By Greg Duncan, MELP, ASP, Sr. EHS & ESG Content Manager
Everyone is talking about environment, social, and government (ESG) these days. ESG initiatives and corporate ESG performance are steadily becoming a top priority for businesses that want to continue to attract investors, keep pace with shifting consumer preferences, respond to evolving requirements from supply chain partners and other stakeholders, and remain competitive in a market that increasingly demands greater corporate social responsibility. Whether you’re already pursuing ESG initiatives or you’re just getting started in ESG, the good news is that you might be further along in your ESG journey than you know.
One of the largest areas of focus within the scope of ESG is reducing the organization’s carbon footprint—the impact that organizations have on climate and the environment. The single greatest contributor to reducing your organization’s carbon footprint is reducing consumption of fossil fuels and improving the energy efficiency of your facilities and operations. Quantifying your organization’s carbon reductions can sound like a monumental challenge, but there are many small steps businesses can take that add up to meaningful and significant reductions.
ESG Advantages of Electric Vehicles & Equipment
One of the most effective carbon reduction strategies that you may already be pursuing is replacing older fossil fuel-powered vehicles with electric vehicles (EVs) and other electric-powered equipment. This includes electric passenger vehicles and other types of road vehicles in your corporate fleet, but it also includes electric-powered industrial trucks (e.g., forklifts) and other types of electric-powered material handling equipment. Many businesses have been using these types of low/zero emissions vehicles and equipment for years, even decades, and if you’re already using them in your workplace, take pride in the fact that you’ve already made a significant step toward reducing your carbon footprint and improving ESG performance.
Use of electric vehicles, especially powered industrial trucks, has been the standard in many industries for years. While it is certainly the most economical and safest choice in many industrial applications, there are benefits for ESG performance that are only recently coming into perspective. In addition to reduced operating costs, cleaner equipment, and decreased reliance on fossil fuels, quantifying your use of EVs and other types of electric-powered equipment is a key contributor to your organization’s carbon footprint and GHG emissions reductions, and therefore, your overall ESG performance.
Electric Vehicle Charging & Low Carbon Fuel Standard (LCFS) Credits
It’s not only the ESG advantages that EVs and other types of electric-powered equipment can offer. There are real, tangible incentives available for organizations to transition their fleets. There are many government and market-based business incentives that businesses can qualify for by transitioning to renewable and more energy efficient equipment and technologies.
I recently attended the 2023 ProMat manufacturing and supply chain logistics conference in Chicago, Illinois and sat in on a session which discussed how transitioning to EVs and other types of qualifying electric-powered equipment can make businesses eligible for financial incentives. Namely, the session discussed Low Carbon Fuel Standard (LCFS) credits, a type of market-based incentive similar to renewable energy credits (RECs) that can be traded in participating LCFS markets.
What are Low Carbon Fuel Standard (LCFS) Credits?
If you’ve never heard of them before, LCFS credits are essentially a form of currency used within participating states and regions with renewable portfolio standards (RPSs) to account for the market value of using renewable fuels and energy efficient vehicles. The LCFS market revolves around the monetary concept of the “Cost of Carbon” which can quantified and offset using renewable or energy efficient technologies as an alternative to fossil fuels. LCFS credits are distinct from other types RPS credit markets that exist, but are part of a larger framework of incentives designed to help businesses make progress toward carbon emission reduction targets.
There’s a lot of terminology and legal jargon involved, but the basic idea is that there are real dollars and cents to be earned in the use of renewable energy and energy efficient technologies as an alternative to fossil fuels. If your business operates within an RPS state or one that participates in renewable energy markets, use of those renewable and energy efficient technologies can earn you incentives like LCFS credits that can be traded within those markets for cash.
Figure 1: US Renewable Portfolio Standard States Map
Even if you don’t live in a state or region that has RPSs or participates in LCFS markets, there may still be financial incentives for your business to transition to EVs and other electric-powered equipment. There are many active incentive programs throughout the US, but the vast majority are implemented at the state level. To learn more about available incentive programs in your state or region and how to participate, visit the US Department of Energy’s Alternative Fuels Data Center.
In addition to both direct and indirect financial incentives, the use of low-or zero-emissions technologies such as EVs and other electric-powered equipment has the ultimate effect of reducing the organization’s market-based Scope 2 GHG emissions—a key metric in overall carbon reductions and ESG performance.
Electric Vehicle & LCFS Case studies
During the session at ProMat, presenter Evan Rosenberg from SRECTrade highlighted a few of their own customer case studies showing how companies who transitioned their vehicle fleets from fossil fuel-powered equipment to electric vehicles (EVs) and other electric-powered equipment were able to realize significant financial benefits in the form of Low Carbon Fuel Standard (LCFS) credits.
- One company with 20 facilities and 2,500 registered pieces of eligible equipment earned $1.2 M in credit value over a period of 12 months
- A company’s single facility operated approximately 200 electric fork trucks and earned $2,500 per newer model vehicle, and $450 per pre-2012 model fork truck
- A smaller facility transitioned to electric-powered dockyard trucks and installed 4 charging stations. Even with low/moderate usage was able to earn $6,000 in LCFS credits per charger, averaging a return of $0.11/kWh of electricity consumed
Electric Vehicle Energy Data Tracking
These incentives can provide a significant ROI for businesses looking to make the transition to EVs and other electric-powered equipment, but applying for and earning them requires some careful documentation and verification. To be eligible for LCFS credits and other similar incentives, not only must vehicles be of an eligible type, but electricity consumption used to charge or otherwise power them must be accurately tracked. More specifically, you need to determine how much energy (i.e., kilowatt hours) is used.
This isn’t always easy because there’s not always a direct means of monitoring how much energy is used to power EVs and other electric-powered equipment. In a perfect world, your EV charging stations are on an independent electricity utility supply and/or you have a smart meter that reads consumption at those charging stations specifically sot that your utility bill will show precisely how many kWhs you’re using for those EVs. This is not often the case, and if your charging stations are on a shared electric supply with other devices or machinery in your facility, you’ll have to calculate the energy consumption of your EV charging stations based either on data from the charging station itself or based on manufacturer specifications for power output (P) and hours of use (t).
It’s a relatively straightforward calculation, but when you’re trying to track energy consumption for EVs and other electric-powered equipment across multiple chargers at multiple facilities or locations, it can be a significant challenge to calculate and aggregate your energy consumption data. As we saw in our case study example earlier, one company needed to track 2,500 vehicles across 20 locations. Tracking down energy consumption data across such a large organizational scope can take up a significant portion of your day unless you have a system that can automate data collection and calculation and centralize the documentation of energy consumption for reporting purposes.
ESG Initiatives, Electric Vehicles & Carbon Footprint
Even if you’re not able to participate in LCFS credit markets or other similar incentive programs, there is still immense value in making the transition away from fossil fuel-powered equipment to EVs and electric-powered equipment, wherever possible. As noted earlier, reducing your organization’s Scope 2 GHG emissions is a central contributor to overall ESG performance, and the use of EVs and other electric-powered equipment represents a big step toward that goal.
It all starts with being able to quickly and easily assess your electric power consumption and perform the necessary calculations to determine both the proportion of your energy consumption allocated to EVs and what carbon dioxide-equivalent (CO2-eq) emissions are reduced by that usage. More generally, ESG performance depends on your ability to assess the total CO2-eq emissions of your overall energy consumption and quantify your total carbon footprint. When you can accurately quantify that energy consumption and easily calculate your corresponding CO2-eq emissions, reporting that data for regulatory reporting requirements and/or ESG reporting standards is made simple.
VelocityEHS Can Help!
The ESG Solution, part of the VelocityEHS Accelerate® Platform, gives you the support you need to track all three scopes of your GHG emissions, with reporting capabilities aligned with major ESG disclosure frameworks right out of the box. The GHG & Energy Management capabilities, supported with our Utility Data Sync features automatically collects your energy usage data directly from your utility provider, applies the correct emission factors, and converts data to the units you need – minimizing potential for error and administrative burdens while streamlining reporting tasks.
Request a demo today to see how VelocityEHS can help you leverage your utility data to help you earn a real return on your EV investment and lay the groundwork for future ESG performance.
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