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A Look At The Economics Of Electric Buses

Even as electric cars are yet to break into mainstream society, the era of electric buses already seems to be upon us. Several cities around the country (and the world) have piloted programs to test electric public transit. But does the economics of electric buses in public transit make sense currently? It is difficult to say, considering the absence of data.  

The argument for use of electric buses in public transit is a complex one. This is partly because electric buses do not have the infrastructure and market advantages enjoyed by their diesel and natural gas counterparts. Hence, they are costlier, by default. For example, electric buses cost $300,000 more than diesel buses and have an average lifespan of 12 years, comparable to the low-floor, 40-foot, large, heavy duty diesel bus that comprises 75% of the transit market. 

The case for electric buses can be distilled to a couple of points. 

The first one is related to pollution and carbon credits. Judah Aber, cofounder of EB Start Consulting, made the case for NYC to adopt electric buses in a 2015 report. He has estimated a net reduction of between 575,000 and 300,000 units of CO2, considering scenarios where the entire fleet is electric versus partial electrification of NYC’s fleet. Aber does not provide approximate or accurate monetary costs associated with this reduction. The U.S. Interagency group estimated a social cost of carbon of $21 per metric ton back in 2010. But experts have suggested that this figure might be too low. Assuming an average cost of $30 per metric ton, this translates to savings of $17.2 million and $9 million in each case. 

The second argument for use of electric buses is related to healthcare. In his report, Aber uses a diesel emissions quantities tool which has a health benefit analysis component. He estimates that the health benefits of switching from diesel buses to electric buses are approximately $150,000 per bus, which, according to him, translates to $100 per NYC resident (if the entire fleet is electric).

Finally, there is the cost. Typically, this argument should trump all others. But the absence of consistent and complete information makes it difficult to state a case based purely on this metric. 

For example, estimates for battery costs, which are the most expensive line item for electric buses, are unavailable or differ widely. Proterra, a startup that manufactures electric buses, uses 90 kWh LTO (Lithium Titanate) batteries for on-route charging of its electric buses. The startup did not provide battery costs to a California Air Resources Board study last year but did state that a midlife battery replacement is recommended after 6 years and that battery typically costs $75,000. BYD, a Chinese manufacturer of electric buses, uses 140 kWh LFP (Lithium Iron Phosphate) batteries. Because BYD did not provide actual battery costs, CARB estimates a cost of $900 kWh. The Chinese startup claimed that prices of its batteries will reduce by a further 33% by 2025. That calculation may be upset by sustained cheap prices for natural gas, which is used in some cities as fuel, and diesel.    

There are also infrastructure-related costs to consider. Most cities, which are phasing electric buses into their fleet, have not provided estimates for charging depots or electric charging stations for cities. Both modes of charging are expensive. Even Norway, which leads Europe in terms of electric vehicles, is yet to adopt electric buses for public transit. 

The introduction of electric buses has had mixed results, so far. For example, Hong Kong’s ride with electric buses hasn’t been smooth. The city purchased 36 electric buses last year and started a two-year pilot program. BYD, which supplied the buses for Hong Kong’s pilot, had to recall five buses from the original fleet due to an assortment of problems, such as braking issues. In China, cheats have had a field day siphoning government subsidies for electric vehicles. In the case of electric buses, they have used generous subsidies to finance more than the cost of their buses. 

Of course, this does not mean that electric vehicles are doomed. Substantial progress has already been made. In an interview with Greentech media, Ryan Popple, CEO of Proterra, said electric vehicles said their battery was “steadily squeezing more miles “. According to him, the cost of their battery has become competitive with diesel and would result in savings of $20,000 per year for public transit authorities in the United States.


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