One of the nation's biggest and most successful companies is making a bet on alternative fuel vehicles in Minnesota.
General Electric Co. on Thursday opened a facility where companies can check out cars and trucks powered by something other than gasoline. The center is operated by GE Capital Fleet Services, a company based in Eden Prairie that leases more than 1 million vehicles to corporate clients.
The vehicles available for testing at GE's test track included a Navistar eStar electric delivery truck that can travel about 100 miles between charges.
On Thursday, Keshav Sondhi, chief engineer for FedEx, took the truck for a couple of spins around the half-mile track. FedEx already has more than 50 of the trucks deployed in high density markets such as Chicago and New York City. Sondhi said the company may put a lot more electric trucks in congested urban centers.
"A third, one-third of our fleet could be all-electric," he said. "All our urban routes could be conducive to electric vehicles."
That would work out to about 9,000 trucks.
Sondhi said the eStar costs one fifth what it takes to operate a gasoline-powered truck. On the other hand, at $150,000, the truck's price is triple the cost of a regular one.
Even after a decade, the eStar would still be more expensive than a gasoline-powered vehicle. But saving money on trucks isn't what's driving FedEx's interest in electric vehicles.
"The guiding principle is truly independence from foreign oil," he said. "That's our chairman's mantra: independence from foreign oil."
For other organizations, the motivation might be reducing fuel costs or their impact on the environment. Whatever the motive, at the GE fleet center, the choices range from electric-powered Chevy Volts to garbage trucks powered by compressed natural gas.
"We want to make sure we immerse our customers, make them aware of all of the benefits of making a transition to alternative-fuel vehicles through this education center," said Deb Frodl, chief strategy officer for GE Capital Fleet Services.
Government reports indicate only about 4 percent of the vehicles on U.S. roads run on alternative fuels some or all the time. Frodl believes that will steadily change.
The upfront cost of most alternatively fueled vehicles is relatively high, ranging from about $20,000 for two-passenger electric cars to more than $100,000 for trucks. But Frodl said state and federal tax breaks and subsidies can significantly reduce the bottom-line price by as much as $15,000.
"We can make the economics work," she said. "The operating savings of some of these alternative fuel vehicles is just so substantial. In time, as the technology improves this will be really, really attractive for corporations."
For businesses, potential savings on fuel costs are strong financial incentives, said Richard Battersby, vice chairman of the alternative fuels committee for the NAFA Fleet Management Association.
Battersby, also director of fleet services for the University of California, Davis, said compressed natural gas can cost as little as $1 a gallon. Natural gas provides about the same energy and miles per gallon as gasoline.
"Combine that with a federal tax incentive and perhaps a rebate, and all of a sudden it's making fiscal sense," he said. "It's not just, 'Hey we want to do the right thing and we want to lessen our impact on the environment.' But now they're looking at alternative fuels and saying, 'Hey, we can actually [help] our bottom line.'"
But financial motivation isn't universal. The state of Minnesota has steadily added vehicles that run on E85, a fuel mix rich with ethanol, to its fleet.
E85 costs 10 to 15 percent less than gasoline. But it cuts a vehicle's miles per gallon by about 15 percent.
Holly Gustner, assistant director of fleet and surplus services for the Minnesota Department of Administration, said the state's interest in E85 pimarily has to do with the environment and reliability.
"That's a renewable fuel," she said. "It's also a domestic fuel. It's made right here in the Midwest. And then also biofuels are cleaner burning than gasoline."
Vehicles that use E85 now account for 3,000 of the 7,800 state vehicles. The state government's consumption of E85 hit nearly a million gallons last year, a nearly tenfold increase over 2005.
GE hopes that within five years, alternative fuel vehicles could account for more than 10 percent of the vehicles on the road.