3 Trends Making the Case for Bus Electrification

U.S. electric bus manufacturer Proterra reached its 100th customer this week, in a sign of how far the industry has come.

Just a few years ago, electric buses had negligible market presence and faced an uphill battle to convince transit agencies to part ways with the buses they knew and trusted. That has changed now, thanks to declining battery prices, innovative financing mechanisms and a growing roster of customer testimonials.

GTM checked in with Proterra Chief Commercial Officer Matt Horton to gauge what this milestone really means. A deal with the Detroit Department of Transportation and Michigan's Suburban Mobility Authority for Regional Transportation got Proterra to the 100-customer mark. Besides being a nice round number, 100 customers equates to about 10 percent of all transit agencies in the U.S., including very small operators. "One hundred transit customers is actually a very meaningful percentage of transit agencies that have now decided to move to electric vehicles," Horton said. Proterra has sold more than 800 buses now, but only 390 have hit the streets to date, due to the time it takes to build them after an order comes in. That leaves plenty of work before Proterra and peers like BYD, New Flyer, Nova Bus and Gillig can declare victory in bus electrification.

But Horton pointed to several trends he sees helping the cause. "On the transit side, the path toward full electrification seems much more clear today than it ever has been."

Early customers coming back for more

When electric buses were new on the scene, transit agencies were hesitant to go all in. They wanted to vet the technology and ensure that it performed as well as diesel or natural-gas buses, and that charging cycles did not interrupt their duties.

"One of the clear trends that we’re seeing is that many customers that purchased their first pilot vehicles almost a decade ago have now purchased several rounds of electric vehicles," Horton said.

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The average order size is also rising. "Where five years ago, we saw transit agencies purchasing two or three vehicles, we’re now regularly seeing procurements for 30 to 100 vehicles."

The largest single deal Proterra has completed so far is 39-bus order from Edmonton, Alberta. The next largest came from Septa in Philadelphia, which ordered 25 buses; Chicago ordered 20.

New financing strategies emerging

Many early purchases of electric buses relied on specialized grants for electric vehicles. That's not a huge departure from conventional bus purchases, which generally tap into funding from the Federal Transportation Administration to defray up to 80 percent of the purchase price, Horton said.

"We’re seeing more transit agencies use their traditional forms of financing rather than waiting for a special electric vehicle grant," Horton said. "The industry is now viewing electric vehicles as a mainstream procurement option."

Agencies receive a limited amount of federal funds, and electric buses still carry an upfront premium of about 50 percent compared to a new diesel bus. Proterra has attempted to counter that obstacle by selling the bus while leasing the battery system for 12 years. Japanese investment firm Mitsui & Co. allocated $200 million to bolster the leasing program in April.

Taking the battery out of the initial sale price brings the upfront cost in line with diesel. Then, the customer pays for the leased battery instead of shelling out for the diesel fuel and higher maintenance costs associated with internal combustion engines.

"Every customer is different, but generally speaking, customers will experience savings on a monthly basis by using a battery lease," Horton said.

Anyone paying attention to the battery manufacturing industry knows that it's changing rapidly, and price and energy density can improve precipitously in just a couple of years. The lease reduces technology risk because it means a customer need not sink capital into today's battery technology; Proterra guarantees the battery performance and will provide a midlife replacement.

Grid implications of charging becoming clearer

After getting a transit agency on board with electric buses, the next step is figuring out how to serve their charging needs in the most efficient way. That's not trivial, because bus batteries are large enough that charging several of them at once can easily require physical grid upgrades that are both expensive and time-intensive.

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Proterra tackles this challenge with a dedicated Energy division, responsible for studying customers' energy needs, modeling when and how much the buses will need to charge, installing chargers and optimizing energy use while charging.

When battery packs held less energy, this planning relied more on tools like overhead chargers to top up batteries while buses made their rounds. Now, the largest Proterra bus variant holds up to 660 kilowatt-hours, and the needs for charging in the field have shifted.

"We used to think a lot about on-route charging," Horton said. "With the significant declines in battery costs and the increases in energy density, it's now possible to package almost all the energy you could ever need on the vehicle."

Bus fleets charging at random or during moments of high grid demand could pose a real challenge for grid operators. But loading up a battery once for a day's operations removes charging from the peak demand hours, thereby reducing the strain on the grid from electric bus adoption.

"The buses are almost always charged overnight, when demand on the grid is the lowest," Horton explained. "It actually helps the utility operator keep a more stable baseload of power that they need to deliver."

Proterra Energy is exploring other techniques to manage the impact of charging, like installing used bus batteries to buffer the charging station's interaction with the grid. Stationary storage can shield the customer from high charges associated with use during periods of peak power demand, likely to be triggered by several buses charging simultaneously. The company has not yet deployed this technology, Horton noted.

V2G on the horizon

Down the road, Proterra's chargers could provide vehicle-to-grid (V2G) services, allowing transit agencies to make money by discharging power from bus batteries into the grid when demand is high. The hardware can handle it, Horton said, but there isn't yet a clear model for how this would work or how utilities would compensate bus operators.

"Our customers are generally pretty sophisticated about maintenance and management of their fleet assets," Horton said. "If it’s an economic benefit to them to use the vehicles to provide grid services, we believe many of them will choose to do that."

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The core imperative is ensuring that buses maintain enough charge to do their jobs while balancing V2G performance. School buses look like the best fit, based on the hours they sit idle during the day and throughout the summer, Horton said.

Compensation for grid services needs to be defined at a sufficient level to make the effort worthwhile. If a business structure emerges, this could turn electric bus fleets into valuable flexible power sources for the grid.