Green Operations

On the Quest for Green Dollars

May 2013, Green Fleet Magazine - Cover Story

by Chris Wolski - Also by this author

Fleets today have a number of potential sources for funding alternative-fuel vehicle projects.
Fleets today have a number of potential sources for funding alternative-fuel vehicle projects.

Sustainability has become a byword for many commercial fleets today — often as an extension of their companies’ green initiatives designed to cut the overall corporate carbon footprint.

The good news is that there are numerous solutions available to fit to the fleet and its customers’ needs to make a fleet more sustainable. The downside is alt-fuel vehicles can be budget busters.

However, there is money available from local, regional, state, federal, and even private sources that can go a long way to funding the purchase of alt-fuel vehicles to transform a traditional gasoline-powered fleet into a sustainable fleet.

Planning Ahead

The biggest mistake fleet managers make when looking for grants to fund their alt-fuel vehicle purchases is chasing dollars without a solid plan, according to Bill Van Amburg, senior vice president of CALSTART, a national, non-profit advanced transportation technologies organization founded in 1992 to promote a clean transportation industry.

“CALSTART tries to stress with fleets that there are dollars out there, but the first place to start isn’t looking for dollars. The first place to start is the fleet plan, and really lay out what you want to do,” Van Amburg said.

Chasing the dollars without a plan will typically end in a scenario with a fleet manager finding funding for propane autogas, for example, and deciding, based on the available funds to pursue the funding without regard to the needs of the fleet and its customers.

Instead, fleets should develop a fleet and transition plan for the technology, determine what platforms make sense for the technologies that interest the fleet, determine how many of the vehicles are desired, and decide on the time frame to acquire them.

“It’s much more powerful to go to a funding agency and know exactly what you want to do and write in a proposal that you have a five-year plan, have laid out an implementation strategy, and explain why these funds are needed, because this is exactly what the fleet needs to do this year. And, this will let the fleet do it faster, instead of saying ‘I heard you had some money and maybe I’ll buy two of these things.’ There’s a big difference in those proposals,” Van Amburg said.

For instance, FedEx Express’ fleet secured funding to purchase alt-fuel vehicles to meet its sustainability goals, in part, because it had clear goals about its fuel-economy improvements (20 percent by 2020) and the exact models and mileage bands it needed them for to reach the goal, according to Van Amburg.

Planning doesn’t involve just knowing what the fleet needs or wants. Timing also plays an important part in the process.

While there are different types of grant funding methods, the traditional one involves submitting an application and receiving funds directly from the granting organization.

Complexity arises after the grant is approved and before the money is disbursed to the fleet.

“This has happened several times with fleets we’ve worked with. They go through the proposal process and get picked for that calendar year. However, they can’t buy the vehicles and hope to get reimbursed until they’re under contract with the agency, and the contract doesn’t come into effect until the next year. Then, sometimes the dollars run out,” Van Amburg said. “You really have to know the time horizon of the grant funding or whatever the funding source is.”

Building Relationships

It isn’t enough to have a fleet plan. Running in parallel with developing the plan is developing relationships with funders, service providers, and even other fleet managers to make the fleet stand out during the application process.

“As the funders get to know you and get a sense of what you need and what you know about the subject, they might keep an eye out for you. So, when your proposal comes in, they can put a name to it, and can say, ‘I know that fleet, they’re real, they’re committed,’ ” Van Amburg said.

At the very least, potential funders should be called, and, ideally, met in person.

It’s important to keep in mind that relationships with funders will likely be for the long haul. “You need to build long-term relationships for a few reasons. It’s how you’re going to be successful when you apply. The funder will know how serious you are. And, you’ll probably need more than one source of funding,” Van Amburg observed.

This is what John Clements, director of transportation for California’s Kings Canyon Unified School District, did when pursuing funding for electric and hybrid school buses.

According to Van Amburg, Clements developed a solid plan and built strong relationships with everyone he would need to involve in the process.

“He connected with local people, worked with vendors, and got to know all the sources of funding,” Van Amburg said.

In total, Kings Canyon secured funding from four or five different sources, including using vouchers, local sources, and regional sources of funding. Clements credits his personal relationships for his funding success.

“I have been very blessed to work for a supportive public school district for nearly 39 years that has allowed me to participate in state, local, and federal clean air workgroup meetings,” he said. “My attendance, along with funding opportunity workshops, has enabled me to build working relationships with various agencies and their staffs. The knowledge I have gained has aided me to use multiple funding sources to provide near full-funding for my district and neighboring schools to obtain these clean emissions alternative- fuel school buses and white fleet vehicles.” (Editor’s note: A “white fleet vehicle” is any school district vehicle that isn’t a school bus.)

Joining local chapters of the NAFA Fleet Management Association or Clean Cities, for example, can give fleet managers access to information about grants available in the area and access to potential funders.

One-on-one relationships with fleet peers who have received grants can also be useful in determining what worked and what didn’t and traps to avoid when asking for funds.

Fleets can use a five-step process developed by CALSTART to create an alternative-vehicle implementation plan. A plan must be developed prior to “chasing” grant funding and is one of the keys to successfully obtaining a grant for fleet programs.
Fleets can use a five-step process developed by CALSTART to create an alternative-vehicle implementation plan. A plan must be developed prior to “chasing” grant funding and is one of the keys to successfully obtaining a grant for fleet programs.

Finding the Money

Once the foundations have been laid, fleet managers can then start pursuing money. If relationships with potential funders have been already developed, it should be fairly simple once an announcement for applications is made.

Finding funding sources and building relationships is a hand-in-glove process. Today’s reality is there’s less money available, but it’s there. It may just take some additional detective work to find it.

“It is more in pockets [of funds] than it used to be,” Van Amburg explained. “What isn’t as available as much is federal money for the technologies as there used to be. Federal incentive dollars, such as tax credits, have pretty much run out in the vehicle space, except for light-duty electric. So you can still get the $7,500 tax credit for an electric car, and fleets can get it the same as a consumer. But, when it comes to tax credits for natural gas trucks and hybrid trucks, it has pretty much all run out and Congress has not renewed them.”

That being said, even on the federal side, there are pockets of money available for fleets.

“There are still a few opportunities at the federal level if you know the timing and where to look for them,” Van Amburg observed, specifically in the Diesel Emission Reduction Act (DERA) program run by the Environmental Protection Agency (EPA) and Clean Cities.

Fleet managers will most likely have better luck at the regional, state, and local levels, according to Van Amburg.

“Many states — for air quality or energy security reasons — have grant programs fleets can apply for,” he said. “Sometimes, they’re run out of the state energy or environment offices, or sometimes regional air quality offices. The national fleets are looking at California, New York, Ohio, and Texas — there are a lot of programs. Each state has individual opportunities.”

Van Amburg added that, as of press time, among the best states to find alt-fuel vehicle money are New York and California, mainly in the form of vouchers. In the near future, Chicago will also be offering vouchers. Funding opportunities are readily available online. (See Sidebar, “Alt-Fuel Funding Opportunities,” for places to start.)

Funds don’t have to come just from public sources. There are a growing number of private funders coming on the scene as well.

Some of these are already well-known by fleets that have invested in compressed natural gas (CNG)-fueled vehicles. This funding involves setting up the fueling infrastructure.

In this model, a fueling provider agrees to build the fueling station for the fleet or for several fleets in exchange for guarantees in throughput and a small surcharge on the CNG pumped into the vehicles.

“You’re essentially paying for the station; you’re just paying for it with a little surcharge on the fuel. That’s been working on the natural gas side. I’ve even seen it on the propane autogas side,” Van Amburg said.

Several vehicle and major system makers have been exploring variations on this approach, though no one has yet finalized the structure. According to Van Amburg, it would involve a new kind of sales or lease agreement, where the fleet would obtain the alternative fuel or advanced vehicle at the same price as its conventional counterpart, and pay for the higher cost of the system over time from a share of its benefits — either through a share of the much lower fuel prices (natural gas) or fuel savings (hybrid). It’s a model the solar panel industry has been using.

A private model that has been put into practice is one developed in Northern California. A group there will write-down part of the cost of the vehicle and allow the fleet to pay it back over time from the cost savings generated from the vehicle.

“So, there’s some private capital involved, but it’s not that prevalent. It’s something we’d like to see more of,” Van Amburg said.

There are also hybrid offerings of public-private money. One example Van Amburg cited was a program in which EPA dollars are used to help fleets running Class 8 trucks fund diesel particulate filter (DPF) and idle-reduction generators.

“The EPA dollars have been used to buy down the rate of the loan out of the capital market,” Van Amburg explained. “It’s been able to provide a discount lend rate for that package.”

While private money may not be as prevalent as public monies, there is one certainty, according to Van Amburg, these new economic models are going to continue to grow.

FedEx Express’ fleet secured funding to purchase alt-fuel vehicles to meet its sustainability goals, because it had a clear plan to show funders how the fleet intended to use the money.
FedEx Express’ fleet secured funding to purchase alt-fuel vehicles to meet its sustainability goals, because it had a clear plan to show funders how the fleet intended to use the money.

Writing the Grant

Once the planning is done, relationships forged, and grants identified, it’s time to write the grant.

The first thing that fleet managers need to know is that the process to write the application will likely take longer than they expect.

“You’ve got to set aside at least two weeks for two people to fill out some of these proposals,” Van Amburg said. “Although that could be duration, and not total time.”

Van Amburg advised fleets to lay out a duration time line with the starting point as the submission date and work back to identify benchmark dates, including building in times for approvals from senior management and the company’s legal department, for instance.

Another issue that may have to be determined is who will be writing the grant. In some large and public organizations, there are expert grant writers on staff. If there aren’t internal resources available, it may make sense to hire a freelance grant writer. And, in some cases, it may fall to the fleet manager or one of his or her subordinates to write the application.

No matter how the grant writing process is handled, there are some points to keep in mind when completing the application, according to Van Amburg, including:

● Having a clear vision of what the fleet wants.
● Understanding what the funder wants, as well, and what it is allowed to pay for.
● Writing to the grant criteria — show how the goals will be met.
● Being concise and to the point and sticking to the facts and not engaging in self-aggrandizement.
● Avoiding being greedy; show how the fleet can be competitive within the
projected plan.

Also, during the grant writing process, it should be determined who will be handling the reporting side of the award. This could be handled by a consultant, but, since it has to do with the internal processes of the fleet, it could be difficult for an outsider to track.

The DOE’s Energy Efficiency & Renewable Energy website lists alt-fuel vehicle incentives available at the federal level and for each state, which can be an invaluable tool for fleet managers during the planning process.
The DOE’s Energy Efficiency & Renewable Energy website lists alt-fuel vehicle incentives available at the federal level and for each state, which can be an invaluable tool for fleet managers during the planning process.

Following Directions

Many grants come with reporting strings and other requirements attached, and Van Amburg noted that it is important to be fully aware of what those rules are, because failing to follow directions could doom the application to rejection.

“Some reporting criteria, for instance, are pretty streamlined. You just have to provide the receipts that you’ve purchased the vehicles, how much fuel you’ve used, and how many miles they are running,” Van Amburg explained.

But, sometimes, they can have consequences for the fleet. For instance, under the DERA grant program, fleets are required to punch a hole in the engine block of out-of-service vehicles that are being replaced, which, naturally, destroys its value in terms of remarketing.

“You need to know the rules as you get into the process, just so you know you can compile the data, and you’re comfortable with the rules,” Van Amburg said.

Vouchers Becoming Popular

There can be little argument that pursuing a grant can be a time-consuming and complex process. But, there is another option that Van Amburg said CALSTART has been vocally supporting: vouchers.

The process is simple and is handled directly by the dealer. If the fleet qualifies, it’ll get a vehicle, for instance a hybrid-electric Class 6 truck, for half or more of the incremental amount. The dealer is reimbursed by the state, in this case California, for the difference.

While the voucher system eliminates much of the time-consuming grant writing process, it has another advantage for fleets. It eliminates the timing issue that can derail a fleet’s grant.

“The vouchers can get secured at your time of order, and they’re going to be held until the time you’ve paid for the vehicle. It doesn’t really matter what your fiscal timing is,” Van Amburg explained.

CALSTART recently completed an industry whitepaper on vouchers, “Clean Tech Vouchers: An Effective Tool for All Regions,” that is available for download at www.calstart.org/Projects/htuf.aspx.

Funding and Consequences

Typically, a grant requires a certain amount of reporting or other requirements, which, as mentioned previously, are often fairly straightforward and crucial.

If there is a lack of compliance, this could jeopardize the fleet receiving the balance of the grant money. “The funder can even go after the money they’ve given you, because you didn’t do what was required for the grant,” Van Amburg warned.

Long-term this could mean that the fleet may not get funding in the future.

“If you have a bad reputation among funders, you won’t qualify. This is usually as a result of a bad audit or non-compliance,” Van Amburg said.

However, this scenario is very rare. “Most people are pretty careful,” Van Amburg said.

Alt-Fuel Funding Opportunities

While alt-fuel funding certainly doesn’t grow on trees, there are still millions of dollars up for grabs. Below is a small sample of the starting points fleets can use to find funding for their alt-fuel initiatives.

http://Grants.gov – a listing of all current federal grants available.

● Alternative Fuels & Advanced Vehicle Data Center – a clearing house of alternative-fuel data, information, and publications run out of the U.S. Department of Energy www.afdc.energy.gov/afdc/laws/matrix/tech

● National Clean Diesel Campaign (NCDC) – includes tools and resources, including grants and funding opportunities. The campaign is administered by the Environmental Protection Agency (EPA).http://epa.gov/diesel/

● Clean Cities – includes information about alt-fuel transportation technology, grants, and links to local coalitions. The U.S. Department of Energy administers the program. www1.eere.energy.gov/cleancities/index.html

● Propane Education & Research Council (PERC) – promotes the safe, efficient use of propane autogas as a preferred energy resource. www.propanecouncil.org

● National Biodiesel Board – a national trade association representing biodiesel energy. www.biodiesel.org

● NGVAmerica – a national organization dedicated to the promotion of natural gas for use in transportation. www.ngvc.org/about_ngv/index.html

● Electric Drive Transportation Association (EDTA) – dedicated to advancing electric drive as a core technology for sustainable mobility. www.electricdrive.org

● CALSTART – a national, non-profit advanced transportation technologies organization that promotes a clean transportation industry. www.calstart.org

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