Executive Order 14057: Achieving 100 Percent Zero-Emission Vehicle Acquisition by 2027
July 26, 2023
President Biden set a lofty goal for the Federal Government and the American people on December 8, 2021, when he signed Executive Order 14057 “to achieve a carbon pollution-free electricity sector by 2035 and net-zero emissions economy-wide by no later than 2050.” The goal of net-zero emissions by 2050 is one many United Nations (UN) members see as the next step toward a sustainable future. To this end, Executive Order 14057 aims to transform the Federal Government’s operations and procurement strategies over the next several decades by, among many other actions, achieving “100 percent zero-emission vehicle acquisitions by 2035, including 100 percent zero-emission light-duty vehicle acquisitions by 2027.”
As the largest player in the U.S. economy, the Federal Government is using its weight to strengthen the Zero Emission Vehicle (ZEV) market and lead by example on the journey to net zero. With the federal government taking such an aggressive step, they aim to strengthen the demand for and development of ZEVs. Like with other green technologies such as solar panels, the Federal Government intends to accelerate the growth of ZEV technologies by investing heavily in the market. However, the scale of this undertaking carries many risks that make compliance with the Executive Order difficult.
Three primary risks complicate the institutional adoption of electric fleets and can hinder the operations of any government entity in the process. These risks include the functional shortcomings of ZEVs compared to traditional ICE (Internal Combustion Engine) vehicles, market distortions caused by rapid institutional investment in an already concentrated industry, and strain on a power infrastructure not designed to process the rapidly increasing load that ZEVs are placing on it. These risks, however, can be mitigated with the proper expertise, analysis, and planning.
A clear risk with ZEVs is their reduced functionality compared to traditional ICE Vehicles. These functionality risks include shorter ranges (particularly in extreme weather conditions), lower towing capacities, and long charging times.
The ZEVs’ limited ranges compared to ICE vehicles are not ideal and present significant challenges to their adoption, but they can be accounted for and planned for with dependable accuracy. The reasonable solution is to use ZEVs for shorter trips in an area with abundant charging stations. This strategy is certainly part of the solution but can only mitigate the challenge in some regions. Extreme weather conditions exacerbate ZEVs’ reduced range. The ZEV’s ideal operating temperature is between 70 and 80 degrees Fahrenheit. In freezing temperatures, ZEVs lose up to 30 percent of their full range and more as temperatures drop below freezing, increasing the chances of getting stranded in dangerously cold weather.
Also, when an ICE vehicle runs out of gas away from a station, a friend, colleague, or state trooper can bring a spare gas container to get the car to the nearest gas station. If a ZEV loses power, towing it to the nearest charging station — at greater expense — is the only option.
Reduced towing capabilities present a ZEV functionality challenge. While every vehicle suffers a reduced range when towing heavy loads, regardless of fuel type, ZEV trucks lose more range than gas and diesel trucks when towing identical loads. Electric truck-manufacturer Rivian states its R1T pickup would lose about half its 314-mile range. In addition, a series of Kelly Blue Book tests showed ZEV trucks consistently losing over half of their range when towing moderate to heavy-weight trailers.
Impact on U.S. Economy and Supply Chains
Once those in charge of implementing Executive Order 14057 plan for functionality risks, they must consider the risk that rapid, national-scale fleet electrification can create for the ZEV market. The Federal Government is the largest player in the U.S. economy, meaning that an order of this scale will significantly impact the economy and can put further stress on strained and complicated supply chains.
The ZEV market in the United States is already strong and growing fast. ZEV sales jumped from 3.2 percent of all vehicles sold in America in 2021 to 5.8 percent in 2022, with 807,180 vehicles sold that year. The private demand for ZEVs will rise in the coming years, particularly in states that have promised to ban the sale of new ICE vehicles by 2035
Supply chain complications stemming from the Covid-19 pandemic and growing global security concerns have hindered the markets for lithium and semiconductors, two of the most critical and expensive components for ZEVs. Consequently, the price of lithium has almost tripled in the last five years and increased by over 24 percent in the last twelve months alone. Volkswagen’s Skoda Auto has had to reduce production due to a lack of semiconductors. While all modern cars require semiconductors, ZEVs require roughly twice as many semiconductors as traditional ICE vehicles. In addition, this shortage will likely continue through 2023 at current demand levels, a deficit that the sharp increase in demand for ZEVs will significantly exacerbate.
These opposing shocks to supply and demand will drive up the prices of ZEVs, especially in the short run, as suppliers bring their production of these new vehicles to scale. The markets for lithium, semiconductors, and ZEVs will each stabilize with time, but in the short term, prices will be high and supply chains unreliable. The concentrated supply chains for these products lack redundancy, risking production capacity if only one part of the chain is disrupted.
Markets are typically the best mechanism for selecting the product that best compromises between price and quality, while a fixed price contract unilaterally decides both. While this may be an efficient way for the government to operate, imposing this method on the free market will distort the competitive market forces that foster innovation and efficiency. This favoritism will grant artificial advantages to automakers that signed with the Federal Government over other automakers and could lead to less efficient automakers gaining control and an overly specialized market tailored to government specifications and desires rather than those of the broader economy.
Lastly, ZEVs put a significant amount of strain on local infrastructure that can have disastrous consequences when the bulk of the transportation sector of a region relies on ZEVs. The power crisis California experienced in 2022 highlights this risk. California boasts the highest number of ZEV charging stations of any state, with 29 percent of all the chargers in the nation; it is the single largest and one of the most enthusiastic ZEV markets in America. Many of the functionality risks discussed are either mitigated or nonexistent in California due to its operating conditions, making it the seemingly idyllic ZEV marketplace because of its population concentration and weather.
Most of California’s population is concentrated in the San Francisco Bay and Los Angeles regions, meaning fewer long treks out into the countryside with few available chargers and more short trips in populated areas. California also has mild weather for most of the year, reducing the risk of cold or heat harming battery life.
However, in late summer 2022, California experienced a heatwave, causing a spike in demand for electricity. The already strained power grid could not support its typical needs and the rapidly growing power demands of the fastest-growing ZEV market in America, forcing state officials to ask residents not to charge their ZEVs until the power crisis had passed.
ZEVs stress the same grid used for everything else and leave little recourse when that grid is stretched beyond capacity or fails.
Mitigating the Risks
While there are risks and obstacles with large-scale fleet electrification, none of them are insurmountable. Three strategies can mitigate these risks: data analytics, organized procurement, and a well-designed strategic communication plan. These strategies can reduce functionality risks by analyzing fleet needs based on location, adverse conditions, and infrastructure to develop the optimal replacement plan for each vehicle in the fleet.
Supply chain analytics can create a plan to source from various suppliers to prevent excessive concentration in a small number of suppliers. The analytics will help mitigate supply chain risks created by market distortions resulting from fleet electrification. A detailed analysis of fleet locations and local infrastructure can create a flexible vehicle replacement plan, mitigating power grid strain risk. Finally, add a strategic communications plan to the supply chain processes to ensure user cohesion.
The road to net zero has many risks, some more obvious than others. But those responsible for implementing Executive Order 14057 can mitigate those risks.
How WBD is Helping
WBD’s experienced consultants can help reduce risks and provide implementation support for any organization electrifying its fleet. WBD has extensive experience in operations and supply chain management, protecting clients from the hazards created by complicated and fragile supply chains or geopolitical instability.
For our DoD client, Defense Information Systems Agency Joint Service Provider, WBD’s strategic communication experts developed an enterprise calendar and long-term roadmap with clearly defined priorities and measures of success. The calendar and roadmap allowed all users to better monitor and track progress toward the organization’s long-term strategy. WBD also developed and implemented a supporting strategic communications plan to build organization-wide cohesion.
WBD has an extensive history of fighting climate change by supporting green infrastructure and cutting-edge research and recommendations on critical issues that threaten the U.S. The fight against climate change is increasingly difficult due to inflationary and logistical challenges. WBD’s consultants identify strategic solutions to these challenges by creating innovative and efficient tools. Using innovative technologies, services, and AI, our data scientists provide end-to-end solutions to help businesses leverage the strategic and operational value of an ever-growing data pool.
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Whether at the local, state, federal, or even international level, creating and implementing a plan to combat climate is complex. Our team of driven professionals has the expertise to find those solutions and make better decisions that will benefit the United States and the world now and in the future.
Author: John Perkins, Senior Associate at Washington Business Dynamics, is a strategy, financial, and operations professional supporting WBD’s state, federal, and commercial clients.