Navigating the Zero-Emission Headwinds

Many fleets in the utility sector have set ambitious zero-emission targets, but headwinds in the U.S. electric vehicle market – due to production slowdowns and an evolving regulatory environment – are creating new obstacles.

Even so, it doesn’t appear that fleet managers are significantly adjusting their electrification roadmaps. American Electric Power, Pacific Gas and Electric, Sacramento Municipal Utility District and numerous other utilities have made net-zero pledges that they intend to keep.

These long-term goals of zero emissions are still in place despite recent regulatory changes from the Biden administration, which shifted emphasis in the EV landscape to emissions performance rather than mandating specific technologies. Under the second Trump administration, tax incentives for clean vehicles and charging infrastructure could also be under fire.

Given manufacturer production planning, the enormous inertia of environmental policy and yearslong utility fleet buying cycles, redirecting the momentum of zero-emission planning is like trying to turn a battleship – it doesn’t happen quickly. Even a five-year horizon doesn’t provide a definitive view of the future. While EV plans remain solid, there will be a few bumps along the way.

The market uptake on consumer EVs was not what industry stakeholders were hoping for or anticipating, so the trend is shifting toward hybridization, noted Phil Dunne, U.K. managing director at the global strategy consulting firm Stax (www.stax.com). “Everybody knows that fleets will continue on the electrification path, but in this transition period, nobody’s quite clear on what portion of the fleets they should be electrifying, so it’s a difficult period for fleet managers.”

In the short term, utilities could see fewer EV buying options as the market realigns within the regulatory environment. Manufacturers may drive adoption rates of current EVs through pricing.

“The only short-term options are around incentives; that’s where the manufacturers have some level of control,” Dunne said. “At the point of sale, they can incentivize differently around hybrid and EVs versus internal combustion engine vehicles.”

Dunne recommended fleet managers stay the course, taking advantage of sales incentives while monitoring market developments.

In some areas of the U.S., sales of medium- and heavy-duty ICE vehicles are hampered due to the Advanced Clean Trucks regulation, which started in California and has spread to other states. The regulation requires an increasing number of zero-emission vehicles to be sold until ICE vehicles are completely outlawed by 2036. Per the act, 11% of all model-year 2025 semis, garbage trucks, cement trucks and other heavy-duty trucks must be EVs.

However, truck dealers cannot sell newer, more environmentally friendly diesel and gas vehicles because fewer EVs are being driven off the lot. Older vehicles with higher emissions levels may stay in fleets longer.

Working the Plan
As noted earlier, Sacramento Municipal Utility District plans to stay the course toward its net-zero carbon goals. Casey Fallon, SMUD’s director of purchasing, warehouse and fleet, said the organization stands by its “moonshot” goal of zero emissions from the power supply by 2030 – and they’ve made impressive progress.

SMUD has followed national trends in the sense that the utility is tracking outcomes beyond simply buying a certain number of EVs each year.

“As a fleet operator, we look at outcomes, such as zero-emission miles driven per year,” Fallon said.

In 2020, zero-emission mileage accounted for 1% of SMUD’s mileage. By the end of 2024, zero-emission miles rose to 3%. In January 2025, EV mileage accounted for over 6% of the utility’s mileage due to new electric pickups joining the fleet.

Across all types of vehicles, SMUD’s carbon dioxide emissions have decreased from 5,600 metric tons in 2019 to about 3,900 metric tons in 2024.

“We’re just trying to figure out ways to use hybrid and zero-emission vehicles in practical applications that will create these outcomes,” Fallon said.

SMUD has made significant investments in EVs, such as converting to an all-electric sedan fleet in 2021. Additional improvements have resulted from driver education and training.

“We can change behaviors like reducing nonproductive idle time rather than just trying to buy more EVs,” Fallon said.

California’s Advanced Clean Fleets Regulation (ACFR) is influencing SMUD’s fleet purchasing strategy. The regulation rules cover medium- and heavy-duty trucks, which are about 40% of the 1,000 assets in SMUD’s fleet. There are two paths under the ACFR: the purchase option or the milestone option. Under the purchase option, 50% of vehicles bought in 2026 or 2027 must produce zero emissions. The milestone option graduates the fleet’s makeup, from 10% EVs in 2026 to 100% by 2042.

“That gives us quite some time to figure this out, and one of our goals is to be on the purchase plan until 2026 when we’ll probably switch over to the milestone plan and manage our outcomes that way,” Fallon said.

Given the turmoil in the EV market, SMUD plans to focus on adding light-duty all-electric pickups and hybrids to its fleet over the next several years. According to Fallon, “That approach will help us with our outcomes-based goals to reduce emissions.”

In the meantime, heavy-duty EV pickups will join the SMUD fleet as the utility adjusts to the different duty cycles of EVs, such as charging requirements and range expectations.

About the Author: Gary L. Wollenhaupt is a Colorado Springs-based freelance writer who covers the transportation, energy and technology sectors for a variety of publications and companies.