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Tom Heintzman: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape. I’m your host, Tom Heintzman. Please join me as we explore today’s most pressing issues with special guests that will give you some new perspectives and help you make sense of what really matters.

Keegan Tully: What’s nice about EVs is that there is the promise that they can be cheaper on a total cost of ownership basis. So capex plus opex, they can be cheaper than internal combustion engine vehicles in the long run. And for me, that’s what businesses are waiting for to really jump in with both feet to electrify their fleets.

Tom Heintzman: Welcome to our multi-part series on the role of electrification in the transition to clean electricity. The last few episodes have been focused on nuclear power, and today we’re turning to the demand side of electrification, specifically the electrification of fleets. I’m delighted to welcome my guest Keegan Tully. Keegan is the president and CEO of PowerON, an electrification solutions partner to all types of fleets. In 2021, Keegan led the establishment of PowerON as a new subsidiary company of Ontario Power Generation, or OPG as it’s commonly known. Prior to his current role, Keegan held various leadership positions at OPG, including Director of Business Development, where he focused on strategic initiatives in electrification and electric transportation. Before that, he launched a joint venture company called Ivy Charging Network that many of you will have seen if you’ve been driving along the 401 highways in Ontario and built it into a major player in the EV charging space. Keegan also served in various economic and financial advisory roles with the Ontario Ministry of Energy. Good morning, Keegan, and welcome to the show.

Keegan Tully: Good morning, Tom. Thanks for having me.

Tom Heintzman: So Keegan, to give our audience some context, can you start by providing an overview of PowerON? What’s its business? Who do you serve? Who are your customers? And how do you make money?

Keegan Tully: Yeah, I think at the highest level of the way I describe our business is turnkey charging infrastructure for electric vehicle fleets. So we design, build, operate, maintain, and sometimes even finance charging infrastructure for fleets. But we also do other behind the meter electrical solutions. So as you get into bigger, more complex charging installations, you might see it paired with things like solar PV or stationary battery storage, backup generation, those types of things. And so we really do all of those solutions and deliver it for the fleet. We operate across Canada and serve sort of all different types of fleets from delivery, logistics, lots of transit, and even sometimes marine vessels. And what we find is really, you know, transit is moving the fastest in Canada to electrify and, you know, our transit projects at the TTC and at Oakville are some of the biggest charging projects of any kind really in North America.

Tom Heintzman: Well you mentioned the TTC and Oakville. So let’s take a deeper dive into the electrification of mass transit and also of commercial vehicles. So what exactly does PowerON do for say the TTC or for Oakville? And how does PowerON help fleet operators meet the business case to electrify? Also what challenges are you facing as you help them electrify?

Keegan Tully: When you start electrifying the first phase often for many fleets is pilots and that’s not necessarily ultra challenging. You can often fit a few chargers within your sort of existing facility. It’s relatively easy compared to deeper electrification. What we find is as you try to electrify more of your fleet, the cost, the complexity and the risk really rise and you’re taking these small electricity consumers and turning them into major electricity consumers. And so, fleets can try to develop that capability to manage the complex electrical systems required for electrification themselves, or they can look to other partners to do that for them and that’s where we really step in is sort of, it’s almost like contracting out your electrification. So we’re the project managers, we’re overseeing the design, construction of all of it, and then doing the operations and maintenance of all of the charging infrastructure for the fleet. What that really entails is I’m shifting the risk of all of that delivery over to us. We find in general. We have the knowledge and the expertise we’ve developed in managing all of these projects and so we can do it sort of faster, cheaper and with less risk than the fleet doing it themselves. I think a lot of what you see for challenges is people expecting they can just plug in chargers so they’ll order vehicles, the vehicles show up and, shortly before that, they’re planning to add all this charging infrastructure, but it’s a major electrical consuming device, especially as you get into heavier duty fleets. They often find they don’t have capacity on their side. They need to talk to their utility. Utilities have long timelines for connections. There’s a lot of that complexity that when you’re doing it for the first time, , you run into issues and so we really just help streamline and solve that for fleets by making it a lot easier for them to electrify.

Tom Heintzman: Are there a couple of case studies that you can provide to demonstrate how fleets are electrified and what you do in order to maximize financial savings and reduce risk and emissions? What are the keys to success in successfully getting a fleet up and running and then operating them on an ongoing basis?

Keegan Tully: Yeah, so let me talk about Oakville Transit. It’s one of our largest individual charging projects. It’s probably one of the biggest charging projects in North America. The way it sort of started out was you have this forward thinking municipality with a desire to reduce emissions from their transit fleet, one of their biggest emitters in their organization. I think they recognized fairly early on that their expertise was really in operating a bus fleet and not in charging infrastructure and electrical systems. They wanted to move pretty quickly to electrify. They’re doing around half of their fleet of buses at their depot. But they also had a funding shortfall for charging. They were getting funding for buses, but there was a gap on the charging infrastructure side. What we came up with there was really sort of a design, build, finance, operate and maintain solution for them really in the simplest terms, charging as a service. So, we designed and build all of the charging infrastructure. It also involves backup generation and stationary storage. We finance all of that. And then we operate and maintain it over a 20 year term and Oakville pays us back over the life of the contract. So, they had this capital funding that’s a big expensive infrastructure project. But this was a way around that to get the charging installed and really, they can pay for part of that charging with the savings they’re getting from using electric buses instead of diesel because they’re much cheaper to operate. One of the other things they recognized was that this wasn’t their core expertise. They were looking for an electrical focused entity that could manage the risk. And so the contract really transfers the risk of electrification. We’re accountable for delivering the project on time. We’re responsible for the budget and then we need to make sure everything operates and works well and has high uptime for them. That’s how we sort of shift some of the risk away from the fleet. Through discussions with Oakville, we recognize that they were sort of a smaller electricity consumer. They were really ramping up their exposure to this new commodity that fluctuates in price, electricity. And they had concerns about managing the budget of that going forward. And so, we were able to come up with a sort of unique solution for them where we fixed their price of electricity, over the medium term to give them sort of that budgetary certainty around what the program would cost. I think it’s understanding the different problems for different fleets, what motivates them what risks do they want to avoid and transferring them over to an entity like PowerON. The first phase of that project is complete. Buses are coming in. The second phase is in construction right now. And yeah, it’s one of our biggest projects that we’re really excited to finish up early next year.

Tom Heintzman: That’s fascinating. I love all of it, but in particularly I’m amazed at the fixing of the power prices for the medium term. Can you just give us a sense of how big that Oakville operation is? I don’t know whether it’s in terms of number of buses or vehicles or just to give the audience a sense of the magnitude of this.

Keegan Tully: It’s around a hundred charge points, so DC fast charge points. The overall garage is around 200 buses and they’re going to be electrifying about half of that garage over time. Part of the project is also to expand and add more capacity for buses and it’s a mix. You know, they have sort of traditional 40 foot buses, some smaller electric buses that they use for different routes and all different types of charging. So, slower plug-in charging, some faster DC fast plug-in charging, overhead pantograph charging, and then some on street high power opportunity fast charging for them. So it’s a real mix of everything. I think for transit as well, reliability is key, right? They have to move people all the time, even when there’s an emergency or a power outage. We’ve seen that with flooding in Toronto over the last years with major power outages, but these transit agencies still need to move people. One of the things Oakville was also looking for was being able to operate without the grid. And so we’re installing backup generation there that can keep them running for 48 hours plus, even if the grid goes down so that buses that are still out on the road as you know they are much more reliant on electric vehicles in the future.

Tom Heintzman: So, let’s shift a little bit and look at a different type of fleet because I’m curious about what you’re doing in marine transportation. As I understand it, you also provide electrification infrastructure to enable marine transportation to go electric. Could you give us an overview of the types of challenges marine vessels face to electrify and how that’s different than what vehicles would face on land and what opportunities you’re helping marine fleet owners capture?

Keegan Tully: Yeah, I think electrification or electric vehicles are always easier to convert when they’re on a sort of return to base type operation with very defined roots. And so that really helps you manage constraints on range that exists with electric vehicles and make sure that you’re comfortable completing the route with the battery capacity that you have. For marine, many vessels, you know, don’t really fit that bill if they’re traveling the world, doing shipping, that might not be the easiest to electrify. But there are many types of marine vessels that do fit within that. And particularly ferries is where we see a lot of electrification. You know, it’s point to point. You can put charging at one or both ends of a route, the ferries often doing the same route. And so it’s pretty electrifiable. The other thing about ferries is for a long time, many, or if not most ferries have had sort of diesel electric drive train. So they would have had a diesel engine producing electricity feeding an electric motor, which actually spins a propeller. Before there was any talk of electrification, many ferries and other marine vessels worked like that. To electrify, it’s not completely different to just swap out the diesel or augment the diesel generator with batteries I think that’s something that’s a little bit different where some element of electrification has always sort of existed in the marine industry. Where you get into sort of bigger challenges, I think is a lot around space constraints, right? You’re right up against the edge of the water at any dock. Often there are passengers and terminals and things. And so finding space to put charging infrastructure, to put electrical infrastructure like transformers, switchgear can be a real challenge. One of the things we see sometimes, we’ve done some work on it, is sort of floating electrical substations and things like that, where you actually put a barge to get away from the space constraints on land. Charging tends to be very high power, right? They’re big vessels, they’re only docked for a period and then they might be going on a longer route. You have really high power charging needs that often leads to sort of automated charging systems. So you’re not just plugging in a ferry. You need like an automated charging system where there’s lots of development, but that gets more technically challenging. These big power demands also place spikes on the grid. So when the ferry comes in, you need to dump all this power into the boat while it’s docked. That can cause problems for the electricity grid. On our ferry projects in Ontario, the Wolf Island and Amherst Island ferries, we’re actually deploying battery storage systems, stationary systems to sort of manage that big spike on the grid. So the battery charges up slowly from the grid. When the ferry comes in, it dumps its power into the boat. That helps manage the cost and the capex of the system. And so those are some of the challenges and some of the solutions that you see that are a little bit different from land-based vehicle fleets.

Tom Heintzman: On this show before Keegan, we’ve discussed the use cases for storage. So it’s fascinating that the storage could be providing, I guess, essentially a gas tank for the ferries and then presumably when the ferries don’t need them, the battery can also be helping to stabilize the grid. So it is interesting how all these systems start commingling, I guess. Historically, you wouldn’t have had ferry fleet really having any tie into the electricity grid. I’d like to finish kind of at the 100,000 foot level, so to bring it much higher up and generally get your sense on where the EV market is going. On one hand, EV sales have boomed in recent years, thanks in part to strong policy support across many regions. For instance, now EVs represent more than 50% of new car sales in China. However, we can all point to recent examples of influences that would slow down the uptake of EVs. So for instance, tariffs on imported vehicles, suspension of zero emission vehicle rebate programs and in Europe also recently weakened fuel economy targets for 2025. Just curious, what is your outlook for EVs and growth and penetration of the vehicle market?

Keegan Tully: Yeah, I think we, certainly see a bit of demand whiplash when subsidies change or policies change around electric vehicles. The industry is certainly pretty dependent on that still to stimulate demand. For us, you know, there’s generally different geographies that, where one is going more negative on the policy side, someone else is going more positive, that sort of helps manage a bit of that fluctuating demand for us. But when you think about fleets and electric vehicles, you see a little bit of activity now where people see this coming. They want to pilot and test and get ready for the transition or you have big brands where it’s sort of a marketing piece to their business. They want to be seen as, you know, good corporate citizens. But I think that sort of green aspect of EVs will only take the transition so far. And what’s nice about EVs is that there is the promise that they can be cheaper on a total cost of ownership basis. So capex plus opex, they can be cheaper than internal combustion engine vehicles in the long run. And for me, that’s what businesses are waiting for to really jump in with both feet to electrify their fleets is that total cost of ownership to be cheaper for an electric vehicle than an internal combustion engine vehicle. And right now, what we see, especially in the medium and heavy duty segments that a lot of fleets use, is that the vehicles are just too expensive. You see, many vehicles being five or six times the price of an internal combustion vehicle and you just can’t make the economics work. Businesses might test and try at that pricing, but they will never convert their full fleet to electric until the pricing is more competitive. For me, what I would love to see is a disruptor come in, or multiple disruptors that are really focused on building electric vehicles from the ground up and driving the costs down. Because when you break down the costs of these medium and heavy duty EVs, you know it’s hard to justify them and understand where they’re coming from. The batteries don’t justify it. That’s the main sort of incremental cost on an internal combustion engine vehicle. And so why are they so expensive? You really need somebody like a Tesla that did that on the light duty vehicle side that showed what a purpose-built EV could be to get the rest of the sort of incumbent OEMs to really focus on driving the cost down of these vehicles. Because when the vehicle cost comes down, you can bring that total cost of ownership down on EVs. And that’s when I think you’ll see that demand really skyrocket when it just makes business sense to electrify because it drives costs out of your business. You know, I don’t know if that’s going to happen in the next three years, but for me in the medium term, you know, maybe five years, I think that’s totally, totally possible with more investment in manufacturing of EVs in those medium and heavy duty segments. I don’t have a crystal ball, but that’s what I’m excited for and I believe it will happen at some point in the future.

Tom Heintzman: Well, we have seen that downward trend on prices in the passenger vehicles. So one would think that it’s just a matter of time until it gets into medium and heavy duty vehicles. Keegan, thanks for taking the time to join the show today, we really appreciate your thoughts and thanks to the listeners for tuning in. Please join us next time as we tackle some of sustainability’s biggest questions, providing you different perspectives to help you move forward. I’m your host, Tom Heintzman, and this is The Sustainability Agenda.

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Driving change: The case for fleet electrification

Tom Heintzman

MD & Vice-Chair, Energy Transition & Sustainability

CIBC Capital Markets

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