Forget the Hype, Here’s the Reality of Electric Construction Equipment

Bryan Furnace (00:00):

Today we're here to talk about the new revolution happening in the equipment industry. And right now we all see this on the front lines as electrification. And that's really the way this interview started was talking about electrification. But then my interview candidate Ray from Volvo really blew my mind with how the other side of the industry is thinking about this revolution and it goes far above and beyond electrification. So without further ado, here's my interview with Ray.

(00:36):

Well, Ray, thank you so much for being on the dirt today. I really appreciate your time.

Ray Gallant (00:45):

Pleasure to be here, Bryan.

Bryan Furnace (00:46):

Well, my first question, I'm just going to hit you right out of the gate with it. The industry really is pushing sustainability pretty hard. While all of us out in the field are kind of really fighting that change. We're very happy with where we are with our nice soot blowing diesel engines. Why is Volvo joining in with the industry on this push towards electrification?

Ray Gallant (01:07):

So that's an interesting question and a very straightforward question, if I may say. We believe that sustainability is a worthy goal, a worthy thing to pursue. We recognize that the technology is not advanced to the point where every application can instantly switch tomorrow to a more sustainable basis. Our approach is to switch what we can switch to a more sustainable footprint. But more importantly than that, take the features of these new technologies and take advantage of them going forward.

(01:44):

So electric machines, for instance, battery electric machines are very quiet, have low vibration as well as zero emission. So you're doing good for sustainability and for the environment. But at the same time, because they're quiet, because they have low vibration, they can do applications where traditional diesel machines could not even function. So in around animals or valuable livestock where you don't want the fumes going into livestock. In around food, food sources, in indoors, applications like that, that traditionally are very difficult or expensive to do with diesel equipment or cannot even be done at all, electric equipment has a chance to go in there and do that.

(02:29):

So our push is to find and take advantage of those individual special applications where you can use electric equipment. And as the electric equipment gets better and better and better, and as the technology matures, then it may be a more viable alternative for general construction use. But we're not, at the moment, saying that the technology is ready to replace every application, nor would we promote that because it wouldn't be good for the industry.

Bryan Furnace (03:02):

And it does occur to me, that's one of the things when we talk about electrification. That a lot of the industry comes at this from a very biased viewpoint of we think about it from the perspective of what we do in the industry. And for a lot of us it's out in the middle of a cornfield that's being turned into a residential subdivision or a new highway project, and there's no way you're going to be able to power this equipment as it stands right now electrically. But it's because we also don't think about the other aspects of the industry where this is actually viable technology and this is something that's actually going to bring a lot of benefits to these industries rather than just becoming the pain that we view it as out in the field in our area of the industry,

Ray Gallant (03:42):

And it's more than just changing the machine. So one of the things we have to look at is the overall energy management of the site. Right now, we have diesel fuel, which is, in this country, relatively cheap and relatively easily accessible and has been for a hundred years. We've never had a problem basically, with a few little interruptions. We've never had a problem getting all the fuel we want and generating lots of energy on our job sites.

Bryan Furnace (04:09):

Sure.

Ray Gallant (04:09):

That thinking has to change and that's a lot of the change that people are pushing back against. So no longer are you going to be thinking in terms of refueling a machine once a day. You're going to have to get used to probably refueling two or three times a day with shorter, quicker refueling intervals on electric machines. Or having an electric machine that's hooked up to the grid all the time. So you don't have the mobility that you have with a diesel machine today, but your energy costs are much, much lower and it's much cleaner for the environment.

(04:45):

So again, it's not a matter of just looking at the environmental and sustainability benefits from that sense. It's a matter of taking a look at all the advantages and taking advantage of those advantages. That's our job as OEMs to find those, put them out there to the industry and help customers take advantage of that and run better, more efficient, more cost-effective in productive sites.

Bryan Furnace (05:12):

You touched on something that I think a lot of people, including myself, don't think about when it comes to electrification, and that's the cost of the energy. So my personal experience, my dad has one of the new F-150 Lightnings. And so we've been running a bunch of experiments and playing with that. And one of the things that's really stuck out to me is, we're driving that truck around for far cheaper than we are my equivalent gas truck. And it's because you can tap into the grid and you can get that energy at a much cheaper price than you are filling up at a full tank of gas or a full tank of diesel at the pump. And I think that's going to shock a lot of people when they really put those numbers down on paper and see the savings on the electric side.

Ray Gallant (05:52):

And I think, again, it's a matter of converting the industry to take a longer term look at this. There's no question that electric equipment right now is more expensive than diesel. But if you take a look at the operating costs, the maintenance costs, the ongoing costs throughout the lifecycle of the machine, they're actually much cheaper to run than a diesel machine. So that equation, again, has got to gradually work its way into the public, into their thought process so that they understand where the advantages are. And it's not to force people to do something, I don't believe in that approach to show them that, okay, there is another way and here's the advantages of it to go electric or to go sustainable technologies.

Bryan Furnace (06:33):

Yeah. So my next question for you, and this is going to sound like I have an agenda, but this is just a legit me asking as someone who is kind of behind the scenes in this area of the industry. How do you see this technology morphing and changing and becoming more relevant to more areas of the industry? For instance, those guys that are out there in the cornfields or on these big highway projects. As someone behind the scenes, what do you see happening over the next five to 10 years?

Ray Gallant (08:31):

So we talk about three technologies merging together and being the drivers of this revolution in technology in the next few years. One is the sustainable power. So whether it's battery, electric, grid, connected, alternate fuels, renewable diesels, or even hydrogen, those technologies are going to be more and more prevalent. And of course, as they become more and more prevalent and you get fueling sources, they're going to become more and more practical.

(08:57):

The second set of technologies are telematics. So now we've got machines connected. We can sense the environment around them. We have very good ability to gather information about what the machine is doing, how productively it's working, how the operators are working and gathering all that information and reacting to it very quickly. And the third, of course, is using that information to automate the processes. So, not only can you look at the advantages of an electric drive versus a diesel, for instance. But electric drive, you can actually start taking the information from the machine, coordinating between machines, automating certain parts of the process much easier than you can with a traditional diesel drive where you have a throttle control and all the things that go along with that.

(09:43):

So with electric machines, you have electro hydraulics, you have the telematics integrated. That I see, is the big revolution, and that's what's going to make the difference in energy capture or energy efficiency on a job site. We can spend millions, literally millions and billions of dollars, trying to get one or 2% more efficient with the engine in burning diesel or burning fuels. Or you can turn around and look at a job site and say, "Okay, how can I get my machines to work together in a better way? How can I get the idle time down? And how can I make sure that machines aren't queuing up for a loading site, that everything's matched up properly? So how can I control the flow of material in a site rather than just worry about what each individual piece is?"

(10:29):

So it's the technology that came from the manufacturing sector where you would never think of trying to optimize a factory by looking at each factory piece of equipment and optimizing that. You look at the entire flow of the factory and where your bottlenecks are, not looking at only the individual pieces of equipment and how efficiently they're running. And we have to adopt the same kind of thinking. The site is nothing more than a factory moving materials around and changing the profile.

Bryan Furnace (11:00):

It's funny, the more conversations I have with the manufacturers on this topic, the more revelations I have, and one of them that just occurred to me is the whole telematics thing. As a former equipment salesman and someone who works on the receiving end of the equipment, that's always felt like it's a tool that you guys use to diagnose my equipment. You give me some nice usage numbers, and that's really nice. It didn't really occur to me until this very moment that you guys are getting a constant feed of information from every machine equipped with telematics. So that you're getting real-time feedback as to what the usage numbers are and how much fuel's being consumed and how many tons are being moved per gallon of diesel.

(11:41):

And so when you guys start throwing out these numbers on the electric equipment, this is not you guys kind of throwing your thumb up in the air and going, "Eh, we think it's about here." This is real information that you guys have done the analysis on because you have it.

Ray Gallant (11:54):

And actually, the analysis is a good point. We talked about digitization and AI being the technologies together. And what's happened is that the centers have become so fast and so accurate that we can gather millions and millions of bits of data from a job site every minute if we want to.

Bryan Furnace (12:13):

Wow.

Ray Gallant (12:14):

The problem is that we can't possibly analyze that using traditional means. So we have to start looking at AI programs to look at that data, spot the trends, and predict where the site can be improved and optimize the site that way. So again, as more and more of that technology comes in, that's where the power of this starts being unleashed. And that's what's going to be the key to... You make them more efficient, you have less energy used that makes the charging systems or refueling systems, all these other things start being viable.

(12:49):

If we were to simply build battery electric machines and expect them to have the same energy usage in a day as a diesel machine, your battery packs become too large, unwieldy, too heavy, too expensive to be practical. So the real secret is to develop these technologies in parallel and we'll get to a point where, in my opinion, it'll be much more efficient to run a connected site electrically than it ever was to run it diesel wise.

(13:19):

It's very true that the telematics, it started basically as monitoring and maintenance, if you will. So we were spotting if you needed new oil changed, we were spotting if you had a problem, what was the problem? What was the error code that we could go out and fix? But I think nowadays, telematics has evolved far beyond that. And a good example of that is, if you look at the agricultural industry and precision farming where they're literally placing the seeds or changing the amount of fertilizer. For every square foot of their field, they're able to control exactly what they want in there and what the fertilizer dose is and all those things in a way that you never could as an operator on a tractor without the help of these systems.

Bryan Furnace (14:07):

I tell you, this interview is kind of cracking my brain open a little bit. We traditionally, in our industry, again, as the frontline guys that are using this stuff, we think about technology as being machine control and GPS and over dig protection. And I hadn't even considered the possibility of AI algorithms working on data in the background to completely change the way our job site fundamentally works because we've never had access to this sort of technology before. We're kind of on this next evolution of the industry that I would almost liken to going from the old cable driven machines to when we finally came out with hydraulics. Whatever we're on the cusp of, it's going to be a monumental shift in the way these job sites operate.

Ray Gallant (14:51):

And I think, that this is a pattern that you see with every new technology, every disruption in an industry. Because of technology, you see this pattern. So the first examples of the technology that the early adopters buy, if you want to use that term, they're not always better than what it replaces than the mature product of the old technology.

Bryan Furnace (15:13):

Sure.

Ray Gallant (15:14):

And we're seeing that. The electric cannot hold a candle to diesel in some applications. Right now, the technology is just not there. But fast forward 10, 15 years down the road, and what you invariably see if you look back in history of disruptive innovations is those new technologies eventually become far more productive and far more efficient than the technologies they replace. That's just the way it works.

Bryan Furnace (15:40):

Sure.

Ray Gallant (15:40):

Very few technologies actually burn out. They may take a long time to mature. But technology has a way of finding its place, and people have a way of finding the right applications for the technology and a way to take advantage of the opportunities and features that that technology brings.

(16:01):

And that's what I'm really pushing with the industry and the people I talk to and our customers is, don't look at this as a replacement for diesel. Look at this as, "Okay, what new applications can I do that I could never do before? Where is this going? Where will it be five years, 10 years from now? How can I prepare myself?" And that includes education, job retraining, because a job to the future... Even the operator's job of the future is going to be very different than it is today, or it was 20 years ago. That's all part of the change. It's not just re-powering a machine. If you're looking at it that way, quite frankly, there's not a lot of advantages, and I would agree with your first statement. There's a lot of pushback for people that are just going to replace a diesel with electric machine. But if you look at where the future is going, what it can do on your site, this becomes a pretty exciting picture.

Bryan Furnace (16:56):

Yeah. Like I said, this is fascinating and you're really cracking my brain open on this one because I hadn't even considered that whole other aspect of where this goes. We just get so fixated on the electrification and that's never going to work, that we totally miss the bigger picture. So this is really interesting. To kind of turn the focus back on you guys as a manufacturer, what are some machines that Volvo currently offers in the electric market, and what do you guys have coming down the pipeline and how do you see that playing out?

Ray Gallant (17:26):

Volvo is subscribed to the science-based targets to the Paris Accords of 2015, and we basically have made a public statement that we want to be about 35% electric by 2030.

Bryan Furnace (17:39):

Wow.

Ray Gallant (17:39):

And we want to be fossil free by 2040.

Bryan Furnace (17:42):

Wow.

Ray Gallant (17:43):

Which basically means to hit the 2050 target to the Paris Accords, we need to start converting the fleets about 10 years earlier.

Bryan Furnace (17:53):

Sure.

Ray Gallant (17:53):

So that's basically why we're setting our targets way ahead. So we don't want to get to 2049 and all of a sudden have to hit a 2050 target. It's too late by then. So we're setting our targets very ambitious and very far ahead. What this means for us is that we have to launch a lot of models basically, in the next seven years to have a chance to hit those kinds of numbers. So we started in 2019 with compact equipment. It's the easiest to electrify from a battery electric point of view. It was developed basically in the forklift and scissor lift industry. So we could basically borrow from that and very easily and quickly produce a line of machines.

(18:36):

So we produced five models starting in 2019. We brought them into North America in 2021. But they were three models of small compact excavators, an EC 18, which is a conventional swing, small excavator, 1.8 ton, and ECR 18, which is a short swing version of that 1.8 ton machine. And an ECR 25, which is a short swing, two and a half ton excavator. And in two models of loaders and L25 and an L20 compact wheel loader. And then this year we followed up with the DD25, which is a double drum asphalt roller, two and a half ton size. And that machine is produced here in Shippensburg, Pennsylvania in the US. So that's our first machine that we're producing here in the US.

(19:22):

And then we've also launched our next series of battery powered equipment, which is a 600 volt battery powered as opposed to the 48 volt compact equipment. We now a 600 volt, 23 ton excavator to the EC 230. That is again, a battery electric machine with a 600 volt battery pack, 264 kilowatt hours of storage on board.

Bryan Furnace (19:44):

Well, my final question for you is, anytime I interview a manufacturer on electric equipment, I try to give them an opportunity to talk about some of the unforeseen benefits to electric because so much of the industry just has that knee-jerk, "No way. That'll never be helpful. That's awful." We've touched on a handful of them already just through our conversation, but what are some of the unforeseen benefits of switching over to an electric piece of equipment?

Ray Gallant (20:07):

So the main benefits are, of course, everybody talks about it’s emissions free, it's clean, that's a given. But the noise and vibration free aspect of electric equipment is often overlooked. We have operators that get on the equipment and they get off after four or five hours working the equipment and they say they're amazed because they're not tired, they're not fatigued, they don't have that... You get off a piece of diesel equipment, sometimes you feel like you're still operating, you're almost shaking. It's like getting off a ship.

Bryan Furnace (20:42):

Yeah, you hear it in your sleep.

Ray Gallant (20:46):

With electric equipment, they get off and it's okay, no big deal. I was sitting in my easy chair all day. It's the same type of feeling. So that's one big thing. The other big aspect that people don't think about necessarily is that electric motors by design have full torque at any RPM. So unlike a diesel where you have to throttle up and wait for the engine to get into its ideal torque range, and its efficient torque range, for that matter. An electric equipment, it doesn't matter which RPM you operate at, it has all its torque at that RPM.

(21:22):

So what operators are feeling is that they will swear that it's a stronger machine than the diesel. It actually isn't. What it is, it's more reactive than the diesel. So when they pull back on the joystick, it's instantly got full power available without having the engine RPM to go up or the engine to recover from a drawdown in RPM, it's instantly available. So operators will get off and say, "It's far more productive machine. It's more powerful than the diesel." It's actually not. It's just more reactive. So it's going to be an interesting journey. Again, I think there's all kinds of opportunities, but it's up to us to identify them and make them happen and take advantage of them.

Bryan Furnace (22:07):

Yeah. Well, Ray, thank you so much. This has been a super insightful interview. And quite honestly, I know there's going to be a ton of growing pains with the new technologies that are coming down the pipeline. But ultimately, I'm excited at what it unlocks for the job site and to see what that looks like as we implement it in the future.

Ray Gallant (22:27):

As am I. Thank you very much, Bryan.

Bryan Furnace (22:28):

Well, thank you again for the riveting conversation. This was one of my favorite interviews just because it really made me totally reframe the way that I'm thinking about this next era that we're moving into in our industry. And let's be honest, this is an old industry that hasn't had a lot of huge changes since we switched over to hydraulics. I mean, what was the last big evolution in this industry? It's been a while.

(22:52):

And so this is a really exciting time to be in this space. And I hope this gives you some insight and helps you as you make decisions on the future of your company. So, as always, thanks for watching and we'll catch you on the next episode of The Dirt.