Should the US Postal Service Fleet go Electric?

5 years ago by Eric Cote 13

Ford Electric Long-Life Vehicle (LLV)

The United States Postal Service has over 140,000 Grumman Long Life Vehicles (LLVs) in their fleet.  These vehicles are intended for urban delivery, and their shells are built to last for many decades.  According to the USPS, as of 2007, the average LLV is roughly 16 years old, on its second engine, and third or fourth transmission.  Because of the nature of their delivery routes and short daily distances, I’ve long been a proponent of converting this large fleet into battery electric vehicles.  But what would it cost?  Would a financial savings be realized?

It turns out that the Postal Service is trying to answer these questions, though not as quickly as one may expect.  In 2000, Ford manufactured 200 electric LLV’s for the post office.  Unfortunately, in 2002, the batteries for these vehicles ceased to be manufactured, and Ford “exchanged” all of the vehicles.  This may sound reminiscent to GM’s forceful take-back of the EV-1 in the same time period.

Fast forward 10 years, and a small experiment has again begun with electric vehicles.  This time, five awards were given to a handful of companies to look into converting a small number of LLV’s to electric vehicles, and to evaluate their feasibility and cost profile.  This year, USPS Chief Sustainability Officer Thomas Day is quoted as saying that, while fuel costs are much lower, maintenance costs are a different story.  He states that the battery must be replaced after only “a couple of years” and that the replacement cost is $20,000.  Yes, twenty thousand dollars.

Where does this cost come from?  Assuming a realistic battery price of $400 per kWh, a battery to easily meet the needs of the average LLV route of 16 miles per day should only cost around $3,200 .  That seems like a more realistic cost, doesn’t it?

A123 Energy Core Packs Do not Require Expensive Thermal Management Systems

What about battery life?  Chevrolet Volts and Nissan Leafs come with an 8 year warranty.  A123, used in neither of these commercial vehicles, advertises a Nanophosphate battery on their website that is capable of thousands of FULL charge/discharge cycles without those annoying buffers on either extreme of the battery.  This battery chemistry is also reported to handle hot and cold temperatures without the need for advanced (and expensive) thermal management.  They even have sample packs in stock, ready for integration into electric vehicles prototypes, and reportedly cost competitive with today’s batteries.  The down side, however, is that A123’s business model doesn’t currently include electric vehicle conversions; they only want to work with original equipment manufacturers (OEM’s).  Isn’t it surprising that a US company that is low on business (and now financed by a Chinese firm) would turn down the prospect of selling over 100,000 of their battery packs because it doesn’t fit their business model?  I thought so too.

These kinds of business arrangements are likely to leave the conversion companies with second rate battery choices that have a higher overall cost point.  Even so, it’s hard to imagine the $20,000 cost that Mr. Day stated as being accurate.  Recently, Bob Lutz was quoted as stating that all of the Volt’s electric components only cost $10,000, which includes the expensive thermal management system that the A123 batteries would not require.

Despite the price being very conservative, let’s use Day’s original $20,000 figure as an estimate of what it would cost the USPS to convert a vehicle, and see if there are financial savings to be had.  The USPS reports that the average LLV travels 16 miles per day, and due to their stop-and-go nature, only achieves 10.4 miles per gallon fuel efficiency.  That’s an annual cost of $1800 per year, per vehicle.  Now, if we assume that electricity is used instead, that annual cost component reduces to a mere $123.00 per year, per vehicle, or a 94% cost reduction.  These cost estimates assume the average cost of gasoline and electricity in 2011, $3.52/gallon and $0.10/kWh, respectively.  Additional calculation details are shown in the spreadsheet figure below.

Next, if we take this per-vehicle cost estimate, and multiply by the total number of LLVs in their, a cost savings of $240 million per year.  Lastly, if we assume no inflation (a generous assumption for calculating cost savings) and extend this savings out to 10 years – a conservative estimate of the battery and electric motor lifespan – the projected savings over a gas LLV fleet is just shy of $2.4 billion!

These savings estimates assume a $10,000 cost component for each of the electric motor and battery subsystems ($20,000 total), having a 10 year lifetime, or twice the cost that Bob Lutz estimates the Volt’s components cost. Since the LLV’s are slated to be overhauled starting in the 2012-2018 timeframe, this is compared against a total $10,000 cost to replace the vehicle engine and transmission system, multiple times over the same 10 year period.  The $20,000 estimate being used, despite being twice the amount that the Volt’s system costs, still results in $2.4 billion in savings.  Since the cost estimate is very high relative to actual costs of other vehicles, the amount the USPS can save by going electric may be much higher than what’s projected here.

While the $2.4 billion in savings is a large number, it’s still well shy of the $5 billion loss they experienced in 2011.  However, it is a step in the right direction, for their bottom line, as well as the country’s reliance on foreign oil – their present gasoline usage for these vehicles is on the order of 68 million gallons per year.

So what do you think?  If you feel the numbers hold, contact Congress or the USPS today, point them to this write-up, and tell them to electrify the US postal fleet!

$2.4 Billion in Savings over 10 Years is Nothing to Scoff At

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13 responses to "Should the US Postal Service Fleet go Electric?"

  1. NRGTom says:

    This makes alot of sense, but the USPS rarely does. That $20,000 pack replacement probably includes $15,000 of bureaucratic red tape and salaries.

    Im sure someone like AMP or Smith would be happy to bid on a contract to convert 140,000 USPS vehicles over time & with that volume it would not be very expensive to do.

  2. Stanley says:

    This makes so much sense. And added benefit would be a reduction in noise exposure for the mail carriers.

    I think the USPS red-tape for this lies with Congress. Give them the sme flexibility that businesses get, and they can get this done.

  3. Jay Cole says:

    Unrelated to this story, but not really…I can’t believe they still deliver the mail 6 days of the week. Why do you need your Reader’s Digest sweepstake entry on a Saturday? We haven’t had 6 day mail for decades in Canada, smaller communities now get mail 3 days a week.

    There is less and less physical mail going out (a good thing), practically everything is available to be delivered electronically, and there are couriers for when next day service is needed. How can the USPS keep paying all those increasing costs for labor, equipment and gas alongside rapidly declining volumes?

    If it was about money and being profitable at the USPS, how about converting all your fleet to electric, then only delivering the mail 2 days of the week.

    1. Eric Cote says:

      That’s also a good point Jay. My guess is that it would be politically unpopular to put thousands of people out of full time work to deliver mail only a couple days a week in the United States.

      However, I don’t think it would be unreasonable to decrease delivery to 4 or 5 days per week, if that allows the majority of people to remain full time. This would still decrease overtime hours and part time staff, perhaps, but would have a lower effect on overall job numbers, and still save some decent coin.

      1. Jay Cole says:

        Don’t quote me on this, but as I recall they just grandfather the workforce in Canada as they reduce the delivery schedule. Same for house to house deliver, that is practically gone now, except in older areas/select regions…all ‘super-boxes.’

        This way they aren’t putting people out of work, they just aren’t replacing them. Kind of like how auto makers negotiate with the unions, and the whole two-tier wage system — “we won’t do anything bad to you, just the next generation”

        1. BlindGuy says:

          I have 3 sisters that work for the P.O. and 2 of them still do; 1 sister has 25+ yrs.. IMO the P.O. management is harassing their employees over whatever they can to get the higher paid employees to quit. My sister knows vested carriers that literally jog their routes and skip breaks & lunch with pride and management will always push for more and will not hesitate to throw anyone under the P.O. bus. The P.O. has much bigger problems that they need to address “sorry” then to invest big $ for electric conversions at this time. Whatever happened to the Segway EV experiment with the P.O.?

          1. Eric Cote says:

            There is a lot more that can be done, I agree. I do think, though, that since a major investment in refurbishing the LLV’s is about to take place, that doing this conversion may not be much more expensive (if at all), and could result in significant savings.

            If it is a big investment over what is planned, as you suggest, and the ROI is more than a few years out, then I do agree that it should probably not be pursued. The optimistic side of me hopes that is not the case though 🙂

  4. Mark H says:

    Very nice article Eric on many fronts. Fleet vehicles will be critical in advancing the EV. Even if the mail route was cut in half to save money as Jay suggested, that is still 70,000 conversions. I hope Bob Lutz read this!

    1. Eric Cote says:

      Thanks Mark, and good point! My hope is that A123 or a company with a similar technology no longer requiring TMS will be more open to allowing a conversion company access to their products for fleets like this. A 4-day mail schedule would be more sensible too, in my opinion.

      On a side note, I realized that I never updated my savings spreadsheet to reflect a $10,000 cost for battery plus engine. The $2.4 billion in savings number uses this $20,000 cost instead of $10,000. I’ll get that updated!

  5. Herm says:

    2 year life?.. I bet the fleet mechanics were peeing into the packs to protect their future jobs.. but the solution is easy, just make sure the company doing the conversion provides a full powertrain warranty for 10 years.. that will ensure a quality conversion unless its bidded out to the lowest cost contractor and they go out of business in two years 🙂

  6. haroldC says:

    one thing l noticed was the price for doing the conversion doesen’t seem to be in th #’s. to rip out all ice and related parts and install the battries and controls etc must cost a bundle and a half for sure

    1. Eric Cote says:

      Hi Harold,

      Well, the postal service is already gearing up to significantly overhaul their LLV fleet in the 2012-2016 timeframe, meaning that engines and transmissions will likely be ripped out anyway, regardless of whether or not they’re replaced with electric equivalens.

      The other tid bit in the calculations above is that the spreadsheet and related savings calculations actually assume a $20,000 cost for the conversion: I listed the motor and the batteries as separate entities in the spreadsheet, and left them both at $10,000 each. I had neglected to update this value after Bob Lutz came out with the all-inclusive $10,000 figure.

      Because of this, if anything I think the savings estimates are extremely conservative; the costs that are factored in to calculate these savings may be too high by as much as a factor of 2 (and slightly less if you account for labor to remove old parts).

  7. Bonaire says:

    I don’t know if the USPS is mature enough and has a union ready-enough for a low maintenance truck that only need to be plugged in at night. It is government, after all, and anything to slow them down or derail their original plans be damnged.

    Removing saturday delivery – that’s been talked about for over a decade. Talked about. For over a decade! Also, all home delivery was considered for removal (I know folks who work at USPS in D.C.) – and replaced for fee-based home delivery subscriptions. That’s pretty bad too. Just cut Thursday and Saturday delivery for residences. Keep business delivery going 5-days and make businesses pay for saturday delivery.