By John Kemp
LONDON May 29 If any organisation has the
incentive and the scale to roll out a fleet of alternative
vehicles, it should be the United States Postal Service (USPS).
The post office operates the largest civilian vehicle fleet
in the world, with more than 210,000 vehicles travelling almost
1.3 billion miles a year.
The agency has a powerful reason to switch from expensive
petroleum-derived fuels as rising fuel costs make a small but
significant contribution to its mounting financial problems.
Its struggles to find cost-effective alternatives, however,
highlight the obstacles to rolling out alternative vehicle
technologies across the United States.
RISING FUEL BILLS
In fiscal year 2011 (FY2011), the 12 months from October
2010 to September 2011, the postal service made a net loss of
$5.1 billion. It would have been even worse if the agency had
not deferred making retirement-linked payments to the U.S.
Losses are being driven mostly by employment costs,
including legislative requirements that mandate pre-funding of
retiree health plans. Workers compensation, benefits and
retirement funding account for 75 to 80 percent of total
operating expenses, compared with under 10 percent for
transportation and fuel. Nonetheless, the rising prices of
gasoline and diesel contribute to the agency's woes.
In FY2011, a 25 percent increase in gasoline and diesel
prices wiped out all the efficiency gains USPS made from better
route planning, which cut the number of miles driven by 88
million or 5.4 percent. As a result, highway transportation
costs rose $138 million or 4.3 percent to $3.343 billion.
ALTERNATIVES TO OIL
The post office therefore has a sharp financial incentive to
shift from using expensive petroleum-derived fuels to
alternatives such as ethanol (E85), biodiesel, electric hybrids,
or vehicles using gas-derived fuels such as compressed natural
gas (CNG) and liquefied natural gas (LNG).
It also has a legal obligation to use more alternative fuel
vehicles. The Energy Policy Act of 2005 requires that 75 percent
of new vehicles acquired by federal fleets must run on
alternative fuels. The mandate applies to fleets with 20 or more
vehicles in metropolitan areas, capable of being centrally
fuelled, with exceptions for some law enforcement, emergency and
Under the 2005 law, fleets must actually use alternative
fuels in dual-fuel vehicles, unless they receive a waiver from
the secretary of energy ("U.S. Postal Service: Fleet Alternative
Fuel Vehicle Program Report for Fiscal Year 2011" Feb 2012).
The postal service is not technically covered by executive
orders issued by President George W Bush in 2007 and President
Barack Obama in 2009 requiring agencies to reduce their
consumption of petroleum-derived fuels.
Nor is it subject to Obama's 2011 presidential memorandum
requiring federal fleets to acquire only alternative fuel
vehicles by the end of 2015. But the postal service has chosen
to follow all these presidential directives as far as possible.
ALTERNATIVE VEHICLES BUT NO FUEL
USPS has a substantial number of alternative fuel vehicles.
Out of a total stock of 212,000 vehicles in 2010, almost 44,000
(21 percent) were alternative fuel vehicles, according to the
annual report of the Federal Fleet Policy Council. The largest
number were flex-fuel vehicles capable of running on E85, which
accounted for 39,000 vehicles.
The postal service has always been at the forefront of new
transport technologies. USPS is also working with manufacturers
to pioneer and test the latest generation of alternative
vehicles and is currently testing vehicles made by E-Ride,
Vantage, Navistar and Grumman.
The problem is not the vehicles, however, but availability
of alternative fuels to use in them. In FY2011, USPS vehicles
consumed just 782,000 gallons of alternative fuels (on a
gasoline equivalent basis) out of a total of 155 million
gallons, less than 1 percent. Most of the time, dual fuel
vehicles have been filled with regular gasoline and diesel.
CREDIT CARDS AND FILLING STATIONS
As the USPS annual fuel report states: "the postal service
has made a concerted effort to increase alternative fuel use by
issuing memoranda to field operations to utilise alternative
fuels without compromising our mission". It has even written
alternative fuel use into the performance indicators used in
annual employee reviews.
"Unfortunately, the cost of alternative fuels, in most
cases, is higher than the petroleum fuel; this further
exacerbates the postal service's strained financial position,"
according to the agency.
"The vast majority of fuel used for daily mail delivery is
purchased from local merchants using the Voyager Fleet Credit
Card. Letter carriers refuel their vehicles at locations along
their routes where possible, thus avoiding the higher costs (in
terms of work hours and added fuel consumption) associated with
travelling to more distant or specialised fuelling points."
"The potential to utilise E85 and other alternative fuels is
limited by their commercial availability. Like the general
public, the postal service relies on local commercial
infrastructure to supply convenient and competitively priced
fuel," the report writes.
"If alternative fuel locations are not conveniently located
and competitively priced, the postal service cannot access and
utilise them in its delivery fleet."
"While the postal service provides information on
(alternative fuel vehicle) deployment to interested suppliers
and industry advocates to assist in development of fuel
infrastructure, postal fleet demand alone may be insufficient to
make new installations cost effective for commercial fuel
ROLLOUT OF FUEL INFRASTRUCTURE
The post office's problems with adopting alternative fuels
have been made worse by its poor financial condition, tough
competitive environment and universal service obligation. But
they also point to issues that are likely to shape the take-up
of alternative fuels more widely.
The concept of alternative fuels covers a wide range of
substitutes for gasoline and diesel. Not all have the same cost
advantages. LNG and CNG-fuelled vehicles are benefiting from the
sharp drop in natural gas prices, but biofuels do not share this
competitive advantage. Private sector companies planning a
switch are mostly focused on gas-derived fuels. Unfortunately
the postal service is stuck with a strategy based around E85.
Initial use of alternative fuels is likely to be faster
where services rely on (privately owned) central refuelling
stations rather than public filling stations. United Parcel
Service is expanding its LNG truck routes eastward from
Ontario, California, according to my colleague Jason Lange. UPS
bought 48 LNG-powered big rigs last year and recently opened new
routes between Las Vegas and Salt Lake City and has plans to
extend the network to Denver.
UPS is rolling out LNG trucks on a small number of routes
using dedicated refuelling facilities. To do the same on all of
its network, the postal service would have to re-engineer the
way it plans routes and acquires fuel to centralise its
refuelling, which is very unlikely.
But other government agencies operating medium and large
fleets from central locations might be able to put in place or
adapt their own refuelling systems.
At least 12 agencies have received funding to build out
their own alternative fuels infrastructure, including the
Pentagon, each of the armed services, the Defense Logistics
Agency, the Bureau of Prisons, the Federal Bureau of
Investigation and the Department of Agriculture, according to
the Government Accountability Office ("Renewable Energy: Federal
Agencies Implement Hundreds of Initiatives" Feb 2012).
The Air Force initiative, for example, includes "planning,
operation and infrastructure at Air Force facilities to dispense
alternative fuel as well as bulk purchase of alternative fuel to
supply this infrastructure. The Air Force has worked with the
Military Exchange System and the Defense Logistics Agency to
install E85 dispensing pumps at Air Force installations."
The Bureau of Prisons has installed E85 dispensing pumps at
four refuelling stations, and all new refuelling facilities will
be built with this capability in future where fuel supply is
available. The FBI has done the same at its academy in Quantico,
But these closed refuelling systems are small. The big prize
of shifting the postal network from gasoline and diesel is still
some way off. Private operators such as UPS are likely to get