School districts in California can help fund the electrification of their bus fleets through selling credits awarded under the state’s Low Carbon Fuel Standard (LCFS), and similar options could increasingly be available in other states.
Under the program run by the California Air Resources Board, districts can claim credits based on metric tons of carbon emissions avoided when they operate and charge electric buses. Those credits can be sold on the state’s carbon market—where industries and other entities that emit high levels of greenhouse gas (GHG) emissions buy credits to stay in compliance with the standard.
Taking advantage of this opportunity isn’t easy. School districts must understand how to best negotiate the carbon market, and they must accrue enough credits to attract buyers. Voluminous record-keeping and reporting also represent significant barriers.
But institutions like Gladstein, Neandross and Associates (GNA) and energy technology company The Mobility House are helping districts tap funds under the LCFS program by incorporating the standard into larger energy plans for schools, facilitating reporting and interacting with the market on districts’ behalf. In the process, they can use innovative, benefit-maximizing strategies like bundling credits from multiple districts and obtaining higher value credits by having schools charge buses when energy demand is low and renewable sources are more likely to be providing the power.
Incorporating solar on site can also boost the value of credits while saving on energy costs and promoting cleaner energy, explained Zoheb Davar, director of business development and growth at The Mobility House. Meanwhile, buying clean energy credits essentially increases the carbon-credit value of the electric buses, since they are theoretically being charged by clean energy.
Thus far, few school districts are taking advantage of the program, given its complexity and the fact that most districts do not have large electric bus fleets. The vehicles must also be running and charging for credits to accrue, so the pandemic has put the possibility on hold for many districts. Though, Davar said, Mobility House clients in California will start obtaining credits in coming months.
“The real benefit to school districts will become apparent in the next year as we see districts ramp up operations,” noted Eleanor Johnstone, technical program director for GNA.
As institutions like The Mobility House help simplify participation in LCFS markets, and as other funding sources and incentives help schools electrify their bus fleets, more districts are likely to tap carbon credits with help from professionals in the field, experts say.
“This is all brand-new stuff for directors of transportation,” Davar noted “For a school to go out and claim these credits and sell them on the market themselves is kind of a ridiculous concept. It would be a lot of work (for a relatively modest pay-off).”
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Clean energy commodity firm SRECTrade is another entity that helps districts tap carbon credits under the LCFS program, as explained during a webinar hosted by School Transportation News in February. Matthew Belasco, director of maintenance, operations and transportation at Pittsburg Unified School District near San Francisco, noted that his district has earned about $5,000 in revenue under the clean energy program, despite relatively little use of its electric buses during the pandemic.
In 2018, his district purchased its first two Lion Electric buses, and it wasn’t until after purchasing two additional Blue Bird electric buses that the district connected with SRECTrade.
Belasco noted that districts need to install smart chargers for electric buses in order to collect the data needed for LCFS participation, and work with a partner like SRECTrade.
“You’re going to need someone who’s very knowledgeable and makes it very simple,” he explained during the webinar. “We don’t need to do any reports anymore. The only thing we see is the check every quarter.”
There is little risk to participating, he added, since SRECTrade (and other entities doing similar work) is paid only through the revenue from the carbon credits.
Watch a recent webinar on how districts could turn electric school buses into a revenue stream by selling Low Carbon Fuel Standard emissions credits at stnonline.com/go/8u.
“If you are already running electric vehicles, the best time to get started with this program is now,” Iman Nordin, SRECTrade manager of client development, said during the webinar. “Because if you don’t participate in this program and you don’t monetize your credits, you’re essentially leaving money on the table that could go into your budget.”
Nordin noted that tapping separate renewable energy credit markets to collect more credits under the LCFS program involves a “complex mechanism” that she opined is best managed by a third-party expert, not individual districts. But the process can be lucrative, adding 10- to 30 percent more credits and the associated revenue.
Davar said entities like The Mobility House are still figuring out exactly how to work with clients on LCFS deals, for example how much commission to take for managing such accounts. “Whenever you see something along the lines of free money, there will be someone going after it,” he added. “There are competitors out there, it’s kind of the Wild West.”
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Under the LCFS, funds collected for the carbon credits must be used toward carbon emissions reduction.
“Any revenues received have to be reinvested in electrification for transportation in some way, when school districts participate,” GNA’s Johnstone explained. “There are a handful of ways recipients can do that — buying vehicles or charging equipment, workforce training, and administration of participating in LCFS can also be covered.”
Nordin noted that alongside electric, compressed natural gas, renewable natural gas, biofuels, and hydrogen fuels can also receive credits under the program.
But buses powered by natural gas and other low-carbon fuels do not directly allow a district to receive carbon credits. Instead, the natural gas supplier can potentially earn credits and pass some of the benefit on to the district in the form of lower fuel costs, Johnstone explained.
“With fossil natural gas, or CNG, many fleets will investin their own fueling stations, and in that case they are the credit generator,” added Johnstone. “So, these fleets can participate, but the carbon intensity improvement over diesel is negligible, and for other reasons involving more math, the returns from the LCFS are really quite small compared to what they are with [electric buses].”
While California’s LCFS is the “pioneering” clean fuels program, noted Nordin, Oregon also has a similar program, and Washington state legislators are considering a clean fuels bill. Already, the Pacific Coast Collaborative consisting of California, Oregon, Washington, and British Columbia strategically aligns policies to reduce GHG and promote clean energy.
A dozen other states including Connecticut, New York and New Jersey are also considering such programs. The Regional Greenhouse Gas Initiative (RGGI) in the Northeast has long run a multi-state carbon market for electric generation, which could help lay the groundwork for a fuels program. And Illinois is considering energy legislation and a policy that could include carbon markets. Davar said he soon expects to see districts obtaining and selling carbon credits from electric buses in Colorado and New York.
“I do think there’s a lot of potential to run a program in any state,” added Johnstone. “With a lot of federal support there could be more momentum. As some earlier programs mature and more results are communicated, we will start to see states have more information to work with to develop confidence around the topic and develop a program that suits their economy and their needs.”
The payoff from participating in carbon markets is not generally enough to facilitate a school switching out its fleet or even buying a new electric bus, and smaller districts with shorter routes and less charging needs will earn less revenue. But combined with other grants and incentives, including the Volkswagen Environmental Mitigation Trust funds, carbon credits can help districts electrify.
“It’s definitely a growing opportunity. It’s essentially money on the table for something they’re going to do anyway,” Davar commented. “That being said, it is a market, so the more people who do it, there is more supply, which means prices will go down.”
For the foreseeable future however, carbon markets could present an important opportunity for districts looking to electrify transportation.
“Prices have been going up for years now,” Davar added. “There are a lot of carbon emitters that need to offset their emissions.”
Editor’s Note: As reprinted in the May 2021 issue of School Transportation News