Search

The Rapid Substitution Case for Battery Electric Buses: The Low Hanging Fruit

“The alarm bells are deafening,” said U.N. Secretary General António-Guterres, describing his organization’s latest climate report as a “code red for humanity.” Adding to the urgency for immediate government response, the report mostly validates what scientists have long predicted: we have until about 2050 to cut net greenhouse gas emissions (GHG) to zero if we are to avoid the very worst impacts of global warming. Half of these cuts need to happen before 2030, and while the Biden administration has formally committed to these objectives, such goals are beyond the ability of the federal government to achieve alone. Skibo Energy believes that this is an undertaking of huge scale and complexity requiring an “all hands-on deck” approach, involving business, finance, civil society organizations and all levels of government. Among these the role of local transit agencies in bus fleet electrification stands out due to its understated potential impact on carbon emissions and readiness for implementation. In what follows, we will lay out the case for the electric bus as low hanging fruit, emphasizing not just the urgency but also the potential of this high-leverage opportunity. Why Electric Buses?


There are several reasons to focus on replacing fossil-fueled buses, beginning with the fact that transportation is the number one source of emissions in the U.S. and is, therefore, the area most in need of redress. Heavy-duty vehicles (such as transit buses) account for a disproportionate amount of those emissions—only 5% of vehicles on the road, heavy-duty vehicles constitute 25% of transportation emissions. That’s because they drive more miles than passenger vehicles and are less efficient with their fuel consumption. The average transit bus, for example, drives 44,000 miles each year, while getting only 3.3 mpg—that’s almost four times as many miles as the average passenger vehicle while only one-seventh the fuel efficiency. Key to Skibo Energy’s Rapid Substitution, converting a transit bus which consumes roughly twenty-nine times as much oil each year than a typical passenger vehicle (317 barrels of oil vs. 11) is a huge step towards keeping oil in the ground.


By replacing fossil-fueled buses with zero-emission buses, one therefore eliminates a significant amount of oil consumption and thus GHG emissions: in Pittsburgh, PA, for example, electrifying all 750 transit buses would eliminate the demand for 235,500 barrels of oil each year thus preventing an estimated 23,000 tons of GHG gas emissions yearly. There are also meaningful benefits to public health and standard of living, as many studies link particulate matter (like that emitted from diesel buses) to heart and lung disease. Eliminating particulate matter caused by diesel has the biggest positive impact on lower-income communities and communities of color, which are disproportionately affected by poor air quality. While there are multiple options for zero/low emission buses which address Skibo Energy’s Rapid Substitution, this article is focusing on battery electric buses (BEBs) as they are growing in popularity and also improve the user experience for riders, drivers and passersby, via quieter, cleaner, and smoother rides.


But perhaps the greatest advantage of going electric is among the most understudied: the corollary (and exponential) impact that reducing oil demand has on curtailing future oil production—a phenomenon we refer to as ‘Rapid Substitution.’ In brief, a small drop in oil demand has historically resulted in an exponential drop in price due to the particular dynamics of oil production. In the case of the permanent reduction of oil demand represented by electric vehicles, the lower oil price sends a signal to producers that more costly drilling projects will not be a good investment, thus foreclosing future extraction and leaving billions of barrels of oil in the ground (along with their planet-warming carbon emissions). For example: Skibo Energy research suggests that a 5% drop in global oil demand will result in a long-term 50% drop in oil price, dropping the price of a barrel to under $35. This all but eliminates the possibility of future investment in expensive (and often controversial) places, such as tar sands and arctic drilling, which require oil prices above $50 to clear their costs. According to Skibo analysis, electrifying all transit buses worldwide would drop global oil demand ~1.5-2%, making public transportation a leading player in Rapid Substitution. (For more on the theory behind rapid substitution, read here and here.)


While any activity that detracts from oil demand (including EV adoption, public transportation—regardless of propulsion system, or walking) thus contributes to rapid substitution, the institutional nature of electric buses makes them an especially high leverage opportunity to eliminate oil usage and thus emissions. Unlike with transitioning personal vehicles to electric, transit agencies can transition hundreds or even thousands of gas-guzzling vehicles as part of a single, consolidated program. Doing so has the further advantage of building local capacities that will be important for future efforts at decarbonization and sustainability, including organizational and administrative capacities as well as capital financing, a topic we’ll explore further in the next section.


Building Local Capacity


Considering the benefits noted above, as well as the dire implications of staying the course, an ambitious electrification program would seem to be the clear (and urgent) play for any transit agency. And yet, the upfront costs of electrification can be prohibitive: a new electric bus with charging infrastructure can cost two or three times as much as the diesel alternative. In a national political environment wherein transit agencies fight merely to retain status quo services, it’s hard to justify large additional expenses, no matter how necessary. Typically, agencies and state governments alike look to the feds for this kind of “extra” support, and indeed, the Federal government has provided millions of dollars in recent years to fund electric buses, through programs such as the Low-No Emissions program. Still, these grant programs are both limited and competitive and so rarely provide a transit agency with adequate funding to meet science-dictated electrification goals. Moreover, since the grant award system is irregular, it’s also inherently unsustainable, preventing the local agency from proactive planning for long-term de-carbonization. While the Senate infrastructure bill currently making its way through Congress would provide an immense boon to transit agencies, multiplying the amount of funds they have access to over the next five years, it still does not address the fundamental pitfalls of this funding model. What’s needed is a local approach that bolsters and backstops the ebbs and flows of federal support, allowing the feds to contribute when and how they’re able without risking the viability of the project or leaving the job site empty.


There are a number of alternative, somewhat more unconventional methods of funding public transit that could be explored, especially as regards the novel affordances of electric bus technology. For starters, while BEBs represent a relatively high upfront expense, they’re a terrific investment, saving their owners on reduced fuel and maintenance costs over the lifetime of the vehicle. A growing body of work suggests that the total cost of ownership (TCO) of an electric bus is equal to or less than that of a diesel bus. (Electricity is cheaper than diesel and it's also cheaper to maintain a vehicle with fewer moving parts and fluids) But the ‘front-heavy’ nature of electric bus expense causes budgetary issues for transit agencies, which are accustomed to the more symmetrical disbursements associated with diesel vehicles. Transit agencies should therefore consider financing options to better balance expenses across time, such as would allow them to bolster their capital budgets with expected savings from their operations budgets. Many, if not most, electric bus manufacturers offer one form of financing or another, including bus, battery, and operating leasing programs. There also exist various methods of favorable debt financing, via green bonds and concessional loans. Ideally, the Federal government could provide pass-through financing at the lowest rates available.


Getting somewhat more creative, there are also novel revenue opportunities uniquely afforded by electric buses. These include premium advertising dollars (selling valuable ad space to brands that want to associate with ‘clean’ and ‘green’ technology) as well as energy arbitrage opportunities where the local utility offers bi-directional charging and time-of-day rates. Transit agencies could also seek partnerships with local corporations, universities, and nonprofits looking to reduce their carbon footprint, by soliciting the up-front cost differential between a diesel and electric bus and offering in exchange locally managed (and appreciated) “carbon credits.” What better way for a local corporation to gain goodwill amongst neighbors than to directly improve the region’s air quality!


Conclusion


The early twenty-first century is a time when science, technology, and the lived experience of climate change are converging. Not only can we understand this phenomenon but also see it manifest before our eyes—in wildfires, extreme weather, and melting ice caps—and have the ability, through collective action, to respond appropriately. The electric bus is one of those responses and, as has been laid-out here, is also one of the lowest hanging fruits in what will be a generations’-long fight to maintain a planet hospitable for human life.


From a system-wide perspective, the need to build local capacity in organizing, financing, and administering emissions reduction projects is paramount. One need only consider the unreliability and oftentimes dysfunction of attempts to address climate change at the international level and in Washington. Skibo Energy’s Rapid Substitution approach makes clear that small efforts on the local level when multiplied will have huge impacts on a global scale. By leveraging oil’s price-sensitivity to demand, relatively small actors can influence the price of oil futures which will render new oil projects un-investable. The stakes could not be higher, and our response begins with the electric bus.

1 comment