (2014) investigated the factor that makes company willing to adopt EVs and expand this adoption further. The study was done in six public and eight private organizations from the Netherlands and United States that adopted electric vehicles. Based on the analysis, it seems that the government policy in term of subsidies and tax is an important factor for a company to adopt EVs as EVs has high capital costs. Moreover, the government also needs to educate companies and people about EVs, as there is a lack of information and confusion regarding the technology of EVs, EV market, and EV safety.
The importance of government incentive to attract the companies to adopt EVs is also mentioned by Pelletier, Jabali, and Laportie (2016). In this study, the authors explain that Electric vans and trucks for commercial distribution are still not widely accepted due to high capital cost, driving range, payload, reliability, availability, and a high cost for EV's battery that was considered to only has a short lifetime. Nevertheless, the authors argue that if the government gives enough incentives for the electric truck, the electric truck can be an attractive option for companies’
vehicle. Furthermore, another factor that needs to be considered for using electric truck is utilization. Electric truck needs to be operated in high utilization to make it profitable and can overcome high capital cost (Brian & Miguel, 2013).
Based on the studies about the factors that affect EVs’ adoption, there is a conflict between the goals of customers and the goals of governments. Although one of the main reasons EVs have gained interest from the government is because of the urgency to reduce emissions, this environmental concern is, for firms, less important compared to other factors, such as financial consideration. Hidrue et al. (2011) mention that people are more attracted to fuel cost saving opportunity compare to the reducing emissions opportunity. In addition to this finding, Rowe et al.
(2012) mention that people tend to prioritize distance range compare to the need to reduce emissions. Therefore, if EVs can not give more flexibility for distance range, it seems hard to make EVs as a substitution for internal combustion engine (ICE) vehicles.
Based on those factors that affect EVs adoption, two factors are highly related to battery technology; which are driving range and purchase price. The reason of a high upfront cost for EVs is due to the battery cost. The battery cost is calculated based on the price per kWh. To reduce the electric vehicle cost, the battery technology needs to improve. Nowadays, EVs use lithium-ion (Li-ion) battery because it has rapid technology development and considered as a good choice for EV's battery. IEA (2011) stated that among other existed battery's technology until now, lithium-ion batteries offer the best option when optimizing both energy and power density of the battery.
As there is an increased interest in electric vehicle research in the past decade, there has been an improvement in the battery technology of electric vehicle that increases the limited driving distance of electric vehicles. The BEV's range used to be only around 100 miles, but in early 2017, Tesla, a car manufacturer, has introduced a new battery option with a distance range of 335 miles, which makes Tesla has the longest distance range battery for now. The current technology of battery for an electric vehicle has a distance range from around 100 until 300 miles, for example, Chevy Bolt has 238 miles of distance range, Ford Focus Electric has 115 miles of distance range, and Nissan Leaf has 107 miles of distance range (Fortune, 2017). While for the electric truck, the limited driving distance for electric truck ranges from 100 km to 250 km (Emoss.nl, 2017).
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Figure 2. The BEV’s Battery Price, Goals, and Estimations (Based on the data from DOE (2016), GM (2017), HybridCARS (2017), Electrek (2017), and Cleantechnica (2017)
The improvement in battery technology leads to the battery price reduction. Figure 2 shows that the goals to reduce battery cost for BEVs have been set by many automotive manufacturers and governments. The US government announced a goal to reduce battery cost from $500/kWh to
$125/kWh (DOE, 2017). Automotive manufacturers, such as General Motor (GM) and Tesla, also set its goals to reduce BEV’s battery cost. GM, which had succeeded to reduce battery cost until it reached $145/kWh in 2015, declared its target to make its battery cost reach $100/kWh by 2022 (GM, 2017). Similar to GM, Tesla also sets a goal to reduce its battery cost until it reaches $ 100/kWh by 2020 (HybridCARS, 2017).
Several projections for battery cost of BEVs have been made. IEA (2012) estimates the battery cost for BEVs to reach $325/kWh or less by 2020, while McKinseyandCo (2017) has a more optimistic projection of battery cost based on the analysis of data from EU stakeholders.
McKinseyandCo (2017) predicted that battery cost would be $236 /kWh in 2020.
Figure 2 also indicates that the average battery price of BEV shows significant reduction since 2010 until 2015 (Electrek, 2017 and Cleantechnica, 2017). Several estimations seem to have pessimistic prediction compared to this reduction trends. Nevertheless, based on this trends, the goal to reach battery cost until battery cost reaches $100/kWh by early 2020 seems to be not easy, except for the leader in automotive manufacturer, such as General Motor.
1.3.2. Battery Switching Station As Charging Infrastructure for Electric Vehicle
Recharging or charging station is an important infrastructure to support EVs. There are three types of recharging stations; those are a normal or standard charging station, rapid charging station, and battery switching station. At the standard charging station, BEVs need to be charged for six to eight hours to have a fully charged battery while at the rapid charging station, it needs 20 to 30 minutes to be charged, and at switching station, it only needs three minutes to get the fully charged battery (Liu, 2012).
There is a distinct difference between switching battery station with other two station types. In the switching station, the BEVs can get a fully charged battery within three minutes since BEVs only come to switch its used battery with the fully charged battery. This fully charged battery has been
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average price of
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charged before BEVs come, and the driver only needs to pay for miles driven based on the used battery.
Switching battery station has same advantages. It can help to decouple the battery and EV which means it can reduce the upfront cost because the customer does not need to buy the battery but pay for miles used (Mak, Rong, & Shen, 2013). The battery is still be owned by the company, therefore, in other words, the company is leasing the battery to the customer. By this decoupling battery and EV that have a different life cycle, it will be easier to take advantage of the future improvement in battery technology since the customer only needs to change its battery without the need to change EV (Mak, Rong, & Shen, 2013).
Based on these advantages, several organizations, such as Better Place and Tesla, want to adopt battery switching station. Better Place Company had tried to build and made a pilot project in Denmark, Australia, and Israel before it was bankrupt due to poor financial planning (Avci, Girotra,
& Netessine, 2015). In addition to these companies, China's government also has chosen a switching battery station as its core infrastructure option to support EV adoption (Mak, Rong, &
Shen, 2013).
The interest to battery swithcing station also occurs in the reasearch area. Mak, Rong, and Shen (2013) and Avci, Girotra, and Netessine (2015) consider battery swithcing station in their studies.
Mak, Rong, and Shen (2013) develop two optimization models that aim to help the planning
Mak, Rong, and Shen (2013) develop two optimization models that aim to help the planning