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Fireside Chat: Fleet Electrification Is the Key to a Green Energy Future


Editor’s Note: This article is part of Joanna Makris’s Behind the Wall series, where she provides retail investors with the insider scoop on the hottest technologies and trends from today’s business leaders, industry experts and money managers.

Our latest guest on Fireside Chat is a household name in the green community and corporate sustainability movement. Meet Neha Palmer, CEO of privately held TeraWatt Infrastructure.

a bush cut out in the shape of a car with a plug attached to it and a charger symbol in the center implying it's an electric vehicle

Source: Shutterstock

Neha was formerly Head of Energy Strategy at Google, a division of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). As Google’s first hire focused on data center energy, Neha built and led the team developing electric infrastructure and electricity procurement for its global fleet, which covers dozens of sites over four continents.

She was instrumental in helping Google become 100% renewable and the largest corporate renewable energy buyer in the world. (Although Amazon (NASDAQ:AMZN) eclipsed that achievement in June). She left the tech giant to become CEO of TeraWatt Infrastructure, an exciting company in the electric vehicle (EV) charging space. 

Neha and I talked about the real reason behind Amazon’s decision to go electric, what will happen to the grid when it does and how the “negawatt” may be the world’s cheapest renewable alternative.  

The Economics of Fleet Electrification

Before diving into our discussion, let’s take a quick look at the space and how TeraWatt fits into it. Electric vehicle charging networks have been making headlines lately, bolstered by the Biden administration’s $1.2 trillion infrastructure plan.

In addition to my perennial favorite, Tesla (NASDAQ:TSLA), a growing list of startups, mostly special-purpose acquisition company IPOs, have focused on building out passenger EV charging networks. These include Chargepoint (NYSE:CHPT), Blink Charging (NASDAQ:BLNK) and EVgo (NASDAQ:EVGO), among others. None of these companies are anywhere close to profitability; yet all of them trade at incomprehensible valuations.

For anyone interested in digging into this EV valuation paradox, check out my recent Fireside Chat with Andrew Fox, CEO of Charge Enterprises (OTCMKTS:CRGE), who summed it up nicely. 

TeraWatt’s mission is different from this cadre of passenger EV charging networks. The company is purpose-built to focus on large-scale electric vehicle charging infrastructure for fleets of medium and heavy duty vehicles.

Commercial fleets may sound less sexy, but if you look closer, you’ll see there’s a smart business case behind TeraWatt’s focus. Medium and heavy duty class vehicles are expected to electrify faster than passenger vehicles. The reason is simple: There’s a much lower per-mile cost, or TCO (Total Cost of Ownership) for medium and heavy-duty fleets going electric.

So when operators make the decision to electrify a fleet, they have a bottom line business incentive to make this transition as quickly as possible. Ultimately, the motivation behind some of the biggest logistics companies in the world — Amazon, Fedex (NYSE:FDX) and UPS (NYSE:UPS) — to electrify their supply chains boils down to compelling economics. 

A Quick Look at TeraWatt Infrastructure

For the chart geeks among us, this electrification trajectory for commercial fleets looks like an S-curve, and differs from the more linear electrification trajectory for passenger EVs.

graph detailing EV Penetration: Commercial Fleets Versus Passenger EVs

Source: Keyframe Capital and Morgan Stanley, March 2021 EV Tracker Report

The exciting thing about the S-curve for fleet electrification is that it moves fast. But it also creates a huge problem. Simply put, when you plug a bunch of very big batteries in at the same place at the same time to recharge, they consume as much energy as a skyscraper (or large data center).

The existing electricity grid wasn’t designed for the massive scale that’s required for an entire logistic facility or a fleet of vehicles charging all at once. That means we’re going to need new electricity projects everywhere we have a fleet of electric vehicles. And we’re going to need them fast.

chart detailing increasing electricity demands

Source: Keyframe Capital

That’s where TeraWatt Infrastructure comes in. The company, founded in 2018, leverages extensive experience in renewable energy project development and real estate. TeraWatt started out by buying real estate properties along key highway corridors and logistics locations (it’s now in 18 states). But unlike the passenger EV charging networks, TeraWatt has also evolved into a partnership role with its fleet operator customers.

Whereas many of the company’s EV charging peers are using company equity dollars to build out their infrastructure, TeraWatt has a dedicated pool of capital to invest in large scale projects. The company provides asset financing to fleet operators and the companies that sell to them. 

Let’s dive into the interview to find out more.

You spent a lot of time previously at Pacific Gas and Electric for a number of years, and more recently on renewable energy at Google. Talk to us a little bit about how TeraWatt builds on and continues that work.

Neha Palmer, CEO of TeraWatt Infrastructure: For the last decade, when I was at Google, we kind of had two main goals. As a large electricity user, we really wanted the grid to be cleaner. So we wanted more green power on the grid. And we were doing that by directing our own energy procurement by buying as much green energy as possible. So, we were the first company to hit 100% renewable. But what was really heartening was all of the other companies that eventually joined us. And it’s pretty much par for the course that a company has a corporate commitment to buy clean energy, but all the other stakeholders, utilities, regulators all moved along. And what you see now is that the grid is on its way … It certainly has a way to go to being 100% decarbonized and clean. 

And so I see the next wave of opportunity with transportation. And so at TeraWatt, we are riding that second wave of decarbonisation. Right now, in the U.S., emissions from transportation are the largest sector of emissions. So if we want to attack the problem of decarbonisation, this is really a great place to go. So Terawatt was purpose built to focus on fleets, where we see a huge opportunity, as that adoption of electric vehicles and that cohort is happening really fast.

The S-curve for electrification for commercial fleets is expected to be much faster than that for passenger electric vehicles, as you know. And companies like Amazon, UPS and others have all made major announcements to clean up their supply chain. So talk to us about some of the reasons for the difference in that S-curve and how your company is really well positioned to benefit there.

Yeah, a couple of things. As you noted, there’s a lot of commitments alongside the energy commitments…that have been commitments on the supply chain. And so you see complete, across-company decarbonization goals, which include transportation for transportation-heavy industries. But what I think made the big difference in energy, and I think is making the big difference here is that it’s financially viable, and more viable to have electric vehicles. The total cost of operation, which is the metric that companies use to assess whether they’re going to go with one vehicle or another is already positive for electric vehicles in the medium and heavy-duty class. For companies thinking about the bottom line, it’s actually a great way for them to start to drive down costs, and sometimes, if it’s a key portion of their business, a significant component of their costs. They’re looking at it from a sustainability perspective, but also as a competitive, and cost advantage perspective. So that adoption will happen really fast. 

I think the other thing is [that] when you have fleet configurations, some of the anxiety around charging that you might see with passenger vehicles hopefully will be alleviated. And again, that’s part of why we were created…to help that transition and ease the transition for fleets. But certainly, we see that there is a focus on doing this in chunks. You have one vehicle, one decision-maker, in a personal passenger vehicle. But … [in a fleet] you have one decision maker making the decision for 400 vehicles at a time. So that S-curve really is driven by the sustainability goals, and the cost and the ability to impact large volumes of vehicles at one time … and [it] will really accelerate here.

It takes an enormous amount of power and energy to charge multiple electric vehicles in the same place at the same time. Talk to us about how TeraWatt’s technology balances those massive power needs with efficiency.

Just a statistic to throw out there. I saw an estimate, a study that said that the electric generation in the U.S. will have to double if we had a fully electrified transportation system here in the U.S. That’s astounding because it’s already big, but obviously needs to grow alongside electrification. 

So, at TeraWatt, we’re looking at a couple of things. We know that there’s huge amounts of electricity required. That requires the generation but also the grid capacity to get access to that electricity. And we think that that’s going to be a challenge. The number of fleets and where they’re located, which is pretty much everywhere, is just astounding. And so if you think of a lot of large point loads on the grid, that will certainly stress the grid. So we realize that there will be other tools that will be required to make this transition … things like on-site electric storage, on-site electric generation, maybe in the form of solar, to keep it on the clean side … are all tools that will be required — for two reasons.

The first is to control energy costs. Again, a lot of the driver here is sustainability but also costs. And so, to make sure that the cost of electricity is as low as possible, having some of those tools will be required. 

The second is to be able to actually interconnect into the grid. The number of requests that utilities are going to receive is just going to skyrocket in terms of things like requests for power for electrified transport. So by having some of those tools, [like] storage [and] electric generation on site — that will hopefully make that process easier and quicker. And also less costly in terms of getting that connectivity to the grid. TeraWatt is really thinking about it from that perspective. And we have been purpose-built thinking about the real estate needs for that type of installation, where those should be located. And so we have property in 18 states, where we’ve located near first movers of electric fleet charging, in hopes of helping them make that transition smoother and easier.

​​The company is also providing fleet operators with financing and also additional charging at their own sites. Tell us more about that work.

When a fleet owner is deciding whether or not to electrify, they’re often very focused on the vehicles. You know, the medium-duty class is now coming, we see vehicles arriving offline. Heavy-duty is certainly in development. And you know, there is a line of sight to those heavy duty vehicles coming as well. But they’re mostly focused on the vehicles … what’s the cost? How are they going to fit into their operations. What they don’t always focus on, is the charging aspect of this. And just the difficulty that they might have in having a new large electric load emerge on their site. 

So we are helping them think through the CAPEX required for that, and oftentimes, they haven’t planned that in their budget. We are able to develop, but also own and finance large-scale electric vehicle charging infrastructure … taking that from an additional capital class that they have to expand to electrify … to making it more of an operational expense. We are excited to own assets like that [and] … are pairing infrastructure like capital to own assets like that. And that will really be a benefit to businesses as they think about the cost to make this transition.

Some critics say that the battery technology itself is a limiting factor in the pace of adoption of commercial electric vehicles. Tesla has said that the Semi would require five times the number of battery cells as a passenger EV, but it certainly can’t cost five times the price. What are your views on the pace of battery technology and its influence and impact on getting that commercial space going?

Yeah. I’ll go back to my core experience before I got to TeraWatt, which is the solar industry. You know, we’ve seen the cost for solar technology decrease by over 80% over the last decade. It’s pretty astounding. If you would have told me the prices of solar 10 years ago, I wouldn’t have believed you. We see similar trajectories for batteries as well. The amount of R&D effort going into it is certainly intense. Current technology is just decreasing in price as you get more manufacturing capability online. So certainly that’ll be a key factor in adoption. But as I said, you know, the real factor here is the cost and that already is TCO positive for that medium and heavy-duty vehicle fleet– driven by the lower cost of maintenance. So it’ll be a factor. But certainly, you know, we see that becoming an easier part of this as time goes on.

What are your thoughts on the Biden administration’s early efforts in terms of electrification? And do any of those have a benefit for TeraWatt?

It’s incredibly exciting to see all the detail and effort being put into electrification in terms of the infrastructure bill, and other efforts that are going on. What I’m actually really excited about is this potential for a joint Office of the DoE and DoT. Sitting here at TeraWatt, what I see is that this is the perfect marriage of energy and transport. And those two have to really be coordinated to make sure this transition happens as smoothly and as fast as possible. So seeing policy developed jointly is really exciting. You know, for TeraWatt, and many others in the industry, things like tax credits for electric vehicle charging stations, renewable energy … all of those will be really beneficial. But what we see that’s really exciting is this focus on marrying those two different industries from the past … [and] really seeing that they have to be jointly planned, and in policy, plan around that.

What are the most important priorities for you and the business over the next 12 months?

You know, it really is making sure that we are developing products and delivering what customers want .. so, understanding what they need as they start to electrify their fleets. The second piece of that is also teaching customers. Many customers have never thought about the scale of electric vehicles, or the scale of the charging infrastructure acquired. They might be piloting one or two vehicles in a yard, but they haven’t thought about what’s the impact of having 50% of your fleet electrified. So it’s kind of a journey, in terms of working with customers to understand their needs, but showing them what the potential possibilities are with the technology for charging and other things as they scale. So that’s definitely a priority for us. 

We’re going to continue to build out our suite of properties. You know, as I mentioned, we’re in 18 states. And we certainly see the need to expand. Again, charging happens everywhere. There are fleets everywhere. Cities have bus fleets. There’s all kinds of last mile delivery fleets everywhere, because that is now a very important part of American life…having items delivered to your home. So certainly expanding our portfolio. And then, you know, continuing to help the industry move forward. There’s lots of stakeholders here that I mentioned, you know, transportation marrying with energy, really hoping that stakeholders like utilities come along and make things like the process to connect to the grid faster and easier, and more flexible to anticipate things like large loads that might all happen at night, or … flexible resources that might be on site that could put power back to the grid. All of these are really important priorities for TeraWatt right now.

Beyond electric vehicles and renewable energy, what are some ways that we can make our lives greener?

Well, I am a city dweller. And this may be stealing from my past life, but we used to talk about the “negawatt”…the negative megawatts. The unit of energy you don’t use is the cheapest and cleanest. And so you know, taking public transport … you know, all of these things are going to be really important as we think about ways to make our lives cleaner and greener. But, you know, thinking about ways to not do something or not expend that energy or electricity is really, I think a great way to think about it and oftentimes saves money and can actually be a good exercise.

Your comments and feedback are always welcome. Let’s continue the discussion. Email me at jmakris@investorplace.com.

On the date of publication, Joanna Makris did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joanna Makris is a Market Analyst at InvestorPlace.com. A strategic thinker and fundamental public equity investor, Joanna leverages over 20 years of experience on Wall Street covering various segments of the Technology, Media, and Telecom sectors at several global investment banks, including Mizuho Securities and Canaccord Genuity.

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Article printed from InvestorPlace Media, https://investorplace.com/2021/08/fireside-chat-terawatt-infrastructure-fleet-electrification-unlock-green-future/.

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