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Automotive Product Finder Magazine | Potential models for adoption of electric vehicles in public transport
Potential models for adoption of electric vehicles in public transport
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Public transport is an indispensable part of a city’s mobility and, forms a cor part of the future of shared mobility. Among the different available modes, buses are the dominant form of public transport in India. Focusing on the need of public transport with an emphasis on electric buses, Deloitte has laid out four different business models for e-bus operations.
Public transportation has the potential to influence the development of any city. A good public transport is accessible to all and has the power to bridge the gap in mobility. There can be different modes of public transport like passenger trains, buses, trams, rapid transit (metro, subway), and electric rickshaws (for promoting last mile connectivity). But buses are the dominant form of public transport in India. However, this share is declining and is expected to reduce further. The energy consumption per passenger/km in a bus is one-third of that of a car and the CO2 emissions per passenger kilometer for a diesel bus at 20 per cent capacity is one-third of that of equivalent number of cars required. Moreover, public transport addresses the issue of congestion on roads by promoting shared mobility.
The need of public transport with a focus on electric bus
The transition to electric buses is expected to not only help reduce carbon footprint but also save fuel. The enhancement of electric public transport seems to be the need of the hour in every city. The advantages of electric buses have been recognised globally and different cities have taken initiatives to deploy electric buses in their fleets. For example, the city of London has pledged that no new diesel buses shall be added to the city’s fleet from 2018. Even in India, the Department of Heavy Industries, Government of India, has sanctioned $67 million for the procurement of electric buses, e-taxis and e-autos.
Actors in electric bus ecosystem
Among the actors, the electric bus ecosystem has the following playing an important role:
Government authorities responsible for provision of Public Transport services (also termed as authority)
• Bus manufacturers (with or without batteries)
• Battery manufacturers
• Electric utility provider
• Private operators and
• Financial institutions The high capital cost of e-buses requires changes to conventional business models rather than focusing on subsidies, whose aim is to reduce the capital cost to make it comparable to conventional buses. A business model should aim at achieving operational and financial sustainability by bringing in technological innovation, effective grid management, and improving efficiency. As can be seen from the Figure 1, there is decline in total cost of ownership for e-buses on transition from conventional buses to electric buses.
Exploring business models for electric bus operations
Based on the roles an individual actor can play, the following business models can be implemented by any city depending on their suitability and city characteristics:
Business Model 1 - Government driven: This model is based on the premise that because of high requirement of capital investment, getting enough private players would be a challenge, hence government agency involved in operation of buses will assume entire responsibility including procurement (through leasing or outright purchase), provisioning and maintenance of infrastructure facilities and revenue collection. The advantages under this model are that the government retains full flexibility to modify or restructure routes and schedules, fares, etc. The viability gap funding if any, will be easier to access in this case. However, this model will have a huge impact on the budgets of the government and there might be low overall efficiency due to limited expertise or prior experience of government in electric mobility and operations.
Business model 2 - Collaboration between government and energy supplier: The government joins hands with utility or energy suppliers to provide more specialised services related to power and energy supply – a limited but major area of intervention for the government. In this model, government will be responsible for all activities including procurement (through leasing or outright purchase), provisioning, maintenance of infrastructure facilities and bus fleet, and revenue collection. However, energy supplier will acquire, own, operate and maintain battery-charging systems including the provision of battery.
The authority in this case harnesses expertise of the energy supplier, with reduced requirement of initial investment as battery cost is assumed to form a significant proportion of total cost. Energy supplier will play the role of existing fuel stations who stores the fuel. Energy supplier will be able to achieve economies of scale by promoting wider use of facilities. However, the energy supplier might be at risk of low utilisation in initial stages when volumes are low. The bidding parameter can be ‘rate per bus km’ and/or Rate per battery pack per month.
Business model 3 - Government partnering with private operators: In this model, the government may join hands with a private player for implementation of e-bus on public-private partnership basis. This enhances the role played by each individual by leveraging the expertise of players. In this case, private operator procures (on lease or outright purchase) buses complete with batteries and battery charging system, operates and maintains buses and authority makes provision of land, infrastructure and other supporting activities. Revenue collection is arranged by the authority either in-house or through a private agency.
This model envisages reduced quantum of upfront investment by the authority in bus fleet and charging infrastructure. It also reduces staff requirement by the authority. Operational efficiency of the system tends to improve because of higher and focused competence of each stakeholder. The partnership clearly outlines the roles and responsibilities of each partner. However, non-compliance to SLA may lead to penalties. The bidding parameter could be operations and maintenance (O&M) fee per km.
Business model 4 - Partnership among government, energy supplier and private operator: In this model, a partnership amongst the government, the operator and the energy supplier is envisaged for distribution of investment needs and the risks, and to harness expertise of each partner for improved operational efficiency and service delivery. Private operator in this model has an option to procure buses with batteries or without batteries and subsequently operate and maintain these buses. In the former case, the energy supplier acquires, owns, operates and maintains batterycharging systems. In the latter case, battery manufacturer provides battery charging system and maintenance service and buses are procured (on either lease or outright purchase), supplied, charged and maintained by the energy supplier utilising its captive battery charging system. Energy suppliers have the choice of selection and use of any of the available charging systems depending on the availability of power. Authority takes care of revenue collection function besides planning related aspects like demand assessment, tariff fixation, route network planning, infrastructure provisioning, setting performance standards and specifications, monitoring and control of operations, etc.
This model is conducive to improve operational efficiency of activities related to operation and maintenance of e-buses, and supporting infrastructure. This also enables efficient inventory management and focused application of expertise. However, management and coordination of multiple players may pose a challenge for the government. The bidding parameter could be O&M fee per km for the private operator and rate per bus km and/or rate per battery pack per month for the energy supplier.
(This article is a part of Deloitte’s report on Electric Vehicles).
The report has been co-authored by Pranavant Partner, Consulting, DTTILLP, Sumit Mishra, Director, Consulting DTTILLP and Aashima Garg, Consultant, Consulting DTTILLP.
Electric Bus Ecosystem
Public Transport Services
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