Prior to joining ARC in the Spring of 2018, Eddie held both data science and R&D roles in the medical device, medical science, and defense industries. His responsibilities have included experimental design and execution, data analytics, and client services.
Electrification is one of the most significant trends in transport today. Lower maintenance costs, more efficient operation, and zero tailpipe emissions among many other benefits have led to an accelerating adoption of electric vehicles (EVs) for road transport needs. When it comes to promising use cases, electrified urban buses lead the way, but can be a difficult investment for operators to make. In this post, I will be discussing how electric bus battery leasing can help cities make the transition.
Advantages of Electric Buses
To start, electric powertrains have lower energy costs on a per-mile basis than internal combustion engines. They convert energy into motion more efficiently, with today’s electric buses attaining the miles per gallon equivalent (MPGe) of around five times the MPG of their diesel counterparts. Beyond using less energy, electric buses have fewer moving parts and forgo liquid fuels entirely. Below is a list of part replacements/maintenance/issues that electric bus operators do not need to worry about:
- Oil changes, oil filters
- Spark plugs, wiring, ignition coils
- Muffler, timing belt, catalytic converter, air intake filters
- Fuel filters, fuel injector cleaning
- Engine sludge
- Emissions checks
- Less frequent brake replacement due to regenerative braking
In addition, electric buses emit no greenhouse gases or hazardous pollutants into the air where they operate, and their lifecycle emissions continue to drop as nations clean up their electric grids. Softer benefits include less noise pollution, and positive PR for cities looking to attract visitors, talent, and desirable jobs.
Electric Bus Battery Leasing
Lower energy use and maintenance requirements add up to far lower operating costs for electric buses, but they are significantly more expensive than diesels. Though they would make their money back and more from cost savings, municipal transit operators can be put off by the sticker-shock and would have to shift OPEX budget to CAPEX – a change in mindset and process that may meet some resistance.
In light of this, electric bus manufacturer Proterra has partnered with the financial arm of Mitsui & Co., to offer customers a battery lease arrangement. Here, an operator pays for the cost of the bus (but not the battery) upfront and begins benefiting immediately from the upgrade. The operator uses a portion of their operating cost savings to make lease payments on the battery. This means a city can upgrade their buses to electric without paying anything more than they would for a diesel fleet, bring cleaner air to their citizens, and actually spend a little less than they would have, even with the lease payment. The company uses the figure below to illustrate how this works.
In addition to lowering upfront cost, a leased battery from Proterra remains under full warranty during the entire lease period. When its capacity is depleted, such that it is no longer suited for transit purposes, the company will replace it with their latest model, repurposing the older battery for use in secondary markets.
Though the company offers other financing options, including bus loans and leasing as well, battery leasing allows operators to maintain their legacy budgeting structure, making it easier to switch.
High upfront cost is a major barrier to electric bus adoption, removing it will likely raise adoption rates and get this health-saving technology on city streets faster. As many smart city/clean technologies deliver their benefits through operational improvements and over time, offering creative financing arrangements like this one will be key in those markets as well.
About ARC Advisory Group (www.arcweb.com): Founded in 1986, ARC Advisory Group is a Boston based leading technology research and advisory firm for industry and infrastructure.
For further information or to provide feedback on this article, please contact RPaira@arcweb.com
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