Bus electrification in European cities
How funding and policy are driving supply and demand

Over recent years, the European Commission (EC) has been at the forefront of promoting zero-emission transportation throughout the region by funding research, offering financial support and influencing policies to tackle supply and demand issues. For the bus industry in particular, this has been outlined via the 'Clean Bus Deployment Initiative'. It should be noted that encouraging cleaner transport in urban areas has a dual meaning: to lower car travel by promoting public transport, and to shift from internal combustion engines (ICE) to alternative drivelines. As such, funding and policies surrounding the bus industry aim to increase the overall supply of buses, as well as the proportion of cleaner buses. An equally important consideration, however, is that a full bus will be much friendlier to the environment than an empty bus, so increasing demand (ridership) for bus transport is also essential.

Research

With the roll-out of EV technology in transport still in its infancy, there will be a trial period during which coordinated research will be essential to find the best technology (for buses and charging stations) and to develop best practice for implementation and operation of low-emission transportation. With this in mind, the EC has encouraged clean energy and green transport research and innovation through large subsidies under the Horizon 2020 initiative, with around €6 billion pledged from 2014-2020. Some projects related directly to the bus industry are:

  • The Zero Emission Urban Bus System (ZeEUS):
    • Total budget of €22.5 million (€13.5 million funded by the EU).
    • Duration of 54 months (November 2013 to April 2018).
  • European Bus System of the Future 2 (EBSF_2):
    • Total budget of €12.4 million (€10 million funded by the EU).
    • Duration of 36 months (May 2015 to April 2018).
  • Electrification of public transport in cities (ELIPTIC):
    • Total budget of €5.98 million (full amount funded by the EU).
    • Duration of 36 months (June 2015 to May 2018).
  • The fASt and Smart charging solutions for full-size Urban hEavy Duty applications (ASSURED) project:
    • Total budget of €23.64 million (€18.65 million funded by the EU).
    • Duration of 48 months (October 2017 to September 2021).
  • Joint Initiative for hydrogen Vehicles across Europe (JIVE):
    • Total budget of €113.6 million (€32 million funded by the EU).
    • Duration of 60 months (January 2017 to December 2022).
  • Joint Initiative for hydrogen Vehicles across Europe 2 (JIVE2):
    • Total budget of €224.5 million (€25 million funded by the EU).
    • Duration of 60 months (January 2018 to December 2023).

The common aims of these projects are to analyse and share knowledge across EU member states in order to improve technology, develop best practice and encourage the uptake of clean transport. The results of these projects are likely to reduce the cost of 'going green' and make low-emission mobility more affordable to transport operators.

Finance

Although much lower than five years ago, latest estimates suggest an EV bus in Europe still costs somewhere between €470,000-520,000 according to Bloomberg New Energy Finance, far higher than an ICE counterpart. Unsurprisingly, this means that without additional funding to offset high initial purchasing costs and bring the Total Cost of Ownership (TCO) closer to parity with ICE vehicles, non-ICE buses are currently unaffordable. In order to address this, the EC offers financial support through guarantees, loans and grants to promote investment into clean transport. For instance, the European Fund for Strategic Investment (EFSI) consists of a €21 billion guarantee, backed by the EC and the European Investment Bank (EIB), which, in turn, will release a substantial amount of credit to public and private investors. The EFSI should complement grant funding available from the European Structural and Investment Funds (namely ERDF, ESF and CF) and the Connecting Europe Facility (CEF) over the 2014-2020 period. Although not specific to the bus industry, there is likely to be a significant positive impact from these financial tools on non-ICE bus supply with the former pledging €39 billion (out of the €70 billion transport budget) to support the move towards low-emission mobility, and the latter offering €24 billion towards transport.

Policy

As previously mentioned, increasing the demand for bus transport should also be targeted; after all, every additional bus commuter will reduce per capita emissions of the bus itself and, more often than not, result in fewer cars on the road. Achieving this will require further efforts as increasing the supply of non-ICE buses alone is no guarantee of increased ridership, with many commuters still likely to forego public transport in favour of car transport.

Both manufacturers and governing bodies alike will look to increase ridership through demand-side incentives to increase profit and reduce pollution, respectively. Manufacturers aim to achieve this by increasing the appeal of bus transport by adding phone charging stations and making seating more communal, among other things. Governing bodies have taken a different approach by issuing ICE bans in a number of major cities (and eventually nationwide). With the price of electric cars still likely to be premium when most bans are enforced, substitutes to clean bus transport will effectively be prohibited and ridership should increase as a result. Some examples of this are as follows:

  • Athens plans to remove all diesel vehicles by 2025.
  • Provinces in the Netherlands plan to buy only zero-emission buses from 2025 onwards.
  • Berlin has committed to stop the purchase of all conventionally fuelled buses by 2020.
  • Paris will ban petrol- and diesel-powered cars by 2030, before France implements a nationwide ban in 2040.
  • London will ban diesel cars by 2020, before Britain implements a plan to ban all diesel and gas cars by 2040.
  • Oslo plans to ban all cars from its city centre from 2019 by banning parking before a nationwide ban comes into effect from 2025. The city will also stop the purchase of conventionally fuelled buses by 2020.
  • Madrid plans to ban cars from 500 acres of its city centre by 2020 and all diesel vehicles from the city by 2025.
  • Copenhagen will ban diesel cars by 2019, but has banned the purchase of conventionally fuelled buses since 2014.
  • Oxford is set to become the world's first zero-emission zone, with plans to ban all non-electric vehicles from 2020.

In addition to the above list, there are many more cities in Europe that have signed the 'Clean Bus Declaration' and are planning some form of ICE ban, effectively forcing transport operators to renew their fleets with non-ICE vehicles. As with most things related to policy, however, the devil is in the detail - with the distinction between banning the purchase or operation of conventionally fuelled buses tantamount to how fast a city or country will transition to zero-emission transport. With the current lifecycle of a bus being in the region of 8-10 years, if a European city stops purchasing ICE buses, it could, in theory, be a whole decade from the ban's implementation date before any meaningful change occurs.

Predicted results

A combination of these demand- and supply-side factors should see the transition towards cleaner forms of transport within European cities and is likely to increase the stock of electric and hybrid vehicles, especially for urban bus fleets. How significant and fast this transformation will be is dependent on how stringently policy makers enforce ICE bans (and, indeed, the wording of each ban), the extent to which higher quality buses can be competitively priced and, ultimately, how appealing commuters find this mode of transport. Interestingly, if there are any doubts that these bans will be enforced, five cities in Germany have recently unveiled plans to offer free public transport in a bid to avoid paying large fines for breaching the emission limits outlined in the Paris Climate Agreement, signifying their intent to reduce urban pollution and suggesting that the current fervour surrounding bus electrification is more than simple 'greenwashing' politics.

For more Blogs related to the automotive industry please visit: https://lmc-auto.com/news-and-insights/

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