The Tricky Part About Electric School Buses: Planning and Paying For the ‘Fueling’ Infrastructure

July 9, 2024

An electric school bus receives its charge.

We are often in touch with pupil transportation managers across the country. The consensus is, “electric school buses are coming!” But we are also aware that major challenges lie ahead, even if they are not fully in view yet.

Many of those challenges relate to the complex and potentially expensive process of installing charging systems. Developing reliable infrastructure that will unlock the full benefits of electric school buses (ESBs) takes knowledge, planning, time, and money—all while keeping the current bus fleet operating smoothly. Since the cost of infrastructure routinely runs into the hundreds of thousands or millions of dollars, depending on the size of the fleet, it’s clear that creative solutions will be indispensable.

The complexity of the challenges that fleets encounter depend on several factors that strongly influence the ESB financials:

•Phasing: How many steps, rolled out over how many years, do you think it will take to electrify your fleet? What aspects of your infrastructure development should be done up front and all at once? What aspects should be phased? Should some aspects be held off as long as possible, to allow time for new technologies to appear and mature?

•Performance specifications: How much power delivery capacity will you need to meet your transportation needs? How much capacity will you need to optimize your ESB operations, technically and financially?

•Utility relations: What up-front costs will your utility impose on your charging system development project—including to upgrade the power delivery capacity at your facility? Does your utility offer any forms of financial support? Will there be choices to make among electricity rates?

•Financial upsides: Which potential sources of incremental savings or cash in-flows might be available immediately or at certain points in the future? Enrollment in utility load reduction programs such as demand response? Electric bill reductions for your facility? Back-up power during community disasters? Power export to the grid?

Given the nature and extent of the challenges, we believe that many school districts will choose to bring in outside vendors to facilitate the development, financing and operation of their ESB charging systems. (We should note that neither of our firms, Carbon-Neutral Consulting and Energetics, is in the business of providing outsourcing solutions of any nature. Our interest is in seeing widespread uptake of ESBs. This will help our clients and society!)

A variety of “as-a-service” outsourcing models have appeared whose scope includes charging systems. The major variants include:

•Charging as a Service (CaaS) – A vendor provides vehicle charging on a turnkey basis.

•Electrification as a Service (EaaS) – A vendor provides electric school buses and charging on a turnkey basis.

•Transportation as a Service (TaaS) – A vendor covers all aspects of electric bus deployment and operation, including drivers.

Many districts that operate their own fleets will consider the CaaS model first. A typical version of the CaaS offering takes place as follows:

•The school district and vendor sign a long-term contract, commonly with a duration of at least 10 years.

•The vendor covers the charging system’s up-front capital expenditure.

•For the length of the contract, the school district makes monthly payments at the rate specified in the contract.

•With the concurrence of the district, the vendor takes responsibility for designing and installing the charging system.

•The vendor makes an arrangement with the electric utility and pays for the electricity used by the buses.

•The vendor takes responsibility for operating and maintaining the charging system, with a central focus on ensuring that each bus is fully charged at the start of its daily duty cycle.

The length of the contract may give school administrators pause. In our conversations, we have heard that 10-year contracts are not unrealistic, but they are certainly not common. The reason for the extended length is a goal that is shared by both school districts and CaaS vendors: To keep the annual budget for pupil transportation on an affordable track.

We have studied the total cost of ownership of ESBs and have verified one of the key premises of the CaaS business model: The economics of ESBs are likely to become more favorable than those of fossil-fuel buses over the next decade. This means that pupil transportation budgets will not need to increase beyond the normal pace of inflation. Rather, savings over the life of a contract can cover the charging system’s initial capital expenditure. The rate of annual savings will be modest enough that an extended contract length, such as 10 years, is needed to allow the payback process to be completed.

Our school district conversations tell us that many administrators will focus on the tradeoff embedded in the CaaS proposition. On the one hand, a CaaS arrangement offers the ability to “get electrification done” both technically and financially. On the other, it can lock a school district into a relationship with a previously unknown and perhaps recently launched vendor for many years.

We believe that finding an acceptable version of this tradeoff will be possible for many school districts, but only if administrators conduct thorough due diligence on the key factors in the financial equation including the four we listed above that may not be obvious at first glance. And not least in importance is this reality: Many aspects of ESBs, charging systems and the broader operating environment are undergoing rapid evolution. This means that a good long-term contract will allow the parties to identify challenges and opportunities that appear down the road, and to modify the contract in ways that are workable and fair on both sides.

Editor’s Note: As reprinted in the June 2024 issue of School Transportation News.

Ewan Pritchard is an engineering consultant and subject matter expert in sustainable transportation for the Energetics Sustainability Consulting Group of CLEAResult. Stephen Crolius is the president of business strategy firm Carbon-Neutral Consulting.