The outlook for global oil demand has changed dramatically over the last decade. New technologies and policy have energy experts forecasting that demand for oil will peak. Many tie this outlook to the advent of electric vehicles, but given that cars account for only one-fourth of world oil demand today, others factors will play an important role in peak oil, including the electrification of the transport sector and large vehicles, including trucks and buses.
To understand the outlook for electrification of the U.S. transport sector, host Jason Bordoff speaks with Ryan Popple, President and CEO of Proterra, a U.S. company that designs and manufactures fleets of electric powered buses, on a new episode of Columbia Energy Exchange.
Prior to joining Proterra, Ryan was a partner at Kleiner Perkins and one of the first 200 employees at Tesla Motors, where he was senior director of finance. He serves on the board of the Silicon Valley Leadership Group and he previously served in the U.S. Army.
Among the topics that Ryan and Jason discuss are: The economics of electrifying bus fleets and impacts of volatile oil prices; The outlook for battery technology; Electric bus performance today and in the future; The link between energy policy and electrification of the transport sector; and the outlook for electric vehicles outside the United States.
Jason Bordoff: Hello and welcome to the Columbia Energy Exchange a podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. The idea of peak oil demand seems to be all of the rage these days. And although projections vary wildly for how soon it will come, there seems to be broad agreement from many, the technology and policy will push oil demand to peak and then begin a long decline. There’s of course much uncertainty about that outlook however, and often the conversation about it in my view suffers from more hype than data and analysis, that’s why we’ve launched a major research effort on the idea of peak oil demand here at the Center on Global Energy Policy.
And part of that is that, well, a lot of attention focuses on the outlook for electric vehicles, cars are only one quarter of world oil demand. So, the question then is also can we electrify or find other kind of fuels for larger vehicles like trucks and buses. And that’s what we’re going to talk about today, the electrification part at least, to understand what it would talk to electrify the transport sector and what challenges lie ahead.
I’m speaking today with Ryan Popple. He is President and CEO of Proterra, a company that designs and manufactures fleets of electric powered buses. Prior to join in Proterra, Ryan was a partner at Kleiner Perkins, the well known venture captain firm. He was one of the first 200 employees at Telsa Motors, where he was senior director of finance. Ryan thanks for joining us today on the Columbia Energy Exchange.[00:01:36]
Ryan Popple: Thank you.[00:01:37]
Jason Bordoff: So, I want to turn to talking about Proterra, give people a sense of what the company is about. But first I want to help people understand your background, how you came to do this, business degree from Harvard, you served in the US army, tell people how you came to work in the electric vehicle industry, what brought you to Tesla and Proterra, and was there something about what you saw in the military, we often talk about how challenging it is to see fuel supplies and convoys go into fields of deployment overseas, is that connected in any way to why you thought it was important to think about diversifying away from oil as a fuel?[00:02:19]
Ryan Popple: Yeah, absolutely. When I started my carrier, I was an army officer as you mentioned, I attended in college on ROTC Scholarship, and went into active duty in 2000 as an Armor Officer, so the branch of the US Army that is primarily tasked with operating the mechanized forces, so things like tanks and Bradley Fighting Vehicle and Humvees. I was assigned to the 4th Infantry Division in Ford Hood, Texas and did a lot of maneuver with that unit, got some really great experiences, met some amazing people. We also deployed in 2003 as part of Operation Iraqi Freedom, which was the initial invasion of Iraq, so I was over there for just over 9 months with the 4th Infantry.
And, you see a lot of things, when you see the Middle East and the Middle East at war, one of the first things, whether there is a conflict going on or not, it is a really powerful experience to see a place like Kuwait for example. And, in some ways like imagining Houston, but Houston in one of the most volatile regions of the world and you also physically you can see especially as you’re bringing in troop ships and logistics and armored vehicles through the ports, you see the flow and the activity of energy going the other way. So, a lot of Americans have no sense of kind of what’s behind the pump in terms of kind of where that magic energy dense fluid comes from, the –[00:03:52]
Jason Bordoff: The scale and the magnitude of producing this in offshore platforms, bringing it in tankers though the straits of Formosa, that sort of thing?[00:03:58]
Ryan Popple: Yeah, absolutely. And just as a sheer scale of the fact that our energy system today needs roughly a 100 million barrels of a very specific fluid or everything stops. Now, of course tactically seeing how you operate in the military environment and keeping vehicles fueled and troops on the move and just the amount of vulnerability that comes from that, it definitely teaches you to stop taking energy for granted.
We are very fortunate in this country that we have an abundance of almost every form of energy, but the question that I was thinking as I went to business school is, one; how do I find something that I want to work on, that has as much meaning for me as what I had done in the army, and two how can I make a difference in this problem. And so I ended up in the Bay area after graduate school. I worked at the Biofuel Startup. I was also an early employee at Tesla Motors. And –[00:04:58]
Jason Bordoff: You joined Tesla in what year?[00:05:00]
Ryan Popple: 2007. So, I was probably one of the first 200 employees, so I got to see Tesla — Tesla was a pre revenue development stage startup when I joined in and as I was there, we progressed through launching the first car, the little Tesla Roadster, and obtain the funding and put together the business plan for the Model Amsterdam Program. And importantly, we also executed or first partner program with Daimler, where Tesla battery packs went into another vehicle manufacture’s platform to electrify.[00:05:31]
Jason Bordoff: What’s your take on where in Telsa is today relative to where you thought it would be a decade ago where the cars are and now the excitement about trucks?[00:05:39]
Ryan Popple: It’s really amazing. The most special part about it for me is the idea that Tesla at one time was a pre-product company that it was just an idea, and it was incredibly exciting to see the first of the Tesla Roadsters start shipping, achieving our first $10 million of revenue then first $100 million of revenue. And in my mind I thought, if Tesla ever became billion dollar company, this is going to be a smashing success.
In Silicon Valley, once you achieve a billion dollar evaluation, today they call them a unicorn, regardless of what one thing is that Tesla’s relative evaluation, I mean it’s just 60 billion dollar company today, but more importantly than that, it is a competitive magnet for the other OEMs. So, whether people like Tesla or don’t like Tesla or believe what _____ [00:06:31] says or don’t believe him, I don’t think people can deny that Tesla has put an amount of competitive pressure on the automotive industry, that is probably more responsible for where we are with electrification than any other company.
Jason Bordoff: So, I want to come back and talk about what they are doing, what’s happening with the electric vehicles and trucks and obviously buses, what Proterra does, but just to finish your story, and then you go a Kleiner Perkin’s, one of the iconic venture capital firms in Silicon Valley invested in this company, and then, you go off to lead it, what attracted you to the task of running Proterra in particular?[00:07:08]
Ryan Popple: Well, I think of the company’s incliners portfolio that I worked on or the investments that I originated, there were a few companies that were particularly special to me, because they were very similar to some other work that we had done at Tesla, in terms of building a physical product, solving an energy problem or an environmental problem with an actual physical solution to it.
So, even when I was working as an investor with Proterra, I would say I probably followed Proterra more closely or was more excited about Proterra than most of the companies — most of the other half of dozen companies that was working with simultaneously. In 2014, the company got to a point where it had a good idea, it had some initial revenue, it had picked up some early adopter customers, but it was having trouble scaling. And interestingly, the place that Proterra was in 2014 was very similar to the place that Tesla was in 2007 and 2008, so initially you have to be careful about what you agree to help out with.
But, I started basically working as the Interim CEO, while the board try to figure out what they wanted to do in terms of putting together a management team that can scale of a company, by the end of the summer in 2014, I think the board and I both agree that would probably be a good idea that we just keep this going in the direction it’s going, so I started building out the rest of the management team. And, I’ve been CEO now for four years, and as much as interesting as venture capital was, I have to say it’s really wonderful to be back in an operating environment and be responsible for product development again.[00:08:44]
Jason Bordoff: And so, talk about where Proterra is now. I mean it’s growing sales rapidly, but electric buses are still a very small share of the overall bus fleet, how is that changing? So, let’s start by talking about the economics of how electric buses compare with the diesel flee and how much that changes when oil goes from $27 to $70, and up and down, how dependent are the economics and the choices that local officials make in that regard?[00:09:14]
Ryan Popple: Yeah. So, in a lot of ways that ties back to I think what our strategy and our focus is at Proterra. We develop purpose built equipment and technology to electrify heavy duty vehicles. And, the market that we are focused on is the North American mass transit market. Most people in cities are exposed to their transit system on a daily basis, so they are well aware of how many buses are out there, what kind of impact they have and how many people depend on them.
What separates us from really all of the other attempts in this category to get this right is we just to have an extremely intense focus on mastering the product, in terms of making sure that it can beat a diesel bus in every category. So, it’s got to be able to carry as many passengers or more, it has to have as good of great ability or better. We’ve announced a new generation of our drive train for example that has more horsepower and more torque than a comparable diesel engine.
So, we really believe that this type of technology — the clean energy technology has to win head and shoulders above the fossil fuel incumbent, because normally the incumbent technology is so deeply entrenched and they’ve had decades, if not a century to build up barriers to entry, to prevent someone from breaking that monopoly, so —[00:10:38]
Jason Bordoff: And those barriers to entry are just economic that electric buses are more expensive or other barriers?[00:10:43]
Ryan Popple: Oh! You find — it’s amazing, when you really start getting into disrupting a traditional energy market, you’ll find all sorts of barriers to entry that have been placed very carefully, things like our policy, regulation, even contracts around spare parts or contracts on vehicles. We ran in a situation, it was with a fleet in the Midwest, where they had purchased natural gas vehicles and there the contract that they had signed with the fueling equipment provider stated overtly that they could not buy anything other than a natural gas fueled bus for X number of years.
So, things that normally we would think would be sort of anticompetitive behavior, it’s amazing how much of the stuff is embedded in there, in the structure of these markets. For us though, the good news is that the intrinsic advantage of an electric vehicle, a modern electric vehicle over internal combustion engine is so powerful, is so deep that we’re ploughing through those barriers on a daily basis.[00:11:47]
Jason Bordoff: So, if I’m doing procurement for a municipality and I need to buy a bunch of new buses, let’s say oils $60 or $70 a barrel, what’s my — how should I think about that economic calculation?[00:12:00]
Ryan Popple: Yeah. Electric buses really are just a — it’s an economic argument that also gives you a lot of sustainability and public health benefits for free. So, if you are in procurement and you’re looking at your next round of buses and you did a cost analysis, what you’d find is that you could buy a diesel bus for half a million dollars, a natural gas bus for 600,000, hybrid bus probably for 700,000 and an electric would be somewhere between 650 to 750. Now, when you look at those prices and then you compare them to the miles per gallon, what’s interesting is the cheapest option, the diesel, only gets four miles to the gallon.
So, you’re burning a quarter gallon of diesel for every mile that you drive. And, you’re probably driving that vehicle 40,000 miles a year. So, you need 10,000 gallons of diesel for every single diesel bus in your fleet. When you look at the natural gas vehicles, unfortunately they’re actually less energy efficient than the diesels, the natural gas is slightly less energy dense. So, now you’re dropping into the threes in terms of miles per gallon. And even a diesel hybrid, which a couple years ago is considered a very sustainable option, it only gets you five to seven miles to gallon. Electrics are now getting cities 19 to 26 mile per gallon, energy equivalent. So, what that translates into just kind of in simple terms is that the city is probably going to cut its energy cost per mile by 50% and it’s likely going to cut its spare parts cost, by 50% to 75%.[00:13:29]
Jason Bordoff: So, the payback would be how many years roughly?[00:13:31]
Ryan Popple: Four to six years on a 12 year asset.[00:13:34]
Jason Bordoff: And, do you find that that is compelling to local governments or are they thinking so short term that you don’t find policymakers can think four to six years ahead and make that choice well?[00:13:44]
Ryan Popple: We actually find a fleet procurement teams to be a much more sophisticated buyer than your standard consumer of an electric vehicle. So, when I was at Tesla, you spend a lot of time trying to think about how to market an electric vehicle and you need to think about what color the electric vehicle is going to be, what type of leather interior is it going to have compared to a BMW or Porsche. Selling fleet vehicles is — it’s a very pragmatic utilitarian market. One of our board members refers to our customers as spreadsheet buyers.
King County Metro, which is the transit agency that covers the Seattle area, there’s an economist on staff at that agency that monitors and measures the volatility of fuel. So, these are very sophisticated operations, because in a lot of ways, they live and die based on their ability to manage fuel cost. I think it’s similar to how the airlines would think about fuel. If there is a new jet engine that comes out, that reduces the amount of energy they need or the amount of jet fuel they have to buy, they’re going to rapidly implement that engine, because it’s an operational risk management strategy.[00:14:54]
Jason Bordoff: So, do you find that that economic incentive alone is kind of what’s primary driving the rapid increase in battery electric buses that we’re seeing or is it climate change, local air pollution concerns, social cause that are actually the primary driver?[00:15:11]
Ryan Popple: There really have been – there hasn’t been a situation that’s exactly the same across the cities that we serve, and today we’re doing business with 60 U.S. Cities. So, we’ve got a pretty good sample size now of the transit agency, they’re all a little bit different. I would say for all of them, the economics have to make sense. And transit operations are just too big for a city or a county that kind of take a flyer on a technology that doesn’t work. So, I think the only thing, that’s a unifying theme across all 60 cities is this has to financially make sense.
These systems are running on typically a fixed budget, so if you are not as economically efficient or better than what they’re currently dealing with, you will cause a curtailment of the service, that’s number one. Then, there’s always some sort of environmental driver in terms of why the cities got excited about this or why a fleet manager moved forward with it, sometimes that environmental driver is local air quality. And on the U.S. West Coast, I think the local air quality discussion has as much emphasis as climate change and I think we’re learning in particular in California, Salt Lake City that our air at times can be so dirty that we’re not much better off than China or India.
So, you look at Salt Lake City in the winter or the California center valley or LA, and we have very acute health issues that we’ve got to deal with, like rates of childhood asthma that are significantly higher than the rest of the country. So, local air quality I think is a major driver. And I think diesel buses are easy to — it’s easy to understand why internal combustion causes poor air quality, when you follow a bus down the road, and you see kind of black plume coming out of the back of the bus.
And then, in terms of climate change, some of our customers are compelled by a state or municipal or even a personal desire to do something about greenhouse gases. The well-to-wheel reduction in GHG for this technology is about 80%. But I would say if we could do two things only it would be making sure that there’s very strong economic case and the second would be eliminating local air pollution, people are really fed up with local air pollution.[00:17:33]
Jason Bordoff: How dependant on policy support is your business right now?[00:17:38]
Ryan Popple: Relatively independent, we’re now seeing basically as an arrow in the quiver for a transit fleet. So, if you’re going to buy buses, if you have CapEx and you have OpEx that you can deploy towards transit system, it makes sense to evaluate electric as one of those options. And a lot of our customers are putting forward action plans to completely eliminate their diesel or natural gas buses and go to all electric. In some ways, I think we’re unfortunate that we kind of grew up during – with some benign neglect from the federal government. In that we never became dependent upon a very large ITC, there was never a kind of a federal tax credit like the EV tax credit. We didn’t ever –[00:18:26]
Jason Bordoff: The Obama administration set aside around $50 million I think to support municipalities buying electric buses, was that important?[00:18:33]
Ryan Popple: It was for the earlier adaptors, what we’ve seen though is the amount of money that the customers find on a subsidy level per electric bus has come way down. So, five or six years ago, cities would need to cover a substantial premium, today they don’t receive any subsidy in some cases or it’s a $100,000 a bus. But, I think the industry at this point has reached kind of critical mass and has its own momentum. There are some good policies that we can put in place; a great example is letting the utilities get more involved in building and operating the charging infrastructure. But in terms of the individual technology breaking out, I think we’re past that point.[00:19:15]
Jason Bordoff: And we’ve talked about the economics of it, but just help our listeners understand the performance of electric buses today, where they are headed, one of challenges, I think a perception people have had is one of the challenges with large, heavy vehicles like buses or trucks is the range with current battery technology or your navigating steep inclines in San Francisco and battery buses can’t handle that or places with extreme heat and air conditioning needs or cold that can affect the battery performance, how is it improved? Tell us what is it was like, where it is now and where it’s headed.[00:19:48]
Ryan Popple: Yeah. So, we’ve overcome the barriers that prevented option of electric vehicles, in some ways I think we’ve made it look easier than it actually is from a technology perspective. But, in terms of range, range is probably the most important variable in determining whether or not an electric vehicle can really get the job done, in a specific market. So, for our market, we found that once we achieve 200 miles range or more, that pretty much addressed 90% of the routes. There are some routes out there, there are 300 and 350 miles, and we offer a version of our product that has one or two auxiliary battery packs. But, even with those 300 mile routes, we can nail that with six battery packs for a vehicle.[00:20:34]
Jason Bordoff: When you say route that means then the route is done and then they need to recharge, go back out and does that take longer and does that take affect the economics?[00:20:42]
Ryan Popple: Yeah. So, when we say route, it is the amount of miles the bus will drive in a 24 hour period.[00:20:48]
Jason Bordoff: Okay.[00:20:49]
Ryan Popple: So, your typical diesel or natural gas bus will roll out in the morning and it will operate all day, sometimes it will have a break and the driver will get out of the vehicle and take a break or have lunch or something like that. But, when we think about our range requirement, it’s really how many hours of the day is the bus out on the road and how far does it have to go, and then how do we make sure that that bus is fully charged during the overnight period. And we also have to remember that when that bus pulls into the depot, it also needs to be cleaned and it needs preventative maintenance. So, the idea that you can just treat these like an electric car, pull them in the garage, plug them in and drive them out the next day, 10 hours later, that’s not how large transit agencies work.
These buses don’t spend a lot of time sitting still, so at most you’ll have – or you can have as little as a couple hours to recharge the bus. In terms of being able to handle hills and challenging topography, it was a twofold solution. And what doesn’t work and one of the reasons why a lot of electric truck and bus programs have failed in the past is you can’t just take a conventional chassis and take the engine out and stick batteries in and have a viable product for some of these used cases. And, one of the reasons why early electric buses struggled getting up hills is that they took the engine out of the bus, they put an electric motor in and then they put 4 to 6000 battery — pounds of batteries, typically on the roof of the bus.
So, the vehicle weighed more than it used to and they hadn’t designed the purpose built drive train to be able to handle the additional power. What we did is we went back to the drawing board and we redesigned the vehicle chassis. And so, our chassis weighs 4000 pounds less than a traditional bus. One of the reasons our chassis can weigh less is we’re able to distribute the weight of the battery packs in a more efficient manner than with the combustion engine.[00:22:45]
Jason Bordoff: So, light weighting a vehicle more than a improvements in battery technology had been the primary driver and the performance improvement?[00:22:52]
Ryan Popple: I would say it’s all three, the three pillars that you have to master, if you’re going to have a viable electric vehicle in any market, you have to have superlative battery technology. So, high energy density batteries, very safe batteries and you have to be able to operate them in all weather, all conditions. So, battery, body is the second one, you need to take as much weight out of the chassis as you can, because batteries are expensive. And then, the third one is you need a hyper efficient, extremely powerful drive line. If you have all three of those things, you can do things like drive a vehicle 1100 miles. If any one of those things is missing in the system, you’ll have to over compensate in another area and you end up with a 80 mile range vehicle.[00:23:35]
Jason Bordoff: So, what are the biggest barriers to — why is it still – it’s growing quickly, but it’s still small. You’ve told a story about how on cost, on performance, on air quality, it’s kind of superior in every dimension, what’s making it difficult to grow even more quickly?[00:23:53]
Ryan Popple: I would say we’re growing about as quickly as we would want to grow; in fact I would want to grow faster in 2018 than we’re planning to grow, simply because –[00:24:03]
Jason Bordoff: You’re trying about Proterra as a company, I guess I’m asking sort of more broadly, we still see most new buses purchased every year are not electric, why is that?[00:24:15]
Ryan Popple: Well, I think that has to do just with the nature of markets and with technology transfer. So, if you looked at 2017, if you looked at our bookings and our competitors bookings, I actually think one in ten new buses ordered wasn’t electric. So, it is the fastest growing category within transit technology. I think if you look at the numbers, diesel is already in decline. But, technology especially going into a conservative industrial market, there is no fleet that A; has to replace a 100% of its buses in a given year, and B; is going to do any sort of procurement that’s going to cause them to take operational risk.
What we see though that is really interesting is we see these regional adoption clusters, so our first customer was in California and our largest market now is California. And, you can see with the dots on the map, the managers of the different agencies will evaluate the technology, they’ll come and visit a pear fleet. We deployed with King County Metro, that Seattle’s agency and within a year of deploying with Seattle, we had orders from multiple sister agencies in the area.
Same thing with the Northeast, we deployed Massachusetts and now we’re deploying in Philadelphia, we are deploying in New York City. And even in the Southeast as well, we’ve got some really interesting regional adoption clusters where it’s Nashville, its Lexington, its Louisville, Seneca South Carolina we’ll be deploying in Asheville North Carolina, Raleigh–Durham.
So, my guess is that the adoption pattern has to do with how far away is the nearest electric bus fleet. It’s one of the reasons why we are making a consorted effort now to put pins in the map of states that we are not currently in. So, yesterday we unveiled our first vehicle in Honolulu, Huawei and we also have a vehicle in Alaska, because it’s hard for someone in Alaska to drive down and check out their friend’s fleet in Seattle. And again –[00:26:20]
Jason Bordoff: You’re here at New York on a cold day, so it sounds like you didn’t have a good business strategy to be in Honolulu for that unveiling.[00:26:25]
Ryan Popple: I did not, and I hope our head of sales in marketing is listening this, because he is the one who did the Honolulu unveiling and its 20 degrees here in New York today. But New York is a great example, we’re deploying with the MTA here, they’re deploying 10 electric buses to start two different types of technology, so five from us, five from another vendor. And they’re going to shake down the technology; they’re going to give us feedback on what worked and what didn’t. We’re going to think about charging and infrastructure, but New York’s next step will – it could potentially be 10X the size of the initial order. So, everybody goes through their adoption curve.[00:27:01]
Jason Bordoff: So with some of the challenges you see with expanding the deployment of electric passenger vehicles that you need charging stations all over the place, because cars are all over the place that consumers can be irrational, they are not spread sheet buyers like you were just talking about, so these actually overcome some of those. Why did all of the focus and attention start with passenger cars? Why is it so of taken longer for electric buses to takeoff?[00:27:28]
Ryan Popple: You know it’s an excellent question and I don’t have an exact answer to it. I know a number of people who participated in the early days of EVs, I think some of it has to do with the fact that consumers really aren’t taking deep operational risk, when they buy new vehicle, especially if it’s their third or fourth or fifth vehicle. So, if you look at who bought the EV or leased the EV 1 or who the customers were for the original Tesla Roadster, you were – in some ways they were like our early adopters, they had a lot of vehicles in their fleet, maybe four or five cars, they were very green, they wanted to be innovative, they want to do something new.
But, at the end of the day, if that EV 1 or their first generation Nissan Leaf didn’t get the job done, they weren’t going to lose their job, because they couldn’t get to work. So, I think the consumer market was probably the safest place. I also think a lot of the original R&D Projects especially that were – those that were done by university students were done on car platforms, because frankly it’s the cheapest thing to prototype. But now as this evolves and we’re starting to think about EVs, not the just from in innovative perspective or green perspective but from a business perspective, I think we’re going to have this new wave of fleet electrification and companies are just going to make more money by implementing EVs. I recently had a conversation with a CFO of a major truck and freight company, and his feedback was that he will take electric trucks as fast as he can get them and for financial reasons only.
So, it’s going to be interesting to watch how this plays out. I’m actually — based on what I’ve seen in the city bus market, I think we’re going to achieve higher levels of penetration in commercial vehicles with EV, then we are on the consumer side.[00:29:19]
Jason Bordoff: Has the recovery in the oil price from 30 to around 70 today been important in improving the outlook?[00:29:26]
Ryan Popple: It actually isn’t for our market. And, I remember towards the end of 2014, I put together sort of the end of the year wrap up for our board of directors and we do kind of an annual look at risk and opportunity. And at the end of 2014, everyone could see the cracks forming in that oil markets. So, one of the risk factors that we listed for 2015 was oil looks like it’s going to crash, given this price war between OPEC and US Fracking and is that going to cause demand for a product to go away. What was interesting is battery prices were dropping faster than oil prices.
And our sales grew in ’15, they grew in ’16, they grew in ’17, they will grow again in ‘18. As oil prices have come back up and the market is reminded of the volatility, it will probably be a tailwind for a business. But, our business really proved itself from an economic perspective an environment where oil was 30 to 40. And again, for our customers, I actually think it’s the volatility of oil that is the biggest problem. If you’re a government agency and you have a fixed appropriation and you can’t hedge oil prices for 12 years, then how do you buy a diesel bus and manage the risk.[00:30:41]
Jason Bordoff: And so, recovery in oil price is maybe the one tailwind, the other I’m wondering whether it was how much of tailwind it was, was diesel getting a black eye because of the VW scandal, how big an impact did that have one momentum for battery — electric buses?[00:30:58]
Ryan Popple: I think we’re going to look back and it’s going to have as big of an impact on emissions in the automotive sector as some other early tobacco lawsuits had. The conversation has changed, and for a long time, the European manufactures in particular really stuck to this narrative that we can accomplish our air quality and our climate goals with high efficiency diesel. We really don’t hear anyone claiming that any more.
So, it is hard to get a fleet to do something new, you’ve got to figure out how to do things differently, new maintenance practice, new charging practices. And, if you’ve got an excuse for why you don’t have to do something new, and that excuse is an engine company has told you that there is a future version of a diesel engine that will have no pollution or will be twice as efficient per mile, that can bough you down in a lot of inertia, there is a lot of desire to just keep doing what you are doing.
So, those two factors had been very powerful. I will say there is just a general growing awareness of how big of a problem local air pollution is, and I think some of the films and the awareness out of China have caused us to look harder and what we are doing here at home. But yeah, I can’t overstate how big of an impact it had on the market when you started hearing from Mayors not just in the U.S. but mayors in Germany where the diesel engine was invented, saying they were tired of diesel pollution.[00:32:29]
Jason Bordoff: And so, what’s the outlook for electric buses outside the U.S.?[00:32:32]
Ryan Popple: It’s very good. China has essentially mandated electric buses, so they are just going make it work. But, Europe is very interested in moving along, there are lot of good early projects in Europe, they’re using electric buses. We’ve heard from potential clients in Israel, Latin America, in Middle East, interestingly many countries, they would like to save as much of their oil as possible for export and run cleaner vehicles, they are also concerned about local air pollution.
And then, the other China like market that may have a basically heavy-handed government mandate will be India. So, the government of India has recently announced a number of programs that could eliminate the usage of diesel in buses quite quickly. When we talk about country markets though, I’m also – it’s also important to remember that we have individual state markets in the U.S. that are effectively countries, so depending on what California decides on zero machine vehicles and on electric buses, California is a market that is as large and important as an individual European market.[00:33:42]
Jason Bordoff: And, when we look at the future of oil demand, climate change, a lot of focus on passenger vehicles, but almost as big a chuck of global oil demands is freight, have you duty trucks. What can your experience with buses tell us about the outlook for electrifying, the truck fleet which many people think too big, too heavy, these things have to go too far across the country to deliver things, what’s your outlook on electric trucks?[00:34:07]
Ryan Popple: I’d say the U.S. transit market is going to serve as a really useful case study for what the adoption curve is likely to look like in trucking. And, I think that the stereotype or the presumption that heavy duty vehicle operators are not interested in new technology or not interested in environmental sustainability or don’t take innovative risk, I think it’s incorrect. I also — there is no love affair between heavy duty fleets and diesel fuel. It is what they use today, it comes with as many problems as it does solutions, it’s gotten harder to run a complaint diesel engine given the exhaust after treatment you have to deal with, and engines have gotten more expensive and more complicated to repair.
So, I don’t think there is — sometimes you hear like on the light duty side, there is sort of an emotional connection between people and a certain type of car, they still want their loud _____ [00:35:07] those people are making a personal decision to by a car. But fleets, the person who drives the truck or the bus is not the decision maker, the decision marker is a General Manager, a CFO or board of directors. And so, my production would be its going to start slow, it will have kind of a pilot period, but one several creditable fleets do large scale pilots and they’ve proven out that they can save money and meet their environmental objectives, the copycat factor in industrial markets is very intense.
So, I’m optimistic about electric trucks, I don’t know in the new term if we’ll have electric trucks that go all away across the country, but as a Californian, I would love to see electric trucks that do the Port of Oakland, Port of LA, Port of Long Beach simply to get all at diesel out of our community.[00:35:57]
Jason Bordoff: And I know you’ll reject this hypothetical is not possible, but if we are sitting here in 10 years and we are going remember all electric testers, that comment never panned out, what do you think is the most likely answer to that question? What’s your biggest worry?[00:36:13]
Ryan Popple: My biggest worry is just that we don’t move as fast as we can, things that would set this market back would be if an individual fleet had a terrible experience with an individual vendor, safety is something we all have to take very seriously, even though they are a lot of unsafe things that happen with fossil fuels, when you then new technology, you’re held to a higher standard. So, everyone is comfortable with the paradigm of driving all over the place with flammable liquid all around them.
But, you moving with the battery electric category and the presumption is if you are going to change the new technology has to be nearly perfect. It’s hard for me to understand why we wouldn’t at least move to electric drive, simply because of how powerful and how efficient electric motors are. I could see a world where maybe there is a breakthrough in fuel cell technology or something like that, but I fundamentally believe internal combustion engines, the more time you spend in this market, the more you realize what a silly idea it is to use a machine that burns fuel to indirectly produce motion. It’s just — so, we’ll see what happens, I’ll be disappointed in all of us, if you don’t get adoption done faster, because I see where we deploy, the fleets are just better.[00:37:38]
Jason Bordoff: Oh! That’s good note to end on. Unfortunately we are at out of time. I think lot of uncertainty about what the transportation sector would look like in 10 or 20 years, but I think it’s fair to say it’s likely to look quite different than it does today, and Proterra is at the center that we’ll be watching closely to see what you do and what Proterra does. Ryan Popple, thanks for joining us on Columbia Energy Exchange here in New York. Thanks to all of you for listening. For more information about the Columbia Energy Exchange and the Center on Global Energy Policy, visit us online at energypolicy.columbia.edu and follow us on social media at Columbia U Energy. We’ll see you next week.
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