accelerating electrification of transportation · utility on-bill investment at the grid edge...

Accelerating Electrification of Transportation: Utility On-Bill Investment at the Grid Edge

Holmes Hummel, PhD - Founder and Principal Holmes.Hummel@cleanenergyworks.org

100% EV transit bus in Louisville, KY

In the U.S., transit has the most compelling

business case for electrification

Speed, scale – and avoiding stranded assets

Innovation Diffusion Curves (Rogers)

Sources: IEA, Global EV Outlook, 2017; BNEF, Electric Buses in Cities, 2018; McKinsey, Focused Acceleration, 2018.

EV

Transition

is Here

Lifecycle costs of Battery Electric Buses are competitive

• Example case of Lake City (a fictional name for a real city)

$-

$200.000

$400.000

$600.000

$800.000

$1.000.000

$1.200.000

$1.400.000

Diesel CNG Battery electric bus

Fuel costs

Maintenance costs

Other capital costs (incl.

infrastructure)

Midlife costs

Bus purchase cost

Cost Category

Total cost of ownership for a bus purchased in 2019 (discounted)

$-

$200.000

$400.000

$600.000

$800.000

$1.000.000

$1.200.000

$1.400.000

Diesel CNG Battery electric

bus

Midlife costs

Bus purchase cost

Upfront cost for clean bus is 50% or more, a steep barrier

5

Total cost of ownership for a bus purchased in 2019 (discounted)

Most

agencies

seek grants

$0

$100.000

$200.000

$300.000

$400.000

2020 2021 2022 2023

Ne

t P

rese

nt

Va

lue

(2

01

9)

Incremental Upfront Cost of EV Bus & Charger

Public funds Private capital

The incremental upfront cost declines, but also persists

Covering the full amount with grants is not scalable or sustainable.

Instrument Sustainable Scalable

Customer

Balance Sheet

Treatment

Taxpayer funding

Polluter funding (carbon price)

Ratepayer funding (rebates)

Debt financing (bonds) Balance sheet

liability

Lease financing Balance sheet

liability

Utility tariffed on-bill investment

Highly

sought

grants

Funding and financing options for EV buses

Financing

How does utility on-bill investment

via PAYS for Clean Transport work?

Utility tariffed on-bill investments “behind the meter”

have already unleashed capital for efficiency upgrades

Inclusive financing reduces

first cost barriers for all

What would happen if we applied the same approach to

electrification in transportation, starting with transit buses?

on-board batteries and

on-site charging stations

Battery

Example: Eversource in New Hampshire

80% of

Estimated

Fuel Cost

Savings

Fair

ROI

Capital

Provider Utility Transit

Agency

Terms of

Service

Agreement

Utility Transit

Agency

Capital

Provider

… and recover its costs (for battery and charger)

via a flat charge on the bill that is less than estimated savings

A utility can invest in site-specific, cost-effective upgrades…

Attributes Battery Lease

Agreements PAYS®

• Participant needs no upfront capital for cost-effective battery and

charging station

• Participant must accept a liability on their balance sheet

• Participant accepts an opt-in utility tariff (NOT a debt or a long-term

lease) tied to its metered location

• Estimated savings must exceed cost recovery charges

• Cost recovery is through a fixed charge on the utility bill

• Participant accepts tariff with disconnection for non-payment

• Payments end if battery fails and is not repaired or replaced

Comparison between PAYS® and Battery Lease Agreements

How does PAYS for Clean Transport

affect the need for grant funding to

accelerate electrification?

$0

$100.000

$200.000

$300.000

$400.000

2020 2021 2022 2023

Ne

t P

rese

nt

Va

lue

(2

01

9)

Incremental Upfront Cost of EV Bus & Charger

Public funds Private capital

The transit agency depends on nearly the same level of

grant funds the next year to buy more EV Buses

$0

$100.000

$200.000

$300.000

$400.000

2020 2021 2022 2023

Ne

t P

rese

nt

Va

lue

(2

01

9)

Incremental Upfront Cost of EV Bus & Charger

Public funds Private capital

Utility on-bill investment for the on-board battery and

charging station vastly reduces the grant funding needed

3.4:1 3.9:1 4.4:1 5.2:1

$5 M for EV transit buses is enough to pay for the

incremental upfront cost of 15 electric buses…

…or, with PAYS for Clean Transport, $5 M would

cover the incremental cost of 50 electric buses

Why might a utility be motivated to

offer PAYS for Clean Transport for

EV transit buses?

Invested capital for upfront cost of on-board battery

and charging station is fully recovered CAPITAL: CASH FLOWS FOR INVESTMENT AND COST RECOVERY

• Under a tariffed on-bill investment program, Lake City Utility would provide NPV $13.17 million over four

years to support procurement of 56 BEBs over that time span to replace diesel buses.

• Using the utility’s prior discount rate of 6.75% as the program cost of capital, there would be no net financing cost, as the NPV of cost recovery payments would also equal $13.17 million.

Note: All NPV figures are discounted to 2019 and presented in 2019 dollars

$12.84M $13,2 M

-$13,2 M

$0,0 M

$20.000.000

$10.000.000

$0

$10.000.000

$20.000.000

Utility Investment Cost Recovery Net Financing Benefits

Lifetime Discounted Cash Flows for Investment 2020-2023 BEB Procurement

Revenues from new sales to fuel the EV buses exceeds

Cost of Supply by more than 1/3 ENERGY: CASH FLOWS FOR SUPPLY AND NEW SALES

• Over the lifetime of the 56 buses planned for procurement through 2023 by Lake City Transit, procurement

of BEBs would increase utility revenues of NPV $4.17 million from increased sales.

• Lake City Utility would incur NPV $2.40 million in additional costs to serve new load to charge the batteries

on-board these vehicles.

• Lake City Utility would gain NPV $1.78 million in net energy revenue from procurement of 56 BEBs.

Note: All NPV figures are discounted to 2019 and presented in 2019 dollars

Cost of Supply

$2.34M

$4,2 M

-$2,4 M

$1,8 M

$4.000.000

$2.000.000

$0

$2.000.000

$4.000.000

$6.000.000

Increased Revenues Increased Supply Costs Net Energy Benefits

Lifetime Discounted Cash Flows for New Electricity Sales

Utility cost-benefit ratio exceeds 1.1

NET IMPACT

• Combined, a tariffed on-bill

investment program would provide

NPV $17.34 million in lifetime benefits

and $15.57 in lifetime costs, yielding a

benefit-cost ratio of 1.11 and net

ratepayer benefits of $1.78 million.

• This analysis does not account for

potential program administration

costs, which would be a reduction to

ratepayer benefits, and must be less

than NPV $1.78 million to retain

ratepayer benefits.

Note: All NPV figures are discounted to 2019 and presented in 2019 dollars

Investment

$12.84M

Cost of Supply

$2.34M $17,3 M

-$15,6 M

$1,8 M

$20.000.000

$15.000.000

$10.000.000

$5.000.000

$0

$5.000.000

$10.000.000

$15.000.000

$20.000.000

Lifetime Benefits Lifetime Costs Net Benefits

Lifetime Discounted Total Cash Flows 2020-2023 BEB Procurement

Partners Validators

The Lab endorsed PAYS for Clean Transport in 2018

Pay As You Save® and PAYS® are registered trademarks in the U.S. held by Energy Efficiency Institute, Inc.

The Lab endorsed PAYS for Clean Transport in 2018

Pay As You Save® and PAYS® are registered trademarks in the U.S. held by Energy Efficiency Institute, Inc.

Thank you

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@cleanenergywrks