Contents

Introduction

The challenges
– Regulatory uncertainty
– Challenging economics of conversion
– Location of charging infrastructure
– Network charges and grid connections
– Power procurement
– Flexibility

What are the solutions to electrify road freight?
– Clear near-term strategy
– Provision of charging infrastructure
– Making fleet conversion economic
– Planning the networks and making it easier to connect
– Good energy procurement and maximising flexibility to manage costs

Introduction

The Climate Change Committee (CCC) assumes that decarbonising the Heavy Goods Vehicles (HGV) sector will rely primarily on battery electric vehicles (BEVs). By 2040, nearly two-thirds of HGVs on UK roads will need to be electric to meet the UK’s emissions reduction targets.^[1]

This transition represents a substantial new source of electricity demand, but also an opportunity to significantly cut emissions from the UK’s highest emitting sector.

Analysis by Logistics UK estimates that if all logistics road vehicles in 2021 were powered by electricity, demand would be approximately 32 terawatt-hours (TWh), equivalent to Denmark’s entire annual electricity consumption.^{[2], [3]}

The Government has recently announced funding to support the freight sector, including £30m announced to support depots installing charging infrastructure.^[4] As part of the Industrial Strategy, a new freight and logistics plan is due to be published later this year.^[5]

To accelerate progress, policy reform and ongoing government support will be essential to reduce both upfront and running costs and ensure the availability of public charging at key locations.

The challenges

1.    Regulatory uncertainty

• The UK Government has set an ambition for 100% new zero-emission HGV sales by 2035 for vehicles under 26 tonnes, and by 2040 for heavier models. However, progress is still in its early stages: as of 2024, there are only 1,271 electric HGVs (eHGVs) in the UK – representing only 0.2% of the total HGV fleet.^[6]
• Although some large logistics companies are beginning to plan for eHGVs, the road freight industry is predominantly made up of small and medium-sized enterprises (SMEs) – which account for 99.7% of the sector.^[7]  These firms may not have the resources to electrify their fleets without financial support and guidance.
• Other low-carbon technologies can play a role in decarbonising HGVs and other sectors, with their role subject to how these sectors develop both in the UK and globally over the coming years.
• However, currently, the sector lacks the information required to develop a strategy of how we will meet these targets. Without long-term visibility on requirements, costs and Government incentives, operators cannot confidently invest in new technologies.

2.    Challenging economics of conversion

• Whilst some niche use cases may already be economically viable, upfront eHGV costs can be nearly two times the price of a diesel equivalent depending on the make and model.^[8] 
• Whilst maintenance costs are lower for eHGVs, running costs can then be high depending on when and where the eHGV is charged. The UK has the highest industrial electricity costs in the G7, and some of the highest in the world.^[9] This puts us at a disadvantage compared to other nations pushing electrification – including within the transport sector. Most non-domestic electricity users still face significant policy-related costs added to their bills, including from legacy schemes like the Renewables Obligation and Feed-in Tariffs.
• Rebalancing policy costs and enabling some off-peak charging would make eHGV depot charging significantly cheaper than diesel. With these changes a mixture of depot and public charging of eHGVs (which is likely to be required by most operators according to Logistics UK, see below) would also be more cost-competitive than diesel.
• Scaling the savings from this future mixed-charging scenario across the freight sector would equate to economy-wide savings of £2.3bn per year. ^{[10], [11]}

Figure 1: Energy UK analysis of total cost of ownership under current arrangements and different policy scenarios and key variables.^{[12], [13], [14]}

3.    Location of charging infrastructure

• Most charging (76.7%) is expected to take place at depots.^[15]  However, existing depots are poorly suited to accommodate charging infrastructure, with limited space and unsuitable site layouts.
• Insufficient access to electricity network capacity. Retrofitting chargers at existing depots may not be technically feasible, and where it is, could result in substantial infrastructure costs.
• There is also limited scope for operators to move depots as they need to be close to key demographics and strategically positioned along the national road network.
• As a result, it will be important for operators to share charging infrastructure where possible.
• Even operators able to install depot charging will need to have access to public charging for long routes to enable mid-route charging. However, the public charging network is not widespread as some areas are less commercially attractive and public funding is still being rolled out. The public chargers that are currently in place are also largely inaccessible for heavy goods vehicles, and are more expensive than depot charging.
• While the Zero Emission HGV Infrastructure and Demonstrator (ZEHID) trials are showing promising progress, they remain in the innovation phase and are yet to be rolled out at scale.
• Another important consideration is whether a logistics operator can install charging infrastructure at their depot. Larger firms which own their depots may be at an advantage here, compared to those leasing facilities who may face restrictions or delays in investing in charging infrastructure.

4.    Network charges and grid connections

• Operators report that connection dates for upgrades to install eHGV chargers can be as late as 2035, with costs varying significantly between Distribution Network Operators (DNOs).  Connection costs can reach as high as £5m per site.^[16]
• While most DNOs can accommodate new connection requests, sites installing large rapid chargers may require wider network reinforcement, particularly as electricity demand increases.
• Depot sharing and smart charging strategies could significantly reduce grid connection costs by spreading demand and managing peak loads.
• By using private wires and on-site generation and storage, fleet operators can lower their peak electricity demand from the grid, so they can sign up for a smaller, and therefore cheaper, grid connection and pay lower network fees. A UK Power Networks study found that using smart charging to manage load in line with a profiled connection (where charging capacity is limited at certain periods) was shown to save some depots up to £95,000 on the cost of connection and up to 12 weeks in the time to connect.^[17] This can save costs for fleets able to charge overnight. However, awareness of these options is low.
• However, due to rules regarding security of supply, even when sites use private wire or on-site generation, some DNOs still require the connecting customer to pay for a connection for their full peak, on-grid demand.
• Once connected, operators face high ongoing network charges, especially following Ofgem’s Targeted Charging Review (TCR) in 2022/2023. Current network charges are based on maximum capacity, not actual usage or flexibility provided. This offers little financial reward for demand reduction or shifting.
• Carve-outs are being developed for the High Voltage level to avoid penalising public rapid charging hubs with high fixed charges, especially when installed ahead of actual demand materialising. These hubs often require high-capacity connections but may take years to reach full utilisation.
• Further, most developers do not fully understand how network charges are calculated. Whilst some DNOs provide tools to help improve the visibility of network charges (such as NGEDs Clearview Charge) calculations vary between DNOs, making it difficult to accurately estimate costs between DNO service areas.
• It will be important to plan ahead and make anticipatory investments in networks to ensure there aren’t further delays to connect as more fleets convert. However, only large operators are likely to feature in the Regional Energy System Plans (RESPs). Many SME operators do not know future network capacity needs and may not feed into spatial planning.

5.    Power procurement

• Effective electricity procurement can make electric charging more competitive and can help contribute to new low-carbon capacity, but can be complex. Smaller fleets typically use fixed or simple time-blocked tariffs, while larger fleets may optimise buying power in half-hourly intervals or fixing some costs through Power Purchase Agreements (PPAs).
• Some secure power and buy Renewable Energy Guarantees of Origin (REGOs) separately, such as the Shell Recharge eHGV site at Markham Moor while some larger fleets may be able to enter into long-term Corporate Power Purchase Agreements (CPPAs), enabling investment in new low-carbon assets.
• Energy procurement is often managed by separate asset management teams to logistics, requiring new levels of coordination between teams. While some fleet operators manage their own energy procurement, there is often a knowledge gap on the requirements for energy markets. This can limit smart charging and participation in flex markets.

6.    Flexibility

• The ability of fleets to smart charge and participate in Demand Side Response (DSR) is shaped by several interdependent factors, including how a fleet is used, its access to infrastructure, the type of chargers used, and the availability of onsite generation and storage. Overnight charging at depots in particular presents a valuable opportunity to support electricity system stability and reduce peak demand pressures, although this is dependent on the operational demands of the business.
• The diagram below shows the different flexibility options available from the most commonly used to the least common.
• Smart charging is already widely used and key to reducing the impact of vehicle charging on the energy system. It refers to measures that seek to charge electric vehicles at times that help with electricity system operation, providing access to lower cost electricity. eHGV operators may be offered lower prices at set times to encourage them to charge at off-peak prices where possible. Charging at depots can be automatically controlled overnight, so vehicles only charge at low-cost periods.
• Revenues from flexibility markets (where the electricity system operator and networks pay for actions that help stabilise the system) could help to improve the economic case over the coming years, but uptake is limited to date. Some energy retailers and aggregators are starting to enter fleets into national and local flexibility markets but there are a range of general DSR barriers, as well as fleet-specific challenges which reduce uptake. Local flexibility markets may be easier to enter but are only available in some parts of the country.
• It can be difficult to combine or ‘stack’ different revenue streams from various DSR markets and revenue streams from these markets are not currently sufficiently lucrative to overcome the administrative burden of taking part.
• Network and policy-related costs blunt market signals, with levies on electricity bills reducing the visibility of savings from shifting demand.
• Final Consumption Levies (FCLs) are charges used to recover costs associated with renewable generation support schemes, such as Contracts for Difference (CfD) and the Capacity Market (CM). These levies are applied to electricity consumption but not generators making flexible demand less competitive in flexibility auctions to balance the electricity system. This can lead to renewables generators being paid to turn down when it would have been more efficient to turn demand up by charging fleets during periods of excess renewables.  
• Final Consumption Levies put onto demand make them uncompetitive when bidding against generation in flexibility markets.
• Vehicle-to-everything (V2X) refers to the ability of electric vehicles to exchange electricity with the wider energy system, rather than only drawing power from it. This includes vehicle-to-grid (V2G), where energy stored in vehicle batteries can be exported back to the electricity grid to provide balancing services.
• V2X is at a very early stage of usage with trials underway in some public sector applications e.g. refuse vehicles in Islington.^[18] Whilst it is technically possible, export tariffs (the rate the operator is paid for electricity put into grid) can be low value and participation is limited by export capacity (the size of the connection to the electricity network that can be used to export electricity).
• Not all chargers and vehicles are suitable for V2G yet. Device standards for V2G are not yet widely consistent. 
• Participation in flexibility markets and V2G is also dependent on vehicle usage patterns – if a vehicle is continuously on the road, it won’t be able to spend time supporting the grid as will need to ‘charge and go’.

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What are the solutions to electrify road freight?

Clear near-term strategy

• The UK needs a clear strategy to deliver the charging infrastructure needed to support zero tailpipe emission HGVs and to meet the 2040 ambition.

Provision of charging infrastructure

• Whilst Government has committed £30m to a depot charging scheme, targeted Government support for eHGV chargepoints is required in areas that are not commercially viable for private investment alone. Although some initial funding has been allocated for chargepoints, more is likely to be required – particularly to ensure they are suitable for eHGVs.
• The Government’s Zero Emission HGV and Infrastructure (ZEHID) trials are an important step in testing solutions, but further sustained investment will be needed to scale beyond pilot projects.
• Investment could be directed at key hubs for HGVs based on main routes (East Midlands, Northeast, Bristol) to enable optimised network upgrades using initial funding from the National Wealth Fund deployed to crowd in private finance.
• Investment in HGV charging infrastructure should be de-risked through shared infrastructure agreements and leases that incentivise landlords to install charging infrastructure and ensure they do not outright refuse tenant’s requests for charging.
• Provision of public charging along the strategic road network should be suitable for the projected increase in eHGVs.

Making fleet conversion economic

• As set out in Energy UK’s 2025 paper, non-domestic policy costs should be rebalanced to reduce the operational burden on fleet operators and avoid slowing electrification.^[19]
• Electricity should be included in the Renewable Transport Fuel Obligation (RTFO) to provide chargepoint operators with a market-based mechanism to fund infrastructure rollout.
• Ofgem’s review of network charging needs to consider how charging can reward flexibility from end users like eHGV fleets.
• The Government should also consider the options being developed by the Green Finance Institute to help SME fleet operators cover upfront costs.^[20]

Planning the networks and making it easier to connect

• The Government should undertake detailed modelling to understand the electricity network upgrades required as more fleets electrify. This can then be used to feed into the Regional Energy System Planning (RESP) process to ensure adequate network capacity is funded and built ahead of time. Minimum fleet representation should be ensured in each RESP region, with dedicated support for SME operators.
• Ofgem should consider how its Cost Allocation Review will impact freight operators.
• Grid connections should be planned early, and where possible, integrate smart charging, energy storage, DSR, and on-site solar generation to reduce peak demand, lower costs, and accelerate deployment.
• Building on the Energy Networks Association Transport Connections Guidance tool which provides fleet operators with early advice on connection, more transparent and standardised information on network capacity is needed to support fleet planning and decision-making.^[21]
• A consistent national approach from DNOs should be established to reduce uncertainty on network charges and improve timelines.

Good energy procurement and maximising flexibility to manage costs

• Further guidance on energy procurement for fleet operators would enable them to buy power more optimally and drive investment in new additional low-carbon capacity.
• Government committed to provide guidance for local authorities to procure flexible EV charging tariffs for residents.^[22] This should be expanded to ensure freight can gain access to charging products and services offered at public chargepoints so that charging can be done at off-peak times where possible.
• Explore V2G standards and V2G use cases for eHGVs to ensure emerging technology can support bidirectional charging.
• Ensure open and accessible flexibility markets, enabling fleet operators to participate in Demand Side Response (DSR). These markets should support revenue stacking.
• Eliminate the Final Consumption Levy (FCL) from flexibility market bids.
• To reassure fleet operators it will be important for the terms of any connection that requires them to flexibly charge or stop charging at times to be clearly set out so they can get a connection that suits their fleet operation requirements.
• They may also need greater reassurance that in the event of a power grid security issue, depot chargers and public chargers would be classified as critical infrastructure to ensure they can continue to distribute vital goods.

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