With the right policies in place, e-buses are a financially sustainable investment for cities.
Transitioning to cleaner technology can be costly and the necessary financial investment is a major hurdle when it comes to the adoption of electric buses in cities. This is not to say that the transition to e-buses cannot be financially as well as environmentally sustainable.
In fact, over a vehicle’s life span, the total cost of ownership (TCO) for electric buses can be lower than for diesel buses. Research in India shows that the total cost of ownership of an electric bus, calculated over a life cycle of 25 years, is 5-10 % less compared to a diesel bus. Other research supports this finding: a study conducted in Qatar found that electric bus TCO is lower than that of a diesel bus by 15% over a period of 10 years.
In the case of electric buses, the initial investment required can be a major obstacle to fast transition. Compared to diesel buses, the cost structure is capital heavy and operationally light, due to expensive batteries and charging infrastructure but lower cost of electricity compared to diesel in the long run.
New policies can encourage the adoption of e-buses by taking the different cost structure into account and allowing for innovative solutions to keep the investment in electric buses down. One way is the option of unified tenders to enable demand aggregation as successfully conducted in India. By pooling demand from five large cities, the Convergence Energy Services Ltd. (CESL), which promotes e-bus transition in India, was able to achieve the critical volume to reduce prices. As a result, the procurement of 5,450 e-buses was not only significantly cheaper than it would have been for any single city, the large-size order also served as an important demand signal to manufacturers.
On the supply side, de-aggregation can also serve to encourage the adoption of e-buses. By segregating the tendering process into separate bids for fleet supply and operator services, financial risk for underlying investors can be reduced, as observed in Bogotá, Colombia. Service operators can likewise benefit from reduced technological risk.
Given that e-bus cost savings are most noticeable over longer time horizons, enabling e-bus fleet suppliers and operators to obtain longer-than-normal contracts, may also assist in a faster transition to e-buses. Santiago, Chile, for example, enables fleet suppliers of electric buses to obtain 14-year contracts – 4 years more than for internal combustion engines. Service operators whospecifically lease buses from suppliers, will be able to benefit from the same, provided 50% of theirfleet are e-buses and that they subsequently hit performance targets. Even prior to those targets,they are still able to obtain an initial contract term of 7 years versus the usual 5 years.
In learning from other cities’ experiences and success cases, financial solutions such as those employed by Bogotá or India, the beneficiary of the world’s largest bus fleet, can be replicated orimproved upon. Key to enabling a rapid and widespread adoption is empowering stakeholderswith the most pertinent information – a prime example being, how to overcome the initial financialbarriers unique to electric vehicles. Forums, webinars and other events or publications such as TUMI’s Africa-India E-Bus Mission study tour are useful sources of inspiration to cities across the globe.
City spotlight
In 2022, the cities of Delhi, Calcutta, Surat, Bengaluru, and Hyderabad issued a unified tender for a total of 5,450 e-buses, securing record low prices with a price difference of up to 48% lower than comparable bids in the last 12-18 months. The mega tender was issued via the Convergence Energy Services Ltd. (CESL), the entity charged with leading the Grand Challenge initiative by the Indian government to boost the adoption of e-vehicles in India. “I can in fact say confidently that we have made electric buses and transport through electric buses a properly viable option going forward.” said Mahua Archarya, Managing director and CEO of CESL. The success of the initiative has fueled ambitions to procure a further 50,000 e-buses in the next five years.
Link to other key messages
Giving out new tenders for buses allows cities to rethink how they acquire and leverage transport data. To find out more, click here.