Fleet technology advances steadily, but high-cost electric investments remain on hold

This article is part of the 2021 Waste Industry Outlook series, which explores trends that will impact the industry's development in 2021. For business trends affecting other industries, see the 2021 Industry Outlook.

Over the past year, local government budgets have come under immense pressure in unprecedented ways. Even with hundreds of billions of dollars in aid potentially flowing to state and local operations, collection services are still expected to face worker absenteeism and record volumes of trash and recyclables.

These conditions have forced some hauling companies and municipal departments to adjust their services, at least temporarily. Despite this, some companies and governments are still weighing immediate investments in new customizable technologies aimed at making collection safer and more efficient while reducing fleets' environmental impact—one of the hottest and most capital-intensive areas being electric trucks.

Take Baltimore, for example, where citywide curbside recycling had just restarted after being suspended for more than four months, with the pandemic serving as the trigger for its procurement of Rubicon's logistics software. This nearly $792,000 investment, made through an emergency contract, enables the city to use a turn-by-turn route optimization product for one year, according to John Chalmers, head of Baltimore's Department of Public Works Bureau of Solid Waste.

According to Rubicon, the company has sold the software to more than 55 cities since 2017 and had been in talks with Baltimore before the pandemic. However, worker absenteeism exacerbated by illness or quarantine highlighted the issue that the absence of a manager or experienced driver could hinder fleets from executing routine routes. In Baltimore's view, digital routing changed that. "When we get a new driver, that driver will be up to speed immediately," Chalmers said.

The product suite is also designed to track missed pickups, which is especially critical when people at home generate higher-than-usual volumes of trash.

"The conversation really accelerated because of the pandemic. We started having serious discussions about how to help them address various challenges in their operations," said Conor Riffle, Vice President of Smart Cities at Rubicon. Beyond the Baltimore contract, "overall, the pandemic has increased adoption of our technology."

Ultimately, Chalmers said, the city is interested in exploring other fleet and collection technologies, but it will depend on budget availability.

Evolutionary pressure

Although the pandemic has had a broad impact, it is only a temporary force driving change compared to other regulatory and economic factors. Industry participants and observers believe these factors will strengthen support for new fleet and collection technologies.

Route optimization may be a lower-barrier option to improve truck road efficiency and potentially reduce emissions, but the vehicles themselves will eventually change as well.

In Baltimore, the 2019 sustainability plan set a goal to reduce citywide greenhouse gas emissions by 30% from 2007 levels by 2023. At the other end, Los Angeles has committed to a zero-emission fleet by 2035, and California has mandated that all new car sales in the state be electric in the same year. More broadly, Washington, D.C., is working with 15 states to ensure that 30% of new medium- and heavy-duty vehicles are zero-emission by 2030 (with a target of 100% by 2050).

New York City is testing partial and fully electric solutions in its sanitation fleet of more than 6,000 vehicles. Meanwhile, Canadian hybrid electric technology company Effenco has retrofitted 12 of its trucks to reduce idling engine use and plans to retrofit 14 more.

Effenco President David Arsenault sees the disruption caused by the pandemic as a catalyst for change. "The waste industry is a relatively conservative industry," Arsenault said. "Most of our customers—seeing how such a tiny virus has had a huge impact on everyone's life—are now really thinking: what about climate change?"

Additionally, Mack Trucks (which claims to currently hold the largest share of the DSNY fleet) delivered an electric demonstration model to the department last fall.

While some cities may be slower to progress on electrification, the better-capitalized private sector is being driven by investor environmental pressure. Over the past few years, all publicly traded companies in the industry have set or committed to setting greenhouse gas reduction targets, which are an important part of environmental, social, and governance (ESG) goals. The nature of these reduction targets varies by company, but regardless of timing or quantification methods, all point in the same direction and may be achieved through at least partial fleet electrification or other new technology investments.

Electrification on the horizon

Among these major companies, Republic Services can arguably be said to be the most leading in embracing the electric future. President Jon Vander Ark last year called the company "long-term bullish on electrification."

Nevertheless, the industry-leading agreement between Republic and Nikola announced last August (for up to 5,000 electric garbage trucks) was terminated in December. Both parties cited "longer-than-expected development times and unexpected costs." Republic said it remains firmly committed to advancing electric options. Mack is one of the partners, and the team plans to test the jointly developed product early next year. Republic is also a major investor in Romeo Electric Power (whose Chief Operating Officer is a board member), a California-based publicly traded company developing lithium-ion battery modules and packs for commercial electric vehicles.

"We look forward to working with all OEM partners to leverage innovative new technologies," the company said in a statement after the split with Nikola, adding that it "plans to make additional purchases from multiple suppliers in 2021." Republic did not arrange a representative to further discuss this change.

"You see increasing competition, which is healthy and I think helps with quality," said Noah Kaye, Senior Research Analyst at Oppenheimer & Co.

Kaye cited existing industry partners like Mack, Peterbilt, and Lion in the electric space, but believes it remains open season for suppliers of all sizes, provided they meet key requirements and can support a strong supply chain. "Waste companies should not rule out working with new market entrants."

One company seeking to seize the opportunity is electric powertrain developer Wrightspeed, another California fleet technology company. "It's safe to say that everyone is talking to everyone right now," said Chairman Kevin Landis, noting interest from potential partners.

In Landis's view, more influential than government- or investor-driven climate action is the declining cost of electric technology. "This is more about economics than politics," Landis said. "The positive public dialogue is encouraging, and it provides a source of pressure. But if the economics don't work, fleet operators will only do the minimum to get by."

While Wrightspeed has previously tested its powertrain in the waste industry, there are currently no pilot projects in progress. The company has experienced multiple leadership changes in recent years, including the departure of founder Ian Wright (a co-founder of Tesla).

According to the company's own analysis, its diesel range-extended electric powertrain can save more than $16,000 per year compared to the fuel economy of heavy-duty residential garbage trucks. Like other companies marketing collection technologies, it emphasizes customization, offering options for mid-life retrofits or brand-new electric trucks.

But according to company data, among Wrightspeed's products, the compressed natural gas (CNG) option continues to show the lowest total cost of ownership. CNG is sometimes called a "transition technology," with less significant emission reductions than electric, and it remains a preferred method for others in the industry such as Waste Management.

Another industry observer believes that despite the pandemic's negative impact on local budgets, cities always face funding constraints when considering large-scale electrification transitions. "Many companies and municipalities are expected to 'wait and see' how early adopters benefit before moving forward with purchasing electric vehicles," said Camron Gorguinpour, Director of Mobility Solutions at sustainable development and energy consulting firm ENGIE Impact, in an email. "Overall, uncertainty around EV infrastructure, organizing required fleet range, and vehicle costs will be determining factors for the technology's long-term success."

To a large extent, many major companies have so far lacked strong commitments. Several executives have said electric trucks will be very important in the future, but quickly pointed out near-term obstacles.

"This is an area where I think first movers are complex," said Ned Coletta, Chief Financial Officer of Casella Waste Systems, citing the lack of existing infrastructure and calling electric technology both expensive and still in early development stages. "There are other things that can be used now," Coletta added, mentioning route optimization technology and automated side-loading trucks, which can address some efficiency and greenhouse gas emission issues in the short term.

Waste Connections, meanwhile, is testing a hybrid truck with a diesel chassis and a fully electric body. "We know that going from testing to mass production of these vehicles will be a long process," said Jim Little, Executive Vice President of Engineering and Disposal. "So in the meantime, we still think RNG and CNG have a long way to go... So we're focused on both ends—long-term in the electric space and what it can do for us, and short-term building our RNG capacity."

Meanwhile, compared to other major competitors, Waste Management's collection fleet is most reliant on CNG (with CNG comprising over 70% of its collection fleet before completing the acquisition of Advanced Disposal Services at the end of 2020), and it intends to stick with it for a while. Waste Management did not specify the current percentage of CNG trucks since integrating ADS.

Chief Financial Officer Devina Rankin cited cost and battery weight as "factors that limit us from viewing it as a near-term solution." But Rankin said the company's fleet strategy will evolve as electric vehicles become "part of a more realistic and viable solution."

Pitching during the pandemic

Despite hesitation on electrification, the industry is becoming more comfortable adopting numerous other technologies.

Waste and recycling software provider AMCS saw hesitation from potential customers and a decline in new sales during the pandemic, but received more requests for route redesigns due to pandemic-induced changes in the ratio of residential and municipal waste to commercial and industrial waste, according to Lasse Jiborn, Commercial Director of Smart Optimization.

Regarding the demand for route optimization, Jiborn said "the demand has always been there," but many customers "didn't really feel the urgency until the pandemic." It is other trends that have developed over the years, including declining costs of connected devices, that have enabled customers to make these transitions relatively seamlessly.

Similar to Rubicon's successful pitch in Baltimore, other collection technology experts believe that current cost constraints are precisely the reason to start using new tools they claim can pay for themselves.

San Diego-based Lytx, which calls itself a video telematics expert, has been operating for over two decades, with part of its business selling 360-degree dashcams to fleets to promote safety and accountability.

When Kristin Costas (now Director of Product Management) joined Lytx about nine years ago, much effort was spent getting customers to accept the idea of in-cab cameras. "Collisions are very expensive, especially in the waste sector," Costas said. Identifying and eliminating even "a small fraction" of risky behaviors "really pays for our technology immediately."

Over the past five years or so, Costas believes cameras have become ubiquitous. Waste Connections said it recently spent $10 million to replace older camera models, primarily through Lytx, but also deploying cameras from 3rd Eye of Katy, Texas, "in markets where that product is best suited," according to email comments from Joe Box, Waste Connections' Director of Finance. "Overall, we are very excited about new technologies that will help drive the next phase of safety improvements." Despite the proliferation of cameras in recent years, garbage and recycling collection remains one of the deadliest occupations in the United States.

Lytx's marketing is still safety-focused, but has evolved to focus on the potential downstream bottom-line benefits of safe driving, including reduced fuel consumption and vehicle wear and tear, Costas said. The company has also ventured into container tracking, which is the primary focus of San Francisco-based Compology.

Compology focuses on cameras that track container contamination and fill rates, allowing businesses to "right-size" pickup schedules. The idea is that reducing pickup frequency can save customers money and reduce unnecessary miles driven, thereby reducing emissions.

According to data Compology collected from approximately 162,000 cameras, the average commercial container in the United States is only 46% full when picked up and emptied. "There's never been a more important time to correct this than now," said Compology CEO Jason Gates.

Compology is also seeing new demand to extend its services to tracking, calculating, and reporting progress on ESG goals, as these goals become increasingly common. Long-term, the company hopes to establish connections with backend systems and potentially serve as a hub between waste generators, haulers, and city or state governments, "all of these parties are looking for the same information, but need it for different reasons."

Overall, Gates believes that whether it's container monitoring, in-cab route technology, or customer interaction through chatbots, businesses that can adopt these tools early will reap the greatest benefits.

As haulers seek help during turbulent times and anticipate future challenges, more companies are building the business case for initial investments.

"Typically, the companies that get the best return from technology are those that can design their business around actually using that technology from the start."

Correction: A previous version of this article incorrectly stated Compology's findings on container fill rates. According to data from 162,000 cameras, the average container in the United States is 46% full at pickup.