Planet Relations

With a projected net loss of $7 billion for fiscal year 2009, the Postal Service needs to find ways to cut costs. While the Postmaster General’s request to cut Saturday delivery will save $3.5 billion, it’s not nearly enough. Electrification of delivery vehicles is one area that holds promise as it could deliver savings of $219 million per year.

The U.S. Postal Service’s current fleet includes approximately 146,000 delivery vehicles. These right-hand drive delivery vehicles average about 10 miles to the gallon and range in age from 8 to 22 years.

According to an August 2009 report (pdf) from the U.S. Postal Service Office of Inspector General, “broad use of electric vehicles in the Postal Service delivery fleet would be operationally feasible.”  The report highlighted several elements contributing to the finding:

• Short delivery routes that average approximately 18 miles a day;
• Regimented operating hours and centralized base locations allowing for off-peak charging;
• Stop-and-go driving characteristics, which creates excellent opportunities for regenerative breaking to recapture energy; and
• High existing fuel expenses.

The report acknowledges that the Postal Service is in the midst of an economic crisis and does not have capital funds to spend on vehicle electrification. Without extensive funding from outside sources, the report concludes that it is not currently economically feasible for the Postal Service to do a broad fleet purchase.

The report did examine the use of vehicle-to-grid revenue (V2G) in addition to outside funding to help offset costs. With V2G, stored battery electricity or capacity can be sold back to grid operators when not needed. The following is a summary of the Inspector General’s financial analysis for several possible scenarios:

• Postal Service Purchases and Maintains Vehicles, Without Government Funds or Grid Revenue: Payback>10 years; Individual Rate of Return (IRR) = -1%

• Postal Service Purchases and Maintains Vehicles, Without Government Funds But Generates Grid Revenue Payback = 5.6 years; IRR = 15.4%

• Postal Service Purchases and Maintains Vehicles with Available DoE Program Grants: Payback = 5.5 years; IRR = 19.9%

• Postal Service Purchases and Maintains Vehicles with Grid Revenue, and DoE Program Grant: Payback < 2 years; IRR = $63.2

For outside funding, the analysis looked to the American Reinvestment and Recovery Act of 2009 as the most likely source. Within the stimulus bill, there are three potential sources of funding:

• Funding for alternative transportation technologies and fleets;
• Loan guarantees for investment in battery technology and demonstration; and
• Grants for development of technology associated with the smart grid.

Several recipients of last week’s smart grid stimulus funding announcement incorporated elements to support vehicle charging including Duke ($200 million), SMUD ($127 million), NV Energy ($138 million), and Madison Gas and Electric Company ($5.5 million), among others. Other V2G funding sources will be made available soon.

Hopefully the Postal Service can take advantage of the funding to help determine whether fleet electrification makes better sense than raising the price of postage (once again).