Strategies for Transit Agencies

The future is looking bright for an accelerated conversion to electric buses by public transit agencies. Over 200 agencies throughout the country are either well-positioned to begin their journey, already delivering on fleet electrification expansion plans or evaluating and completing pilot programs to test the technology. A few are already running 100% electric bus fleets, and over 50 agencies acquired their first electric buses last year. As electric vehicle (EV) technology adoption grows, it has brought about noticeable cost reductions for batteries and vehicles.

There are significant benefits that have been propelling decarbonization of fleets in the transportation sector, such as:

• • Reduced life cycle costs
  • Reduced operating expenditures
  • Impactful sustainability gains

Slowing the conversion to electric was the financial fallout brought by COVID-19 on local government budgets and the higher entry-point cost of technology and its associated infrastructure but that is about to change significantly. Despite the crisis, much progress was achieved last year with the help of several federal and state grants put in place before the crisis hit. Currently, with President Biden’s administration and Secretary Buttigieg leading the Department of Transportation (DOT), we are already seeing dramatic focus on legislation policy making with unprecedented support for public transit and electrification efforts.

Let’s take a closer look at some fast-approaching opportunities public transit agencies can take advantage of to accelerate EV conversion, de-risk their investments and future-proof their operations while meeting sustainability goals.

Take Advantage of Extra Funding

The Duke Energy Fleet Electrification Calculator is a great tool to get you started.

President Biden’s campaign called for $2 trillion toward a clean energy and infrastructure plan, pledging 100% clean electricity by 2035; 500,000 EV charging stations nationwide; zero-emissions public transit for every city of greater than 100,000 residents; and a railroad system revolution. The new administration highlighted transportation as a key sector to advance its climate action agenda and incentives for electrification will show up through several federal agencies (FTA, DOT, DOE, EPA, etc.). In addition, increased budgets could come as a vehicle-miles traveled (VMT) fee is being considered as a fix to replace gas and diesel taxes revenues currently funding the insolvent Highway Trust fund, part of it going to mass transit programs.

Currently, the Spring 2021 round of federal funding is already unrolling with the DOT announcing an increased $180 million for the Low or No Emission Program and DOE announcing $100 million for the Clean Energy Solutions Program. At a local level, there are various incentives, mandates and regulations issued by states, cities, counties or local utilities supporting electrification. New Jersey’s Gov. Murphy recently announced the state will invest $100 million into clean transportation projects. The Michigan Department of Environment is offering $30 million in grants for clean transportation deployments. California’s 2021 proposed budget for economic stimulus includes $1.5 billion in incentives for the purchase of electric or hydrogen vehicles, equipment and infrastructure. An additional $300 million will support installation of EV charging stations at all state facilities.

Additional sources of funding for charging infrastructure may come from regulated local utilities as regional utilities commissions authorize their EV infrastructure expansion plans. Just recently, the California Public Utilities Commission authorized a $436 million budget for the Charge Ready 2 program to fund installation of additional EV charging infrastructure. The North Carolina Utilities Commission has approved $25 million for a charging station pilot program that will include electric buses. Several other authorities are following suit, pending regulatory approvals.

Take advantage of innovative partnerships & financial models

The outgoing Federal Transit Administration (FTA), under Secretary Elaine Chao, issued a new guidance facilitating innovative partnerships and joint development projects. The FTA is giving more flexibility to transit agencies to use federal money for joint development projects involving building commercial, residential or mixed-use facilities near transit or on land owned by transit systems. The new guidance also reduces the FTA’s involvement in the agreements negotiated by project sponsors and their partners. “Innovative partnerships and funding sources can help deliver projects more quickly, and this is especially important as communities recover from the COVID-19 public health emergency,” said FTA Administrator K. Jane Williams in a statement.

The use of public-private partnership models should be explored as it is increasing beyond traditional highway building and large projects. Adding solar generation and energy storage in metro areas to monetize energy production and generate revenues to public agencies might be viable in certain areas.

Contract models, such as Energy-as-a-Service (EaaS), Electrical Infrastructure-as-a-Service (ElaaS), Resilience-as-a-Service and Charging-as-a-Service are on the rise with a warm welcome from transit agencies. These models eliminate the need for initial capital expenditures by transforming them to an operational usage expenditure. The fuel savings alone can help finance electrification under such models. These as-a-service contracts can include electrical and charging infrastructures, optimization and analytics tools, and robust resilience equipment. Duke Energy Sustainable Solutions and other Duke Energy affiliates can also help with a variety of customizable options.

Get faster climate action results

Transportation policy has remained largely unchanged since the 1950s and is primed for a fresh start with significant technological advances, favorable business cases and substantial climate benefits – as seen during the immediate emission reduction levels during COVID-19 shutdowns. In 2020, preliminary numbers by Rhodium Group’s research indicated a reduction of around 10% in greenhouse gases (GHG). The transportation segment is a major energy user, burning most of the world’s petroleum.

Energy efficiency in this sector has decreased since Lawrence Livermore National Lab started tracking energy flow through our economy from around 26% in 1950 to around 20% in 2019. Most energy is simply wasted as heat (80%) and the sector accounted for the largest portion of the total U.S. GHG emissions – around 28%.

In contrast, the Power Generation segment gained around 25% energy efficiency in the last 10 years to about 35% overall by the increased addition of renewables and the swap of coal plants in favor of highly efficient combined-cycle natural gas.

With President Biden rejoining the Paris Agreement for climate change on Day 1 of his presidency, we can expect a series of incentives, mandates, and new rules for climate action.  Transportation electrification is an effective tool in the toolbox to achieve immediate impactful results. Public agencies will play a key role, enabling fast results as electric buses range from 25%-87% less GHG emissions than diesel and 19%-85% less than compressed natural gas (CNG).

Overcome some of the angst: Hydrogen vs. EV and the labor impact

Hydrogen buses are attractive as they offer around 300-plus miles per fill while electric buses offer around 150 miles with current battery technology. This is relevant for longer fleet routes as on-route charging may become necessary or the route will need to be split and covered by additional buses.

Having input of a knowledgeable consultant who can model different scenarios with a mix of technology and charging strategies will pay off quickly.

Here are a few things to consider*:

• • Electrical charging infrastructure costs less than the required by hydrogen fuel charging and supply chain, which needs to include stringently safety precautions.
  • If available locally, EVs may offer additional monetization opportunities using their batteries in vehicle-to-grid strategies.
  • Battery technology is advancing quickly, and the expectation is that capacity will continue to improve.
  • Sustainability gains: When considering life cycle emissions, which includes CO₂ generated during production and supply chain, hydrogen fuel cell vehicle sustainability gains will depend upon how the hydrogen is produced. Right now, most hydrogen supply comes from natural gas and has a significant carbon footprint. This can be reduced dramatically if hydrogen production by electrolysis using renewable energy takes off.
  • On the other hand, EV fleets with access to a cleaner energy grid or deploying on-site renewable energy generation and storage can have an immediate impact with substantially lower life cycle emissions. As discussed above, a market-based model to reduce GHG has monetization incentives designed around life cycle emissions and not only tailpipe. Therefore, hydrogen fuel cell vehicles might not make financial sense, at least in the short term.
  • If hydrogen becomes more cost-effective or more sustainable, a larger-scale hydrogen fuel cell can be added to the fleet depot to generate electricity locally, seamlessly integrating into the electrical charging infrastructure of an electric bus fleet.

*source: Wendel Companies -Internal Transit Presentation – John Havrilla

Another common source of concern is that electrification may bring job losses. Secretary Buttigieg has made clear that workforce issues will be a focus and not overlooked. While autonomous vehicle technologies will have more impact on jobs, EVs can help protect and create new higher-income positions.

Current drivers can be trained on EVs and learn how to optimize their energy usage, taking advantage of their regenerative braking technology to potentially earn an energy-savings bonus. Traditional mechanics shops can be trained to handle medium- and high-voltage technologies, data analysis optimization and related specializations electrification brings. Transportation union workers and city mayors are looking forward to working with the new administration on the opportunities and challenges that will emerge.

Incorporate valuable insights from subject matter specialists and agencies well into their transition

Several transit agencies have shared valuable lessons they’ve learned from their electrification journeys.

Here are a few key insights:

• • Engage the local utility early with forecast energy demands. Additional infrastructure on the utility side of the meter may be required and its implementation synchronized with electrification plans.
  • Engage consultants with electrical charging and energy management experience. This may have a significant impact on the returns of the overall project and life cycle costs by lowering the cost of the infrastructure required or offsetting and hedging energy costs.
  • Implement the bulk of the required electrical infrastructure at the project onset, which can lower the overall cost as electrical infrastructure expansion is not easily added in stages.
  • On-site renewable power generation and battery storage can achieve additional cost savings, help to achieve sustainability goals and improve site resilience.
  • The recent extreme weather events in California and Texas underlined the importance of having a robust power resilience strategy for the successful electrification of transportation fleets. California reported significantly lower renewable energy output during the 2020 wildfire season, and state regulators approved usage of fossil fuel backup generators to cover some of the 1,000-MW deficit experienced. Some California agencies are incorporating fossil fuel backup generators to supplement power during any unforeseen outages and severe weather conditions.

Time to seize the opportunity

As detailed throughout this article, public transit agencies have a tremendous opportunity in front of them and can play a critical role in meeting sustainability goals at the local, state and federal levels. It’s clear – fleet electrification is ripe for scaling.

In order to best position your agency, keep a watchful eye on extra funding and innovative collaborations. Create a compelling business and social case to overcome legacy points of view.  While it can seem challenging, the opportunity is right in front of you. Time to seize the day!