America’s largest cities are converting their bus fleets from fossil fuel to electric – what’s behind this accelerating trend? The answer, in a word: economics.
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Electric buses, all-electric versions of the diesel-dominated mass transit fleet, are nearing cost-competitiveness with traditional technologies, representing billions in potential savings for cash-strapped local governments.
In many locations, the total lifecycle cost of running electric buses is lower than fossil-fueled buses, and if battery prices continue their rapid decline, the unsubsidized cost of buying an electric bus could be cheaper than diesel as early as the mid ’s.
While electric buses make economic sense for local governments, significant hurdles exist to mass fleet electrification. Fortunately, China may hold the key to overcoming them faster and cheaper than expected.
America’s Largest Cities Are Electrifying Their Bus Fleets
Electric buses are becoming a bargain due to lower operational and fuel costs – consider Chicago, which says each electric bus saves $25,000 in annual fuel costs.
The electrification trend is spreading fast. New York City, home to America’s largest bus network, says its 5,700 buses will be all-electric by . Los Angeles, the second-largest bus fleet, will convert all 2,300 buses to electric by . San Francisco, home to 1,100 municipal buses, just announced it will be all-electric by and will only purchase electric buses by .
Two recent analyses show how those economics are improving. In December, Carnegie Mellon University (CMU) researchers assessed the total lifecycle-costs of different bus technologies, finding battery-electric buses are cost-competitive with liquefied natural gas, compressed natural gas, and hybrid diesel buses – about 40% of the U.S. bus market.
Electric buses have lifecycle-cost advantages over internal-combustion engines because they covert energy into motion more effectively and have far fewer moving parts, making them cheaper to power and maintain over time.
CMU reports electric buses are still more expensive than diesel, but local transit authorities receive most of their capital funding from the federal government, so researchers reassessed the equation if 80% of a bus purchase were covered by outside funds. In this scenario, electric buses are the lowest-cost option for cities that receive federal funding.
Even without federal funding, fast-falling battery prices could make electric buses the cheapest option within a decade. Bloomberg New Energy Finance (BNEF) reports batteries will only comprise 8% of the total electric bus price by , down from 26% in , making electric buses cheaper than diesel on an unsubsidized basis. BNEF says if battery costs fall faster than projected, electric buses could reach unsubsidized cost parity with diesel around .
In cities with longer bus routes, electricity prices around $0.10 per kilowatt hour (kWh), and diesel prices around $2.50 per gallon, BNEF says electric buses will be fully cost competitive on a total cost of ownership basis around . For context, diesel prices averaged $3.16/gallon nationally in April , while transportation sector retail electricity rates averaged $0.09/kWh nationally in February and were above $0.11/kWh in New England and the Mid-Atlantic.
Even Higher Electric Bus Upside in School Districts
Big cities may be going electric, but public transit fleets only total 70,000 buses, making their impact relatively small. Meanwhile America’s public schools have 480,000 school buses, so their upside is nearly seven times larger.
According to U.S. PIRG, 95% of school buses run on diesel (compared to 60% of public transit buses) and school districts would save nearly $6,400 annually in reduced fuel and maintenance costs per electric bus added. In this equation, U.S. school districts could save roughly $2.9 billion annually if the entire national fleet were converted from diesel to electric .
Even if PIRG’s estimate isn’t accurate, savings could add up quickly with electric buses: The American School Bus Council estimates U.S. school buses consume $3.2 billion worth of diesel per year, and BNEF estimates every 1,000 electric buses on the road displace 500 barrels of diesel fuel per day.
PIRG also reports replacing all U.S. school buses with electric buses would avoid 5.3 million tons of emissions annually. Anyone who’s ever ridden in a school bus remembers the acrid aroma of diesel exhaust, but breathing in diesel fumes is a major health risk for the 26 million kids PIRG says ride school buses. Diesel exhaust is classified as a likely carcinogen by the U.S. EPA and a study of 61 million people linked diesel exhaust to higher mortality rates.
Can China’s Electrification Success Help U.S. Cities Reach Their All-Electric Goals?
So how can local governments overcome upfront financing hurdles? And why should cities wait decades to convert if lifecycle economics already make sense? The answer could be thousands of miles away.
Shenzen, China converted its entire fleet of 16,400 buses from diesel to electric between and , building the world’s first 100% all-electric bus fleet – larger than New York, Los Angeles, New Jersey, Chicago, and Toronto, combined. World Resources Institute says four factors made this possible:
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Comparing the Chinese and American electric bus markets aren’t apples-to-apples: China has around 99% of all electric buses worldwide, and bought 90,000 electric buses in . China’s transition was powered by a central mandate and transitional funding from the government, but Shenzen’s lessons can still apply, with some translation.
First, local governments can finance electric bus purchases with existing funding. PIRG urged state governments to allocate funds from the $14.7 billion Volkswagen Dieselgate settlement to buying electric buses, along with building electric vehicle charging infrastructure. Federal funds beyond the funding modeled by CMU also apply: In March , the U.S. EPA awarded $8.7 million to replace 450 diesel buses across 141 school bus fleets in 32 states.
States can also pitch in. Los Angeles recently received a $36 million grant from the California Transit and Intercity Rail Capital Program to purchase 112 electric buses, and California’s $25 million Rural School Bus Pilot Project provides electric bus funding through cap-and-trade revenue.
Second, local governments can create purchasing solutions with manufacturers. American electric bus manufacturer Proterra offers to sell electric buses at the cost of a diesel bus in exchange for a 12-year service agreement to use Proterra-owned batteries. Local government procurement policies can account for air pollution and climate benefits of electric buses when making new bus purchases, so that lifecycle costs are clear. Commitments to buy electric buses can attract manufacturer investment, as with Chinese electric bus manufacturer BYD, which built a 450,000 square foot manufacturing facility in California.
Third, local governments should coordinate with utilities to build and optimize charging infrastructure. Rising electric vehicle charging demand is widely accepted as a way utilities can increase electricity sales, provided bus charging is shifted into off-peak hours and regulators allow utilities to recover some costs of building charging stations through customer rates.
Utilities can also leverage their business model to help local governments finance electric bus purchases by covering the up-front cost difference between diesel and electric buses, in exchange for a monthly charge on transit agency power bills and the value of new energy storage resources. In this approach, local governments get electric buses at the price of a diesel bus and save money over time, while utilities gain approximately $100,000 in new power sales over the life of each electric bus.
America “Catching Up Fast” on Electric Buses
America may only represent 1% of today’s global electric bus market, but the economic upside of electrifying transit fleets is too significant to ignore. American’s “markets are driven by unit economics, local policy and community pressure to reduce pollution,” said Proterra CEO Ryan Popple. “The U.S. is catching up fast in adoption, and the market-based approach has led to better technology.”
Our largest cities are sending clear signals that the U.S. is ready to recharge mass transit, and while the federal government won’t issue a national mandate like China’s anytime soon, smart policy can accelerate electric buses on our roads.
Last week, the city of Seneca, South Carolina decided to shut down the Clemson Area Transit System, which served Seneca and nearby Clemson University. Once touted as owning the world’s first all-electric bus fleet, just a few years later two thirds of its expensive electric buses had broken down, the company that made them went bankrupt, parts were no longer available, and the city can’t afford to buy replacement buses.
Seneca is not exactly a major metropolis. But Clemson Area Transit isn’t the only transit agency to have trouble with electric buses. Just the day before Seneca decided to shut down its transit system, Austin’s Capital Metro announced that it was giving up on its plan to electrify its bus fleet by . Electric bus technology, said the agency, simply hasn’t progressed far enough to replace Diesels.
California’s Foothill Transit, one of the first agencies to use rapid-charge electric buses in , has also had problems. Like Austin, the agency had hoped to completely electrify by . Instead, by most of the electric buses in its fleet were out of service. In , the agency decided to return the buses even though doing so would require it to pay a $5 million penalty to the Federal Transit Administration, whose grant initially paid most of the cost.
The Southeast Pennsylvania Transportation Authority (SEPTA) may be the largest agency to have practically given up on electric buses. It pulled its 25-bus electric fleet out of service in when the buses were just five years old. The buses had suffered cracks in their chassis, but it appears that problem was only the straw that broke the omnibus’s back. “We do not feel the current [electric bus] technology is a good investment at this time,” concluded SEPTA’s general manager.
Transit agencies in Asheville, Colorado Springs, and several other cities have reported similar problems. Albuquerque completely gave up on its electric buses and returned them to the manufacturer, a Chinese company called BYD.
Electric buses cost 50 to 100 percent more than their Diesel counterparts. A study by US PIRG predicted that such buses would nevertheless save transit agencies $400,000 apiece over their lifetimes due to lower fuel and maintenance costs. US PIRG relied on four “success stories” to justify this conclusion. Success story number one was Seneca, South Carolina.
The report acknowledged Albuquerque’s problems but blamed them on the city’s hills and high temperatures. Compared with Austin, Albuquerque is practically flat and its temperatures are nowhere near as extreme. If electric buses can’t work in Albuquerque, they aren’t going to work in a lot of other cities.
Other than Albuquerque, one thing many of these failures have in common is electric buses manufactured by Proterra, one of four major electric bus manufacturers that have recently sold buses in the U.S. and the only one to actually be a U.S. company. In , it claimed that COVID-related supply-chain problems had driven it into bankruptcy. The company’s three divisions — transit buses, batteries and drive trains, and charging systems — were sold to three other companies to pay Proterra’s debts and none of the buyers are supporting Proterra’s buses or even making similar buses. In view of the many problems transit agencies were having with its buses before , it seems likely the supply-chain explanation was just a dodge for Proterra’s shoddy design and workmanship.
One reason for that may simply be opportunism on the part of bus manufacturers, including both Proterra and BYD. Before passage of the infrastructure bill, the federal government was paying 80 percent of the cost of Diesel buses but 90 percent of the cost of electric buses purchased by transit agencies. For a transit agency, that meant that an electric bus could cost twice as much as a Diesel bus without costing local taxpayers an extra dime. Bus manufacturers thus felt free to increase their profits by raising the price of their electric buses and, having done so, may have compounded the problem by cutting costs.
Beyond manufacturing defects, electric buses have several generic problems. First, while a Diesel bus can operate all day, an electric bus can operate only a few hours on a single time-consuming charge. Proterra claimed to have solved this problem with a rapid-charge system, but that didn’t prevent Foothill Transit from suffering enormous problems with its electric buses. This probably is particularly serious on long bus routes: Austin’s Capital Metro estimates that today’s electric buses could satisfactorily serve only 36 percent of its routes.
Second, the batteries needed to power electric bus motors are heavy, which is probably why SEPTA’s buses suffered cracks in their chassis. Supposedly, the frames on SEPTA’s Proterra buses were made of “resin, fiberglass, carbon fiber, balsa wood, and steel reinforcement plates,” which almost sounds like a joke. But making frames strong enough to support the batteries means adding even more weight to the buses, which shortens their range and adds to wear and tear on other parts of the buses.
Third, electric buses are not necessarily climate-friendly enough to justify their added cost. In Washington state, where most electric power comes from hydroelectric dams, switching from Diesel to electric buses will definitely reduce greenhouse gas emissions. But most other states, including New Mexico, South Carolina, and Texas, get most of their electricity from fossil fuels and thus electric buses may not reduce greenhouse gas emissions at all when compared with Diesels.
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