No Need To Wait: Electric Buses Are Cost-Competitive Transit Buses Today

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The 14 Proterra Catalyst E2 buses purchased for the DC Circulator have been delivered and will go into service next week in one of the highest profile public transit routes in the country – Washington DC’s National Mall. The brightly wrapped buses aren’t shy about the high tech powertrains that propel them around the nation’s capital but rather, they proudly proclaim their status as 100 percent electric, zero-emission vehicles proudly as they go about their routes.

We spoke with Proterra’s chief commercial officer, Matt Horton, about the deal and more broadly about the foothold electric buses have found with transit authorities across the nation. Diving right into the meat of the matter, Matt shared that is simple economics that are driving transit authorities to electric vehicles, noting that electric buses are not just alternatives to diesel and CNG buses today, but that they are often the best deal, “Even when considering the cost of new infrastructure, it does generally tend to be a better investment today for any operator to select a battery electric option instead of a fossil-fuel powered bus.”

Breaking that down into more digestible metrics, electric buses, like those offered by Proterra, are simply more efficient than their fossil fuel counterparts.

“The buses we offer get over 20 miles per gallon equivalent. When you compare that with a traditional diesel bus, you’re saving more than 80% of the energy that you would have used and maintenance costs are proving out to be significantly better than with fossil fuel powered vehicles. The savings long-term that customers are able to achieve are what is pushing this market to adopt as fast as it is. It’s surprising everybody in transit how quickly electric vehicles are being adopted as best practice in the industry.”

The proven savings and efficiencies of electric buses are even more attractive when the extreme pricing fluctuations of diesel and CNG are taken into account. In contrast, electricity prices are extremely stable and can even essentially be purchased up front by installing a solar system or wind turbines to provide electricity for a fleet.

These musings aren’t just data on a spreadsheet but rather, are being taken seriously by transit agencies around the country, with early adopters like Foothill Transit in Southern California and the Los Angeles Metro, which have both committed to migrating their fleets to electric buses over the coming years. The purchase of the buses for the DC Circulator is not just another pilot but rather, represents the first purchase of what has become the new standard for public transit — electric buses.

Matt shared that these transit authorities are not just the early adopters, they are the first of the early majority. “Now, there are more than 20 transit agencies in US cities that have said formally that they are no longer buying fossil fuel buses and are 100% battery electric in their planning.” Just this week, New York City got on board with the program, proclaiming that it would fully convert its fleet of 5,700 buses to electric over the next 2 decades.

The Proterra Catalyst E2 buses purchased for the DC Circular are absolutely loaded, with 440 kWh of batteries allowing them to drive for the entire day without needing to charge. The buses will return to the depot at night where they will charge up on normal DC Fast Chargers equipped with the SAE Combo CCS adapter. The fact that Proterra’s buses use a standard charging adapter that is shared with passenger vehicles makes it that much easier for cities and counties to electrify fleets over time that can share the same charging infrastructure.

It’s easy to look across the pond at China, where entire cities have converted entire fleets of thousands of buses to electric, and get discouraged at relatively low adoption rates in the US, but Matt shared that there are significant differences in the markets that need to be taken into account when comparing the two.

The financials that help make deals happen are different, with transit buses in China being heavily subsidized by the government. Matt shared that, “the Chinese government has provided huge, huge subsidies to make this transition happen quickly and we think that Chinese transportation networks have benefitted greatly from that kind of investment.”

Back in North America, things are set up very differently, with much fewer incentives for electric buses compared to China. “While the FTA does provide funding for all transit bus purchases, there is a much, much smaller set of financial incentives in the US. So things are proceeding a little more slowly but the outcome is no less certain.” To make up the gap, American markets are taking a much more capitalistic approach, with private capital stepping into the gap with new financial products that allow transit agencies to finance the purchase of the batteries to eliminate the up front capital constraint.

When compared to internal combustion vehicles, batteries are the single largest delta that push battery electric vehicles into a higher pricing tier. Financing the batteries allows transit agencies to use the expense dollars that are already in their budget that would have gone towards purchasing diesel or CNG to pay for the batteries. This allows battery electric vehicles to compete at an equivalent capital purchase price while still delivering savings in lower fuel costs and much lower maintenance costs over the life of the vehicle. “The importance of the private capital coming into this market cannot be understated.”

Battery electric buses didn’t become cost-competitive overnight, but over the last few years have fallen in price, largely as a result of lower battery pricing. Matt shared that Proterra has put a significant amount of sweat equity into its vehicles to cut costs while also packing in new innovations. “Over time, we have invested a lot of money and time in building among the world’s best battery systems. We have done a lot of innovation on our drivetrain.”

Digging into the specifics, Proterra’s buses have come down from $1.2 million USD each to around $700,000 USD today, with the bulk of the savings coming from lower battery costs. This can be seen across the industry and is also receiving a carry-on effect of increased scale. As costs come down, more customers order buses, which gives Proterra more purchasing power to buy batteries at higher volumes and better prices.

Asked if Proterra would follow Tesla into the battery cell manufacturing space, Matt shared that he doesn’t see that happening — at least not yet. “We enjoy great relationships with our battery suppliers and don’t see a need to push innovation down below the module level.”

Proterra is moving aggressively to ramp up its manufacturing operations in parallel to the incoming flow of customer orders. “We are growing incredibly quickly in terms of the number of orders we have received and the number of buses we are building. We took the step last year to open a second manufacturing facility and we are racing to keep up with all of the demand that is now coming to the marketplace.”

Looking into the future just a few years, it’s not hard to imagine a world where electric buses are normal and buses spewing noxious clouds of black exhaust have been largely relegated to fixtures in the history books. The transition to fully electric isn’t starting today, but rather, we are already at a point where citizens should be asking their transit authorities, “If electric buses cost less and don’t pollute, why aren’t you buying electric buses?”

Images courtesy Proterra

Related Stories:

Shenzhen Completes Its Bus Fleet Transitions To 100% Electric Buses

Shenzhen Completes Switch To Fully Electric Bus Fleet. Electric Taxis Are Next.

China 100% Electric Bus Sales “Just” 89,546 In 2017

Year China Electric Bus Sales
2011 1136
2012 1904
2013 1672
2014 12,760
2015 94,260
2016 115,700
2017 89,546
TOTAL 316,978

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Kyle Field

I'm a tech geek passionately in search of actionable ways to reduce the negative impact my life has on the planet, save money and reduce stress. Live intentionally, make conscious decisions, love more, act responsibly, play. The more you know, the less you need. As an activist investor, Kyle owns long term holdings in Tesla, Lightning eMotors, Arcimoto, and SolarEdge.

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