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The golden age of the hybrid work truck may be over before it's even begun.

Although that wasn't the official message at the recent Annual Meeting of the Hybrid Truck Users Forum (HTUF), the phase-out of the federal tax breaks for purchasing Class-6 and 7 hybrid work trucks was the 800-pound gorilla in the room.

The meeting, held October 14-16 in South Bend, IN, was in many ways a celebration of the emergence of hybrid technologies in the mainstream vocational truck business--manufacturers brought 35 different hybrid vehicles for the "Ride & Drive" event, a new record--and yet everyone in attendance, from fleet managers to component suppliers, was acutely aware that when the current tax breaks expire at the end of 2009, the hybrid work truck market will face significant challenges.

John Boesel, president and CEO of hosting organization CALSTART/WestStart, summed up the situation, saying that "Two thousand to three thousand units per year per OEM will get the industry to where it can be self-sustaining and not in need of incentives."

Self-Sustaining

Despite the encouraging fact that several OEMs now have hybrid work trucks in regular production, reaching the target of 2,000 to 3,000 hybrid trucks per OEM before the end of 2009 may be wishful thinking. When the tax breaks were first instituted in the Environmental Protection Act (EPAct) of 2005, giving a $6,000 credit for the purchase of a Class-6 hybrid and $12,000 for a Class-7 hybrid, the hope was that the incentives would jump-start the hybrid truck industry and bring it into the mainstream. But it didn't quite work that way.

"There was an eighteen-month lag time, which was very frustrating," says Rachel Beckhardt, HTUF member and project manager with the Environmental Defense Fund (EDF). "The bill was passed in the summer of '05 and it wasn't until May of '07 until the IRS actually published guidance on how to access the credit.

"That was where EDF and CALSTART really started to have a substantial impact," she goes on. "We leveraged all our clout with that of the manufacturers and suppliers and we said, 'We're making these trucks; let us help our customers access these tax credits.'"

Because of this 18-month delay, the window of opportunity hasn't been open nearly as long as intended. And, strangely, while the federal incentives for hybrid trucks expire in 2009, incentives for biofuels, natural gas vehicles and hydrogen vehicles get a reprieve.

"All the other technologies don't expire until 2012," says Beckhardt. "We've been working hard to get at least an 18-month extension for hybrids, based on the time that was lost, but really the goal would be 2012, like all the other medium- and heavy-duty technologies."

Building Momentum

Will the extra time be enough?

"That would be great," says Beckhardt. "There's a lot of momentum now. Plans are for there to be 1,000 trucks on the road by early 2009, and there are more orders coming our way every day. We're looking for incentives to help fleet managers offset that incremental cost as much as we can."

As a result, the Environmental Defense Fund has joined forces with CALSTART to spearhead HTUF's Incentives Working Group, whose goals include:
1. Develop consensus "rebate structure" for incentives as core of strategy
2. Extend federal incentives for hybrid trucks in energy and climate legislation
3. Expand state incentives for hybrid trucks in six new states
4. Help fleets access regional funds like EPA's Diesel Emissions Reduction Act (DERA) funds

Already, Senators Ken Salazar (D-CO) and Blanche Lincoln (D-AR) have agreed to goal number two, sponsoring an extension of the existing tax credit. A three-year extension might not sound like a huge window, but if you look at the progress made in the hybrid work truck industry in the last three years, it's not hard to imagine that the next three will see just as much progress, perhaps even the achievement of John Boesel's 2,000 to 3,000 production benchmark.

Rebate Guide

Goal number one is a "Consensus Rebate Structure" (see table) to present to state and federal lawmakers to help guide efforts to defray the incremental costs of hybrid trucks to purchasers. Based on New York State's incentive program, which the Working Group describes as its "Gold Standard," the rebate structure takes into account both vehicle weight and demonstrated fuel economy gains to establish a template for covering 50 percent of the incremental costs of purchasing a hybrid truck.

Working at the state level is important because state incentives will have to pick up the slack, whether the federal incentives expire in 2009 or 2012.

"There's a whole portfolio of regional, state and federal tax credits, and you can find them all at the EDF Website," says Beckhardt. "You've got not only the federal tax credit--which, keep in mind, is only good for tax-paying entities, so all those municipalities and state fleets can't even use the tax credit--but you've got a whole host of other mechanisms in place.

"The New York program offsets 80 percent of the incremental cost, so it's no coincidence that two-thirds of FedEx's hybrid trucks are in New York City," she explains. "There are great programs in North Carolina, and in Florida. Just this week California pledged significant money out of their AB 118 pot. There's also the EPA's Diesel Emissions Reduction Act, which has $250 million available throughout the 10 EPA Regions, and is available to non-profits and municipal fleets. And that will pay 25 percent of not just the incremental cost, but the total cost of the entire new truck."

Consensus Rebate Structure by Vehicle Weight and Demonstrated Fuel Economy Gain

New Application Guidelines

Another recurring theme at HTUF was that some early hybrid users have reported less than stellar reductions in carbon emissions and fuel use. There's no problem with the hybrid systems, it turns out; some fleets are simply putting hybrid trucks to work in applications that don't take advantage of the system's strengths.

"For hybrids, you really have to get the right guidelines in place, and that's a work in progress," says Kevin Snow, hybrid application development lead for Eaton Corporation. "You can't use your normal truck spec' and your normal application guideline process, because the duty cycle is so critical."

Hybrid trucks achieve their best fuel economy in duty cycles that involve short runs and frequent stops, or that involve excessive idling to power PTOs and work accessories.

"But," Snow says, "you may have a situation where it's 50/50; they may be 50 percent on the highway, which isn't the ideal route. We can't assume everybody's going to go right into the perfect fit, so we're re-spec'ing the rear axle ratio on the truck, to get better fuel economy on the highway, to strike a better balance.

"We still strongly recommend that they go into the proper, city-delivery, multiple-stop type route," Snow says. "That would be ideal. But for those who aren't, we're capturing them at the spec'ing stage."

Plan Ahead

The bottom line for fleets is this: if you have even the slightest interest in adding a hybrid truck to your vocational fleet, start doing your homework now.

Talk to your dealer, your OEM, your component suppliers. Visit the Websites below to research financial incentives available to you. Plan your purchases now, so that you can make your best deal. Help will still be available after 2009, but why wait?