By Jake Medwell and Loren Smith
The views expressed here are solely those of the authors and do not necessarily represent the views of FreightWaves or its affiliates. Jake Medwell, founding partner at 8VC, and Loren Smith, president of Skyline Policy Risk Group, discuss key industry topics for this regular quarterly Q&A exclusively on FreightWaves.
JAKE MEDWELL: Today we’re checking in on some of the major policy items that could affect the freight industry at a macro level, including permitting reform, electric vehicles (EVs) and what Congress does next in Washington, now that the debt ceiling has been resolved.
Starting with that, what’s the aftermath of the debt ceiling deal? Did the freight industry get any particular wins in it, besides, of course, not having a default of the U.S. government?
LOREN SMITH: The permitting reforms ended up being focused on energy projects, particularly the Mountain Valley pipeline project in the eastern U.S. along with process tweaks that may help renewable energy projects over the rest of this decade.
It’s been interesting to see more bipartisan interest in Congress on permitting reform over the past couple years. Here in 2023, it’s not just oil pipelines that get hamstrung by the bureaucracy but a lot of green energy projects as well, including the transmission lines to get that power where it needs to go.
MEDWELL: How much do we really expect from the reforms in the debt bill? Is this a sea change?
SMITH: No, not a sea change. To some extent, we need to see how these changes to siting authority are going to play out. Overall, I think there’s an understanding that if you want electric vehicles to arrive in force, you need some significant upgrades to the U.S. power grid. But that’s still going to be difficult and take years to execute on.
MEDWELL: Speaking of electric vehicles, the government has put a lot of effort into nudging the transportation sector toward EV adoption. How is that coming along?
SMITH: Car manufacturers are working toward that, shifting production to EVs in most vehicle types.
Truck manufacturers are taking a slightly different approach. While they understand the pressure to shift away from diesel- and gasoline-powered engines, EVs don’t seem like the answer for heavy-duty trucking. In part, that’s due to the size of battery you need for an 18-wheeler: With the current state of that technology, the batteries are so heavy that it reduces the amount of freight the truck can carry.
MEDWELL: Meaning potentially more trucks on the road and everything that implies for safety and congestion.
SMITH: Yeah. So most truck makers seem to be looking at hydrogen, if they really have to shift off diesel.
MEDWELL: Are the regulators OK if truck makers go with hydrogen?
SMITH: Sort of. Because of the climate focus, the Biden administration and climate advocates generally want to see water-derived “green” hydrogen rather than hydrogen derived from natural gas. And there are safety regulations that need to be reviewed to make sure the hydrogen is handled properly.
MEDWELL: What about the automakers? They’re full-tilt into EVs, right?
SMITH: For the most part, yes. However, there are two big hurdles to overcome with EVs.
We’re going to end up with a lot of EVs in the fleet, but depending on how you handle these two hurdles, it could be 20% EVs in 20 years or 60%. There will also be a large share of hybrids that continue to have small gas tanks.
The first hurdle, which is more upstream, is how you ensure a supply chain for the batteries, the most exotic component of an EV. Getting that requires a U.S. trade strategy to get the critical minerals — Congo, Australia, Chile, potentially. It can also involve accessing domestic U.S. sources of rare earth elements. By the way, that’s where the permitting reform issues with the debt ceiling are relevant — it could make mining easier, too.
MEDWELL: And if mining is easier, the U.S. can have a more robust supply chain with a domestic component. What’s the other hurdle for EVs?
SMITH: The other hurdle, as we discussed, is the power grid. If EVs are going to surge upward as a percentage of cars on the road, we’ve got to increase the production capacity of the power grid — we need more power.
Decarbonization and shifting to renewables is a top focus for policymakers in the Biden administration and in many states, but we’re also going to need: A) more power and B) more resiliency for the grid.
MEDWELL: Increasing power production sounds relevant to permitting reform also.
SMITH: It does indeed. Not just for the power production, but for transmission lines too, potentially. To be clear, a lot of things other than permitting go into any of these large projects, but that’s where policymakers seem to be considering tweaks right now.
MEDWELL: And a stronger power grid could potentially grease the skids for EV adoption. Very interesting.
Final question: What’s the next big fight in Congress, after the debt ceiling?
SMITH: Keep an eye on the rail safety reform bill that’s currently moving through the U.S. Senate. The interesting thing will be to see what the House does later this year, if the two chambers can agree on anything.
It’s important to note that there’s not any specific deadline for anything to happen on rail, so it’s not clear if there’s enough of a forcing mechanism to make Congress cut a deal on it. It may be that the response to the derailments from earlier this year will be handled mainly by the regulators.
MEDWELL: We’ll close on that note and hope to see more progress soon. Thanks, Loren.
SMITH: Thanks, Jake!
About the authors
Jake Medwell is a serial entrepreneur and investor. He is a co-founder of 8VC, a U.S.-based venture capital fund that manages several billions of dollars in committed capital. He leads 8VC’s logistics and transportation practice which was ranked No. 1 globally in 2022. He most recently co-founded BATON, a logistics technology company that sold to Ryder Systems in 2022. Prior to launching 8VC, Medwell co-founded Humin, a consumer mobile software company where he built the engineering team and led growth. He also co-founded The Kairos Society, where he sits on the board of directors. While in college at the University of Southern California, he founded Sole Bicycle Co. and grew it into an industry leader. Most recently, he co-founded Operation Masks with partner Drew Oetting to help bring personal protective equipment to medical workers on the front line of the fight against COVID-19.
Loren A. Smith Jr. is the president of Skyline Policy Risk Group, a research and consulting firm focused on the supply chain. He previously served as deputy assistant secretary for policy at the U.S. Department of Transportation.
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