EV school bus rollout off to slow start despite billion-dollar subsidies
Some U.S. school districts face a learning curve in ditching their dirty diesel buses — even with big federal subsidies.
EV school bus rollout off to slow start despite billion-dollar subsidies
Some U.S. school districts face a learning curve in ditching their dirty diesel buses — even with big federal subsidies. But the challenges are solvable.
19 December 2023
Back in October 2022, the Biden administration announced the first investment from its historic program aimed at addressing the climate and health impacts of the nation’s nearly 500,000 diesel-burning school buses.
The initial award of nearly $1 billion in rebates was enough to order around 2,300electric school buses to be distributed among 372 school districts across the country. Through 2026, the Clean School Bus Program, created by the 2021 Bipartisan Infrastructure Law, will disburse a total of $5 billion — the single biggest investment of its kind.
One year later, some of the buses financed by the first billion-dollar installment are already running daily routes. But not all — or even the majority — are on the road yet, and some school districts are struggling to keep up with the process of using the money.
As of last month, the World Resources Institute’s Electric School Bus Initiative had tracked 436 electric buses delivered and in operation. Most districts have deployed only a handful of electric buses, though a few have gone big with tens or even hundreds.
That leaves nearly 2,000 electric buses that haven’t been deployed yet. About 43percent of school districts have gotten extensions from the U.S. Environmental Protection Agency to miss an April deadline for ordering buses, according to data tracked by WRI. And 36 districts, or about 9 percent of the total, have entirely withdrawn their plans for a collective 181 electric buses, WRI data indicates.
“I do think there are challenges of working through transitioning your fleet,” said Sue Gander, director of WRI’s Electric School Bus Initiative. “It definitely requires a lot of work.”
Plenty of things can delay or derail an electric school bus project, she said. Some school districts have been bogged down in the application process. Others have had to wait for back-ordered buses and charging equipment to be delivered. Still others have learned that their rebates don’t cover the full cost of deploying the buses or installing the chargers they’ll need. And others have found that the utility grids delivering power to their bus depots need upgrades that will take months, or even years, to carry out.
“All of these things are solvable. It’s just finding the time and space, and the knowledge, to make it work,” Gander said.
“The lag we’re seeing is not greater than we’d expect,” she added, but “we’d love it to move faster.” Electric buses aren’t just far cleaner and healthier for the 20 million schoolchildren who ride them and the communities they travel through, she noted. They also cost less to fuel and maintain than diesel buses, offering school districts an opportunity to reduce their transportation budgets — if they can overcome the barriers to getting them on the road.
But these barriers can be daunting, particularly for the low-income, rural and tribal school districts that made up 99 percent of the awardees in EPA’s first round of rebates. These “priority districts” may have less money to cover costs that exceed their rebates for the buses, which still cost roughly three times as much as their diesel-fueled counterparts, or the additional cost of buying and installing chargers.
Electric buses are “a new experience for many school districts,” Alejandra Nuñez, an EPA deputy assistant administrator working on the Clean School Bus Program, said during a November webinar hosted by WRI.
EPA is working with federal agencies such as the Joint Energy and Transportation Office, which was formed to support the tens of billions of federal funding flowing to electric vehicles and charging infrastructure, to provide technical support for school districts, she said. It’s also working with WRI and other nongovernmental entities like the Beneficial Electrification League, which collaborates with rural local governments and electricity cooperatives.
“We’re helping them with fleet planning, helping them with utility engagement,” Nuñez said. “We are being very intentional as to how to help school districts to actually implement this, and it’s working well. But we’re learning a lot in the process because a lot of this is new.”
School districts and school bus industry partnerships
Solutions to this problem are coming not only from the EPA and groups like WRI but also from fleet management companies and the country’s biggest school bus manufacturers, Blue Bird, Thomas Built and Navistar IC.
The latter company is how Ron Chaffin, transportation supervisor at Putnam County Schools, a Tennessee school district with about 12,000 students and 80 buses, got his district’s two EPA rebate-funded electric buses up and running for this school year.
“Back in October of last year, I got a call” from a representative of Cumberland, his district’s bus distributor, asking if the school district would be interested in applying for the rebate program, he said. “She applied for the grants for us and all the other districts she sells to,” some of which were included among the 11 other districts in the state to win rebates through the EPA’s program.
The Cumberland representative also helped get the application paperwork in by the April deadline. It delivered the Navistar IC electric buses in late July and worked with the district to pick and install its 19-kilowatt Level 2 chargers in its bus depot building. Those are relatively low-wattage chargers for big buses with big batteries — but they’ve been more than sufficient to keep the two buses running on their twice-daily routes, he said.
“We picked two extreme routes – one I call the ‘mountain route’ and one I call the ‘city route,’” he said. He wasn’t sure if the mountain-route bus would be able to retain sufficient battery capacity, but so far it’s been returning to base with about 55 percent of its charge remaining, or 45 percent if the bus is also running its heaters, with regenerative braking helping to recharge batteries depleted during uphill climbs. The city bus rarely returns to base with less than two-thirds of its battery capacity remaining.
As for recharging costs, the district saw about $240 in increased electric bill costs during the first 20 days of electric bus operations, he said. But “with diesel, we would have been looking at $600 to $700 for that 20 days.”
And then, of course, there are the health benefits to consider. Studies have linked the toxic gases and fine particulate matter in diesel engine exhaust to health harms ranging from fatigue and nausea to increased risk of asthma, heart disease and cancer.
Chaffin recounted what a driver operating one of the district’s electric buses told him at a recent meeting. “He said it’s the first year in 15 years that he went home [after work] and didn’t have a headache from the diesel fumes. That’s a huge difference — and if that’s a difference for the driver, what’s the difference for the students?”
Putnam County Schools owns and operates its buses, as do roughly two-thirds of U.S. school districts. But about one-third of the country’s school districts contract with transportation services companies for their buses — another partner that can help ease the transition to electric school buses.
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First Student, the country’s biggest school-bus operator, with about 46,000 buses distributed among about 1,200 school districts, “has been very active in the EPAClean School Bus Program,” said Kevin Matthews, the company’s head of electrification. First Student already operates about 310 electric school buses, and last year, 12 of the 52 applications it submitted to the EPA’s first round of rebates were approved, adding another 160 electric buses to the fleet it manages.
Not all of those applications have led to buses being deployed, he noted. “We did have to give one back in Oregon, a three-bus win. It turned out that the routes and charging infrastructure we needed were not going to work out very well,” he said.
But as a former EV industry lobbyist and EPA staffer, Matthews also understands how to navigate the federal bureaucracy — and how to recognize drawbacks in the way programs are designed.
One problem Matthews identified in the first round of rebates was “the way EPAawarded the money — $375,000 per bus and $20,000 for infrastructure per bus” for the largest buses available in the highest eligibility tier, he said. Being limited to $20,000 for the charging equipment required for an electric bus was “really restrictive. I think when people won the money and then started pricing out the infrastructure, they were like, ‘Holy cow, this won’t cover it.’”
In other cases, after a school district “won the money and then called the utility — and the utility said, ‘Gee, to get that much power, it’s going to take three years, or you’re going to have to pay us to bring power to your location.’ So that kind of messed things up.”
First Student works with about 130 utilities serving its more than 500 fleet locations. When planning an electric bus deployment, “the first thing we do is map locations to the utility that serves that district. Then we understand what the utility will offer us in terms of infrastructure,” such as the “make-ready” rebates and incentives that some utilities offer to customers installing EV chargers.
“The second thing we do is understand if we’re going to have to do a major upgrade on our facilities,” he said. “And then we look at other sources of funds that can help us. Does the local government have help? Can the state government help out?”
Highland Electric Fleets, a Massachusetts-based electric transportation-as-a-service startup that’s overseeing some of the largest electric school bus projects in the country, is focused on many of the same tactics as First Student, including utility engagement and applying for rebates.
But the EV-only firm also takes on the upfront cost of buses and charging equipment and the long-term installation, operations and electricity costs for school districts, bundling them into long-term contracts with monthly fees. That can reduce the financial and operational risks to school districts, while also creating economies of scale that can drive down the cost premium between electric and diesel buses.
“Planning and experience matter a lot. It increases your chance of success in having a project that’s up and running,” said Matt Stanberry, vice president at Highland Electric.
Getting electric school buses from 1 percent to 100 percent
The second round of EPA’s Clean School Bus Program, which accepted applications earlier this year and is expected to announce grant awards totaling $400 million in early 2024, was a competitive process rather than a lottery. That required school districts and their partners to demonstrate public- or private-sector cost-sharing and a successful track record of operating existing electric-bus fleets.
But the second round also changed some of the structures that caused problems in the first round, Matthews said. For example, it allowed districts and their partners to spread a total grant of $395,000 per bus between buses and chargers as they saw fit, he said.
The EPA’s third round of $500 million in rebates, now open for applications through the end of January, drops the highest tier of funding to $345,000 for each bus and its charging infrastructure, which may put financial pressure on districts and partners, he noted. “We’re going to be hard-pressed to make $345,000 work unless we’re in a really good utility territory” with ample incentives to defray charging installation costs, he said.
At the same time, the transportation-as-a-service business model is “sort of designed to deal with those types of issues,” Highland Electric’s Stanberry said. “Since we’re typically buying everything upfront on behalf of a district and pressing down the total cost” — something Highland promises it can do via bulk orders and more efficiently managed fleets — “we’re shrinking the expenses associated with electrification and providing the financing to cover any gaps in that package.”
School districts will have more financial help coming to support deployments from the next round of EPA awards, WRI’s Gander noted. The Inflation Reduction Act created tax credits for commercial electric vehicles and EV chargers that will help defray some of the costs involved. It also created a “direct-pay” mechanism that allows nontaxed entities like school districts to receive tax credits as direct federal payments — a potentially complicated process that WRI expects to offer technical support for next year, she said.
EPA is also using $177 million in federal funding to provide services through 16regional Environmental Justice Thriving Communities Technical Assistance Centers, or EJ TCTACs, to help school districts and communities navigate the federal grant process, manage grant funds, set up community meetings, provide translation services and other nuts and bolts of the process.
Finding more ways to reduce the upfront cost barriers to electrification will be critical to opening up the electric bus opportunity to more school districts. The $5 billion coming from EPA — along with roughly $3 billion in state-level incentives announced to date from early leaders like California and New York and a growing number of states with electric school bus mandates such as Colorado, Connecticut, Maine, Maryland, Michigan, New Jersey and Washington — is still far short of the $30 billion that a 2021 study projected would be needed to electrify just half of the country’s school buses.
In other words, the public funding announced to date “is not going to be enough,” Margarita Parra, director of transportation decarbonization at Clean Energy Works, one of the nonprofits that conducted the 2021 study, said during WRI’s November webinar. As more states follow the lead of California and New York in mandating a complete switch to all-electric school buses by 2035, “we need to find more ways to fund this transition.”
That need is drawing in an increasing amount of private-sector investment. Highland Electric Fleets has raised $253 million from investors and partnered with Thomas Built and Blue Bird. Nuvve, a publicly traded EV-charging and vehicle-to-grid provider, is working with Blue Bird on a financing joint venture for electric bus leasing and infrastructure deployment with school districts in California, Colorado, Illinois and other states. Canadian electric bus-maker Lion Electric has teamed up with Zum, a San Francisco–based transportation-as-a-service startup working on all-electric bus fleets.
Earlier this month, sustainable infrastructure investor Generate Capital threw its hat in the ring, announcing an electrification-as-a-service joint venture with Blue Birdthat will provide electric school buses and associated charging infrastructure “at an affordable monthly fee.”
Generate, which has raised over $8 billion over the past decade to build, own and operate assets ranging from renewable energy projects to waste management facilities, has been in the electric bus business for years via its partnership leasing electric transit buses with BYD. Its latest joint venture with Blue Bird is aimed at “simplifying the process of procuring electric transportation,” Generate CEO and co-founder Scott Jacobs said.
“You take the capital costs and operating responsibilities out of the equation and sell on the simple proposition of a better offering,” he said. “We believe the business model needs to change for these technologies to be adopted.”
Just when these kinds of business-model changes may overcome the high upfront cost of electric buses remains an open question. Today, First Student’s Matthews said it just can’t work out financially “without grants and incentives. That’s the end-all, be-all — full stop.”
“Outside of that, we’re going to need volume,” he said. “Volume will drive down the price of school buses. And that’s the whole premise behind the EPA Clean School Bus Program. The $5 billion is going to get us part of the distance. It won’t get us all the way there.”
Kids riding in rolling yellow bombs , unbelievable