Energy Transition Challenges and Trends – Anders Berger

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Frank Balas: Welcome to Innovation Insights. I’m Frank Balas from Emerald. My guest today is Anders Berger from the Volvo Group. Welcome to the show.

Anders Berger: Thank you, Frank.

Frank: Anders, thank you very much for your talk earlier. It was very interesting. One of the things that I’d like to hear a little bit more about is, what exactly Volvo is doing with electrification of heavy-duty vehicles.

Anders: We are taking a very segmented, market-segmented approach, you can say, to electrification. First, now we are investing heavily in developing battery electric trucks. The first wave will be aimed at city distribution, regional distribution, and refuse in urban environments. Typically trucks up to the 26 tons, ranges up to 2-300 kilometers, and remaining mainly on overnight charging at the depots where they stand overnight. That is the first important wave, but it’s not the big part of the C02 footprint in Europe, because they are not… That mileages are short. So, the next important step which we’re aiming now, is at regional haul and heavier construction transports. That is a much greater, up to 50, 60% of the European transport work is actually regional. So, managing 300 kilometers ranges, and with 44 tons, etc, with battery electric trucks, is what we’re going to launch in the not too distant future you know, because that will make an impact on the climate as well. But it will, in contrast to the urban applications, require quite a substantive investment in charging infrastructure for… In the destinations, in terminals, in harbors, in logistic parts, etcetera, where trucks load and unload, and also along the highways for public charging, truck stop charging actually. So that must come with a joint and synchronized build-up of infrastructure.

Frank: So, it sounds like the… On the truck side, Volvo is almost there, and infrastructure on the charging side is still one of the issues. Do you see there being other impediments, other barriers to the wide-scale adoption of trucks?

Anders: It’s probably the business case. The business case for our operator, our customers, the haulers, is still very difficult on these electric trucks. The investment cost is higher than a decent truck, and you need to put on quite some mileage to be able to earn that back in terms of lower operating costs. And of course, this is a business with very low margins, quite risk-averse, etcetera, so we need some incentives here in order to kickstart the market and shave off some of the uncertainties that is out there always when we try to introduce new technology.

Frank: So, it sounds like the governed regulations are one of the important factors to really move this to the next step. Do you see there being regional differences between North America, Europe, and possibly the Asian markets?

Anders: I think that in Europe, I think we’ll have a quite a common road map. It will not be evenly distributed across Europe due to different reasons. I will foresee, or we foresee that electrification in Europe will come in Western Europe, Benelux, then other countries, Germany, France, etcetera, before reaching out to eastern parts of Europe, etcetera, in the beginning. I think that the same goes for the US. It will be California, it will be New York, New York State, a few of those states that will definitely be forerunners in this case, and then other parts of the market will come gradually as costs go down, as risks are lowered, and you get a gradual shift in the market. Asia, it’s very difficult to judge. If you look at China, for instance, they seem to be the only player that can bet on all horses at the same time, so where that will go, and it’s very difficult to say, I would think. So my crystal ball doesn’t really stretch that far.

Frank: Yeah, I guess China’s certainly been one of the leaders in electrification of buses. I think they have a few hundred thousand running now, and we hear a lot of talk about all the battery electric they’re rolling out. But when you look at China and also Korea, I think Japan, there’s been a big push to hydrogen, and I think there’s a lot of talk in Europe and in North America as well, but when we look at hydrogen right now, a lot of it isn’t actually green. It’s made from natural gas, and there’s obviously a road map toward going to green hydrogen made from electricity, but there’s some pros and cons. People talk about the low efficiency of hydrogen. Could you just talk about how do you see that, and how does Volvo see the introduction of hydrogen? Are there particular use cases and challenges?

Anders: Yeah, going back to this segmented approach, that was one very important segment that I didn’t mention, and that’s the long haul, the demanding long-haul trucks that more or less operates in 24/7 mode, and they are a challenge, both from an energy battery size point of view, and also for the sake that they do not have the time to charge in the same extent as others. So for that segment, we definitely see fuel cell electric vehicles. It’s important for us to make this emphasis that both are electric vehicles. You replace batteries with a fuel cell, but to 85, 90%, they are identical vehicles, identical drive lines. And we see that as a very promising technology, as you say that there is an issue with energy efficiencies, overall system energy efficiency.But going forward in Europe and seeing what the role probably hydrogen will play in the overall energy system of Europe and in other parts of the world, we believe that hydrogen, and green hydrogen will become a plausible future. So that is one of the reasons why we, together with Daimler Trucks, invested in this joint venture to see if we can speed up that development and also target the slightly more heavier and… applications as trucks. Much of the fuel cell development so far has been targeted on passenger cars and it’s a big difference in terms of durability, etcetera, so we need… And power levels, of course, and we need to adapt the fuel cell technology to truck applications.

Frank: Yeah, I read a little bit about what Volvo and Daimler are doing together. It sounds like a huge project. But I guess when we look at the sector, and of course from Emerald’s perspective, we’re always interested in startups and what startups can do. Do you see there being a role for startups, either in hydrogen, but also in just the more general electrification of trucks?

Anders: I think there is. I think any time we do big technology shifts from one dominant design, and in this case, probably to one or two dominant designs, we would say that the electric driveline, the electric propulsion is the new dominant design replacing the internal combustion engine. And I think that that creates opportunities for startups and venture cap in terms of the complementary, the surrounding… The ecosystem, the new ecosystems that the big giants like ourselves and Daimlers and others, we are not good at serving those niches, those small pockets in the market where… Which for any other company can be a big pocket. So I think there’ll be plenty of opportunities, particularly related to the services connected to the base technologies that we now introduce.

Frank: Great. Anders, thank you very much for sharing your thoughts on electrification.

Anders: Thank you.

Frank: It was a pleasure speaking to you, and I hope to have a chance to speak to you again soon.

Anders: Thank you. Nice talking to you.