MOBILITY AND TRANSPORT CONNECTIVITY SERIES ELECTRIFICATION OF PUBLIC TRANSPORT A Case Study of the Shenzhen Bus Group Institute of Transportation Studies MOBILITY AND TRANSPORT CONNECTIVITY IS A SERIES PRODUCT BY THE TRANSPORT GLOBAL PRACTICE OF THE WORLD BANK. THE WORKS IN THIS SERIES GATHER EVIDENCE AND PROMOTE INNOVATION AND GOOD PRACTICE RELATING TO THE DEVELOPMENT CHALLENGES ADDRESSED IN TRANSPORT OPERATIONS AND ANALYTICAL AND ADVISORY SERVICES. ©2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of The World Bank, together with external contributions from Shenzhen Bus Group, University of California Davis, and China Development Institute. 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Table of Contents Acknowledgments vii Abbreviations viii Excecutive Summary 1 Part I Policy and Enabling Environment 8 Chapter 1 The Ecosystem and Policy Environment 9 1.1 Context 9 1.2 The Electric Mobility Ecosystem 11 Chapter 2 Shenzhen Bus Group and Its Electrification 20 2.1 Shenzhen Bus Group 20 2.2 SBZG’s Bus Electrification Journey 28 Part I Key Lessons 32 Part II Business Model and Implementation 33 Chapter 3 The Business Model 34 3.1 Ownership and Financing 34 3.2 Allocation of Responsibilities within SZBG 37 3.3 New Business Model for Electric Taxis 37 Chapter 4 Acquiring and Managing an Electric Vehicle Fleet 40 4.1 Planning and Technology Selection 41 4.2 Acquiring the Vehicles 44 4.3 Operation Adjustment 52 4.4 Maintenance and Asset Management 57 4.5 Operating and Managing Electric Taxis 63 Chapter 5 Acquiring and Managing Charging Infrastructure 66 5.1 Acquiring Charging Infrastructure 67 5.2 Technical Specifications 68 5.3 Operating Charging Facilities 71 5.4 Taxi Charging Infrastructure 71 Part II Key Lessons 73 Part III Assessment of Costs and Benefits 76 Chapter 6 Total Cost of Ownership 77 6.1 Introduction 78 6.2 Bus TCO 78 6.3 Charging Infrastructure TCO 92 6.4 Discussion 98 Chapter 7 Environmental Impacts 100 7.1 Methods 101 7.2 Emission Results 107 7.3 Comparison of Results 111 Table of Contents i Chapter 8 Cost-Benefit Estimation 118 8.1 Introduction 118 8.2 CAPs and GHGs 119 8.3 Marginal Cost for Damage Estimation 121 8.4 Emissions and Benefits 122 8.5 Discussion 125 Part III Key Findings 127 ii Table of Contents Figures Figure 1-1 Number of motorized vehicles in Shenzhen 2010–2018 10 Figure 1-2 Shenzhen transportation mode share in 2010 and 2016 11 Figure 1-3 Interaction of government and industry 11 Figure 2-1 Total income of SZBG in 2018 (million yuan) 22 Figure 2-2 Comparison between revenue and operating cost of SZBG 2013–18 22 Figure 2-3 SZBG’s bus routes 23 Figure 2-4 Public transport trips in Shenzhen 24 Figure 2-5 Passenger trips and number of buses before and after fully electrification 25 Figure 2-6 SZBG’s different categories of employees per electric bus as of 2019 26 Figure 2-7 Dominant bus model in SZBG, BYD K8 27 Figure 2-8 Locations of charging stations and maintenance workshops of SZBG 27 Figure 2-9 The Electrification journey shown in bus composition of SZBG fleet 29 Figure 2-10 SZBG charging stations, available years and operators 30 Figure 3-1 Bus–battery separation financial leasing model 35 Figure 3-2 Whole-vehicle lease financial leasing model 36 Figure 3-3 Collaboration model of PCET (based on PCET 2014) 39 Figure 4-1 Average electricity consumption of electric buses per 100 kilometers in 2019 41 Figure 4-2 SZBG procures electric vehicles in eight steps 45 Figure 4-3 K8 bus specifications 49 Figure 4-4 The philosophy of charging arrangement to minimize the electricity costs 53 Figure 4-5 Charging terminal with one plug (left) and charging terminal with four plugs (right) 53 Figure 4-6 Charging guidance card on board of Line 38 54 Figure 4-7 Display of the bus operation and dispatching platform in the ITC 55 Figure 4-8 Display of Safety Management System of the ITC 56 Figure 4-9 Number of defects of conventional and electric buses per 1,000 vehicle kilometers running 58 Figure 4-10 Cost comparison of maintenance and repair between SZBG’s diesel and electric buses 59 Figure 4-11 Digital display of depot and vehicle information in the ITC 62 Figure 5-1 SZBG charging terminals by power output 70 Figure 6-1 Value of the composition of the bus costs in 2019 86 Figure 6-2 TCO results by year 88 Figure 6-3 Variables that affect the diesel bus TCO per kilometer 88 Figure 6-4 Variables that affect BEBs TCO per kilometer with subsidy 89 Figure 6-5 Total cost distribution 91 Figure 6-6 Unit cost distribution 91 Figure 6-7 Liuyue charging station operated by Winline 93 Figure 6-8 Value of charging station cost components in 2019 96 Figure 6-9 Yearly and cumulative costs and revenues for each bus charging 97 Figure 7-1 Description of comparative life cycle assessment in this study 102 Figures iii Figure 7-2 Average emissions rates across 2018 PEV models in China 103 Figure 7-3 Energy source for electricity generation by China Southern Grid (2018) 108 Figure 7-4 Relationship between share of coal and benefits of bus electrification 115 Figure 8-1 Annual average air quality in Shenzhen during 2014–19 119 Figure 8-2 Shadow price of carbon in USD per 1 metric ton of CO2 equivalent (constant prices) 120 Figure 8-3 Bus operation pollution damage from DB and BEB 123 Figure 8-4 Economic benefits from BEB avoided CAPs and GHGs in 8 years 123 Figure 8-5 TCO and environmental cost of DB and BEB 124 Tables Table 1-1 National and local purchase subsidy for electric buses (thousand yuan) 14 Table 1-2 Stakeholder in Shenzhen bus electrification 17 Table 2-1 Operational data of the three transit bus companies in Shenzhen (2018) 21 Table 2-2 Per route bus statistics of the three transit bus operating companies in Shenzhen (2019) 21 Table 2-3 Different type of bus lines of SZBG 23 Table 2-4 Electric bus models of SZBG fleet 26 Table 2-5 Timeline of Shenzhen bus electrification 28 Table 3-1 Operating cost comparison of electric taxis and gasoline taxis (yuan/1,000km) 38 Table 4-1 Pros and cons of two electric bus types 42 Table 4-2 Key performance parameters compared 44 Table 4-3 SZBG bus procurement results in 2015 46 Table 4-4 SZBG bus procurement results in 2016 47 Table 4-5 SZBG bus procurement results in 2017 47 Table 4-6 Specification of bus model in SZBG 48 Table 4-7 BYD e6 key specifications 51 Table 4-8 Maintenance and repair staffing transformation plan after the electrification 61 Table 6-1 Basic setting of BEB and DB 78 Table 6-2 BEB and diesel bus model configurations 79 Table 6-3 Bus purchase price and subsidies 81 Table 6-4 Electricity Price Scheme 82 Table 6-5 Weighted average price of electricity and diesel 82 Table 6-6 Diesel and electricity consumption efficiency 82 Table 6-7 Maintenance cost for diesel buses and BEBs 84 Table 6-8 Variables and range adopted in TCO literature 85 Table 6-9 Present value of diesel bus and battery electric bus 86 Table 6-10 TCO results compared with results from literature 87 Table 6-11 Monte Carlo distribution settings for diesel bus and BEB 90 Table 6-12 Cost structure of a charging station construction 94 iv Figures and Tables Table 7-1 Studies on EV battery production GHG emission 104 Table 7-2 Emissions from the production of diesel used in transportation 106 Table 7-3 Emission factors from electricity generation (g/kWh), 2018 108 Table 7-4 Emission of an electric bus from electricity consumption (g/100km) 109 Table 7-5 GHG emission of an electric bus (g/100 km) 109 Table 7-6 GHG emission from diesel production for one diesel bus per 100 kilometers 109 Table 7-7 Emission of a diesel bus when in operation 110 Table 7-8 GHG emission of one diesel bus (g/100km) 110 Table 7-9 GHG emission per 100 kilometers of one diesel and one electric bus (gCO2eq) 111 Table 7-10 Comparison of emission of 100 kilometers for one diesel and one electric bus (g) 112 Table 7-11 Pollutant emission reduction of bus electrification 113 Table 7-12 Share of energy use in power grid in different regions in China (2018) 114 Table 7-13 Benefits of electric bus in different regions in China 114 Table 8-1 CAP cost from EU 28 121 Table 8-2 Shadow price of carbon (USD/tCO2eq) 121 Table 8-3 Estimated economic benefits from air pollutant emissions reduction for the bus fleet 122 Table 8-4 Estimated economic benefits from the reduction of GHG emissions from the bus fleet 122 Tables v Acknowledgments Alejandro Hoyos Guerrero (World Bank) Bianca Bianchi Alves (World Bank) Christophe de Gouvello (World Bank) Gerald Ollivier (World Bank) This report is an output of the Transport Georges Darido (World Bank) Global Practice of the World Bank Group, with Dominic Patella (World Bank) close collaboration with the Shenzhen Bus Group, the University of California Davis, and Franck Taillandier (World Bank) the China Development Institute. The authors Muneeza Alam (World Bank) are thankful to Binyam Reja, Transport Global Lulu Xue (World Resource Institute) Practice Manager for China and Mongolia, for Peng He (World Economic Forum) his initiation of the effort and guidance in Alissa Kendall (UC Davis) preparing this report. The authors thank the support extended to Authors of the report include: this case study by: World Bank Foreign Affairs Office of Shenzhen Municipal Yang Chen People’s Government Weimin Zhou Transport Bureau of Shenzhen Municipality Annika Berlin The authors wish to acknowledge the excel- Huijing Deng lent visual design of the report by Guomeng Ni Danhui Tian and the editorial support of Chitra Arcot and Jin Wang Chunyu Lin. Shenzhen Bus Group The authors are also grateful for the opera- Joseph Ching Yuen Ma tional and administrative support received from Azeb Afework and Yumeng Zhu. Hallie Mingyu Liao Bonnie Xuemei Guo This report is supported and disseminated Sophie Xuan Xu under the umbrella of TransFORM, the Chris Yudong Liang Transportation Transformation and Innovation Knowledge Platform, a flagship knowledge University of California, Davis dissemination platform to share innovative Xiuli Zhang solutions in transport between China and Alan Jenn other World Bank client countries. This report Yunshi Wang is also published as part of the recently launched Mobility & Transport Connectivity China Development Institute Technical Series of the World Bank Transport Yu Liu Global Practice. Jingyun Li Fulei Wei Qian Wang Yong Bian Chunmei Li The report benefited from valuable expert advice received from the following peer reviewers: vi Acknowledgements Abbreviations Abbreviation Full Name AC Alternating Current BEB Battery Electric Bus BEV Battery Electric Vehicle BYD Build Your Dream Company Limited CAN Control Area Network CAP Criteria Air Pollution CATARC China Automotive Technology and Research Center Company DB Diesel Bus DC Direct Current EAP Employee Assistance Program EBC Eastern Bus Company EEA European Environment Agency EU European Union EV Electric Vehicle FCV Fuel-cell Vehicle GHG Greenhouse Gas HEV Hybrid Electric Vehicle ICEV Internal Combustion Engine Vehicle IPCC The Intergovernmental Panel on Climate Change ITC Intelligent Transportation Center ITS Intelligent Traffic System LPG Liquefied Petroleum Gas MIIT Ministry of Industry and Information Technology MOF Ministry of Finance MOST Ministry of Science and Technology NDRC National Development and Reform Commission NEV New Energy Vehicle NJGD Nanjing Golden Dragon Bus Company Limited OEM Original Equipment Manufacturer PGC Potevio Group Corporation PHEV Plug-in Hybrid Electric Vehicle SZBG Shenzhen Bus Group SMTC Shenzhen Municipal Transport Commission SDRC Shenzhen Development and Reform Commission SNEVLG Shenzhen Energy Saving and New Energy Vehicles Demonstration and Promotion Leading Group SOC State of Charge SOE State-Owned Enterprise STC Shenzhen Transportation Commission SWT Shenzhen Winline Technology TCO Total Cost of Ownership UITP Union Internationale des Transports Publics WZL Wuzhoulong Company Limited WBC Western Bus Company Abbreviations vii Executive Summary China is the only economy worldwide that has buses in 2009, under a national electric vehicle implemented large-scale electrification of city demonstration program that challenged ten buses, accounting for 98 percent of the global cities across China to deploy at least 1,000 electric bus stock and 95 percent of the global electric vehicles (EVs) for three years. In 2017, stock of dedicated bus chargers (IEA 2020). Shenzhen became the first city in the world This rapid technology transition was driven by that fully electrified its urban transit fleet of strong policies supporting local governments 16,359 electric buses. In addition, Shenzhen is with experimental innovations and lessons also approaching the goal of fully electrifying from pilot projects that were scaled across the its taxi fleet of 21,609 taxis—99 percent country. As early adopters with the operational electrified at the end of 2019 with 21,485 experience of a whole lifecycle of electric electric taxis. Private cars, garbage trucks, and buses, Chinese cities can offer valuable other heavy-duty vehicles are transitioning knowledge and lessons to the rest of the world toward electrification as well. in the technology, policy, infrastructure, and capacity requirements for making the electrifi- The Shenzhen Bus Group Company Ltd. cation transition. This case study on the (SZBG), one of the three major bus operators electrification of buses and taxis is part of a in Shenzhen, was the first public transport larger effort by the World Bank Transport operator in China and the world to electrify its Global Practice to share China’s experience in entire fleet. SZBG operates nearly 6000 rolling out electric mobility to the international electric buses running one third of the city’s community so that other governments can bus routes, carrying 40 percent of bus passen- make more informed decisions, avoid potential ger trips of Shenzhen. The SZBG electrified its risks, save resources, and connect to experts whole bus fleet from 2009 to 2017 in three in the field and build capacity. phases: a demonstration stage in 2009–2011, followed by small pilots from 2012–2015, and The City of Shenzhen has China’s, and the large-scale electrification from 2016–2017. world’s, first and largest fully electric bus and This was certainly not a transition without its taxi fleets. Shenzhen began adopting electric challenges: how the SZBG dealt with them and Executive Summary 1 what the financial and environmental impacts are, could provide important lessons for public Collaborating transport operators around the world embark- Closely with Public ing on a similar path. and Private The authors would like to note that Shenzhen is a unique case for electrification, even in Stakeholders China. Shenzhen has a mild and warm climate and relatively flat topography, where electric vehicles tend to perform in a more reliable way The transition to electrification requires than in cold or hilly areas. More importantly, coordination and policy synergy across Shenzhen is one of the most affluent cities in different levels of governments as well as China—a young megapolis rising after China’s different departments within the governments. economic reform and opening up, with overall Private players especially in vehicle manufac- high-quality infrastructure—street network, turing, charging, and new technology are also power grid, utilities—and an almost complete critical. The ultimate users of the service are supply chain locally from battery production passengers, who should not be neglected. and vehicle manufacturing to battery recycling Shenzhen’s success in electrifying its entire companies and research and development bus fleet in a short period of time was a joint institutions, most notably housing the head- effort by private and public entities. quarters of the automobile manufacturing giant Build Your Dream Company Limited (BYD). Shenzhen has established the Shenzhen Furthermore, Shenzhen municipal government Energy Conservation and New Energy Vehicle is financially and institutionally capable—while Demonstration and Promotion Leading Group it can afford very generous fiscal subsidies, the (SNEVLG) to trickle down national and government has been famous for its policy provincial policies and to coordinate relevant innovation and ambition, given Shenzhen’s municipal departments. The government Special Economic Zone status. Despite its mandate to shift completely to clean energy unique advantages that most other cities might buses—accompanied by generous national not have, this case study on the electrification and local government subsidies that signifi- of buses and taxis of the SZBG still provides cantly lowered the upfront cost—supported the other cities and bus operating companies with fast and full electrification of the bus fleet in a series of useful lessons, especially on the Shenzhen. The combination of purchase practical implementation details as well as a subsidies from national and local governments valuable accounting of the financial and together contributed more than 60 percent of environmental impacts of the electrification the total procurement cost of the electric buses using real-life data. from 2015 to 2017, which was critical for its large-scale adoption. The municipal govern- ment of Shenzhen also made significant efforts to resolve the land availability issue for constructing new charging stations. The main private stakeholder was the bus manufacturer. The manufacturer provided warranties that cover the lifetime of a bus in Shenzhen, its maintenance support as well as training for operator staff. Such warranties not only relieved the operator’s concern over technology uncertainty and reduced the 2 Executive Summary maintenance cost but also incentivized is to facilitate technology selection and manufacturers to keep innovating and improv- adoption. The technology department studies ing their electric bus performance. Another the available technologies on the market and important private stakeholder is the charging coordinates the needs from relevant depart- service provider who functions as a conduit ments inside the SZBG including operation between the grid company and bus operators and fleet management, maintenance and by evaluating grid capacity and providing repair, financial, procurement, information additional transformer and power lines as technology, human resources, and strategic necessary. investment. Besides government and industry partners, the Aiming for large-scale adoption in a very short SZBG also worked closely with private compa- time, the SZBG decided to choose a vehicle nies and nonprofit organizations including model that would require minimal changes to Huawei, Didi Chuxing and the International the existing bus routes and schedules. Unlike Association of Public Transport (UITP) running other cities that tested different electric bus pilot programs on intelligent dispatch systems, technologies, Shenzhen remained dedicated on-demand bus services, and autonomous to a single, proven vehicle technology—elec- driving technologies. Furthermore, the SZBG tric buses with a large battery—to achieve the conducted passenger satisfaction surveys daily mileage of its required operation. Shen- every year to evaluate its service and to make zhen’s electric buses are dominated by the adjustments—passengers expressed very high BYD K8 bus—67 percent of the fleet—that is satisfaction with the electric bus service, and 10.5 meters long with a theoretical 250-kilome- the SZBG was able to maintain a stable ter battery range, featured by two-hour direct ridership against the overall declining bus current (DC) fast charging or 4- to 5-hour demand with the expanding metro system. alternating current (AC) slow charging. With an average daily operation distance of 190 kilometers, these buses could run a whole day, and would only need recharging at night for Selecting most routes. Over the ten-year period, the SZBG and the manufacturers worked together Technology to Fit to improve the technology and optimize the Operational Needs vehicle configurations based on operation feedbacks, and created a more mature and and Constraints standardized product. In selecting of charge technology, the SZBG decided to use DC fast charging stations to At the early stages of electrification, overcome two of the most prominent issues of 2009–2013, EV technologies were not widely charging speed and the lack of space at tested, and technical specifications of vehicles depots—DC fast charging allows multiple varied among manufacturers. At the same buses to be charged at the same charging time, bus operators also lacked the technical terminal without moving them. The SZBG also knowledge to evaluate specifications. The considered several alternative charging modes SZBG has gained a critical understanding of such battery swapping and wireless charging the technology from a small-scale pilot and but did not choose those due to various learned to specify the vehicle and charging reasons including technical constraints, needs that fit their own operation requirements financial viability, charging efficiency, and and constraints. The SZBG has established a impact on the grid. technology department, whose major mandate Executive Summary 3 Finding Viable they are in the best position to manage. The charging service provider and the SZBG fleet Business Model to operators can then focus on the operation and Improve Financial management of the charging facilities and the bus fleet respectively. Efficiency The key challenge for electric bus adoption Upgrading the around the world is its high capital cost, even Digital Systems and though the price of the electric bus has dropped significantly since the SZBG started Training Staff for its electrification process. Even with sizable Better Operation national and local government subsidies, the purchase cost of electric buses is still much and Management higher than conventional buses. The need for charging facilities also increases the costs, and the land acquisition or rent for charging By considering both operational needs and stations adds to the initial investment needs. electricity prices, the SZBG fits the charging The SZBG introduced a financial leasing arrangements into its operational plan. The model that used a financial leasing company SZBG conducts performance and efficiency that purchases and owns the vehicles and checks of each route in every six months and leases them to the SZBG for a period of eight makes appropriate refinements depending on years, with a lifecycle warranty for key parts the running distance, shifts, and charging time. offered by bus manufacturers. The SZBG Charging facilities and shifts for charging were takes ownership of the vehicles after the also carefully designed to accommodate the leasing period is over. The batteries are large charging demands at night. For example, returned to the manufacturer to recycle and using the charging terminals with four plugs dispose, while the bus body is sent for scrap- allowed four buses to be charges simultane- page and metal recycling. Since the leasing ously—reducing the need to move electric period equals the total life of the buses, this buses at nighttime. arrangement turned the high-cost procurement Electrification works concurrently with informa- into more manageable annual rental or lease tion and technology as a lot of real-time data payments. The charging facilities including from the vehicles and charging facilities can be charging stations and transformers are owned collected and managed. With the electrifica- by the owners of depots, who can be the tion, the SZBG upgraded its bus dispatch and SZBG or a charging service provider, while the management system to support efficient and government owns the power supply lines. This safe operations of electric bus fleets. Three arrangement turned out to be a common systems were integrated to form SZBG’s model followed in China, and has nurtured a Intelligent Transportation Center (ITC): bus healthy and competitive market for charging operation management system, safety service providers including the participation of management system, and repair and charging grid companies. Based on this whole-vehicle management system. The integration of lease financing, the SZBG established a viable charging terminal information and bus model where players with different specializa- management system reduces drivers’ range tions are responsible for the businesses of anxiety, improves operation efficiency and their own expertise while bearing the risks that 4 Executive Summary safety, and offers potential for more efficient On one hand, by leasing charging facilities and asset management and better services to purchasing charging services, the SZBG passengers. transferred the land acquisition risks, including ownership rights, resettlements, land use On the other hand, comprehensive and changes, and land lease disputes to the well-planned training for all staff in the SZBG charging service providers. On the other hand, was crucial in making the electrification the Shenzhen Municipal Government has transition a smooth process without laying off a relaxed land use regulations and provided single employee. Operational differences incentives to find available land for charging mandate training for existing bus drivers to be stations. By 2020, the SZBG has 1707 eligible to drive electric buses including charging terminals at 104 locations (including requirements to pass a driving test and a its own depots, bus terminals, as well as public knowledge test. For maintenance staff, a parking lots, parks), reaching a ratio of 1:3.5 of step-by-step staff transformation plan—train- charging terminal to the electric bus. Nine ing, re-assignment, incentives, talent attribu- charging service providers constructed and tion, and compensation—was devised for each managed these charging facilities. The team in each maintenance and repair work- majority of the charging terminals are shop, mindful of the differences with the new equipped with 150-kilowatt (50 percent) and system based on specialty, age, and experi- 180-kilowatt (19 percent) DC fast chargers ence. with different configurations based on the charging arrangement. The number of charging terminals, charging plugs, and power of the charging terminals were decided based Overcoming on the land availability at the location of the Obstacles in charging station, number of buses to be served, space requirements, speed of Building the charging terminals, grid capability, and other factors. Realizing the scarcity of charging Charging facilities and space for new charging facilities Infrastructure as the main obstacle, the SZBG decided to remain with DC fast charging—as opposed to AC slow charging, battery swapping, or wireless charging—to ensure operational The prerequisite of charging infrastructure is efficiency. The SZBG also explored and one of the main operational differences encouraged innovations in network charging between diesel and electric buses, and the and flexible charging cabinet to overcome the network of charging stations had to be built charging bottleneck. over time. The rapid rollout of electric buses from 2016 to 2018 required a large amount of land for charging stations, which was challeng- ing for a large and densely populated city like Shenzhen. Furthermore, charging buses escalated local electricity demand, sometimes requiring transformers and additional power lines to be added to increase zonal grid capacity. The lack of space for building charging infrastructure has been a bottleneck for electrification. Executive Summary 5 Financially Viable According to a regular satisfaction survey, bus users rated comfortability, safety, and afford- Only with Subsidies ability much higher due to smoother rides with and Significant an electric engine. Electric buses also run quieter than diesel buses, and the smell of Environmental diesel exhaust at bus stations has disap- peared. Additionally, the bus fare has been Benefits maintained at the same low level for passen- gers, leading to overall positive user feedback. The transition to a new fleet helped improve With government subsidies and the manufac- public transport services. The SZBG fully turers’ lifetime warranty, the total cost of explored new mobility solutions to provide ownership (TCO) of electric buses is 35 customized public transport services to the percent lower than the diesel fleet for the public that demonstrated synergies between SZBG. However, if the subsidies are excluded, electric and smart mobility. The SZBG the TCO of battery electric buses (BEB) is 21 co-founded Didi Youdian Technology Company percent higher than diesel buses (DB). The in 2016 to cover on-demand services that electrification of public transport significantly complemented traditional fixed-route bus reduced greenhouse gas (GHG) emissions operations. They also invested in a mobile and air pollution in Shenzhen. The lifecycle application to integrate more urban mobility GHG emission of an electric bus is only about services in the creation of a mobility-as-a-ser- 52 percent of the emission from similar sized vice (MaaS) platform. diesel buses in Shenzhen. Electrifying one 10.5-meter bus saves 274 tons of carbon The SZBG leveraged government’s support for dioxide in its 8-year lifetime. The electrification electrification to reform and revive the strug- of the SZBG buses saves 194,000 tons of gling taxi sector, taking advantage of govern- carbon dioxide annually. The electrification ment subsidies and lower operating costs of also contributes to a significant emission electric taxis due to its much lower energy cost reduction of air pollutants including CO, NOX, and the waived license fee. SZBG’s taxi PM2.5 and PM10. Subsidizing electric buses subsidiary companies were 100 percent provides strong economic benefits while electrified by the end of 2018 with a total of making technology financially viable for the 4,681 electric taxis, following a viable business bus operator, taking the results from the model where all stakeholders collaborated to estimation of environmental benefits and TCO. benefit. The cost of operating electric taxis is Higher subsidies than economic benefits are almost 30 percent lower than the cost of justified at the beginning with electric buses operating gasoline taxis. However, charging being a new technology, but subsidies should time is a big hindrance and takes about three be downscaled and phased out gradually once hours per day of operation, considering travel the technology gets to scale. If the other time, wait time, and charging time. The SZBG benefits from bus electrification such as noise explored innovative measures to enhance reduction, passenger and driver comfortability efficiency and generate revenue such as improvement, grid stability improvement and developing a one-stop service complex, small easier data collection to improve bus operation parcel delivery, school taxi, traffic police are included, the economic case for BEBs support, advertising and marketing campaign, would only grow stronger. and driving data collection. By the end of 2018, 11,571 charging terminals were available to Passenger satisfaction significantly increased electric taxi charging in Shenzhen, and the because of the transition to electric buses. network continues to expand with the growing 6 Executive Summary demand of electric private cars. Part I: The Policy and Enabling Environment of Electrification of Buses in Shenzhen Part II: The Business Model and Implementa- In This Report tion of SZBG’s Transition to Electric Mobility Part III: Assessing the Costs and Benefits of SZBG’s Transition to Electric Mobility Electrification of public transport provides an A Separate Brochure: Key Steps of Bus Fleet opportunity to achieve multiple objectives: Electrification for Cities low-carbon urban development, reduction of local air pollution, creation of jobs, and higher acceptance of public transport by residents. However, owing to higher capital costs versus diesel or gas alternatives, the rapid evolution of product technologies, limited operational experience, and lack of trained personnel, the adoption of electric buses has been slow worldwide. Electric buses require different operational and financing schemes due to their higher fleet costs, the need for charging infrastructure, and additional land requirements to park and charge the buses. To be successful, electric urban buses must be approached as a coherent system that embraces the vehicle, the infrastructure, the operation, the users, and the financial sustainability. Finally, their introduction involves a new set of stakehold- ers, such as electric utilities and battery manufacturer companies and stronger collabo- ration with local government agencies that usually have higher stakes in these projects because of the provision of subsidies. Although many of the operational lessons are transferable to other cities in emerging econo- mies, the successful transition not only depends on technology but also political will. Probably the most important first step in the transition of electric mobility is providing a vision with stronger targets. The Shenzhen case study provides references and recom- mendations to cities for the deployment of References electric buses based on the comprehensive analysis of the journey of the SZBG. 1 International Energy Agency. 2020. Global Electric Vehicle Outlook, IEA, Paris. https://www.iea.org/reports/- The case study is organized into four main global-ev-outlook-2020 parts: Executive Summary 7 1 Policy and Enabling Environment Chapter 1 The Eco-System and Policy Environment 1.1 Context equivalent from fossil fuels in 2019 (EU 2020). China has placed great emphasis on the promotion of electric mobility since 2009, motivating to reduce local and global emis- The transport sector is facing a major transfor- sions, strengthen the local automotive industry, mation. Technological advancements play an and reduce oil dependency. In the public important role in decarbonizing the transport transport sector, with strong promotion from all sector as part of global climate change levels of governments, China's urban transit mitigation efforts. The International Energy bus fleet by the end of 2019 consisted of more Agency (IEA) estimates that electrification of than 324,000 electric buses, which indicates the global vehicle fleet of public transport an increase from 0.33 percent in 2013 to 46.8 buses will comprise about 30 percent of percent in 2019 (MOT 2020). China is the only projected emission reductions in transport by economy worldwide which has large-scale 2050 (IEA 2017). The electrification of public implementation of electric buses, and is one of transport provides an opportunity to achieve the early adopters to have had the operational low-carbon development and the reduction of experience of a whole lifecycle. These lifecycle local air pollution, if the transition is well experiences and lessons learned from electric designed and coordinated among a wide mobility programs are extremely valuable to range of stakeholders. However, owing to the rest of world to understand the technology, higher capital cost versus gasoline or diesel policies, infrastructure, and operational design alternatives, rapid evolution of product technol- and meet the requirements of successful ogy, limited operational experience, and lack of adoption and transition. trained personnel, the adoption of electric One of the earliest adopters of electric mobility buses has been slow worldwide. was the city of Shenzhen. Shenzhen’s electrifi- In China, the transport sector was the fastest cation experience offers a rare opportunity in growing sector for carbon dioxide emissions, understanding the challenges of enacting wide reaching 986 million tons of carbon dioxide scale, system level changes from a small The Eco-System and Policy Environment 9 electric bus pilot to the whole public transport Shenzhen is a vibrant young city with rapid mobility system. Shenzhen became the first motorization. Shenzhen started to implement city in the world in 2017 that fully electrified its the purchase restriction policy on cars in 2014. urban transit fleet of 16,359 electric buses.1 In The policy limits fewer than 100,000 vehicles addition, Shenzhen is approaching the goal of being allowed to register each year, with fully electrifying its taxi fleet of 21,609 license plates allocated by a combination of taxis—99 percent electrified at the end of 2019 lottery and auction. As a result, the number of with 21,485 electric taxis. private cars has been increasing at a much slower pace after 2014. As estimated, Shen- Located in China’s south-eastern province of zhen had 3.37 million automobiles4 (figure 1-1) Guangdong, adjacent to Hong Kong SAR, by 2018. Nevertheless, share of daily trips by China, Shenzhen was designated an econom- Shenzhen residents using nonmotorized ic special district of China in 1978. Shenzhen transport continued shrinking, dropping from has a subtropical climate with average 57 percent in 2010 to 52 percent in 2016 temperature of 23ºC and annual precipitation of (figure 1-2). Public transit buses and subway 1935.8 millimeters. The city has a population systems are important transportation modes. of 13.43 million (end of 2019) and an area of Shenzhen’s first metro line started operation in 1,991 square kilometers.2 With a gross 2004 and expanded rapidly since then, with domestic product (GDP) of 2.42 trillion yuan eight lines of 289.5 kilometers long. The mode (approximately USD 356 billion) in 2018,3 share by metro rose from one percent in 2010 Shenzhen is one of the most developed cities to seven percent in 2016, and rose further in China—ranked third in the Chinese Cities afterward lifting more public transport shares. Economic Ranking 2018. Figure 1-1 Number of Motorized Vehicles in Shenzhen 2010–2018 Growth Rate (%) 4.0 25% Number of Automobiles (million) 20% 3.0 15% 2.0 10% 1.0 5% 0.0 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 10 The Eco-System and Policy Environment Figure 1-2 Shenzhen Transportation Mode Share in 2010 and 2016 Bike, 6% Metro, 1% Commute Bus, 4% 2010 Walk, 51% Transit Bus, 15% Private Car, 19% Taxi, 2% Motocycle, 2% Bike, 5% Metro, 7% Commute Bus, 3% 2018 Walk, 47% Transit Bus, 12% Private Car, 22% Taxi, 1% Motocycle, 2% 1.2 The Electric Mobility EcoSystem Shenzhen’s success in electrifying its entire bus fleet in record time was a joint effort by private and public entities. Stakeholder analyses recognize the complexity and importance of coordination between different entities in the transition to electric mobility, and the relationship between them. The roles and interactions of public and private players in the ecosystem are shown in figure 1-3. Figure 1-3 Interaction of Government and Industry National Gov Shenzhen NEV Leading Group MIIT NDRC SDRC STC SUPLRC MOST MOF SFB District Office SEB Operating Consolidate Land Subsidy Subsidy Subsidy Subsidy Use and Electricity Bus Operating Charging Service BEB Manufacturer Company Provider Lifetime Long-Term Warranty Customer Product Test Bus Charging and Feedback Service The Eco-System and Policy Environment 11 Note: National and local governments provide purchase subsidies to the electric bus manufacturer. The Shenzhen local government also provided subsidy for bus operating companies and charging station companies. In this way, the government departments relived the financial burden for all its industry partners on the business chain. Lifetime warranty and battery change offered by the BEB manufacturer in accordance to negotiation and contracts helped ease the bus operating companies on the uncertainty of technology. Feedback and recommendations on the BEB product design also promote the product evolvement for the manufacturer. The charging companies take care of the construction and operation of the bus charging stations, which also facilitate the bus operating company’s smooth transition from traditional buses to electric buses. 1.2.1 Role of the For example, MIIT organized a crossministry meeting on May 14, 2019 to discuss the roles Government and task assignments among different ministries to enhance the safe operation of NEV. Ministries that attended the meeting At National Level included NDRC, MOT, Ministry of Finance, Ministry of Public Security, Ministry of Ecologi- With the motivation of reducing imported oil cal Environment, Ministry of House and Urban dependency, strengthening national automo- Development, Ministry of Transport, Ministry tive industries, and improving air quality, the of Commerce, Ministry of Emergency national government initiated the national new Response, and Commission of National energy vehicle (NEV) promotion strategy. The Assets. This level of coordinated meetings Ministry of Industry and Information (MIIT), was held regularly or ad hoc to discuss National Development and Reform Commis- emerging issues, potential policies and the sion (NDRC), Ministry of Science and Tech- allocation of responsibilities among ministries. nology (MOST), and Ministry of Finance In each ministry, one office acted as a focal (MOF), known as the “four ministries”, led the point of NEV. This mechanism discussed and promotion and development of the NEV coordinated policies regarding every aspect of industry and prioritized the electrification of NEV. buses. Other ministries, such as the Ministry of Transport (MOT)—responsible for the The four ministries established a program rollout of new energy buses and taxis—play called “Ten cities one thousand NEVs” in 2009 supporting roles. that challenged ten cities across China to deploy at least 1,000 electric vehicles in each Among the four ministries, MIIT plays the city each year for three years. Shenzhen was leading role as it formulates the industrial among the first batch of demonstration cities development plan and coordinates the NEV under this national electric vehicle demonstra- development, administrative, and supporting tion program that began its electrification departments. MIIT also maintains a catalog of journey. NEV models that are qualified for governmen- tal subsidy. The Communication and Clearing National policies and guidance are then Center under MIIT collects data of NEV sales passed on to provincial and municipality levels and subsidy amount, verifies them, and through series of directives. evaluates the required annual operating mileage. MIIT is also responsible for organiz- At Provincial and Local Level ing multiministry meetings to discuss the Guangdong Province, where Shenzhen is policy and coordination mechanism among located, established a coordinated meeting different ministries. mechanism for different provincial-level 12 The Eco-System and Policy Environment departments to discuss policies at the provin- supervises and approves the routes and bus cial level. These meetings also serve as a stops, reviewing and updating them twice a mechanism to pass national level policies and year. It also bears the responsibility to evalu- directions to the municipality level. ate the performance of bus operating compa- nies based on the trip frequency at rush hour, The primary motivation behind the Chinese the safety of the operation, feedback from bus local government’s support of NEV deploy- riders, and ridership volumes. ment is to promote local tax-paying industries and improve local air quality. Three munici- The STC was initially skeptical at the early pal-level agencies are playing critical role in stage of bus electrification with concerns of the process. higher costs, risk to service quality, and the associated financial burden to the bus operat- Shenzhen NEV Leading Group: The munici- ing companies (Huang and Li 2019). However, pal government established the Shenzhen when government agencies reached consen- Energy Conservation and New Energy Vehicle sus on full electrification, the STC actively Demonstration and Promotion Leading Group facilitated the adoption of electric buses and (SNEVLG) in December 2009 in response to provided operational subsidies for bus operat- emerging opportunities of electric mobility. ing companies. The STC also supports the The main municipal government departments construction of charging infrastructure in involved are the Shenzhen Development and coordination with SUPLRC. Reform Commission (SDRC), Shenzhen Transportation Commission (STC), Shenzhen Finance Bureau (SFB) and the Shenzhen Urban Planning, Land and Resources Com- 1.2.2 Incentive Policies of mission (SUPLRC). Hosted at the Shenzhen Bus Electrification in Development and Reform Commission Shenzhen (SDRC), SNEVLG comprises the mayor’s office, the SDRC, STC, SFB, SUPLRC and district offices. SNEVLG works as the platform Bus Purchase Subsidies for communicating and facilitating cooperation among the municipal departments in promot- China’s national government provides subsi- ing NEV development. dies based on the electric vehicle range, battery energy density, and other metrics to Shenzhen Development and Reform promote the electrification of vehicle fleets and Commission: The SDRC takes the leading the development of the technology. The role in the NEV development of Shenzhen. national purchase subsidy was matched by The SDRC developed regulations and Shenzhen’s local government 1 for the NEVs oversees the process of the NEV purchase purchased in Shenzhen. The local subsidy 5 subsidy program. It also sets subsidy applica- amount was the same as the national subsidy tion requirements, reviews and approves until 2016. Subsidies started to decrease these applications. Moreover, the SDRC also since 2017, and the local subsidy could not interprets national and local regulations, exceed half the amount of the national issues guidance principles, and provides local subsidy (table 1-1). incentives and subsidies to EV manufacturers, vehicle dealers, vehicle operators, and charging operators. Shenzhen Transportation Commission: The STC is the supervisory authority of the transport sector of Shenzhen. The STC The Eco-System and Policy Environment 13 Table 1-1 National and local purchase subsidy for electric buses (thousand yuan) Model Length (m) 6-8 meters 8-10 meters 10+ meters Year Subsidy (Thousand yuan) Light duty Medium duty Heavy duty 2013–15 National 300 400 500 2013–15 Local 300 400 500 2016 National 60–250 96–400 120–500 2016 Local 60–250 96–400 120–500 2017–2020 National 90 200 300 2017–2020 Local 45 100 150 The combination of purchase subsidies from In addition, during the large-scale rollout national and local government together stagewhere the land availability for charging contributed more than 60 percent of the total stations became a bottleneck for electrifica- procurement cost of electric buses from 2015 tion, the Shenzhen local government made to 2017. great efforts to address this issue, encourag- ing land allocation by government agencies Charging Infrastructure and providing a simplified, fast-track review Shenzhen announced the Blue-Sky Sustain- and approval process for land use applica- able Action Plan (the Shenzhen Blue Plan) in tions of charging infrastructure construction. April 2018. The plan aims for an annual See detailed discussion in section 5.1. average PM2.5 quality of lower than 26 Operation Subsidy ug/m3. The plan emphasized ten key areas covering electrification of transportation Like most other cities in China, transit bus among others to meet its targeted goal. The operation in Shenzhen relies heavily on the Shenzhen Blue Plan provided subsidy for the municipal government subsidy. With diesel construction of charging stations for all types bus operation, the subsidy fills the gap of fare of EVs. Every charging terminal received a revenue and operation cost for the bus subsidy of 600 yuan per kilowatt for direct operator. Additional subsidy was provided to current (DC) fast charging. Alternating current incentivize the operation of electric buses (AC) charging facilities with power rates especially at the early stage. According to an exceeding 40 kilowatts received a subsidy of official document from Shenzhen Finance 300 yuan per kilowatt whereas AC charging Bureau and Shenzhen Municipal Transporta- facilities rated less than 40 kilowatts received tion Commission, the operation subsidy for a subsidy of 200 yuan per kilowatt (SFB and electric buses in Shenzhen was calculated SDRC 2019). based on the annual mileage of the bus 14 The Eco-System and Policy Environment operation—6.6 yuan per kilometer per bus Bus Manufacturers with annual mileage of more than 64,000 The relationship between local governments kilometers, with a cap at 70,000 kilometers. and the original equipment manufacturers For example, the STC provided 244,000 yuan (OEMs) based in their territories is interdepen- (USD 34,531) per bus each year of operation dent. While the local government relies on subsidy to the SZBG with the diesel bus local industries for GDP growth and tax operation. Battery electric buses (BEBs) collection, the local industries rely on the receive 420,000 yuan (USD 59,821) per bus government for better industry policies, each year from the STC for their operation.6 subsidies, and joint promotion of products. This operation subsidy alone recovers about Sharing responsibility with OEMs has been 87 percent of the operating costs for running underlined as a prerequisite for the successful electric buses in the SZBG. operation of electric buses. Collaboration with bus operating companies closely allows manufacturers to detect and 1.2.3 Industry and Private improve technological deficiencies related to Sector the early electric bus models. With the benefit of frequent communication and feedback from bus operators, bus manufacturers can Bus Operating Companies upgrade their vehicle technology at a faster pace. On the other hand, the manufacturers The bus operating companies are on the provide an extended warranty on the key parts frontline of bus electrification. They face the of the electric bus that covers the lifetime of a challenges of high investment, potentially high bus in Shenzhen. The manufacturers also operation costs, the uncertainty of evolving provide technical and maintenance support as technologies, and shortfalls in the number of well as training for bus operators to relieve and the location of the charging stations. They their concern on the uncertainty of the need to make procurement decisions on the technology. This cooperation provided the electric bus acquisitions, adopt operation SZBG with more confidence in their ability to changes such as route and charging as well operate electric buses, and provided signifi- as manage the transition of bus drivers and cant relief on operational costs. maintenance staff. The top three bus-operat- ing companies that provide the majority of Charging Service Providers transit bus service in Shenzhen are Shenzhen Charging service providers—who typically are Bus Group (SZBG), Eastern Bus Company responsible for the construction and operation (EBC) and Western Bus Company (WBC), of charging stations—benefit from investment consolidated in 2007 from many smaller in the charging facilities that enabled them to private companies. enter the charging market for long-term Shenzhen is not only the base of China’s revenues, especially the earlier movers. leading EV maker, BYD, but the city also Charging service providers function as a hosts the headquarters of several large conduit between grid companies and bus battery companies. Electrification of buses operators by assessing grid capacity and has led to increasing involvement of organiza- providing additional transformer and power tions that did not have a big role in the city’s lines as necessary. Some grid companies also public transport ecosystem previously includ- enter the market to provide charging services. ing vehicle manufacturers, charging service providers, and grid companies. The Eco-System and Policy Environment 15 1.2.4 Bus Passengers importance, comfort is the most important aspect for passengers, followed by safety and affordability. Passenger interviews showed that the cleaner and smoother ride of Passengers are the users of the system and an electric bus contributed to high satisfaction their satisfaction is the ultimate objective of in comfort. The buses run more quietly than operating companies and governments. The diesel buses, and the smell of diesel exhaust SZBG conducts passenger satisfaction at bus stations has disappeared. surveys every year and evaluates its service according to six criteria: affordability, conve- The stakeholders and their roles in the nience, safety, regularity, comfort, and driver’s ecosystem for the electrification of buses in service. Passengers showed very high Shenzhen are summarized in table 1-2 (see satisfaction level of electric bus services. next page). According to the same survey, and of relevant 16 The Eco-System and Policy Environment Table 1-2 Stakeholder in Shenzhen Bus Electrification Roles and Responsibility in NEV Sector Sub-Sector Department and Groups Development NDRC: National Development and Reform Commission Initiate the NEV development plan MOST: Ministry of Science and Guide technology development Central Technology Government MIIT: Ministry of Industry and Lead the NEV industry development Information Technology MOHURD: Ministry of Housing Manage land allocation and requirements and Urban-Rural Development for constructing charging facilities MOF: Ministry of Finance Manage NEV related incentive policy Govern- ment SDRC: Shenzhen Development Initiate the NEV develop plan for Shenzhen and Reform Commission SFB: Shenzhen Finance Bureau Manage the NEV related local subsidies STC: Shenzhen Transportation Supervise the transportation industry in Shenzhen; manage the adoption and Local Commission operation of transit bus companies Government SUPLRC: Shenzhen Urban Planning, Support charging facility construction and Land and Resources Commission operation SEB: Shenzhen Electricity Bureau Coordinate the connection of charging stations to the electricity grid Facilitate land use and electricity connection District offices for charging stations Public Bus Operating Shenzhen Bus Group, Eastern Bus Purchase, operate and maintain electric buses Companies Company, Western Bus Company NEV Provide electric bus products, and Manufacturers BYD, NJGD, WZL maintenance and repair services and training Financial Bank of Communications Provide financial services Industry Agency Charging Charging facility provider, i.e., Provide charging facilities and management Industry Potevio, Winline Power Provide electricity connection to the grid and Grid China Southern Power Grid (CSG) related infrastructure Ride electric buses, and provide feedback to Bus Passengers bus companies End User Passengers The Eco-System and Policy Environment 17 Notes Reference 1 Shenzhen Urban Transportation Planning Center, 1 Crippa, M., Guizzardi, D., Muntean, M., Schaaf, E., Shenzhen Transport Annual Report 2018 Solazzo, E., Monforti-Ferrario, F., Olivier, J.G.J., Vignati, E., Fossil CO2 emissions of all world countries - 2020 Report, EUR 30358 EN, Publications Office of the 2 http://worldpopulationreview.com/world-cities/shen- European Union, Luxembourg, 2020, ISBN zhen-population/ 978-92-76-21515-8, doi:10.2760/143674, JRC121460 3 https://www.chinadaily.com.cn/a/201902/28/WS5c772 2 Huang, Ping, and Ping Li. 2019. “Politics of Urban 0fda3106c65c34ebd70.html Energy Transitions: New Energy Vehicle (NEV) Develop- ment in Shenzhen, China.” Environmental Politics (0): 1–22. https://doi.org/10.1080/09644016.2019.1589935 4 http://wap.sz.gov.cn/zfgb/2017/gb1007/201706/t2017 0612_6992333.htm 3 International Energy Agency. 2017. Global Electric Vehicle Outlook, IEA, Paris. https://www.iea.org/reports/- global-ev-outlook-2017 5 To be eligible for the purchase subsidies, the NEV needs to be listed in the “Recommended Model Catalogue”. MIIT has maintained the national-level eligible NEV model catalogue, and SDRC has been managing 4 Ministry of Transport (MOT). 2020. Statistical Bulletin and updating the city-level NEV model catalogue, which on the Development of the Transportation Industry in 2019 overlaps but with some difference with the national-level catalogue. 5 Shenzhen Finance Bureau and Shenzhen Develop- ment & Reform Commission. 2019. “Shenzhen New 6 Subsidy of Electric Bus During Promotion Period in Energy Vehicle Development Financial Incentives (in Shenzhen, Shenzhen Finance Commission and Shenzhen Chinese).” January 30, 2019. http://www.sz.gov.cn/zfg- Transportation Commission, 2017, http://www.sz.gov- b/2019/gb1087/201901/t20190130_15533201.htm .cn/zfgb/2017/gb1007/content/post_4983581.html 18 The Eco-System and Policy Environment Bibliography 8 Xiong, Ying, Yongwei Zhang, and etc. n.d. “Analysis on Developing a Healthy Charging Service Market for EVs in China.” Accessed October 23, 2019. http://nrdc.cn/infor- mation/informationinfo?id=204&cook=1 1 amap. 2018. “2017 Public Transportation Big Data Analysis Report for Major Cities in China.” 2 Breetz, Hanna L., and Deborah Salon. 2018. “Do Electric Vehicles Need Subsidies? Ownership Costs for Conventional, Hybrid, and Electric Vehicles in 14 U.S. Cities.” Energy Policy 120 (September): 238–49. https://doi.org/10.1016/j.enpol.2018.05.038 3 Gong, Huiming, Michael Q. Wang, and Hewu Wang. 2013. “New Energy Vehicles in China: Policies, Demon- stration, and Progress.” Mitigation and Adaptation Strategies for Global Change 18 (2): 207–28. https://- doi.org/10.1007/s11027-012-9358-6 4 Lajunen, Antti, and Timothy Lipman. 2016. “Lifecycle Cost Assessment and Carbon Dioxide Emissions of Diesel, Natural Gas, Hybrid Electric, Fuel Cell Hybrid and Electric Transit Buses.” Energy 106 (July): 329–42. https://doi.org/10.1016/j.energy.2016.03.075 5 Nurhadi, Lisiana, Sven Borén, and Henrik Ny. 2014. “A Sensitivity Analysis of Total Cost of Ownership for Electric Public Bus Transport Systems in Swedish Medium Sized Cities.” Transportation Research Procedia, 17th Meeting of the EURO Working Group on Transportation, EWGT2014, 2-4 July 2014, Sevilla, Spain, 3 (January): 818–27. https://doi.org/10.1016/j.trpro.2014.10.058 6 Palmer, Kate, James E. Tate, Zia Wadud, and John Nellthorp. 2018. “Total Cost of Ownership and Market Share for Hybrid and Electric Vehicles in the UK, US and Japan.” Applied Energy 209 (January): 108–19. https://- doi.org/10.1016/j.apenergy.2017.10.089 7 Wu, Geng, Alessandro Inderbitzin, and Catharina Bening. 2015. “Total Cost of Ownership of Electric Vehicles Compared to Conventional Vehicles: A Probabi- listic Analysis and Projection across Market Segments.” Energy Policy, 80 (May): 196–214. https://- doi.org/10.1016/j.enpol.2015.02.004 The Eco-System and Policy Environment 19 Chapter 2 Shenzhen Bus Group and Its Electrification 2.1 Shenzhen The company was restructured as a state-owned bus operating company in 1983. It Bus Group was restructured again as a joint venture company with investments from Hong Kong SAR, China in 2004. The SZBG has three major stakeholders: public share (55%), Shenzhen is served by three major bus Kowloon Motor Bus of Hong Kong SAR, China operating companies: the SZBG, Eastern Bus (35%), and others (10%). Company (EBC), and Western Bus Company (WBC). All three are joint ventures with public Among the three main bus operating compa- and private shares. The three companies run nies, the SZBG serves 319 routes, had 5988 routes in the central urban area and outer buses in operation in 2019, and carried about districts. Meanwhile, several other small 594 million passenger trips in 2019 (table 2-1). bus-operating companies run a small number Overall, the SZBG accounted for a little more of bus routes in suburban areas. than one third of the number of routes, total kilometers, and total passenger trips of the The SZBG is the oldest company among the three major companies (table 2-2). The three major bus companies, having started its average annual running distance for each bus bus service in 1975, under the name of Bao’an was similar for the three bus operating compa- County Shenzhen Town Bus Company. At this nies with about 61,000 kilometers per bus humble stage, they only operated one route each year. with two buses and had twelve employees. 20 The Eco-System and Policy Environment Table 2-1 Operational data of the three transit bus companies in Shenzhen (2019) Annual Bus- Annual Length of Travel Passenger Ticket Fare Number Routes Number Distance Trips Revenue of Routes (km) of Buses (million km) (million) (million yuan) SZBG 319 6,932.11 5,988 365.49 594.01 1,290.11 EBC 269 7,218.74 5,795 356.37 470.21 1,187.02 WBC 332 6,937.28 4,976 304.91 453.26 1,004.43 Total 920 21,088.13 16,759 1,026.77 1,517.48 3,481.57 Source: The Shenzhen Bus Group Annual Report 2019 Table 2-2 Per route bus statistics of the three transit bus operating companies in Shenzhen (2019) Annual Bus- Annual Annual Average Running Passenger Annual Travel Passenger Route Average No. Distance Trips per Distance Trips Carried Length of Buses per route Route per Bus per Bus (km) per Route (million km) (million) (thousand km) (thousand) SZBG 21.73 18.77 1.15 1.86 61.04 99.20 EBC 26.84 21.54 1.32 1.75 61.50 81.14 WBC 20.90 14.99 0.92 1.37 61.28 91.09 Average 22.92 18.22 1.12 1.65 61.27 90.55 SZBG’s buses are operated by five bus subsidiary companies divided into 67 bus fleets. The business areas of the SZBG include city bus, medium- and short-distance bus services, taxis, vehicle rental service, vehicle parts, vehicle repair and maintenance, housing, property management, hotel, advertis- ing, and retail operations. With the introduction of electric vehicles, the SZBG has also entered the market of electric vehicle (EV) charging infrastructure including design, construction, operations, and maintenance. The SZBG receives substantial amounts of subsidies from Shenzhen municipality based on the total mileage of bus services provided. Besides the subsidy, the main revenue of the SZBG is ticket fare of bus and taxi services (figure 2-1). The bus service is considered public welfare in Shenzhen, so the fare is kept low. With the subsidy, the SZBG turned in profits of 101 yuan million in 2018 (figure 2-2). Shenzhen Bus Group and Its Electrification 21 Figure 2-1 Total Income of SZBG in 2018 (million yuan) 1349 2735 400 148 Bus Ticket Revenue Taxi Revenue Other Revenue Subsidy Figure 2-2 Comparison between Revenue and Operating Cost of SZBG 2013–18 500 400 million yuan 300 200 100 0 2013 2014 2015 2016 2017 2018 Subsidy Revenue Operating Revenue Operating Cost 22 Shenzhen Bus Group and Its Electrification 2.1.1 Routes and Fare The SZBG operated nearly 330 service routes with 5,998 buses, as of December 2019 (table 2-3). Table 2-3 Different type of bus lines of SZBG Type of Line Function Operating Hour Fare Routine and main bus 2 yuan ($0.28) or 10 Regular fixed bus routes 6:30 - 23:00 yuan ($1.4) for long- lines (202 routes) distance trips Branch lines Connect communities to metro 1 yuan 6:00 - 20:00 (45 routes) stations or shared bus terminals ($0.14) Connect business centers Express lines 1-2 yuan and large communities with few 6:30 - 23:00 (29 routes) ($0.14-0.28) stops in-between Night lines 1-2 yuan Night operation 23:00 - 6:30 ($0.14-0.28) (20 routes) Additional service provided Rush hour lines during peak commuting hours morning peak (07:00 - 3-7 yuan (34 routes) with fewer stops (some operate 09:00) and evening ($0.43-1.00) only one direction) peak (17:00 - 19:30) Note: $ refers to USD. The number of routes operating in the SZBG are under continuous adjustment, so the numbers vary through the report at different stages. Figure 2-3 SZBG’s Bus routes Note: Display from the SZBG’s Intelligent Transportation Center Operation Management System. Light blue lines are the routine lines in operation at the time. Shenzhen Bus Group and Its Electrification 23 SZBG’s bus routes vary in length from 2–74 from 2.2 billion in 2013 to 1.6 billion in 2018. kilometers, though most vary between 12 and Patronage of the SZBG buses dropped from 28 kilometers (figure 2-3). Each route has 18 833 million riders in 2013 to 607 million in buses on average, but some routes do operate 2018, decreasing eight percent annually on with as many as 75 buses. Passengers pay average (figure 2-4). Shenzhen’s metro between one and ten yuan, while most routes network development plan of 2016–2030 are priced at two yuan. would increase its service to 32 lines, with 1142 kilometers in operation by 2030. Bus ridership continued declining after the metro line extended from 178 to 286 kilometers in 2.1.2 Ridership October 2016 (figure 2-5). The role of bus services in Shenzhen is to provide more feeder services to the metro network. Conse- Shenzhen’s bus and the metro system support quently, the bus network has been restruc- the bulk of public transport modes while ten tured to provide a more flexible service to the percent of passenger trips are made by taxi. passengers. With the metro system expanding rapidly, the annual bus passenger ridership dropped Figure 2-4 Public transport trips in Shenzhen 4500 Passenger Trips (million) 3000 1500 0 2013 2014 2015 2016 2017 2018 Bus_SZBG Bus_Other Metro Taxi Source: SZBG Annual Report 2014–19. 24 Shenzhen Bus Group and Its Electrification Figure 2-5 Passenger trips and number of buses before and after fully electrification 350 6200 Full Fleet Electric 6000 300 Buses 5800 250 Metro COVID-19 5600 Expansion outbreak 200 5400 150 5200 5000 100 4800 50 4600 0 4400 2013 2014 2015 2016 2017 2018 2019 2020 Monthly Passenger Trips (million) (left y axis) Daily Travel Distance (km/veh) (left y axis) Number of Buses (right y axis) Note: The x axis represents the year and month of the events. After the extension of the metro network in October 2016, the bus operating distance (yellow line) and the bus passenger trips have been dropping gradually. After full electrification in July 2017, the monthly passenger trips (green line) were maintained stable until the COVID-19 outbreak in January 2020. However, with the full electrification of its bus fleet in July 2017, the SZBG witnessed a ridership increase of 2.4 percent. SZBG’s bus ridership started to rise slightly following its full electric replace- ment for two years into 2019 until the COVID-19 outbreak. However, how much of this increase was because of the electrification is unclear, as Shenzhen also introduced on-demand services as well as more flexible routes to connect suburban communities and metro stations about the same time. 2.1.3 Staffing The SZBG had 27,460 employees on its payroll in March 2019, most of whom were drivers (figure 2-6) (see next page). Shenzhen Bus Group and Its Electrification 25 Figure 2-6 SZBG’s different categories of employees per electric bus as of 2019 1.74 2.00 1.00 0.40 0.31 0.30 0.18 0.22 0.06 0.003 0.00 Driver Conductor Maintenance Ancillary Manager Fleet Working Sector Other Staff and Repair Working Staff Manager Manager Technicians 2.1.4 Bus Fleet Among the entire SZBG bus fleet of 5,967 buses, 4,654 were heavy-duty buses with a bus body length of more than ten meters and 1,313 were medium-duty buses of less than ten meters. The fleet is primarily composed of buses from BYD (81%) and Nanjing Golden Dragon Bus (NJGD) as shown in table 2-4. The dominant model BYD K8 is 10.5 meters long and has a 250 kilometer-battery range, characterized by a two-hour DC fast charging or 4–5-hour AC slow charging (figure 2-7). Table 2-4 Electric bus models of SZBG fleet in the end of 2020 Procurement Lifetime Model # % of fleet OEM Model Length (m) Number Year (years) CK6120LGEV1 3.18% BYD K9B 12 190 2013 8(+2) CK6100LGEV2 66.87% BYD K8 10.49 3990 2015-17 8(+2) NJL6859BEV9 16.21% NJGD H85 8.49 967 2016 5(+2) BYD6100LLEV 2.56% BYD C8A 10.49 153 2016 8(+2) BYD6100LSEV 0.50% BYD K8S 10.2 30 2016 8(+2) BYD6711HZEV 0.55% BYD K6 7.1 33 2016 5(+2) BYD6100LSEV1 0.67% BYD K8S 10.35 40 2017 8(+2) BYD6110LLEV 4.19% BYD C8B 10.69 250 2017 8(+2) NJL6859BEV43 1.09% NJGD H85 8.49 65 2017 5(+2) BYD6850HZEV5 1.84% BYD K7 8.49 110 2019 5(+2) BYD6100LGEV9 0.17% BYD K8 10.49 1 2019 8(+2) NJL6680EV4 1.68% NJGD H60 6.8 100 2019 5(+2) BYD6700B2EV1 0.64% BYD B6 6.99 38 2020 5(+2) Note: ‘+2’ represents the lifetime can be extended for 2 years based on actual usage. 26 Shenzhen Bus Group and Its Electrification Figure 2-7 Dominant bus model in SZBG 2.1.5 Charging BYD K8 Infrastructure The SZBG worked closely with charging operators or charging service providers on the charging station construction and operation. The SZBG had 104 charging stations for their buses by the end of 2019 (figure 2-8). An additional ten stations are under the construc- tion and about 20 more stations are planned for construction. The 104 available charging stations supply a total of 1,707 charging terminals with 2,989 charging plugs. Figure 2-8 Locations of charging stations and maintenance workshops of SZBG Note: Display from the SZBG’s Intelligent Transportation Center Charging and Maintenance System. Light dots with a flash sign inside are charging stations; dots with a tool sign inside represent maintenance workshops. Light blue color means the occupancy rate is less than 50%; light green color means the occupancy rate is more than 50% but less than 80%; orange color means the occupancy rate is more than 80%. Shenzhen Bus Group and Its Electrification 27 2.1.6 On-demand Bus Approximately 1,008 Youdian bus routes were operated in 2018. Services U+ minibus service was launched in 2019 to serve first- and last-mile mobility. It is a dynamic On-demand electric bus services including on-demand service without fixed routes or the Youdian bus and U+ minibus service were stops—so called micro-transit. The service can introduced for travelers via the Youdian respond to the passengers’ real time travel Chuxing application on mobile devices. The requests. The application matches passengers’ application was jointly developed and operat- demand with the minibuses’ routes so that their ed by the SZBG and DiDi Chuxing Compa- routes in this system are dynamic and subject ny—the top ride-hailing company in China. to minor detours to allow sharing while accom- modating individual requirements. The Youdian bus service was launched in 2016 to meet commuting demand with direct services that were not covered by regular bus routes. With the Youdian Chuxing smartphone application, passengers can request a direct 2.2 SZBG’s Bus bus service between an origin and destination Electrification pair, either joining an existing route request or adding a new route. If the proposed new route Journey receives enough passengers, then the customized bus service would start operation. The bus routes are constantly updated based The SZBG electrified its bus fleet over eight on passengers’ demand. Typically, this years from 2009 to 2017 (table 2-5). The service is more expensive than the regular procurement was phased, dividing bus procure- bus fare and passengers can purchase tickets ment in batches. to reserve a seat using their mobile phone. Table 2-5 Timeline of Shenzhen bus electrification Time Event May 2008 First hybrid bus in trial operation June 2009 10 hybrid buses in service July 2011 101 electric buses and 26 electric minibuses in service September 2012 First bus line with all electric fleet launched November 2015 545 electric buses, 100% electrification target set by the STC June 2017 Electrification completed with 6053 electric buses 28 Shenzhen Bus Group and Its Electrification The electrification has three phases: a In 2011, Shenzhen hosted the International demonstration stage in 2009–2011, followed 26th Universiade1and launched 101 Build by targeted electrification from 2012–2015, Your Dream Company (BYD) K9 model and large-scale electrification from buses, all of which were BEBs. All newly 2016–2017. purchased buses from 2011 onward by the SZBG were BEBs. One hundred and ninety China’s nationwide NEV promotion started BYD K9 buses and 210 A10 buses from WZL with the “Ten Cities with One Thousand (see detailed fleet composition in table 2-4) Electric Vehicles” demonstration program in were added to the SZBG electric bus fleet in 2009. Shenzhen was one of the ten leading 2013. With the operation of the vehicles in cities selected for early demonstration. The these two stages, the SZBG has built confi- SZBG was one of the first operating compa- dence in the use of new technology for transit nies to purchase the WZL plug-in hybrid buses. electric buses at that time. These plug-in hybrid buses turned out to have less reliability Three batches of 1,600, 3,573 and 355 and higher outage rate during operation than electric buses were procured from 2015 to diesel buses and BEBs, hence the manage- 2017, completing the fleet electrification. The ment team decided to shift to a full-electric SZBG became the first transit bus company strategy soon after this purchase. Since then, worldwide with a 100 percent electric bus fleet these hybrid buses get phased out after eight with 6,053 buses on June 8, 2017. All the years of operation, and the SZBG has not 16,539 buses across the entire three bus-op- purchased anymore. erating companies in Shenzhen were electric by the end of 2017 (figure 2-9). Figure 2-9 The Electrification journey shown in bus composition of SZBG fleet 6000 SZBG Bus Fleet 4000 CNG Diesel Hybrid 2000 Electric 0 2013 2014 2015 2016 2017 2018 2019 2020 Note: The chart states the number of buses with different fuel at every half year. With more electric vehicles replaced traditional buses in the fleet, the SZBG reached 100% electric bus fleet in July 2017. Shenzhen Bus Group and Its Electrification 29 The SZBG first planned charging stations at bigger terminal stations serving multiple routes to provide service for buses running on several different routes. Longer routes and more frequent operations were provided with another charging station at the other terminal of the route. After several years of development of charging infrastructure, most of the routes have access to at least one charging station at the terminal of each route. Figure 2-10 SZBG charging stations, available years and operators Charging operators provide the construction, operation and management of the charging infrastructure. Potevio Group Corporation (Povetio, green dots) and Winline Technology (Winline, blue dots) in figure 2-10, are the two largest charging operators who provide the SZBG with most of the charging facilities. Potevio Group Corporation built and provided most of the charging stations for the SZBG. After 2017, more companies entered the market and built a significant number of new bus charging stations. Before constructing any charging station, the SZBG communicates frequently with the charging facilities provider on multiple factors including location, size, charging speed, and charging capacity of the stations. The SZBG pays the charging operators the electricity fees and a charging service fee. 30 Shenzhen Bus Group and Its Electrification Notes Reference 1 http://www.newsgd.com/specials/Universiade/de- 1 Huang, Ping, and Ping Li. 2019. “Politics of Urban fault.htm Energy Transitions: New Energy Vehicle (NEV) Develop- ment in Shenzhen, China.” Environmental Politics 0 (0): 1–22. https://doi.org/10.1080/09644016.2019.1589935. 2 Wang, Yunshi, Daniel Sperling, Gil Tal, and Haifeng Fang. 2017. “China’s Electric Car Surge.” Energy Policy 102 (March): 486–90. https://doi.org/10.1016/j.en- pol.2016.12.034. 4 Shenzhen Bus Group and Its Electrification 31 Part I Key Lessons: the development and reform commission, the state-owned assets supervision and the Coordination and administration commission put SZBG’s agenda Collaboration to the forefront of the policy development. Manufacturers provided extended warranties for the key parts of the electric buses, espe- cially the batteries. While increasing the One of the main challenges in urban mobility in purchase price of buses, it shifted the technol- cities in China is the lack of cross-agency ogy risk to manufacturers who have the communication and coordination. Departments highest technical capacity to manage such within the same municipal government are risks, so are incentivized to keep innovating often reluctant to share information, and and improving bus performance. SZBG’s close sometimes compete for resources with partnership with the bus manufacturer—for overlapping responsibilities. Unlike traditional example, onsite supervision at the manufactur- bus companies, bus manufacturers and gas ing stage—and the charging service provid- stations who dealt with mature products and er—service standard and depot renova- clear supply chains, the electric bus was new tion—proved to be critical in overcoming the with unclear roles and responsibilities among technology maturity, financial, and operation players. With more sectors and players challenges. The SZBG also collaborated involved, the transition to electric public productively with private enterprises and transport requires even wider scale of coordi- nonprofit organizations including Tencent, nation and policy synergy. Uncertainties of the Huawei, BYD, Didi Chuxing, the Urban technology and supply chain as well as Transportation Association, and Haylion demand response also require a viable model Technology to explore innovations on intelli- for all stakeholders to collaborate. gent dispatch systems, on-demand bus service, route optimizations, and autonomous driving technologies. Shenzhen’s Solutions Public Consulting and Participation: The SZBG cares about the voice of the passen- gers. The SZBG conducts three types of activities to address their concerns. SZBG’s Coordination: Shenzhen municipal govern- first campaign “Friends of the Bus” in 2010 is ment established the Shenzhen Energy an online and offline service where passen- Conservation and New Energy Vehicle gers can leave comments and take part in Demonstration and Promotion Leading Group events such as focus-group forums and polls. (SNEVLG) that engages all levels of its diverse By doing so, the SZBG was able to ensure stakeholders to participate actively through comments from passengers were addressed frequent deliberations to achieve consensus efficiently using an online platform. Also, the and cooperation among different parties SZBG regularly hosts offline events to get to towards the same goal—promoting NEV know its passengers. Further, the SZBG development. collects large datasets to understand their Collaboration: The Government, vehicle customers: SZBG’s intelligent dispatch system manufacturers, charging service providers, was built upon collecting detailed traveling and bus operators collaborated closely through origin and destination data of its passengers a viable business model with risks and costs and the bus operation. The SZBG can analyze allocated to the appropriate party. SZBG’s the demand and onboard occupancy to close dialogue with the transportation bureau, optimize the routes further and improve its quality of service. 2 Business Model and Implementation Chapter 3 The Business Model 3.1 Ownership 3.1.1 Bus-battery and Financing Separation Lease At the early stage of the electric bus deploy- Even with sizable national and local govern- ment from 2011–2013, vehicle technology was ment subsidies, the purchase price of electric not mature, especially with the reliability of buses is still much higher than conventional batteries. At that time, vehicle manufacturers buses. The SZBG used a financial leasing usually did not produce batteries, and there- model that introduced a financial leasing fore did not offer warranties for batteries. The company for instance, of a bank, that would SZBG acquired the battery and the vehicle purchase and own the vehicles and lease separately to minimize the operational and them to the SZBG. The bus operating compa- financial risks of battery deficiency. In practice, ny would take ownership of the vehicles after the Shenzhen government signed a conces- the leasing period is over. Since the leasing sion agreement to allow one state-owned period equals the total life of the buses, this enterprise (SOE), Potevio Group Corporation arrangement turned the high-cost procurement (PGC), to be the charging service provider into a much easier manageable annual rental that purchased and took ownership of the or lease payment. batteries. PGC also provided guarantees for the SZBG to the financial leasing compa- The SZBG has used two business models ny—the financial leasing branch of the Bank during its electrification process, the early of Communications—that purchased the stage bus-battery separation lease model and electric vehicles without batteries and then the later whole-vehicle lease model. leased the buses to the SZBG. The SZBG 34 The Business Model paid annual leases over eight years to PGC for batteries and to the financial leasing companies for the buses with a leasing agreement. In addition, the SZBG paid an annual service fee for PGC to provide charging and battery maintenance and recycling services (figure 3-1). The early batch of electric buses acquired in 2011 used this model when Shenzhen hosted the Summer Universidad. This model worked in overcoming upfront financial barriers by shifting financial risks to financiers, charging service providers, and vehicle manufacturers. However, the technology was still nascent in the developing stage, and the poor quality of the battery for the initial batches not only led to PGC’s financial loss but also disruptions of SZBG’s bus operation. Figure 3-1 Bus–Battery Separation Financial Leasing Model National & Local Governments vehicle sale/ production subsidy trade vehicle without battery Financial Leasing Electric Bus Manufacturer Company Battery Manufacturer after-sale services trade battery charging & mantenance service Bus Operator Charging Service Provider charging subsidy operating subsidy National & Local Governments 3.1.2 Whole-vehicle Lease whole bus. With the leasing plan, the SZBG pays the lease seasonally to the financing leasing company with an annual interest of As the purchase price of electric buses about four percent over the lifetime of the decreased from 2015 onward and battery buses which is eight years. The manufactur- reliability improved, and government subsidies ers were paid in three payments of 60 for electric bus purchase and operation percent, 30 percent and 10 percent of the stabilized, the SZBG no longer needed a purchase contract value—and did not include commissioned SOE to provide guarantees to the purchase subsidies that were paid directly get reasonable rates for the leases. Financial to the manufacturers by the government—by leasing became the whole-vehicle lease the financial leasing company as the accep- model, where the SZBG directly worked with tance payment, mid-term use payment, and the financial leasing company to lease the retention payment over the lifecycle of BEBs. The Business Model 35 The bus manufacturer provides lifetime Based on this whole-vehicle lease financing, warranty1 for the battery, electric motor, and the SZBG established a viable model where controller, known as the “3-e system” accord- players with different specializations are ing to the contract signed. Charging service responsible for the businesses of their own providers construct and operate the charging expertise while bearing the risks that they are facilities while the SZBG pays the charging in the best position to manage. The buses service fee. This is more efficient than the and batteries are owned by the financial bus–battery separation model because fewer leasing company with lifecycle warranty for parties are involved with lower transaction key parts offered by bus manufacturers. The costs. SZBG’s financial leasing model has charging facilities are owned by the owners of demonstrated a viable way to overcome the depots, which can be the SZBG, charging financial barrier of electrification (figure 3-2). operator, or others. The charging service provider and the SZBG fleet operators can then focus on the operation and management of the charging facilities and the bus fleet respectively. Figure 3-2 Whole-Vehicle Lease Financial Leasing Model National & Local Governments vehicle sale/ production subsidy pay for the whole bus in 3 tranches Financial Leasing Electric Bus Manufacturer Company provide whole vihicle plus warranty for 3e system Bus Operator Charging Service Provider charging subsiduy operating subsiduy National & Local Governments 36 The Business Model 3.2 Allocation of 3.3 New Responsibilities Business Model for within SZBG Electric Taxis • SZBG headquarters plans and The SZBG started its taxi operation with only adjusts the bus routes or stops and reports to 150 traditional internal combustion engine STC for review and approval. STC may also (ICE) vehicles in 1992. By mergers and request route and stop changes based on acquisitions, its taxi fleet grew to about 6,000 needs at the network level or for emergency taxis managed by 13 subsidiary taxi compa- or event needs. All bus schedules are made at nies. Nine of them are operating in Shenzhen the central bus dispatching center in consulta- and four of them run businesses in other tion with dispatchers from each subsidiary cities. company. The headquarters plans the budget for maintenance and repairs and provides The SZBG started a joint venture with BYD in guidelines to the subsidiary companies. SZBG 2010 to establish a subsidiary taxi company headquarters also coordinates with other Pengcheng Electric Taxi (PCET) and piloted parties such as the vehicle manufacturers, the first 100 electric taxis. More pilot programs charging facility operators, and the grid. followed from 2011 through 2014, bringing the total number of SZBG-owned electric taxis to • SBG subsidiary companies, includ- 850. Large-scale conversion started in 2017 ing subsidiary electric bus and taxi operators, with strong government support and mandate. are responsible for the actual operation By the end of 2018, the SZBG was managing including drivers and dispatchers, mainte- approximately 7,700 taxi drivers and was the nance and repairs of vehicles, and facilities in owner of 4,681 taxis operated in Shenzhen, all depots. Specifically, fleet operators manage battery electric and accounting for about buses and taxis, conduct daily safety checks one-fourth of the total taxi fleet in Shenzhen. and inspections while the workshops at depots handle maintenance and repair works. Before the electrification, the taxi business in Shenzhen was facing challenges; operating costs were increasing with the rapid economic growth in Shenzhen, but the taxi fare was highly regulated. Taxi drivers were contem- plating changing jobs as income kept falling. The SZBG saw the potential to reform and revive the taxi sector by leveraging govern- ment support to develop NEV. The Business Model 37 Table 3-1 Operating cost comparison of electric taxis and gasoline taxis (yuan/1,000km) Operating costs (yuan/1,000km) Electric taxis Gasoline taxis Difference Fixed costs 614 653 -6.00% 1) Depreciation 227 107 113.01% 2) License fee 0 264 - 3) Labor cost 292 210 39.26% 4) Other fixed 95 73 29.31% Variable costs 456 889 -48.63% 1) Energy 310 791 -60.75% 2) Maintenance & Repair 146 98 49.21% Total 1,071 1,542 -30.57% Source: PCET 2014, Large-Scale Operation and Management of Pure Electric Taxi Fleet Assuming a fleet size of 800, the cost of fee—monthly vehicle rental plus maintenance operating electric taxis is 30.57 percent lower and repair fee. PCET covers the vehicle than the cost of operating gasoline taxis (table purchase, and maintenance and its repair 3-1) , mainly due to its much lower energy services are provided by the vehicle manufac- cost by switching from gasoline to electrici- turer via a contract. PCET collaborates with ty—the waived license fee for NEV offset both charging service providers to offer charging higher vehicle depreciation and labor cost. services. Drivers get all the revenue deducting The SZBG developed a business model for the monthly fee to PCET and charging (figure electric taxis to maximize technical specialty 3-3). Using this model from 2012 when PCET and risk management capacities. PCET was running 800 electric taxis, the operation signed operating contracts with individual of PCET turned profitable. drivers, who would pay PCET a fixed 38 The Business Model Figure 3-3 Collaboration Model of PCET (based on PCET 2014) Government Passenger Satisfaction Feedback Purchase Subsidy Waive License Fee Social Supervise Service Responsibilities Operating Vehicle Sale Contract Vehicle Manufacturer PCET Driver Maintenance & Supervise Repair Contract Service Charging Service Provider Note: Based on PCET 2014. According to the interviews with taxi drivers, yuan per vehicle for a single-shift taxi or changes to drivers’ income appear to be 11,000 yuan for a double-shift taxi after the different; some decreased and some electrification to compensate for the loss of increased after the electrification. The nonop- operating time. The fixed maintenance fee of erating hour for charging time—three hours 1,500 yuan per month is also less than per shift at the early stage when charging gasoline taxis, and drivers can liberate stations were scarce—meant a significant themselves from concerning any vehicle loss of revenue compared to the ten minutes malfunctions. Moreover, the charging cost is of gas-refueling time. Competition from significantly less than fuel cost, saving 100 ride-hailing taxi service companies such as yuan per day of operation. The SZBG also Didi Chuxing also contributed to this matter. created a bonus system based on the result Range anxiety still exists; drivers at certain of drivers’ evaluations that incentivized drivers times have to give up more profitable to provide better service. These bonuses long-distance trips—for example, to the rewarded outstanding performances on airport or Dongguan City—because of the energy-saving, mileage bonus, good conduct potential need of charging. On the other hand, bonus and service excellence. These bonus- the taxi company PCET for instance, es kept the SZBG being competitive in both decreased the fixed monthly fee of 8,000 the labor and taxi market. Notes 1 Battery producers provided four years of warranty. The Business Model 39 Chapter 4 1 Acquiring and Managing an Electric Vehicle Fleet • Innovative financing model to overcome high upfront acquisition costs by sharing the risk of technology uncertainty • Open bidding procedures to ensure the competitiveness of electric bus’s quality and price • Lifetime warranty for the 3-e system from manufacturers lowers the technical and financial risks of bus operators • Operator’s involvement in the manufacturing process for technical improvement, for example, the onsite manufacturing supervision • Professional charging service providers to construct and operate charging; The issue of land availability for charging infrastructure especially in the urban core • The local grid capacity expansion might make up as much as one third of the total investment cost of a charging station by consulting with local grid 4.1 Planning and additional electricity, and that shortens the running distance per charge. Data of SZBG Technology Selection bus fleets (figure 4-1) show that the average electricity consumption of electric buses per 100 kilometers in summer is 19.3 percent more than non-summer months. This addition- Before launching the new electric bus fleet on al energy consumption of almost 20 the road, massive preparation and analyses percent—or reduction of running distance—by were undertaken. The various type of works switching on air conditioning is higher than the included analyzing the existing bus routes, ten percent estimated by previous research.1 choosing the right bus type, providing training The heat also increases the safety risks of courses to bus drivers and electricians, and electric buses. Although the SZBG sustains evaluating the potential impact on the electrici- incident-free operations, the very early stage ty grid to ensure the capacity was compatible of electrification had encountered a few with the new charging demand. incidents where batteries had caught on fire due to extreme heat or external force. At temperatures greater than 50°C, the battery 4.1.1 Analysis of climate, discharge capacity would gradually go down topography and bus routes and the battery, without adequate cooling mechanisms, runs the risk of catching fire. High temperatures together with the heat of Climate: Shenzhen has a subtropical marine battery charging can cause problems of climate with temperature between 0°C and overcharging and thus affect the lifespan of 40°C and an average temperature of 23°C. the battery. Manufactures are implementing While warm climate is generally good for more stringent tests on batteries to minimize electric bus operation,1 summer’s extreme risks of it catching fire. heat requires air conditioning that consumes Figure 4-1 Electricity consumption of SZBG buses and climate in Shenzhen in 2019 120 400 106.55 107.99 107.44 106.39 98.13 99.97 96.97 317.3 94.81 89.63 91.81 353.3 89.68 86.08 304.5 300 258.9 SZBG Bus Fleet 80 231.3 153.4 200 40 69.1 25.8 21.85 100 29.3 29.15 16.7 28.5 28.15 17.6 16.1 26.55 23.4 65.6 19.45 47.2 35.4 26.6 26.7 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg electricity consumption (kWh/100km) Avg temperature (oC) Avg precipitation (mm) Acquiring and Managing an Electric Vehicle Fleet 41 The summer in Shenzhen can be hot with routes in 2015 before its large-scale electrifi- frequent rainfalls, storms and even typhoons cation, with nearly 5,000 diesel buses and 101 that average about 193.3 centimeters of electric buses. The bus routes ranged from precipitation annually. Urban flooding and several kilometers to more than 50 kilometers wading due to heavy rainfall could also impact long, with an average route length of 20.2 the operational safety of electric buses. Risks kilometers and a running distance of 229 of electricity leakage during flooding had kilometers per day per bus. The running caused batteries to submerge in rainwater. To distance requirement and the locations of deal with it, the SZBG regulates that if any charging stations—availability of space in sections of road are submerged by 15 centi- terminals and depots—were important input meters or more of rainwater, electric buses for the procurement of buses and charging would need to detour the service to other facilities. roads. 4.1.2 Selection of bus Topography: Shenzhen’s topography is model primarily flat with some hills—most road networks do not have steep gradients. The Multiple factors influence the choice of the survey to BYD indicated that even with right bus model including average daily steeper gradients, different engines could be running mileage, ridership, weather condition, selected to accommodate the topography. road condition, and the ease of adoption. The first step was to select small capacity or large Bus routes: The SZBG operated 327 bus capacity battery of the buses (Table 4-1). Table 4-1 Pros and cons of two electric bus types Large capacity electric bus Small capacity electric bus Longer running distance: Existing models of electric bus can support 200–500 km with full battery Easier for adoption: Running distance Lighter: Although most urban roads comparable to diesel bus and the designed to accommodate heavier daily running mileage allow electric freight trucks too Pros bus to replace diesel bus without More Affordable: battery costs less significant re-routing Short charging time: Typically, a Interchangeable: Electric bus ready to 10–15-minute charging at terminal run any route if needed and supply could run a roundtrip increased demands from other routes easily Less reliance on the locations of charging facilities Heavier: A 10.5-m long electric bus is Shorter running distance: about 15% heavier than a diesel bus Heavy reliance on coordination Longer charging time: Based on with charging facilities. Electric bus Cons charging facilities and battery, the needs to be charged after several charging time with high-power DC routes, which requires charging charging takes about 2 or 3 hours available at the right place; therefore, More expensive: Battery costs 40% of careful adoption on different route the total price of 10.5-m electric bus 42 Acquiring and Managing an Electric Vehicle Fleet After considering these factors, the SZBG cabinet of K8. As a result, passenger capacity decided to adopt the large capacity electric expanded in K8. BYD K8, as the dominant bus model with daily running distances model, operates on the main bus routes. The comparable to their traditional diesel buses so NJGD bus models, procured in 2016–17, are that minimal changes to existing bus routes smaller buses that operate primarily on branch and schedules were needed. routes. BYD K9 and WZL A10 were two of the earliest The electric bus fleet in the SZBG dominantly bus models launched by the SZBG in features a single, reliable vehicle model–BYD 2011–2013. Initially, owing to low battery K8, which is 10.5 meters long with about 250 energy intensity, fewer passenger seats, and kilometers running distance under ideal battery depreciation, both models suffered conditions. With DC fast charging facility, this service issues and were used on shorter or model can be fully charged in about two or less frequent routes. The battery range on the three hours with proper technical require- ground was about 180 kilometers or even less ments under the safety instruction for hot and was unreliable as its state of charge weather and water protection for batteries. (SOC) dropped frequently. Thus, frequent With minor adjustment of bus scheduling, one maintenance was needed because of electric bus model procured in 2015–17 could malfunctions or breakdowns. In 2011, two replace one traditional diesel bus in the bus electric buses had to replace one diesel bus to fleet. The average daily operation distance for maintain the same level of service. the 10.5-meter electric buses in Shenzhen in 2019 was 190 kilometers; electric buses could Model BYD K8, procured in 2016–17, is an run a whole day and only needed recharging upgraded model of K9 based on feedbacks at night on most routes.Technology improve- and suggestions from the SZBG after deploy- ments have given bus operators more options ing K9 for a period. BYD K8 is smaller in size to suit their operational requirements. Bus but can carry 87 passengers, which almost performance in running distance and malfunc- doubles the passenger capacity of the K9 tion rate caught up quickly with the high-pow- model. Therefore, not only the battery energy er-density batteries and more mature electric density was improved, the size of the battery engine and control systems (table 4-2). is also smaller on K8. Further, the battery packs were also reorganized to sit under the Acquiring and Managing an Electric Vehicle Fleet 43 Table 4-2 Key performance parameters compared Electric bus Electric bus Latest electric procured in procured in bus procured Conventional 2011–15 2015–17 diesel bus (BYD K8S) (BYD K9) (BYD K8) Length (m) 10.5 12 10.5 10.5 Nominal battery capacity (kwh) / 324 292 330 Advertised running distance with full 500 250 250 400 tank or battery (km) Running distance About 330 About 400 180 or less About 200 in real life (km) Energy efficiency 33 liters 140 kWh 100 kWh 70 kWh (/100 km) Battery-system energy density / 90 110 140 (Wh/kg) 4.2 Acquiring the Vehicles 4.2.1 Procurement Process While the financial leasing company owns the electric buses for their eight-year lifecycle, the actual user, the SZBG, bears the responsibility of procurement to acquire high-quality products at competi- tive prices. In the whole-vehicle lease model, the SZBG procures the buses through a process of eight steps (figure 4-2). 44 Acquiring and Managing an Electric Vehicle Fleet Figure 4-2 SZBG procures electric vehicles in eight steps 2. Conduct market research 4. Consult with vehicle manufactures 1. Analyzing the need of bus fleets 5. Invite bidding 3. Determine technical specifications 6. Evaluate bits submitted 7. Deploy technicians to the contract winning manufacturer 8. Accept vehicles Since SZGB is an SOE, the Shenzhen combination of scores for technical specifica- municipal government requires these procure- tions, offered price and warranties, and ments to be implemented via public bidding. services provided. After the manufacturer is The bidding is organized by Shenzhen selected, the SZBG would send their own International Tendering Company Limited, a technicians to the manufacturing plants to state-owned tendering company responsible ensure vehicles are made to the operation for public tenders in Shenzhen. Shenzhen standard, and acquire knowledge of mainte- International Tendering Company Limited, nance and repair. After every batch of vehicle together with some representatives from the is delivered, the SZBG technicians then would SZBG, select the evaluators from an expert perform a thorough inspection of the vehicles pool. The evaluators formed the bid evaluation before concluding the whole procurement committee that evaluates the bids based on a process. Acquiring and Managing an Electric Vehicle Fleet 45 The SZBG implemented most of its bus buses were procured via open bidding, on procurement during 2015–17, acquiring 1,600 average saving 20 percent and 11.3 percent buses in 2015, 3,573 buses in 2016, and 355 from estimated costs after bidding and buses in 2017. Since the purchase subsidies contract negotiation respectively. While more were paid directly from the government to the than 70 different electric bus manufacturers vehicle manufacturers and only depended on operate in China, they usually participate in technical parameters such as size and range biddings in provinces where they have a local that did not vary among manufacturers, the presence. In the latest bidding process from bus purchase prices in subsequent discus- the SZBG, only two manufacturers—NJGD sions did not include government subsidy and BYD—participated (table 4-3, table 4-4, amount. Several different models of electric table 4-5). Table 4-3 SZBG bus procurement results in 2015 Cost Winning price Subsidies received Winning estimate per bus (SZBG per bus by Vehicle type Number per bus paid to manufacturers) manufacturers manufacturer (million yuan) (million yuan) (million yuan) 180 pure electric 180 BYD 0.90 0.81 1 bus (10.5 m) 420 pure electric 0.90 0.73 1 420 BYD bus (10.5 m) 1,000 pure electric 1,000 BYD 0.81 0.58 1 bus (10.5 m) Source: SZBG Note: The winning price is the price after government subsidy. 46 Acquiring and Managing an Electric Vehicle Fleet Table 4-4 SZBG bus procurement results in 2016 Cost estimate Winning price Subsidies received Winning per bus after per bus (SZBG per bus by Vehicle type Number subsidies paid to manufacturers) manufacturers manufacturer (million yuan) (million yuan) (million yuan) 7 m bus 33 BYD 0.40 0.24 0.6 8 m bus 967 NJGD 0.40 0.319 0.8 10.5 m bus 2,390 BYD 0.73 0.58 1 High floor bus 153 BYD 0.73 0.58 1 Double decker 30 BYD 1.30 1.26 1 Source: SZBG Note: The winning price is the price after government subsidy. Table 4-5 SZBG bus procurement results in 2017 Cost estimate Winning price Subsidies received Winning per bus after per bus (SZBG per bus by Subject matter Number subsidies paid to manufacturers) manufacturers manufacturer (million yuan) (million yuan) (million yuan) 10.5m High 250 BYD 1.05 0.93 0.45 floor bus 10.5m Double 1.8 1.66 0.45 40 BYD decker 8m bus NJGD 0.7 0.592 0.3 65 Source: SZBG Note: The winning price is the price after government subsidy. Acquiring and Managing an Electric Vehicle Fleet 47 Buy-Back of Old Diesel Buses: As an SOE, 4.2.2 Technical all buses owned by the SZBG are managed by the state-owned asset committee. Per Specifications and Warranty government requirements, it is important that the total value of state-owned assets be handled properly. The SZBG and the vehicle The technical specification of buses includes manufacturer negotiated that the winning vehicles, main parts, ancillary facilities and air manufacturer would buy back the old diesel conditioning (figure 4-3). This section (4.2.2) bus fleets at a price of 5 percent of the uses the largest batch of buses procured in after-subsidy purchase price. Since BYD won 2017 as an example. most of the bids, BYD bought back many of the old diesel fleets based on their usage and depreciation. Diesel buses in relatively good 4.2.2.1 Vehicle Specification condition that meet the local operation The main vehicle specifications include size, standards could return to service other areas; structure and dimension, power battery type otherwise, they were decommissioned by (conductive DC charging), minimum battery BYD via a locally registered vehicle decom- capacity (varies from 115–250 kWh), and missioning companies. C-rate2 (>=0.5C, SOC from 0%–100%). Also included are the national and local technical, safety, material, charging, communication, battery and system requirements or standards, and testing protocols that EVs must comply with. The same model of buses can have different specifications (table 4-6). Table 4-6 Specification of bus model in SZBG Sub- Capacity Voltage Length Width Height Power Max. Gross Model Model (kWh) (V) (mm) (mm) (mm) Output Passengers Weight (kW) (kg) C8A 290.08 518 10490 2500 3520 180*2 24–44 17500 C8 C8B 255.74 473.6 10490 2500 3520 180*2 24–46 17950 K8 291.6 540 10490 2500 3150 90*2 87 17800 K8S 331.56 614 10200 2500 4200 100*2 72 18000 K8 K8S 253.44 422.4 10200 2500 4200 100*2 77 18000 48 Acquiring and Managing an Electric Vehicle Fleet Figure 4-3 K8 bus specifications 1. Charging Hatch 2. Radiator Hatch 3. Rear Battery Compartment Hatch 4. Middle Passenger Door 5. Middle Right Battery Compartment Hatch 6. Front Door Switch Botton Hatch 7. Front Passenger Door 8. Main Power Switch Hatch 9. Distribution Box Hatch 10. Middle left Front Battery Compartment Hatch 11. Fuel Heating Hatch (vehicles in the south do not have) 12. Rear Hatch 13.Front Hatch 4.2.2.2 Main Parts and Ancillary Facilities 4.2.2.3 Warranty Power System: Technical specification and Vehicle manufacturers provide various lengths warranty requirements for power battery of warranty on batteries, electric motors, and include specific requirements for cooling for controllers or the 3-e system. At the bus-bat- the hot and humid weather in Shenzhen. tery separation lease stage, the battery Specifically, the drive motor and control warranty was only set for four years. At a later system has specific requirements for heat and stage, vehicle manufacturers provided eight humidity resistance as with the electronic years of warranty on 3-e system for buses that control system of battery management system the SZBG purchased, and a lifetime warranty (BMS), electronic control unit (ECU) and other on 3-e system for electric taxis with requiring sensors, and an onboard monitoring unit. manufacturers come to the site within four Other parts include an air compressor, axle, hours to resolve any malfunction. Smaller turning and braking systems, suspension, and repairs had to be resolved in six hours while tire, etc. Manufacturer bidders who do not 3-e systems faults had to be corrected within meet these specifications will have points 48 hours. The warranty also requires the deducted from their technical scores. manufacturers to replace batteries when the state of charge (SOC) falls below 80 percent. Ancillary Facilities refer to on-board GPS and dispatching systems, smart card readers, cash collectors, TV and media systems, and 4.2.2.4 Vehicle Safety Wi-fi. To address the safety concern, the Technolo- Air Conditioning: Cooling capacity (e.g., >= gy and New Energy Department and the 26,000 kcal/h for 10.5m buses) and energy Procurement Department of SZBG have efficiency ratio (>=2.2)3 are the most important developed specifications to ensure the safety parameters. of the vehicle to be procured. Acquiring and Managing an Electric Vehicle Fleet 49 The SZBG requires manufacturers to meet a reduced through using structurally stronger set of high safety standards for battery packs. materials for the bus frame, which provided These standards include a protection level more efficient wire position and bundling, that is no less than IP67—which represents a improved waterproof, dustproof, the rustproof high water and dustproof battery pack—and performance of chassis and body, and with satisfactory operation safety in extreme some oversight, flaws in the assembling temperatures ranging from minus 20°C to process correction. BYD, in turn, also benefit- 65°C. Besides the safety standards applied to ed from the onsite manufacturing supervision the battery packs, the SZBG established an of the SZBG as it helped improve the design additional set of requirements on signal and production process of buses. interference, insulation, and convenience of After initial years of learning and operation, repair and maintenance for motor and control the technical specification for batches systems. Subsequently, the manufacturing procured later witnessed the following trends. procedure and material used, overall structur- al integrity, proper protection of the wiring and • More coverage of the warranty, more parts and the flame resistance performance detailed description in the bidding documents, were set to the highest acceptable standards and for a longer period: the warranty for the for the vehicle’s chassis. Manufacturers were key parts, mainly the 3-e system, had to be also required to build in automatic fire extin- provided for the entire life cycle. guishing devices to protect passengers and drivers in case of fire incidents. • Higher standards in line with the technology progress: for instance, higher battery energy density, longer running distance, faster charging speed, integrated 4.2.2.5 Onsite manufacturing supervision controllers, battery cooling methods—that is, An advantage the SZBG had was co-location shift from air- to liquid-cooled battery system with one of the leading electric bus manufac- as an effort to prolong battery life—and turers, Build Your Dreams Company (BYD). electronics protection standard. These After BYD won the bids, the SZBG formed a improvements aligned with the continuously manufacturing supervision expert team, and updated technical requirements for receiving sent technicians to BYD’s plant for onsite subsidies from national and local govern- supervision and training. These technicians ments. not only accumulated skills in maintenance, • More ancillary facilities were included repair and troubleshooting of the newly to provide more smart services such as procured vehicles, they also monitored and accessibility facilities, a voice guidance provided valuable suggestions to the manu- system for the blind, smart monitoring device, facturer about technical specification, selec- and driver zone barriers. tion of materials, production process, location, and composition of parts. The SZBG sent more than 100 technicians providing 875 suggestions, 761 of which BYD incorporated on its electric bus design for the batch of 3,573 buses in 2016. The SZBG sent approxi- mately 30 technicians who provided 359 suggestions, 277 of which were incorporated for the batch of 355 buses in 2017. As a result, the quality of the buses was improved and maintenance and repair needs were 50 Acquiring and Managing an Electric Vehicle Fleet 4.2.3 Electric Taxi Fleet Procurement Taxi procurement went through similar processes as buses in accordance with SZBG’s company rules. Manufacturers also bought back and decommissioned replaced internal combustion engine (ICE) taxis. National and local governments provided purchase subsidies—44,000 yuan per vehicle from the national government and 22,000 yuan per vehicle from the Shenzhen government—which rendered the out-of-pocket procurement price of electric taxis comparable to the traditional taxis. Similar to the practice employed for electric buses during the manufacturing stage, each subsidiary taxi company sent its technicians to the manufacturer’s plants to learn about its maintenance and to oversee the manufacturing process of the electric taxi. SZBG’s dominant electric taxi model is the BYD e6 (table 4-7). Table 4-7 BYD e6 key specifications Dimension (mm) 4560 (Length), 1822 (Width), 1630 (Height) Weight (kg) 2175 Battery Capacity (kWh) 82 Mileage (km) 300 Passenger Capacity 5 The SZBG has several key technical requirements on the major parts of the vehicle: reliability of battery life for power battery to reduce the need to change battery in the five-year lifecycle of the taxi; the energy density to reduce the battery weight and to increase distance per charge; the safety feature; and the charging frequency and charging speed. The motor and control system specifies the component size and weight, reliability, energy efficiency, noise and vibration control, speed range, and torque. Acquiring and Managing an Electric Vehicle Fleet 51 4.3 Operating • Routing adjustment to new metro routes: With the development of Shenzhen’s Electric Buses metro service, the function of the urban electric bus changed from backbone to a more feeder role to complement the metro service. The SZBG undertook several measures to Some longer bus routes were shortened to overcome the challenges of its operations. provide feeder-line services. These measures included refining the opera- • Emergency response plans: Each tional plan and scheduling for each line, fleet or route has an emergency response optimizing charging arrangement, and the use plan for any extreme weather, electricity of intelligent bus dispatch and management offcuts at charging stations, accidents, sudden systems. The adoption of the large capacity driver shortage, and holiday passenger surges electric bus made these measures relatively to ensure that bus services remain at an easier to implement. However, the SZBG has acceptable level. been making constant route adjustment and optimization—routine and ad hoc. While the • Charging arrangement for electric routine optimization occurs twice a year, the bus: Typically, three types of shifts for bus ad hoc optimization gets implemented as the lines in SZBG: road condition and passenger’s demands - Morning shift (early morning to early change. The SZBG deployed smaller batches afternoon) of electric buses at the very beginning of the electrification process using a learning-by-do- - Afternoon shift (early afternoon to late ing approach. Some routes were divided in night) half and moved under the management of different fleets, and some bus stops were - One-day shift (morning to night) rearranged. With better technology (see the The typical charging arrangements for electric evolution of bus technical specifications in buses are: table 4-2 and table 4-6) and accumulated experience, the SZBG could eventually - All electric buses receiving manage to operate the same number of buses full-charging at night (23:00 – 7:00 hours) in service while maintaining service. - In most cases, those morning shift and afternoon shift can run for the whole shift 4.3.1 Operation Plan - The one-day shift would need a quick Adjustment charge during the daytime up to the SOC needed to finish the day’s operation (fully charged at night) The SZBG has more than 300 routes in daily operation. It conducts regular performance Operational needs and electricity prices at the and efficiency checks of each route every six different times of day dictated charging months and makes appropriate refinements arrangements (figure 4-4). depending on the running distance, shifts, and charging time. • Ensuring bus frequency to meet the demand: SZBG collects passenger-flow data thrice a month of workdays, weekends, and holidays to optimize scheduling based on actual demand. 52 Acquiring and Managing an Electric Vehicle Fleet Figure 4-4 The philosophy of charging arrangement to minimize the electricity costs 16:30- 19:00 19:00- 14:00- 16:30 21:00 17:00- 21:00- 11:30- 19:00 23:00 14:00 9:00- 17:00 9:00- 11:30 19:00 7:00 -7:00 -9:00 7:00 -9:00 23:00 -7:00 Regular Operation Period Peak Electricity Period Peak Operation Period Regular Electricity Price Period Low Electricity Price Period As all electric buses are scheduled for full Figure 4-5 charging during nighttime (23:00–7:00 hours), Charging terminal with one plug (left) charging facilities, and different shifts for and charging terminal with four plugs (right) charging need to be carefully designed to accommodate the large charging demands at night. Traditionally, one DC charging terminal has one charging plug to charge one electric bus (figure 4-5 left). But to maximize the number of electric buses charged at the same time, SZBG negotiated with the charging service companies to modify some of the charging terminals with four plugs (network charging as discussed in section 5.2; see figure 4-5 right). Each charging terminal’s output is fixed, therefore each charging plug charges at quarter of the power to each bus when all four plugs are used simultaneously for charging. Although lower power requires a For example, bus terminal Xiangmei Bei in longer time to charge, this arrangement has Shenzhen has 17 charging terminals each of the benefit that it does not require moving 150 kilowatts. The charging speed depends electric buses at nighttime. Acquiring and Managing an Electric Vehicle Fleet 53 on the power of the charging terminal and the 4.3.2 Upgraded Bus specifications of the battery. One-to-one charging is provided to the first batch of 17 Management System buses for the first round of overnight charging. With the remaining state of charge and a 150-kilowatt charging terminal, charging Electrification works concurrently with informa- usually takes one to two hours. The second tion and technology as a lot of real time data batch of buses receives a one-to-four capaci- from the vehicles and charging facilities can ty, so that 17 charging terminals can charge be collected and managed. With the electrifi- up to 68 buses at the same time. With each cation, the SZBG upgraded its bus dispatch charging plug of about 40 kilowatts, the and management system to support efficient charging usually takes six hours. and safe operations of electric bus fleets. Upgrades included the following three Each bus carries a charging guidance card to modules: ensure that drivers know when and where to charge (figure 4-6). The SZBG tries to keep • Dispatching module: to account for the number of electric buses to be charged electric bus running duration and charging during the daytime to a minimum to lower the needs. cost of electricity. Therefore, bus route • Battery monitoring module: added by operators design their scheduling and collecting battery real time data from each charging arrangements to lower the percent- electric bus’s control area network (CAN). age of daytime charging. The SZBG provides incentives, such as a bonus to bus route • Charging terminal monitoring and operators, if the percentage of daytime charging arrangement module: to collect real charging is lower than the benchmark. time information of each charging terminal. Bonuses are paid to the fleet management as After the upgrade, real time battery data of all part of their salary. electric buses under the SZBG are integrated into the Intelligent Transportation Center (ITC) and are used to improve operational efficien- Figure 4-6 cy. The ITC integrates three main manage- Charging guidance card on board of Line 38 ment systems: bus operation management system; safety management system; and repair and charging management system. With charging terminal information integrated with a bus management system, dispatchers can give specific commands on charging and parking to drivers. This reduces drivers’ anxiety about remaining battery power and their unnecessary runs to charging stations. Note: The card provides detailed information on the current SOC of the bus battery (80%), charging time (overnight charging with no supplementary charging in the daytime), charging location (Xiangmei Bei) for one bus under Bus line No.38. 54 Acquiring and Managing an Electric Vehicle Fleet The bus operation management system forecasted bus arrival time. Fleet managers analyzes traffic patterns and service perfor- can obtain data including previous day’s mance in real time (figure 4-7). By collaborat- overall passenger heat map, route’s ridership, ing with the ride-hailing company Didi Chux- fare income, real time vehicle movement as ing, a large amount of real time traffic data well as real time streaming of onboard from Didi Chuxing is available to help forecast cameras to make minor adjustments to the traffic conditions. This information is sent to dispatch headway or resolve potential safety the dispatching module and to the passenger issues. information boards at bus stops to show the Figure 4-7 Display of the bus operation and dispatching platform in the ITC Note: the left panel shows from top to down, left to right: performance score, on-time performance of dispatching, dispatching ratio, fleet size, passenger distance, operating revenue; the middle panel shows the routes and buses in operation; the right panel shows from top to down, left to right: daily cumulated number of buses in operation, total passenger trips, passenger distance, and bus shifts by subsidiary companies, as well as the dispatching ratio and the list of headway abnormality at the far right. The safety management system of the ITC regulation. These data also help the SZBG has played a critical role in SZBG’s electric develop personalized training packages to bus operation. The SZBG worked with the improve drivers’ skills and safety habits SMTC to collect and map all the historical further. The video data also help analyze the traffic accidents and violation, so that it can fatigue level of drivers to lower safety risks, dispatch its safety management personnel via a module of the safety management and fleet management to perform an on-site system. The system can either send out a inspection of operation in the corresponding verbal alarm to the driver or to management area. For every bus route, the fleet manager depending on the severity of the fatigue level organizes a monthly service meeting to in real time so that proper action can be taken. update any changes in the locations with Selected vehicles in the SZBG fleet are also potential safety hazards, and discusses testing the advanced driver assistant system proper mitigation actions to be taken by (ADAS) developed in 2019 to assist the driver drivers. The data from the video monitoring reduce or eliminate blind spots. At the depots, system installed inside and outside the bus the safety management system provides a are collected to analyze passenger occupancy color-coded map to categorize the safety and comfort level. The SZBG requires fleet requirement level of different functional areas management to keep video footage for a within the depot as well as real time video minimum of 14 days so that fleet management footage of the depot (figure 4-8). can identify drivers’ violation of any safety Acquiring and Managing an Electric Vehicle Fleet 55 Figure 4-8 Display of Safety Management System of the ITC Note: the left panel shows basic information on a selected depot, including the layout of the depot. The middle panel shows the safety risk ratings of the depots, with the red color highest and the green color lowest. The right panel shows the safety facilities in the depot including security cameras, fire extinguishers, fire hydrants, etc. as well as the live feeds from the on-site cameras to the far right. The SZBG fully explored new mobility • Electric Engine and Control: The solutions to provide customized public engine pedal of an electric bus is more transport services to the public and demon- sensitive than a traditional pedal, which strated the collaboration of electric mobility requires gentler driving at departure. and smart mobility. The SZBG founded Didi • Safety Check by Drivers: Safety Youdian Technology Company in 2016, along checks are needed at the start of each shift. with Didi Business Service Company and The items and requirements to check for an Shenzhen Beidou Application Technology electric bus differ significantly from a diesel Research Institute. The SZBG plans to bus. expand its mobile application further to integrate more urban mobility service to Operational differences necessitated training create a mobility-as-a-service (MaaS) for existing bus drivers to be eligible to drive platform. electric buses. The Training Center of the SZBG developed a set of courses for no less than 72 hours and hands-on driving training 4.3.3 Training of Bus for all drivers at the beginning stage of electrification, including requirements to pass Drivers a driving test and a knowledge test. 1. Knowledge training: The course The differences in driving patterns between covers content in EV technologies, operation diesel bus and electric bus in the SZBG safety, safe driving behaviors, maintenance include: guide and contingency management. The test • Longer Braking Distance: Since the includes both theoretical and practical knowl- electric bus is heavier because of the battery edge. The drivers need to pass the test with a packs, its braking distance is longer than that minimum of 90 points out of 100. of traditional diesel buses, increasing collision 2. Test-driving requirement: To assist risks. drivers transitioning from a traditional to an electric bus, each driver needed at least 50 56 Acquiring and Managing an Electric Vehicle Fleet kilometers of empty-bus driving practicebefore • Air Conditioning and Others: being eligible to operate an electric bus with Inverter air conditioner—used to control the passengers. The whole training process was efficiency of the compressor which can help supervised in a controlled environment and achieve 30 percent better energy efficiency2 recorded on videos. than regular air conditioner units—is fully welded, therefore has fewer maintenance and 3. Online platform for continuous repair needs. learning: The training center also developed a self-paced online learning platform in 2018 for • Maintenance checks and repair drivers to take appropriate lessons or to follow workload between electric and conventional their interest. This platform offers more than buses differ. 300 courses to all staff members. • Regular inspection, daily inspection, and level I maintenance (every 4000–5000 km) remain the same, with increased empha- 4.4 Maintenance sis on the safety inspection. and Asset • Low maintenance need, including level II maintenance (every 20,000 km) and Management workshop repairs, is reduced especially on mechanical defects. However, work on electronic parts increases. 4.4.1 Vehicle Maintenance • Overhaul maintenance and and Repair Need and Costs whole-component repairs mainly on engine and body are significantly reduced for the electric bus. The maintenance for the 3-e Compared with conventional internal combus- system is covered by manufacturer warranty. tion engine buses, electric buses in general • Storage need is significantly reduced have fewer maintenance and repair needs. as the type and stock of repair materials and • Power and Transmission System: components are fewer. Electric motor, gear decelerating drive, and motor controller of electric buses have a more straightforward mechanical structure and provide higher transmission efficiency. • Drive and Brake System: While the frame and axle of electric buses do not vary much from conventional buses, most electric buses use air suspension systems, which are lighter, more energy efficient, and less noisy than leaf-spring suspension. The air suspen- sion system is also superior in maintenance and repair needs. Tire wear is more for electric buses because of heavier weight. Electric buses also use disc brakes that require less maintenance work than drum brakes. Acquiring and Managing an Electric Vehicle Fleet 57 Figure 4-9 Number of defects of conventional and electric buses per 1,000 vehicle kilometers running 0.200 0.150 0.100 0.050 0.000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Conventional Bus Electric Bus Note: Data for electric buses are the average of the 10.5m BYD K8 procured in 2016, and the data on the later years are based on reasonable assumption; data for conventional buses are the average of the 11m buses in SZBG’s fleet. Electric buses had a higher defect rate in maintenance cost of year five to eight were year-one (figure 4-9) because of technical assumed with 20 percent annual growth rate modifications and adjustments made to the from year four, because it is expected the vehicle model at the initial deployment stage. maintenance of chassis, bus bodies and other About half of all the defects for electric buses parts of the electric bus in the later years will at the two year-two stage were on the 3-e cost more. 3-e system warranties from the systems that were under manufacturer manufacturer also reduce SZBG’s mainte- warranty. Other repair issues include nance costs significantly. Diesel buses require compressor defects and battery degradation. overhaul maintenance every four years, targeting mainly diesel engine and transmis- Data from one earlier batch of electric buses sions that incur a substantial cost. Although (BYD K8) that the SZBG procured in 2016 the annual maintenance cost of tires of the show that the total maintenance and repair electric bus is about 30 percent more than costs for electric buses were much less than diesel bus on account of its weight, it is those of conventional buses in the early years estimated the total maintenance costs of the (figure 4-10). Because the K8 model was electric bus lifetime are about 30–40 percent procured in 2015–16, only the first four years of the traditional diesel bus. of maintenance cost are available. The 58 Acquiring and Managing an Electric Vehicle Fleet Figure 4-10 Cost comparison of maintenance and repair between SZBG’s diesel and electric buses Maintenance costs (thousand yuan per bus) with annual running distance at 66,000 km 200 177.38 160 120 80 35.97 37.36 38.28 31.35 33.07 35.64 40 27.52 33.03 20.91 22.94 13.99 15.44 19.11 12.08 4.19 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Diesel Bus Battery Electric Bus Note: Data for electric buses are the average of the 10.5m BYD K8 procured in 2016, with the maintenance data for the first four years in reality and assumed costs from year 5 to 8 with a 20% annual growth rate to include further maintenance requests. Data for diesel bus are the average of the 11m buses which was in SZBG’s fleet. The surge of the cost in year 4 represents the overhaul maintenances on diesel engines and other key parts. Diesel buses are basically discarded in the eighth year, so no sharp increase in maintenance costs at the end of the eighth year. Data from one earlier batch of electric buses cost more. 3-e system warranties from the (BYD K8) that the SZBG procured in 2016 manufacturer also reduce SZBG’s mainte- show that the total maintenance and repair nance costs significantly. Diesel buses require costs for electric buses were much less than overhaul maintenance every four years, those of conventional buses in the early years targeting mainly diesel engines and transmis- (figure 4-10). Because the K8 model was sions that incur a substantial cost. Although procured in 2015–16, only the first four years the annual maintenance cost of tires of the of maintenance cost are available. The electric bus is about 30 percent more than maintenance cost of year five to eight were diesel bus on account of its weight, it is assumed with a 20 percent annual growth rate estimated the total maintenance costs of the from year four, because it is expected the electric bus lifetime are about 30–40 percent maintenance of chassis, bus bodies and other of the traditional diesel bus. parts of the electric bus in the later years will Acquiring and Managing an Electric Vehicle Fleet 59 Battery to conduct the cascade-utilization of these batteries, designing products for energy At initial stage of the electric bus deployment, storage, telecommunication base station Shenzhen piloted the bus-battery separation power reserve, and solar PV lamps. lease (车电分离). However, PGC which purchased and managed the battery had not specialized in handling batteries. Consequent- ly, the poor battery quality supplied in the 4.4.2 Maintenance and initial batches led to PGC’s financial loss and Repair Technicians disrupted SZBG’s bus operation. Shortly after, the SZBG moved battery ownership and management to the vehicle manufacturers The human resource and technical depart- who provided lifetime warranty with promise of ments of the SZBG developed a maintenance battery replacement when its capacity fell and repair technician staffing standards and below 80 percent. Some buses experienced transformation plan at the beginning of the battery degradation as early as at their electrification which is critical in facilitating 50,000-kilometer mileage. In the SZBG, most SZBG’s electrification transition. They of the batteries on the BYD K8 model needed assessed staffing requirements for different to be replaced after 2–2.5 years; for other bus types of technicians based on detailed models, the replacement cycle was about analysis of staffing and new requirements of 3–4.5 years. Manufacturers would only workloads and skill levels. They developed a replace the battery after multiple repair step-by-step staff transformation plan—train- attempts. Also, manufacturers usually only ing, re-assignment, incentives, talent attribu- replace batteries partially, that is, some cells tion and compensation—for each team in of the battery pack each time, as long as the each maintenance and repair workshop, refurbished battery meets the SOC require- considering the difficulty of transformation ment. It is fair to assume that on average, the based on specialty, age, and experience. replacement cycle is four years that is, one bus gets two battery packs in its lifetime. To illustrate, one high-maintenance workshop at Caopu in Shenzhen was considered the China’s regulation requires EV manufacturers most difficult one to adapt as it focused on to bear the responsibility of battery recycling highly specialized and streamlined engine and which is why the residual price of the battery body repairs and work. The SZBG worked is considered zero for the operator. BYD takes with BYD and turned Caopu Workshop into a recycles old batteries as agreed with the BYD electric vehicle service center, providing SZBG. According to BYD, the vehicle and 3-e-system component maintenance and battery manufacturer developed a repairs, body repairs, and warranty services to cascade-utilization plan for power batteries the SZBG and other bus companies in depending on their remaining capacity. Those Shenzhen. The total number of maintenance with relatively high capacity would be used for technicians has decreased slightly, with the storage after capacity optimization. Low frontline maintenance technician to bus ratio capacity batteries would be disassembled, including workshop management went down and the valuable metal being recycled. The from 0.37 in 2016 to 0.30 in 2018. SZBG started the recycling of over 700 tons of power batteries from its first batch of 200 retired electric buses in March 2020. The SZBG and the PGC (the owner of the batter- ies) are working with Shenzhen Recycle Environmental Technology Company Limited 60 Acquiring and Managing an Electric Vehicle Fleet Table 4-8 Maintenance and repair staffing transformation plan after the electrification Target Specialty Old Staffing Difference Staffing Electromechanical technician 619 0 619 Mechanical technician 709 1286 -577 Electrician 152 174 -22 Spray painter and panel beater 188 249 -61 Others 0 56 -56 After electrification of the fleet, only 55 percent • Training by vocational school support- of the original labor force of mechanical ed by the SZBG: The affiliated technical technicians was needed, while a large number training school provided specialized training of electromechanical technicians had to be course and the course was largely subsidized added (table 4-8). The SZBG practiced an by the SZBG. Among the 1800 mechanics at elite and mass training approach in transform- the SZBG, more than 1200 of those have ing the skill sets of technicians to electrome- successfully acquired the electrician certifica- chanical technicians. tion to perform electric-bus maintenance as of mid-2019. These transformations needed • Training by electric bus manufacturer: several months of training, learning, and SZBG’s technical department has sent over certification to ensure a smooth and safe several batches of maintenance technicians to transition to an electric bus fleet. The SZBG BYD, the bus manufacturer’s plant, for onsite also offered incentives and rewards if the training since January 2016. These elite maintenance technician progressed to obtain maintenance technicians, numbering 128 national skill level certificates such as EV accumulated maintenance, repair, and battery maintenance technician. The company troubleshooting skills on the newly procured also hosted several internal technical competi- vehicles including the 3-e system. They also tions for maintenance staff. provided valuable suggestions to the manu- facturer on the design of the buses. Acquiring and Managing an Electric Vehicle Fleet 61 4.4.3 Toward Systematic After the electrification, the SZBG placed a lot of emphasis on charging and set up an Asset Management energy management system to be certified by ISO 50001. While maintenance and repair standards and procedures are set up to As a state-controlled joint venture, SZBG’s minimize service disruptions and ensure assets are supervised directly by the safety and environmental compliances, the state-owned Assets Supervision and Adminis- component of funding and valuation is tration Commission of Shenzhen with the lagging. With its ambition to be the model in main purpose of preventing loss or misuse of electrification of public transport in the state-owned assets. As a public service country and the world demonstrating the provider that receives annual subsidies from successful reform of SOE, the SZBG is an affluent city government, asset manage- working toward systematic asset manage- ment of SZBG was limited to ensuring ment that incorporates a full-fledged asset operation and safety while having less management plan and capital investment incentive of reducing lifecycle cost or asset planning. value appreciation. Inventory was limited to meeting the demand of storage and repairs. Figure 4-11 Digital display of depot and vehicle information in the ITC a. Depot information b. Vehicle information The digital management systems of the ITC information of individual vehicles. With data (figure 4-11) have established a solid founda- accumulated, the SZBG is planning to tion for systematic asset management. The provide all vehicles with predictive mainte- platform monitors the occupancy level of nance service based on wearing status and repair and maintenance workshops and parts simulation as well as an online mainte- charging stations to schedule maintenance nance manual that connects to the CAN.as and repair works. The depot management an online maintenance manual that connects system also tracks workshop workflow to the CAN. including the time and other service 62 Acquiring and Managing an Electric Vehicle Fleet 4.5 Operating assigned to drivers living in different zones during their shift-changing time. and Managing Electric Taxis 4.5.2 Maintenance and Repairs An electric taxi differs in its characteristics in operation compared to traditional taxi vehicle mainly because of its charging requirements. Technicians have been trained at the manu- At an early stage of electrification, a facturer’s plant about the maintenance of three-hour nonoperating period was essential electric taxis. After electric taxis were in each shift, which included driving to the deployed, all subsidiary taxi companies charging station, a wait time of about an hour continued their technical collaboration with the at the charging station, and a charging time of manufacturer—inviting BYD’s technicians to about 1.5 to 2 hours with DC fast charging. taxi workshops for learning advanced knowl- The SZBG implemented numerous measures edge and techniques as well as shared to increase the operation efficiency and learning sessions. The SZBG arranged annual viability of its electric taxi service. competitions among technicians and awarded the most outstanding. The SZBG also focused on compiling the experience accumulated by these technicians and shared such experienc- 4.5.1 Increase Double-Shift es as online courses to all its technicians. Taxis With the joint venture with vehicle manufactur- ers and trained technicians, the taxi mainte- In Shenzhen, some taxis are operated by one nance workshops of the SZBG were certified driver for a whole day—the single-shift to be able to provide maintenance and repair taxis—and some are operated by two drivers services to other BYD e6 cars. Meanwhile, on day and night shifts. After electrification, BYD has also gained valuable data and the SZBG re-negotiated the contracting terms experiences from these maintenance and with taxi drivers to increase the percentage of repair works to improve the quality of vehicles. double-shift taxis. While single-shift drivers are less affected by charging need as they need to rest during the full day, the 4.5.3 Intelligent Charging double-shift drivers for the SZBG could use and Management System the electric taxi more efficiently, and lower SZBG’s investment costs of vehicles as well as the nonoperating time. With double-shifts, The need of charging batteries has been a drivers were required to charge their taxis fully major obstacle to operate any taxi efficiently. in between shifts at a charging station when Thus, improving the charging management two drivers mutually agreed. The shift change system has been critical to tackle this in Shenzhen usually occurred during challenge. The system monitors and analyzes 03:00–08:00 a.m. and 15:00–-20:00 p.m. At real time status of the vehicle—remaining an early stage when the charging stations power and vehicle location—and the charging were insufficient and distance per charge was terminal—queueing and pricing—and sends shorter, taxis needed to charge at shift change charging reminders or suggestions to drivers, as well as during their shift. The taxi operator and other relevant data to charging stations arranged to stagger the charging schedule Acquiring and Managing an Electric Vehicle Fleet 63 and taxi operators for improving the efficiency. demands longer time and distance especially when it rains. ii) Drivers report larger blind SZBG’s taxi subsidiary is developing an spot of BYD e6 at the front and side of the car integrated taxi management system. This because of a very wide A-pillar, or front pillar, system plans to include more functions for and a flatter windshield and a longer front driver management: vehicle management face. iii) It is quieter inside the vehicle—some through defect alert; battery monitoring; drivers are not aware of the speed, so speed- maintenance statistics and reminder; charging ing occurs more often, and drivers seem to and dispatching management including get more fatigued on highways. troubleshooting and repair of charging termi- nals; and maintenance management, schedul- ing and status checking. The system can also analyze facial expression of drivers during 4.5.5 Leveraging Assets for operation to identify fatigue and send alarms Revenue Generation to alert tired drivers, and protect their safety. Taxi Hubs: The SZBG further plans to 4.5.4 Safety and Emergency develop some of the taxi charging locations at terminals, depots, and parking lots into Response one-stop service complex with functions such as public charging, maintenance and repairs, car wash, convenience stores, entertainment, Taxi drivers are the key to ensure safety. All psychological consultation as part of the taxi subsidiaries of the SZBG have empha- employee assistance program (EAP), apart- sized training for all drivers on the safe ments, advertising, and logistics. Some of the operation of EVs including knowledge and maintenance workshops with skilled techni- driving practice. PCET organizes monthly cians could become authorized service safety study groups to discuss typical safety centers for other EVs. cases, risks, and mitigation measures specific to electric vehicles. The intelligent manage- ment system also sends reminders and alerts Parcel Delivery: With the advancement of to drivers in real time, monitoring the GPS intelligent transport systems (ITS), SZBG’s data as well as camera feeds inside taxis. taxi fleet and other on-demand vehicles can Drivers’ performance and behaviors are potentially move to other tasks during low reported regularly and evaluated with financial demand times or when on empty mileage. For incentives. PCET also developed an emer- example, PCET launched a few initiatives to gency response plan and conducts semi-an- offer more diverse services. For example, nual fire drills and evacuation drills for taxi PCET’s collaborates with a courier company drivers. SF Express to use taxis to deliver small packages within the city. In the trial period, SF Interviews of taxi drivers in Shenzhen, Express provided the software support and conducted by this study, showed that while the orders, and PCET assigned about 1,000 electric taxis are in general easier to drive with electric taxis to provide small parcel delivery better vehicle control—can go with empty services with minimal impact on operation shift, can go closer to the curb—several major costs. This parcel delivery service turned out traffic safety risks of the electric taxi fleet to have generated significant income for persist. Such risks have contributed to the drivers, far exceeding earnings collected from increase of taxi accident rates in Shenzhen. i) passengers during the COVID-19 outbreak Vehicles are much heavier, so the braking and recovery time. 64 Acquiring and Managing an Electric Vehicle Fleet School Taxi: PCET also started an internal trial of a school taxi. PCET provided mobile Notes application-based service to transport school- children. Their application (app) provides parents real time video footage of the respec- 1 According to research using data from various cities, extreme low temperatures in winter impact the battery tive taxi as well as the location of the taxi, charging time significantly. Statistics show that under indicating details for students’ departure and minus 25°C, charging time slows down by 38.9 percent arrival information on their way to school. All than that at 25°C. In addition, extreme low temperatures of PCET’s taxis are equipped with panic raise challenges for the motor and heating system. buttons that report to the respective police department, and the guarantee of children’s safety offered by this service makes it much 2 The C-rate is a measure of the rate at which a battery is being charged or discharged. It is defined as the current more attractive than a regular street-hail or through the battery divided by the theoretical current draw privately hired vehicle. under which the battery would deliver its nominal rated capacity in one hour. Traffic Police Support: PCET is developing a program that allows taxi drivers to help the 3 Energy efficiency ratio (EER) for the air conditioner is traffic police. Taxi drivers receive notifications the number of British thermal units (BTU) the air condition- of nearby traffic regulation violations or crash er is pulling out per hour divided by watts of power and can take photos at the violation of crash consumed. The higher the ratio is, the more efficient the air conditioning unit. sites when the police are absent and far to reach. The taxi drivers who submit valid photos are rewarded afterward. Advertising: PCET has also worked with Meituan-Dianping, an e-commerce and food delivery company, for local commercial advertising and marketing campaigns using its electric taxi fleet. Driving Data: The SZBG is considering leveraging the large amount of data collected by the fleet for revenue generation as a huge asset. Driving data and vehicle diagnostics are used as training datasets for autonomous driving by large-scale manufacturers such as SMIC and Ford. The SZBG also piloted putting more sensors like the millimeter-wave radar on buses to collect more data for such purposes. Acquiring and Managing an Electric Vehicle Fleet 65 Chapter 5 Acquiring and Managing Charging Infrastructure • Selection of optimum electric bus models based on climate, topography, existing bus network and technology • Training to drivers and maintenance staff key for operation; more electromechan- ical technicians instead of traditional mechanists • Electric bus routes and network should be continuously optimized on demand, functionality and charging facilities • The latest electric bus model supports continuous running for a whole day in most urban scenarios, and supports 1:1 replacement of diesel buses during operation • An intelligent bus management system is an important tool for successful operation and asset management 5.1 Acquiring impose additional loads on the electricity grid. A report by NRDC (Xiong et al. 2019) showed Charging Infrastruc- that concentrated charging of electric vehicles ture would additionally burden the regional electrici- ty grid, and unmanaged charging activities would magnify such burden. In the scenario of unmanaged charging, the burden of China’s The SZBG was a pioneer bus operator in national electricity grid would increase by electrification. With the lack of technical 13.61 and 153 gigawatts in 2020 and 2030 capacity—and therefore no charging operation respectively. Besides, the high-power needs of permit—at the beginning of the electrification charging facilities, especially fast charging, meant that the SZBG could not own or operate would result in harmonic current （谐波电流） the charging infrastructure initially. A charging and impulse voltage （冲击电压） challenging the service provider owns the charging station and power grid corporation. All these projected the transformer, while the government owns consequences would have to be considered in the power supply lines. This arrangement the design and construction of charging turned out to be a common model in China, stations by a closer coordination with the local and in a way, has nurtured a healthy and grid authority. competitive market for charging service Whether capacity of the power substation is providers including grid companies. sufficient or whether a special power conduit The charging service provider performs two needs to be added or whether a transformer main tasks: substation capacity needs to be expanded, not only makes up as much as one third of the • Constructing charging infrastructure, total investment cost, but also causes uncer- including charging terminals, transformers, and tainties of approvals and delays by the power other charging related facilities. supply bureau to approve any expansion. The • Providing charging services, which SZBG was fully aware of the potential impact include hiring technicians to perform daily and expansion work on the electricity grid. charging and maintenance service. During the initial phase of electrification, the SZBG collaborated with leading charging Selection of the charging service provider also companies on the market and coordinated with follows similar steps as with other procurement the grid and authorities. Since the ownership of electric buses. The SZBG had 1,707 of private electric cars was still low in 2015, charging terminals at 104 locations for buses such collaboration enabled opportunities to by June 2019. The investment cost of a single generate stable revenues for charging compa- charging terminal ranges between 200,000 nies and lowered the risks that SZBG faced in and 1,000,000 yuan. The cost includes the capital investment, technology and coordina- devices of the charging terminal, the recon- tion. struction of the surrounding area, the trans- former, the grid line expanded, and the land According to interviews with some large ownership or lease. Apparently, for a large charging operators, building and operating charging station with many charging terminals, charging stations for electric taxis are more such investments are significant. Costs of profitable—where investment breaks even in financing costs and research and development about three years under the subsidy policy in (R&D) also affect profitability (details in Shenzhen—than those for buses, whose chapter 6). break-even time takes four to five years. This is because taxi charging stations can also The charging facilities for electric buses provide services to private cars and other Acquiring and Managing Charging Infrastructure 67 service vehicles. The revenue includes initial stage. The SZBG piloted the network government subsidies—at 0.6 yuan per charging concept of one charging terminal with watt—and a service fee for charging. The bus multiple charging plugs to save the need for charging stations in Shenzhen are reserved space at depots, as more space is required if only for charging electric buses owing to safety buses need to be moved for charging at night. considerations. The land availability issue became even more Potevio Group Corporation and Shenzhen severe when the taxi fleet was electrified. The Winline Technology (SWT) are the top two Shenzhen government has made significant charging station companies providing efforts since 2018 to address the land avail- infrastructure for the SZBG. PGC is the largest ability issues to remove bottlenecks and charging station company and the earliest delays attendant on construction and opera- player in providing charging facilities for tion of charging infrastructure. electric buses, taxis, light delivery trucks, and i) Allocating the goal of charging station other private EVs in China. As discussed construction for taxi fleet to each district previously, PGC was not only the charging government to be accountable and monitor the facility provider but also the owner of the bus progress. batteries leased to the SZBG from 2009 through 2015. The SWT, established in 2007 in ii) Encouraging government agencies Shenzhen, leads in producing charging such as Urban Management Bureau, Water equipment with multiple charging outlets. PGC Supplies Bureau, and the New Development is an SOE and was a critical actor during the District who have government-owned land demonstration phase. The SWT on the other such as parks, parking lots, and water treat- hand, is a private company entering the ment plants, to allocate land for charging market at a later stage of large deployment. infrastructure. Several other companies joined the market after 2016 to develop charging infrastructure iii) Relaxing and simplifying the land use with incentives provided by the Shenzhen approval process for the construction of government; more than a dozen major compa- charging infrastructure and its ancillary nies operate charging stations throughout facilities such as transformer room, rain Shenzhen. shelter, restroom, by assigning them as temporary building and temporary land use The Challenge of Land Availability: After the category; lowering the approval authority to early deployment of electric buses and district level; and setting the compensation construction of charging facilities at several standard to industrial benchmark land price for major bus depots, land availability in Shen- temporary land use or short-term lease. zhen quickly became the biggest challenge. Difficulty in finding lands with a clear title and ownership meant much higher costs, long delays, and other uncertainties for the 5.2 Technical construction and operation of the charging infrastructure. Although the SZBG transferred Specifications the land acquisition risks—ownership right, the potential of resettlement, land use changes, lease disputes to mention a few—to the The technical specifications for charging charging service providers, the lagging infrastructure include requirements for progress of charging stations on account of charging mode, power output, and monitoring land unavailability became the bottleneck in and management systems. the deployment of its electric bus fleet at the 68 Acquiring and Managing Charging Infrastructure The selection of charge mode was determined not own the battery, and the operator or user by bus fleets charging needs, available does not have an incentive to swap their technology, and costs. The SZBG decided to battery because they might get an old battery. deploy DC fast charging stations with AC–DC Wireless charging has the advantage of transformers installed in the charging station to convenience and flexibility, but the existing transform the AC from the city grid to technology of wireless charging still cannot overcome two of the most prominent issues of compete in charging efficiency. Furthermore, charging speed and the lack of space at wireless charging would have much larger depots. Despite higher costs, compared to AC impact on the grid than DC fast charging as it slow charging mode with onboard transform- requires an even larger power output due to ers, DC charging with the transformer built at significant energy loss. the bus depot or charging stations has three The power output of the charging terminals is advantages that the SZBG considers import- a major technical specification as the charging ant. i) Reduction of potential malfunction spots speed depends heavily on it. The SZBG on the buses especially when technology is piloted a network charging in 2016 with a still nascent—it is easier to inspect and fix compact design of one charging terminal technical problems at the charging terminal equipped with several charging plugs to rather than on individual vehicles. ii) Power handle four buses at the same time. Although output allowing faster charging speed, with it takes longer time to charge, this arrange- C-rate1 of 0.5, 40 percent faster than AC ment significantly reduced the need to move charging (C-rate of 0.3), or more buses to be buses at nighttime, which overcomes the charged in reasonable time. iii) More flexible in difficulty of moving buses within insufficient location of charging terminals which can be space at depots and saves labor cost. For easily upgraded without the extra cost of example, at Ziweige Station, 63 buses can be upgrading all individual buses. charged using five charging terminals without Several alternative charging modes were also moving any bus. A more flexible charging considered, for example, battery swapping and concept was later introduced to adjust the wireless charging. The SZBG did not select power output of each charging plug to achieve the battery swapping option because of the the best efficiency and reduce. following factors: i) Since batteries by different The SZBG charging terminals allocate the manufacturers use different standards, battery power output distribution (figure 5-1).The swapping can only happen within the same majority of the charging terminals use 150 manufacturer or even the same vehicle model. kilowatts (50%) and 180 kilowatts (19%) DC ii) Safety is still a big concern in swapping, fast chargers. given the weight and size of the battery pack, requiring redesign of the vehicle structure. iii) The swapping needs additional working space and the efficiency is still low, which is extreme- ly costly and causes bad customer experience especially in the urban core area where the demand for battery swapping is high. iv) Battery cost; battery swapping usually requires 50 percent of redundancy in battery, which implies much higher costs. v) Unviable battery ownership; the existing government subsidy policy assumes one battery per vehicle—the manufacturer cannot claim subsidy if it does Acquiring and Managing Charging Infrastructure 69 Figure 5-1 SZBG charging terminals by power output 851 329 282 93 96 2 20 17 14 45kw 60kw 100kw 120kw 150kw 160kw 180kw 240kw Flexible Power Charging Cabinet As technologies advanced, the SZBG required and monitoring procedures for both diesel and charging terminals to have a modular design. electric vehicles, charging stations, and The modular design aided maintenance and depots. Although the workshop has less waste repairs as technicians could easily remove that water after the electrification from the elimina- part to be replaced to minimize service tion of oil change, it still has an increased disruption. Typically, the charging service obligation to handle hazardous materials. providers require manufacturers to provide Technical standard compliance is important for more than two years of warranty of charging the large-scale construction of a charging facilities. infrastructure. The Shenzhen government urged the Shenzhen Power Supply Bureau to The charging monitoring and management develop technical standards to construct system needs to manage the payment, defects charging stations, and the technical specifica- of charging equipment and maintenance, tion of electric vehicle charging system was reporting, and to interface with dispatching, formally implemented in 2015. In addition, the operation, and other systems. One important Pengcheng electric taxi company under requirement is that the provider should share SZBG’s control drafted another document all the data and information related to charging “Specification of Electric Taxi Charging and with the SZBG, who also has the authority to Depot Facility” that was submitted to the Union publish the data. All software is expected to Internationale des Transports Publics (UITP) have lifetime warranty with free upgraded standard committee in November 2019 as a services. standard for international adoption. The final Technical Standard: The SZBG has devel- approval of the specification standard was oped a technical standard to convert traditional pending at the publication of this report. bus terminals and depots to accommodate charging, environmental and safety standards, 70 Acquiring and Managing Charging Infrastructure 5.3 Operating operation of its first 100 BYD e6. Later as the shareholder of PCET, BYD joined forces to Charging Facilities construct more charging stations including underground ones to meet the demand of later deployment of electric taxis. Nine operators constructed and manage the The charging infrastructure for electric taxis 1,707 charging terminals that the SZBG has has a unique challenge. Unlike BEBs which for its buses. the PGC and SWT are the major return to a specific depot for overnight two operators which control the biggest charging, electric taxis need to offer 24-hour shares—35% and 33% respectively. service. An electric taxi depends on the facility to charge at any close-by location when Malfunctions of charging facilities affect needed. Instead of a large cluster of charging charging, especially when the charging infrastructure in one location, it became terminal–bus ratio is low, and place reliance on imperative to have a large number of charging the service quality and response time of facilities at widespread locations. charging operators. According to SZBG’s fleet technical staff, large operators like the PGC BYD e6 shares the same charging protocol as and SWT tend to have better service and other electric passenger cars. Thus, during the faster response. For example, the SWT electrification process, the SZBG actively provides a 24-hour repair team. Some reached out to other business entities that charging providers store backup charging offered charging infrastructures at various modules onsite such as one backup module locations such as public parking lots, shopping per four charging terminal, and stock backup malls, and residential areas to open their parts in the local factory. The two largest charging services for their electric taxis. The operators also use their staff or contractors to SZBG launched its own business as a charge the vehicles besides maintaining and charging service provider in 2018 and started managing the charging facilities, monitoring construction of some charging stations to the charging and payment, and conducting match the demands of electric taxis and other maintenance and battery testing. The opera- electric passenger cars. tors’ charging staff are in general well trained to minimize safety issues from mishandling. By the end of 2018, 11,571 charging terminals The SZBG staff or bus drivers were permitted were available for electric taxi charging in to move the buses at night to charge in turn Shenzhen. The charging terminal network when the charging terminal–bus ratio was low. continues to expand with the growing need for electric private cars. 5.4 Taxi Charging Infrastructure At the first pilot in 2010, PCET relied on the bus depots owned by the SZBG to construct its first two charging stations and worked with a charging service provider to ensure the Acquiring and Managing Charging Infrastructure 71 Notes References 1 The C-rate is a measure of the rate at which a 1 Xiong, Y., Zhang, Y., et al. n.d. “Analysis on battery is being charged or discharged. It is defined as the Developing a Healthy Charging Service Market for EVs in current through the battery divided by the theoretical China”. Retrieved October 23, 2019, from http://nrdc.cn/in- current draw under which the battery would deliver its formation/informationinfo?id=204&cook=1 nominal rated capacity in one hour. 72 Acquiring and Managing Charging Infrastructure Part II Technical capacity: With the pilots, SZBG had opportunities to engage the main stake- Key Lessons: holders in the EV ecosystem, including government and industry policy makers, manufacturers and researchers. The commu- Technology (im)maturity nication with the industry improved their technical knowledge and capability to select the right type of electric buses for its operation. SZBG also established a technology R&D At the early stages of electrification in China, department, whose major mandate was to 2009–2013, governments gave substantial understand the latest EV and charging support to the automobile industry and their technology and give recommendations to related companies to develop China’s electric management. SZBG invested significant vehicle industry, resulting in many new EV resources into capacity building and staff manufacturers. The vehicles and the technolo- training, for drivers, maintenance technicians, gies were not widely tested, and the technical as well as management and administrative specifications of vehicles varied among staff. Recruitment, vehicle manufacturer’s manufacturers. Consequently, much uncertain- plant onsite supervision, technical competition, ty and many risks persisted in the early staff reporting card and bonus, certification, adoption of the electric bus. As technologies and continuous and comprehensive training developed some sophistication on battery, are some leadership measures that have electric engine, control system, and supply reaped good dividends. It has been an impres- chain integration, EVs improved significantly, sive achievement that SZBG has kept all its and market competition eliminated poor labor force intact through the electrification performers. Basic EV standards were estab- transition. lished, but still many EV manufactures in the market continued selling products of a range in Close partner with manufacturer and quality. charging service provider: Through continu- ous dialogue with the EV industry and market Bus operators, lacking technical knowledge or research, SZBG had the ability to identify capacity to evaluate different specifications of robust manufacturers and to partner with them. vehicles, face higher risks in picking and using Over a ten-year period, SZBG and the manu- (both vehicle and charging) technologies facturers worked closely to keep improving the during their lifecycles. It resulted in unsatisfac- technology and optimizing vehicle configura- tory performances such as running distance, tions and quality based on operation feedback. malfunction rate, or charging speed to name a For example, SZBG has provided hundreds of few. For example, some early batch of buses pieces of practical advice to EV manufacturers that SZBG had procured, experienced serious via onsite supervision during manufacturing battery degradation and a number of buses stage that improved the quality of vehicles had to stay in depot waiting for repairs for a SZBG procured. SZBG technicians also got significant time. first-hand instructions from manufacturers on Using pilots: SZBG procured about 100 how to use the vehicles to maximize efficiency electric buses for piloting during 2011–13. and prevent problems. For example, SZBG Although the performance of those electric incorporated the tips to maximize battery life buses was poor, the pilot allowed SZBG to into the charging protocols for drivers and understand the technical characteristics and charging service providers such as charging requirements so that SZBG could improve its fully before pulling the plug, charging no more business model, implement procurement, than twice of the battery capacity per day, and performing passive battery balancing by was 1,580,000 yuan per bus without subsidies; leaving low-SOC buses to discharge on and the similar model in the market costs only depots. The close partnership between 800,000–900,000 yuan in 2019. Although the operators and manufacturers not only reduced price keeps dropping, the procurement price of the technical risks of operators, but also led to the electric bus is still twice the price of a improvements in successive generations of traditional diesel bus, especially of the electric buses. large-battery ones with acceptable running distance. Extended manufacturer warranty: SZBG required an extended warranty of eight years The Chinese government started giving for the key parts of electric bus to lower the purchase subsidies to incentivize the adoption risks of immature technology. Because of this, of EVs in 2009. The subsidies started to manufacturers are incentivized to provide the decline since 2016, and it is planned that no best quality of electric buses to lower their subsidies will be provided in the near future risks through the long duration of the warranty. (the complete phasing-out was postponed to 2022) to allow full market competition between Developing standard: SZBG worked with EVs and traditional vehicles. The phasing-out partners in developing the standardization of of subsidies encouraged EV manufacturers to adoption and operation of electric buses and improve their efficiency further and reduce the taxis. SZBG worked with Shenzhen Standard- cost of manufacturing and price. Charging ization Research Institute in October 2019 and facilities are also part of the main costs for developed noteworthy standards: “Manage- electrification. Land acquisition or rent for ment specification of operation safety for charging stations requires large amount of battery electric bus”; “Emergency treatment initial investment for larger adoption. specification of operation safety for battery electric bus”; “Technical Specification for Financial Leasing: SZBG actively negotiated Maintenance and Repair of Pure Electric with manufacturers, financial agencies and Taxis”; and the “Comprehensive Charging other industrial departments, and together they Station Infrastructure Specification”. SZBG is developed innovative procurement solutions also a member of both the Bus Committee and (chapter 3). Financial leasing helped lower the the Ride Hailing Committee of the Union initial capital cost. Internationale des Transports Publics (UITP), Taking Advantage of Subsidies: The pilots an international organization of public transport and regular dialogue with the industry helped service provision. SZBG worked with UITP on SZBG better understand the EV development promoting its standards as international and policy evolution, which allowed SZBG to standards. choose the optimum time for electrification. When a relatively mature electric bus model appeared in 2015, and subsidies were antici- Financing pated to decline, SZBG decided to take the full advantage of subsidies from all levels of government to lower the initial costs of electric The key challenge for electric bus adoption buses. around the world is the high capital cost in Collaboration with Charging Service comparison with the traditional diesel buses. Providers: Charging facilities are also part of The price of the electric bus has dropped the main cost and the technology risks. SZBG significantly since 2009 because technology chose to collaborate with the charging service evolves and economies of scale set in. The providers, who invest and operate charging price of the model BYD K8 procured in 2015 stations and services, to ease the initial investment and technology risks. cabinet to overcome the charging bottleneck. Intelligent management systems: SZBG relies increasingly on technology and data for Operations and Management bus ridership analysis, dispatch optimization and charging arrangements. SZBG also uses mobile technology to provide customized Shenzhen is a fast-growing city with expanding on-demand bus service. urban areas and construction that lead to changing travel demands and unpredictable traffic conditions. The bus routes are subject to change as the metro network expands. The electric bus operation faces additional limita- tions because of battery running distance and lack of charging facilities. Land availability in Shenzhen quickly became the biggest challenge after early deployment of electric buses and construction of charging facilities at several major depots. Large-battery bus: On account of very limited depot space and scarce charging facilities available, SZBG chose the large-battery electric bus with long-running distance to minimize the charging need and disruption to operation. Large battery buses are also more flexible to adapt to a changing demand and operate under unpredictable traffic congestion. The chosen model allows to leverage the lower electricity price at night and maximizes battery life due to fewer charging events. Improve fleet operations: Every bus route has a detailed bus scheduling with detailed considerations on different bus arrangements, charging arrangements and emergency response procedures to ensure that the route adapts to different situations. The scheduling is refined every month after analyzing the ridership and traffic data. Operation-oriented charging mode: Realiz- ing the scarcity of charging facilities and space for new charging facilities as the main obsta- cle, SZBG decided to stick with DC fast-charging (as opposed to AC slow charging, battery swapping, or wireless charging) to ensure operational efficiency. SZBG also explored and encouraged innova- tions in network charging and flexible charging 3 Assessment of Costs and Benefits Chapter 6 Total Cost of Ownership • The total cost of ownership (TCO) of BEBs without subsidies is about 21% higher than diesel buses; the subsidies reduce the TCO of BEBs by 35% • The purchase price of BEB without subsidy was nearly triple the price of diesel bus in 2016 in Shenzhen; the price difference has since declined • BEB’s energy and maintenance costs together are significantly lower (about 44%) than diesel bus over its lifetime • TCO analysis if charging stations confirms that charging infrastructure is a profitable business with charging service fees 6.1 Introduction 6.2 Bus TCO Electric vehicles have gained much attention Our study developed a TCO model to compare and are promoted by many countries, not only the cost of ownership between a BEB and a for their emission reduction potential but also comparable DB. because of operational cost savings. Breetz The municipal government set eight years as and Salon (2018) analyzed the TCO of battery the lifetime of heavy duty transit buses to electric vehicles (BEVs), hybrid electric operate in Shenzhen to ensure reliability and vehicles (HEVs), and internal combustion safety of the bus’s operation (table 6-1). In vehicles (ICEVs) in 14 metropolitan cities and other countries, the lifetime of 12 years is more found that the TCO of BEVs are still more common for transit buses; and the effect of a expensive, and concluded that government bus’s lifetime on TCO will be analyzed using subsidy was essential for BEV deployment. sensitivity analysis. The bus routes were Most literature find that the initial capital cost of reorganized considering both BEB drive range the EVs is higher, but the operational cost of and extended metro network. Overall, the daily energy and maintenance is lower than that of driving distances were shortened and more conventional fuel alternatives (Breetz and routes were reorganized to connect the Salon 2018; Wu et al. 2015). This chapter residents’ communities with metro stations. investigates the TCO of electric buses using For a TCO comparison of DB and BEB, we actual financial and operational data from the calculated years between 2016 and 2024 for SZBG. analysis to set the same lifetime and annual We estimated the TCO of bus operation, driving distance. The per kilometer energy and covering the capital cost, maintenance cost, maintenance costs of DB are based on earlier energy cost, taxes and fees, which occur over experience data. the lifetime of the BEB and DB. We also conducted a sensitivity analysis to analyze how much each of the variables investigated would affect the TCO results, including a Monte Carlo simulation to see combined effects by changes of multiple variables. Table 6-1 Basic setting of BEB and DB Diesel bus BEB Lifetime of ownership 8 years 8 years Annual driving distance 66,000 km 66,000 km 78 Total Cost of Ownership 6.2.1 Selection of Sample Buses This study selected the BYD K8 (CK6100LGEV2) to represent the BEB model because it represents 66 percent of SZBG’s fleet after their shift to full electrification. This study selected the Yutong 10.5-meter diesel bus (ZK6105HG1A) as the comparable diesel bus model. The Yutong diesel bus model was SZBG’s dominant model before electrification (table 6-2). Table 6-2 BEB and diesel bus model configurations Bus picture Vehicle Model CK6100LGEV2 ZK6105HG1A Propulsion fuel Electricity Diesel National VI standard Length (m) 10.490 10.500 Width (m) 2.500 2.500 Height (m) 3.150 3.050 Curb weight (kg) 11700 10300 Gross vehicle weight (kg) 18000 16500 Total maximum passengers or seats (including driver 87/32 95/32 a and passengers) Source: www.chinabus.com Note: Seat numbers of 87/32 mean 32 seats, with a total passenger capacity (including standing passengers) of 87. 6.2.2 Replacement Rate If a single BEB can accomplish the driving task of a DB, the replacement rate should be one. The earliest BEB models (BYD K9 and WZL A10) were only adopted on specific routes with a shorter distance and not able to fully replace diesel bus trips. The estimated replacement rate for regular routes was about 0.8 out of 1. SZBG’s existing BEB fleet, comprising mainly BYD K8s, is fully able to cover all the routes. Through SZBG’s refined management and operation, the existing BEBs can achieve a replacement rate of one, without the additional number of buses. Total Cost of Ownership 79 6.2.3 Bus TCO Model The TCO model reveals all the costs related to ownership and operation over the lifetime of a bus. The TCO equation 6-1 and equation 6-2 encapsulates our approach. Equation 6-1 Equation 6-2 Where: • TCO is the present value of the total cost of ownership for the ownership period • Cost capital is the purchase cost, which can be paid one time at procurement or financed over the lifetime of the bus, and includes procurement tax and registration fee • ResidualValue is the resell price or scrappage value of the bus at the end of the ownership period • Cost operation_t includes the insurance and fees, electricity or fuel cost and annual maintenance cost • r is the annual discount rate • T is the period of total ownership Additionally, the Chinese national and local governments provide purchase subsidies to promote BEB adoption. In this study, the subsidy is reflected in the capital cost by subtracting the allowance from the market price. The TCO model presented in this study only includes the direct costs associated with bus use and ownership. The indirect costs such as deliberate scheduling efforts for BEB operation and charging, labor costs of drivers, mechanists or technicians and refueling or recharging staff are excluded. 6.2.3.1 Capital Cost As a big corporate client, the SZBG receives bulk purchase and enterprise discounts. The price (table 6-3) may not represent the market price for individuals or smaller bus buyers. Additionally, the nation- al and local governments provided generous subsidies to bus manufacturers to promote the adoption of electric buses. The results are presented with and without subsidies. The subsidy for electric vehicles in China has been extended to 2022 (instead of ending in 2020) to alleviate the economic impacts of the COVID-19 pandemic on the automotive industry. However, the fiscal subsidy will phase out eventually, and where it does not exist in many other jurisdictions, the no-subsidy scenario is an essential reference for other cities. 80 Total Cost of Ownership Table 6-3 Bus price and subsidies Bulk procurement National Subsidy Shenzhen municipal contract price in 2016 in 2016 Subsidy in 2016 (thousand yuan) (thousand yuan) (thousand yuan) BYD-K8 1580 500 500 Yutong diesel bus 508 0 0 The SZBG substituted most of the diesel buses, 5528 of them, , with BEBs in only two and a half years during 2015–17. Procuring this large volume of BEBs put a tremendous financial burden on the company. The SZBG worked with the financial leasing company and developed a leasing plan to procure electric buses. The SZBG procured electric buses based on their demand and specification, and the financial leasing company paid for the BEBs to the manufacturers. With the leasing plan, the SZBG pays the lease quarterly to the financial leasing company with an annual interest of 4.16 percent over the eight-year lifetime of the buses. We simplified the calculation by applying for the annual payment at the end of each year to the financing leasing company and converted the annual payment to present value with the discount rate. The capital cost for diesel bus is assumed with the same financial plan and same interest and discount rate as of the electric buses. 6.2.3.2 Operation Cost Energy Cost The annual energy cost in each year is the cost of fuel or electricity consumption (equation 6-3). Equation 6-3 EE              energy_t is the energy efficiency of fuel or electricity consumption per kilometer. The diesel price has fluctuated in the past years. We used the average bulk purchase price of diesel at 5.09 yuan per liter. The energy cost of BEB consists of the price of electricity and charging service fee which varies based on the time of the day (table 6-4). SZBG’s average charging ratio at peak, normal and valley times was 12.5 percent, 24.1 percent, 63.4 percent respectively. Therefore, the weighted average price of 0.8576 yuan per kilowatt hour is used for our base calculation (table 6-5). With the variation of the electricity price of time of day and service fees, we set the range of energy cost of 0.6511 to 1.4476 yuan per kilowatt hour for the sensitivity analysis. Total Cost of Ownership 81 Table 6-4 Electricity Price Scheme Industry Electricity Service Fee Total Time of Day Hours Price (yuan/kWh) (yuan/kWh) (yuan/kWh) 9:00-11:30, 14:00- Peak 7 1.0516 0.396 1.4476 16:30, 19:00-21:00 7:00-9:00, 11:30-14:00, 9 Normal 0.6991 0.396 1.0951 16:30-19:00, 21:00-23:00 Valley 23:00-07:00 8 0.2551 0. 396 0. 6511 Table 6-5 Weighted average price of electricity and diesel Diesel (yuan/L) Electricity (yuan/kWh) 5.09 0.8576 Energy efficiency varies with buses running on routes that differ in speed, acceleration, the slope of the road, drivers’ driving habits, and other factors. The SZBG provides training and incentives for the bus drivers, encouraging them to improve the energy efficiency for both BEBs and diesel buses (table 6-6). BEB’s energy consumption data in year one to four are based on the actual statistics from the SZBG, and the later four years are estimated conservatively with a five percent annual growth rate—considering the deterioration of electric motor and the gradually replaced battery cells. Table 6-6 Diesel and electricity consumption efficiency Energy consumption Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 efficiency DB (L/100 km) 37 38 38 37 38 39 38 38 BEB (kWh/100 km) 94 92 98 104 109 114 120 126 82 Total Cost of Ownership Maintenance Cost transmission fluids refill, brake fluids refill as well as checking or replacing a variety of Over the eight years of a bus’s lifetime, diesel mechanical parts. buses undergo scheduled regular mainte- nance every 20,000 kilometers to check the Maintenance for BEVs is substantially lower status of the bus, repair or replace small parts, because of the simplicity of the technology. fill up fluids, check and replace tires if needed, The most essential parts are the electron- fix wear-outs and prevent further malfunction. ics—the battery, the electric motor, and the In the fourth year of operation, diesel buses electronic controllers or the 3e system—which receive overhaul maintenance to check the are included in the manufacturer’s warranty engine, chassis and bus body, and more contract over the entire operating period of the thorough check and repair. Based on SZBG’s bus. Technicians from the SZBG estimate that statistics, the average maintenance cost of a the regular maintenance cost has dropped diesel bus is 0.779 yuan per kilometer. from about 600 yuan per 1000 kilometers for diesel buses to 200 yuan per 1000 kilometers The electric engine and transmission compo- for BEBs. nents are far simpler in a BEB. Additionally, the BEB technology has improved since the SZBG adopted it in 2015, and as a result, the rate of Overhaul Maintenance malfunction dropped substantially. With greater confidence in their products, the BEB manu- Overhaul maintenance for the diesel buses is facturers provide lifetime warranty for BEBs’ scheduled at the end of the fourth year of each 3-e system. This has led to significantly lower bus’s operation. The process includes testing maintenance cost, labor cost, and on-campus and repairing the engine, air conditioner repairs compared to diesel buses. The mainte- compressors, and bus body. The tests also nance cost typically consists of tire replace- cover: the braking system, usually replace- ment cost, regular and advanced maintenance ment of the oil seal; the transmission system, costs. replacing the clutch and drive shaft; the electronic system, replacing the generator and lighting lines; the power system; and the Tire Replacement malfunctioning parts of the steering system, knuckle and booster. The overhaul mainte- The tire replacement cost for a diesel bus is nance costs for a diesel bus are approximately about 90 yuan per 1000 kilometers. Tire 160,000 yuan on average, about 30 percent of replacements for BEBs are slightly higher at the capital cost. 125 yuan per 1000 kilometers for two reasons. First, the total weight of the vehicle is higher The manufacturer provides a lifetime warranty than the diesel bus. Second, BEB’s have for the motor, battery, and electric control in-wheel electric motors playing a role in the systems for BEBs. The bus body also consists propulsion and braking process, which wear of aluminum alloy instead of steel that does down tires. As a result, the tire cost for the not need to be replaced over its lifetime. BEB is about 38.8 percent higher for the Therefore, BEBs do not require an overhaul SZBG. maintenance schedule. Based on data from the SZBG, for the first four years of operation, the maintenance cost of BEBs can be as low Regular Maintenance as 17 percent of the diesel bus’s maintenance During regular maintenance for diesel buses, a cost. However, the maintenance cost increas- maintenance crew performs a series of tasks es gradually in the next four years. Similar to including an oil change, tire rotation, the energy efficiency data, we adopted the Total Cost of Ownership 83 actual data of diesel buses and the first four over the agreed lifetime (eight years for years for BEBs (table 6-7), and made a heavy-duty buses and five years for medi- conservative estimation for BEBs in years 4–8 um-duty buses). The K8 models typically need with an increase rate of 20 percent. In the a battery change after 2-4 years of operation, sensitivity analysis, we adopted the 20 percent depending on the driving behavior, the route and 100 percent of DB’s maintenance cost as characteristics, and the battery energy density BEB’s maintenance cost as the boundary in of different batch of products. However, as the our Monte Carlo simulation analysis. manufactures take care of the battery change within the warranty, SZBG does not pay for For all the electric buses in SZBG, the bus them and battery cost is excluded from the manufactures take care of the three electrics maintenance cost analysis. (electric motor, electric controller and battery) Table 6-7 Maintenance cost for diesel buses and BEBs Maintenance Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Cost (yuan/1000 km) Diesel bus 318 476 502 2706 546 567 581 541 BEB 75 152 211 242 290 348 418 501 6.2.3.3 Operation Subsidies purchase tax and other taxes are waived for transit buses and for new energy vehicles Transit bus operation relies heavily on the (NEVs). SZBG still pays mandatory liability municipal government subsidy for its opera- insurance of vehicle traffic accident of 3,140 tion. The Shenzhen Municipal Transportation yuan, commercial vehicle insurance of 2,100 Commission (SMTC) provided SZBG 244,000 yuan every year and operation fees 804 yuan yuan per diesel bus per year of operation per bus. These taxes and fees are at the subsidy. SMTC provides 422,700 yuan per same rate for BEBs and diesel buses. BEB each year of operation with annual mileage of no less than 64,000 kilometers. The operation subsidies for both DB and BEB Discount Rate were used for overheads in SZBG. We The typical adopted discount rate in literature excluded the operation subsidies in our TCO lies between 1 and 15 percent. To represent analysis. the opportunity cost, we used the discount rate of three percent for the baseline analysis. We conducted a sensitivity analysis to 6.2.3.4 Other Costs and Variables estimate the TCO change with a discount rate Tax and Fees between 1 and 7 percent (table 6-8). With governmental incentive policies, the 84 Total Cost of Ownership Table 6-8 Variables and range adopted in TCO literature Vehicle Data and Region Discount Life year Annual Type Methodology Rate analyzed Distance 7% for Varied on (Breetz and PHEV,BEV, 14 states baseline, average VMT 5%, 10%, Salon, 2018) ICEV 15% for 5 (Vehicle Miles in the U.S. sensitivity Traveled) of Passenger the states analysis Vehicle Varied on Japan, UK, 3.5-4% for regions, (Palmer et PHEV,BEV, California, baseline, 2- range from 11% for al. 2018) ICEV and Texas sensitivity 3 6,213 to 15,641 analysis (U.S.) miles BEB with (Nurhadi, different Borén, and Scenario battery size Norway 1% 8 93,000 km Ny 2014) and charg- analysis Bus ing speed (Lajunen BEB, plug- California in hybrid bus, Simulation 4% None and Lipman, 12 CNG bus, (U.S.) and 2016) fuel-cell bus Finland 3% for BEB, diesel Real practice Shenzhen, baseline, Bus This study 1-7% for 8 66,000 km bus data China sensitivity analysis Residual Value After their lifetime, buses are phased out from the fleet. Typically, the residual value of a diesel bus and BEB is assumed as only worth five percent of the original purchase price. Total Cost of Ownership 85 6.2.4 TCO results Without purchase subsidy, the present value of lifetime total cost of BEB would be 2.17 million yuan, 21 percent higher than a diesel bus’s total cost of 1.80 million yuan. With government subsidy, the total cost of BEB would be 1.17 million yuan, 35 percent less than that of a diesel bus (table 6-9 and figure 6-1). Table 6-9 Present value of diesel bus and battery electric bus DB BEB BEB_subsidy Capital (k Yuan) 529.13 1645.73 604.13 Energy (k Yuan) 885.76 418.30 418.30 Maintenance (k Yuan) 357.74 123.01 123.01 Tax and fee (k Yuan) 42.11 42.11 42.11 Residual (k Yuan) -19.10 -59.39 -21.80 TCO Present value (k Yuan) 1795.64 2169.75 1165.74 TCO per kilometer (Yuan/km) 3.40 4.11 2.21 TCO/km to Diesel bus 100% 121% 65% Figure 6-1 Value of the composition of the bus costs 2500 2000 TCO (thousand yuan) Tax & Fees 1500 Maintenance 1000 Energy Capital 500 Residual 0 DB BEB BEB_subsidy -500 86 Total Cost of Ownership Table 6-10 TCO results compared with results from literature Studies Bus Setting Original Results Transformed Results Diesel bus 3.40 (¥/km) Electric bus with purchase This study, (¥/km) 2.21 subsidy, without charger 2020 Electric bus without purchase 4.11 (¥/km) subsidy, without charger Diesel bus 0.75 (€/mile) 9.34 (¥/km) Finland Electric bus without charger 0.95 (€/mile) 11.83 (¥/km) cycle Lajunen and Electric bus with charger 1.05 (€/mile) 13.07 (¥/km) Lipman, 2016 1.70 ($/mile) 19.04 (¥/km) Diesel bus USA_CA Electric bus without charger 2.10 ($/mile) 23.52 (¥/km) cycle Electric bus with charger 2.30 ($/mile) 25.76 (¥/km) Electric bus 1 extra battery 8.44 (SKr/km) 11.56 (¥/km) Nurhadi et al., and 1 normal charger 2014 Hybrid bus 11.23 (SKr/km) 15.39 (¥/km) Note: Different currencies represented reflect the region of the referenced studies: €- Euro; $ - USD; SKr – Swedish Kroner; ¥ - yuan. We compared results of Shenzhen case with other TCO results of BEB operations in Sweden, and simulated TCO with the road cycles in Finland and California (table 6-10). Our results are lower than other research results, mainly because of lower BEB prices, lower maintenance cost and exclusion of battery replacement cost in this study. The lower TCO results for DB were mainly brought by the much lower capital cost of DB in China (83,000 USD in our case) than those in the US (300,000 USD) and the EU (225,000 USD) in the literature. Total Cost of Ownership 87 Figure 6-2 TCO results by year 400 350 300 Residual Cost (1000 yuan) 250 Tax and Fee 200 Maintenance 150 Energy 100 Capital 50 0 a b c a b c a b c a b c a b c a b c a b c a b c -50 -100 1 2 3 4 5 6 7 8 Year a. BEB cost without subsidy b. BEB cost with subsidy c. DB cost Sensitivity Analysis Sensitivity analysis helps diagnose the most important variables that affect the results of the TCO analysis. The tornado plots are used to present the results of the variables affecting the TCO of DB and BEB without subsidy. Figure 6-3 Variables that affect the diesel bus TCO per kilometer Lifetime (6,15) -24.2%, 2.58 24.9%, 4.25 Annual Distance (50k, 100k) -10.5%, 3.05 9.8%, 3.74 Discount Rate (1%, 7%) -8.3%. 3.12 10.9%, 3.77 DB Price (土 10%) -2.8%, 3.30 2.8%, 3.50 Diesel Price (Yuan/liter) (土 10%) -4.9%, 3.23 4.9%, 3.57 2.20 2.70 3.20 3.70 4.20 4.70 Cost per km (Yuan) Hign End Low End 88 Total Cost of Ownership The increase of lifetime, annual driving 100,000 kilometers will decrease the TCO per distance and discount rate reduces the per kilometer to 3.05 yuan, and a shorter annual kilometer cost of the diesel bus operation by distance of 50,000 kilometers will increase more than ten percent. A ten percent increase the TCO per kilometer to 3.74 yuan. The in the bus price or diesel price will increase discount rate of one percent results in a unit the unit cost by less than five percent. TCO TCO result of 3.77 yuan, and a seven percent per kilometer changes most significantly with discount rate reduces the TCO to 3.12 yuan different bus operation lifetimes. If the bus’s per kilometer. A ten percent increase in diesel lifetime decreases from eight to six years, price will result in a TCO per kilometer to 3.57 TCO per kilometer will increase 24.9 percent yuan, while a ten percent decrease in the to 4.25 yuan; if the lifetime extends to fifteen diesel bus price will bring the TCO per years, TCO per kilometer will decrease 24.2 kilometer to 3.50 yuan. That happens percent to 2.58 yuan. The increase of annual because the energy cost constitutes 49.3 driving distance reduces the share of capital percent of TCO, much higher than that of costs per unit mileage. As a result, an capital cost at 29.5 percent (figure 6-3). increase in the annual operating distance to Figure 6-4 Variables that affect BEBs TCO per kilometer without subsidy Lifetime (6,15) -52.0%, 1.97 51.6%, 6.23 Annual Distance (50k, 100k) -25.5%, 3.06 24.0%, 5.10 Discount Rate (1%, 7%) -8.3%. 3.77 10.9%, 4.56 Electricity Price (yuan/kwh) (土 10%) -1.9%, 4.03 1.9%, 4.19 BEB price (土 10%) -7.3%, 3.81 7.3%, 4.41 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Cost per km (Yuan) Hign End Low End The BEB’s TCO per kilometer results mirror decreasing by 52 percent to 1.97 yuan. similar diesel bus costs with fluctuations in the Extending the annual driving distance to variables. An increase in the bus prices and 100,000 kilometers would bring down the cost electricity raises the TCO per kilometer, and an per kilometer by 25.5 percent to 3.06 yuan. A increase in the operating lifetime, annual ten percent increase of the bus price would driving distance and discount rate decrease result in a 7.3 percent increase in the unit cost. the TCO per kilometer. If the operating lifetime With a discount rate of one percent, the cost decreases from eight years to six years, the per kilometer would decrease by 8.3 percent. A BEB TCO per kilometer increases from 4.11 to ten percent variation of the electricity cost 6.23 yuan. Extending the lifetime to fifteen would result in a 1.9 percent in the per kilome- years would result in the cost per kilometer ter cost (figure 6-4). Total Cost of Ownership 89 Uncertainty Analysis distribution represents that the variable has an equal likelihood in our assumed range. We employed a Monte Carlo simulation to Adopting these two types of distributions, we illustrate our uncertainty analysis to reveal the made assumptions for the distribution of the range of TCOs for the diesel bus and BEB variables based on our analysis in the base (table 6-11). The triangular distribution is a case. By making simulations based on the simplified representation of normal distribu- variable distribution and our TCO model, we tion, which sets the base as the highest can derive the distribution of our TCO results probability, and together with the minimum (figure 6-5). and maximum numbers, determines the shape of the variable distribution. The uniform Table 6-11 Monte Carlo distribution settings for diesel bus and BEB Minimum Base Maximum Distribution Diesel price (yuan/L) 4.0 5.09 6.0 Triangular Electricity price (yuan/kWh) 0.65 0.86 1.45 Triangular Annual mileage (1000 km) 50 66 100 Triangular Discount Rate 1% 4.16% 7% Uniform Lifetime (year) 6 8 12 Triangular Fuel Efficiency (L/100 km) 34 37.9 42 Triangular Energy Efficiency (kWh/100 km) 80 107 120 Triangular Maintenance BEB or Diesel bus 20% 36% 100% Triangular The diesel bus TCO distribution sits between analysis. With a longer annual distance and the BEB TCO with and without subsidy, which longer operation lifetime (on the right side of echoes the results in the baseline analysis. the curves), a high probability indicates that The total cost of a diesel bus is between 1.12 BEB even without subsidy would have and 3.15 million yuan, the cost of a BEB is comparable or lower TCO than that of diesel between 0.75 and 2.30 million yuan with the buses. subsidy and between 1.75 and 3.30 million The total driving distance contributes to the yuan without the subsidy. wider distribution of the diesel bus’s TCO, The energy cost and maintenance cost of the while in the per kilometer analysis, the diesel bus comprise 49 percent and 20 variation in the total driving distance cancels percent of its TCO respectively, and the total out in the differences of the unit cost. As a distance of the bus operation over its lifetime result, per kilometer costs for the diesel bus varies accordingly with our lifetime assump- have lower variation compared to the total tions, annual driving distance, and diesel cost, but augment the fluctuations in diesel price. As a result, the TCO of the diesel bus price, discount rates, and other variables has a wider distribution in our Monte Carlo (figure 6-6). 90 Total Cost of Ownership In BEB per kilometer costs, the TCO is significantly affected by assumptions regarding driving distanc- es. As a result, the per kilometer cost of BEBs without subsidy has greater variation than those observed in the total cost. However, the Monte Carlo projection results indicate a high probability that the unit cost of BEBs without subsidy would be comparable or lower than that of the DBs. Figure 6-5 Total cost distribution BEB Total Probability Density DB Total BEB nS Total 1000 1500 2000 2500 3000 Total Cost (1000 Yuan) Note: Diesel bus total refers to its TCO, BEB total refers to its TCO with subsidy, BEB nS total refers to its TCO without subsidy. Figure 6-6 Unit cost distribution BEB Total Probability Density DB Total BEB nS Total 2 3 4 5 Total Cost per km (Yuan) 6 Note: Diesel bus total refers to its TCO per kilometer, BEB total refers to its TCO per kilometer with subsidy, BEB nS total refers to its TCO per kilometer without subsidy. 1 Total Cost of Ownership 91 6.3 Charging charging station requires significant power grid infrastructure upgrades to increase its capaci- Infrastructure TCO ty. Over the period 2016–18, safety require- ments of transformers became significantly more intense, which consequently increased construction costs. Previously, the charging Before the electrification of their bus fleet, the station company could employ a simple SZBG owned two gas stations with several container-type transformer that was flexible vehicles to provide fuel for their diesel buses. and had no requirements for housing. Howev- The SZBG also hired specialized staff to fuel er, newer rules require transformers to be the fleet. The charging service providers bear properly housed, necessitating both land the cost of the construction and operation of ownership, and concrete and permanent the charging station with qualified staff, and constructed facilities. the bus company pays only the electricity cost and service fees associated with charging for The main stakeholders in the charging BEBs. One hundred and four charging stations business in Shenzhen comprise utility compa- with a total of 1,707 charging terminals were nies, charging station manufacturers, charging built to serve the BEB fleet by the end of 2018. service providers, and landowners. Our study used data from the SWT—a charging service Our study estimates the total cost from the provider and charger manufacturer—thereby perspective of the charging station owner. The facilitating relatively lower costs for stations’ total cost comprises costs of construction of initial investment and maintenance (figure 6-7). the charging station, the high- and low-voltage lines and devices for transmitting electricity to the charging station, the cost of chargers, land rental, operation of the charging station, and the residual value of the charging station after its service life. The revenues of the charging station owners come from the service fee that the SZBG pays. Many factors affect the size of charging stations, such as land availability, charging demand at different locations, speed of charging terminals, and grid capability. Our study assumed a typical charging station to contain 20 charge terminals rated at 150 kilowatts and 40 bus parking spots. A BYD K8 electric bus can be fully charged over two hours at a rate of 150 kilowatts. The buses charge during off-peak hours in Shenzhen between 2300 and 0500 hours, and we assumed the serving capacity of the charging station to be 60 buses every day. Access to land has become increasingly challenging in Shenzhen because of a combi- nation of lack of available land and electricity capacity in the distribution grid. Any new 92 Total Cost of Ownership Figure 6-7 Liuyue charging station operated by Winline a. (upper-left) BEB at charging dock; b.(upper right) Charging operated by professional charging staff wearing protective glove; c. (bottom) BEBs line up in charging station docks. 6.3.1 Infrastructure TCO model Estimates of the TCO of the charging station included initial capital cost, operation cost, and residual value (equations 6-4 to 6-6). Equation 6-4 Equation 6-5 Total Cost of Ownership 93 In year t, Equation 6-6 6.3.2 Initial Investment 6.3.2.1 Construction and Grid Connection Existing bus parking lots could be transformed into a charging lot simply by installing the chargers. A newly constructed charging station would include the construction of the pavement, office, and chargers. Advanced structures like a roof could be built to protect the buses from rain. A solar roof was constructed in some stations to charge the buses with clean electricity. In the case of a sample charging station with 40 bus parking spots within 10,000 square meters in area, 300 square meters were allocated to the charging facilities and related building. Twenty 150 kilowatts DC fast charging terminals with 40 charging plugs were installed. The construction costs included high voltage cable and equipment, low voltage cable and hardware, charging terminals, safeguard and fire prevention devices, and other miscellaneous civil works construction expenses (table 6-12). Table 6-12 Cost structure of a charging station construction Expenses (million yuan) High-voltage cable and equipment 2.18 Low-voltage cable and equipment 1.59 Charging terminals 1.62 Safeguard and fire prevention devices 0.19 Construction expenses 2.10 Total 7.68 94 Total Cost of Ownership Often, the high voltage and electricity more bus parking lots had to be built, demands of the charging station exceed the equipped with charging facilities to meet the capacity of the existing regional grid. The local demand. Typically, for each bus, an area of 12 grid company must upgrade the distribution meters multiplied by 3.5 meters is allocated, network and transformers to accommodate the and they are spaced 0.5–0.7 meters from charging stations. In some cities, this service is each other. The charging service providers a significant cost and constitutes a significant and bus companies worked hard to expand portion of the total cost (Xiong, Zhang,et al. . parking and charging facilities. Some of the n.d.). In Shenzhen, the grid company parking lots and charging stations only have upgrades the network, and the charging temporary land-use permits by leasing instead service providers pay for the costs. of ownership of lands, which leads to higher risks of operation if lands were to be withdrawn by owners for other purposes. 6.3.2.2 Charging Terminals The average monthly land rent in 2016 varied between 10–100 yuan per square meter based The cost of charging terminals has been on their locations. Our study assumes a base steadily decreasing over time from about 750 rate of 30 yuan per square meter. In this case, yuan per kilowatt in 2016 to 450 yuan per twenty 150 kilowatts charging terminals and kilowatt in 2019. Since most of the charging related housing are estimated to occupy about terminals were constructed in 2016 and 2017, 300 square meters land, for which the we assume the average cost of charging charging service provider absorbs the cost of terminals is approximately 700 yuan per rent. kilowatt. 6.3.3.2 Labor 6.3.2.3 Municipal Subsidy Unlike private electric passenger vehicles, The municipal government provides a subsidy charging is not performed by the driver but for the construction of charging stations. The rather by specialized electricians at the bus municipal government provided a subsidy of charging stations to minimize safety risks. On 300 yuan per kilowatt for DC fast-charging average at Winline Technology, the labor stations in 2016, and increased it to 600 yuan allocation is approximately one-seventh to per kilowatt based on the total power of the one-tenth electrician per charging terminal, charging station in 2017 and thereafter. working three shifts per day, and amounted to four staff members with an annual labor cost of about 288,000 yuan. 6.3.3 Operation Cost 6.3.3.3 Repair and Maintenance 6.3.3.1 Land Rental During our interviews, it was revealed that the Historically, SZBG experienced a shortage of repair and maintenance costs were about bus parking lots. Before full electrification, 3,000 yuan per charging terminal every year. about half of the diesel buses parked on the The repair and maintenance costs for 20 streets during nighttime. However, BEB charging terminals in this case would approxi- require parking spaces to be built to accom- mate to 60,000 yuan annually. modate charging during nighttime. Therefore, Total Cost of Ownership 95 6.3.4 Lifetime and Residual maintenance. The residual value of the assets at year eight is estimated at 50 percent of the value original capital cost. Factors that affect the lifetime of the charging stations include the availability of land, the 6.3.5 TCO Results length of time to construct the charging station, and the lifetime of cables, devices, and chargers. In Shenzhen, the most The total cost of a charging station with 20 challenging issue affecting the lifetime of the charging terminals of 150 kilowatts is 7.32 charging station is land availability. million yuan at a 4.16 percent discount rate. The cost of cables, initial construction, and Typically, the designed life of a charger is labor costs are the largest three contributors eight to ten years. Our study assumed that the to the total cost, followed by the cost of the charging station has permanent land availabil- charging terminals, land rental, maintenance ity, and that the lifetime of charging terminals and supporting devices (figure 6-8). The is eight years. It is to be expected that after subsidy from the government canceled the eight years of operation, the cost and the charging terminal cost, which relieved the technical configuration of the charging termi- burden for the investors at the initial stages. nals could also change substantially on Distributing the total costs over the 60 buses it account of technology evolution, and that the services, the value of charging terminal cost is charging terminal devices would be replaced 122,000 yuan per bus. with zero residual value. But the cables or tunnels and transformers have a design life of about thirty years with appropriate Figure 6-8 Value of charging station cost components in 2019 4000 Cable Charging Station Components Costs 3000 (thousand yuan) 2000 Construction Land 1000 Rental Supporting Device Terminal Subsidy 0 Labor Terminal Maintenance -1000 Cable Residual -2000 96 Total Cost of Ownership Figure 6-9 Yearly and cumulative costs and revenues for each bus charging Annual and Cumulative Cost and Revenue ( thousand yuan) 230 180 Cumulative Total Cost 130 Cumulative Total Revenue 80 30 -20 1 2 3 4 5 6 7 8 Year Cost Revenue As noted, the charging station operator can get about 58 percent revenue return over eight years when comparing the present value of service fee per bus over eight years of 193,000 yuan. It would take six years to get back the original investment in our assumption of each charging terminal serving only three buses a day (figure 6-9).The payback period could shorten to four or five years taking the cable’s residual value into account. Total Cost of Ownership 97 6.4 Discussion As a result, the annual driving distance is envisaged to decrease further for urban buses. From our analysis, a longer driving distance could improve the cost efficiency of BEBs, and In Shenzhen’s massive replacement of the we would recommend that the bus companies BEB process, government incentives and the extend the lifetime of the buses and extend the manufacturer’s full lifetime warranty played a warranty with the BEB manufactures to significant role in making BEB’s TCO lower capture more benefits from BEBs. than the diesel fleet for the bus operating The charging service providers invest heavily company. The development and evolvement of on the charging infrastructure. With the BEB technology made it possible to replace government subsidy at the early stage, the diesel bus with one-to-one ratio. With the charging service providers would need four to technology development and massive produc- five years, on average, to get returns on their tion, the TCO of BEB will drop steadily in the investment. The charging stations at bus following years, making it more comparable parking lots serve only BEBs. However, with with the TCO of a diesel bus. better operation arrangements, the bus Lower energy costs and lower maintenance charging stations can provide charging costs could save the transit bus operation services to electric taxies, electric logistic company a great amount of money through the vehicles and private EVs when a vacancy operation years of BEBs. With the passenger arises, to increase profits from service fees. trips shifting from bus to metro service, bus Land availability for charging stations remains routes get modified from longer commuting as one of the key issues in Shenzhen and routes to shorter ones, serving more as feeder requires the careful planning and implementa- lines connecting the metro stations with tion of land use for urban areas. business centers and residential communities. 98 Total Cost of Ownership References 1 Breetz, Hanna L., and Deborah Salon. 2018. “Do Electric Vehicles Need Subsidies? Ownership Costs for Conventional, Hybrid, and Electric Vehicles in 14 U.S. Cities.” Energy Policy 120 (September): 238–49. https://doi.org/10.1016/j.enpol.2018.05.038 2 Lajunen, Antti, and Timothy Lipman. 2016. “Lifecycle Cost Assessment and Carbon Dioxide Emissions of Diesel, Natural Gas, Hybrid Electric, Fuel Cell Hybrid and Electric Transit Buses.” Energy 106 (July): 329–42. https://doi.org/10.1016/j.energy.2016.03.075 3 Nurhadi, Lisiana, Sven Borén, and Henrik Ny. 2014. “A Sensitivity Analysis of Total Cost of Ownership for Electric Public Bus Transport Systems in Swedish Medium Sized Cities.” Transportation Research Procedia, 17th Meeting of the EURO Working Group on Transportation, EWGT2014, 2-4 July 2014, Sevilla, Spain, 3 (January): 818–27. https://doi.org/10.1016/j.trpro.2014.10.058 4 Palmer, Kate, James E. Tate, Zia Wadud, and John Nellthorp. 2018. “Total Cost of Ownership and Market Share for Hybrid and Electric Vehicles in the UK, US and Japan.” Applied Energy 209 (January): 108–19. https://- doi.org/10.1016/j.apenergy.2017.10.089. 5 Wu, Geng, Alessandro Inderbitzin, and Catharina Bening. 2015. “Total Cost of Ownership of Electric Vehicles Compared to Conventional Vehicles: A Probabi- listic Analysis and Projection across Market Segments.” Energy Policy 80 (May): 196–214. https://- doi.org/10.1016/j.enpol.2015.02.004. 6 Xiong, Y., Zhang, Y., et al. n.d. Analysis on Develop- ing a Healthy Charging Service Market for EVs in China. Retrieved October 23, 2019, from http://nrdc.cn/informa- tion/informationinfo?id=204&cook=1 Total Cost of Ownership 99 Chapter 7 Environmental Impacts • The life cycle GHG emission of an electric bus accounted about 52% of the emission from similar diesel bus in Shenzhen • The lifetime GHG emission reduction of one 10.5m bus before and after electrifi- cation could reach to 274 tons CO 2 • After electrification, SBG achieved the annual GHG emission reduction about 194,000 tons CO 2 from their electric bus fleet • Cleaner power grid can generate more reduction benefits of bus electrification Powered by electricity, electric buses are generally considered to produce fewer emis- 7.1 Methods sions that contribute to climate change and local air pollution than diesel buses. However, the exact amount of these emissions depends 7.1.1 GHG Emission and on multiple factors including driving condition, charging behavior, and electricity mix that vary Pollutant Emission of BEBs by geographic location. Our study conducted an environment analysis to complement our TCO analysis (chapter 5) to have a compre- Studies have shown that the operation or use hensive view of socio-economic benefits of phase of ICEVs accounts for approximately deploying an electric bus fleet in Shenzhen. In 83–95 percent of the total life cycle GHG this study, the selected sample vehicles for emissions. (Sims et al. 2014; Ambrose and electric and diesel bus are the same as used Kendall 2016; Archsmith et al. 2015; Norton in our TCO analysis—namely BYD K8 and and Bass 1987; Ying et al. 2018). The tailpipe Yutong 10.5-meter diesel bus. emission is zero in EVs because they use electric power rather than gasoline or diesel as their energy. This shifts a greater portion of life cycle emissions to non-operation stages, that is vehicle production phase and electricity generation stage. In addition, studies show that charging EVs on different grids (Zhou et al. 2010) and different patterns of charging (Hawkins et al. 2013) can significantly alter the GHG intensity of EV operation, and present new challenges in calculating GHG emissions for electric vehicles. The charging time and location are regulated for BEBs operated in Shenzhen, which is usually full charging at night at the depot, plus one quick charging during the daytime if needed. A typical full life cycle assessment (figure 7-1) of EV incorpo- rates vehicle and battery production phase, electricity generation, use phase, and end of life (Dér et al. 2018). In this study emissions from the end-of-life stage are excluded because of data unavailability, and because they are considered minor in comparison to production and use phase emissions. In terms of vehicle production phase, production emissions of bus body, chassis, and power- train of both the electric and diesel bus are similar if the same size and materials are used (Nordelöf et al. 2019). The differences in emissions from vehicle production are mainly from the emissions from battery production for the electric bus, which are estimated in this report. Environmental Impacts 101 Figure 7-1 Description of comparative life cycle assessment in this study Vehicle Production Chassis Production Electric Bus Diesel Bus Use Phase Body Production Use Phase (electric or conventional) Powertrain Production Electricity Production Battery Production Diesel Production Electricity Mix Background System Spatial Context Local Conditions Diesel Type 102 Environmental Impacts 7.1.1.1 GHG Emission from Battery Production Emissions from battery production take a large share of the life cycle carbon dioxide emission of EVs. A recent study by China Automotive Technology and Research Center Company (CATARC 2018) details the carbon dioxide emission of top-selling EVs in China, including the production of batteries and other body parts, and EV use-phase emissions or electricity generation (figure 7-2). Figure 7-2 Average emissions rates across 2018 PEV models in China Geely 2018 EV450 76.1 36.6 162.3 Tesla Model 3 36.6 35.7 304 SAIC Ei5 2018 45 35.5 145.5 ChangeAn 2018EV 260 35.3 22.7 144 0 50 100 150 200 250 300 350 400 g CO2 e/km Battery Production Other Parts Production Fuel Production Note: Statistics include production of battery, other body parts, and fuel. Compared to electric passenger vehicles, BEBs have a much larger battery pack and therefore larger battery capacity that would generate more emissions in the battery production phase, including material extraction, cell assembly, packaging, and other part production. EV battery manufacturing emissions have been studied extensively (Ambrose and Kendall 2016; Messagie 2016; Han et al. 2017; Romare and Dahllöf 2017; Wolfram and Weidmann 2017; Dunn et al. 2016) and result in a wide range of estimates. As many of these studies show, the largest share of carbon emissions in battery production comes from the mining and production of raw materials. Table 7-1 compares studies since 2016 analyzing the emissions related to EV battery production using China’s grid, except for the study (Ambrose and Kendall 2016) which uses Japan’s grid. These studies vary in scope and methodology and provide a range of values for greenhouse gas emissions attributable to battery production. Considering the rapid development of lithium-ion battery industry and the local power mix, this study uses battery production emission factor from the CATARC report (CATARC 2018), generated from market research in China. Environmental Impacts 103 Table 7-1 Studies on EV battery production GHG emission Emission for battery Authors Year Battery type production (kg CO2 e/kWh) 127 LiFePO 4 Hao et al. 2017 97 LiNiCoMn 104 LiMn 2 O4 30–270, average 161 LiFePO 4 Romare and Dalhoff 2017 30–270, average 161 LiNiCoMn 50–75, average 55 LiMn 2 O4 248–258, likeliest 254 LiFePO 4 Ambrose and Kendal 2016 246–257, likeliest 252 LiNiCoMn 207 China market average CATARC 2018 85 LiFePO 4 7.1.1.2 Emission from electricity generation The estimation of carbon emission and other pollutants of electricity generation is complex, and varies in methodology, data and the grid mix from different energy sources. Our study calculated the emission factor using the following variables (equation 7-1). Equation 7-1 Where: • Pi is the annual emission of pollutant i from electricity generation • y is the category of energy in the study area • M is the set of electricity source in the study area • Ai, y is the percentage of energy y used for electricity generation in the study area • Qe is the electricity consumption of electric bus (kWh/100 km) • charge is the charging efficiency • T&D s the rate of energy loss during the transmission and distribution process • i, y is the emission factor for pollutant i from use of energy source y. 104 Environmental Impacts 7.1.2 GHG Emission and Our study conducted an on-site survey at the SZBG headquarters in June 2019 and used Pollutant Emission of Diesel the COPERT model to calculate diesel bus Bus emissions with the following considerations: • Our parameters of diesel buses were collected from desktop research because the 7.1.2.1 Emissions from bus driving unavailability of data for diesel buses that the The most widely used research methods SZBG used before bus electrification. include simulation modeling, bench testing, • Most tailpipe emission standards in tunnel experiment, and vehicle testing for China refer to the European standard system ICEVs to account for diesel bus emissions (Zhou et al. 2010; Tian et al. 2016; Sjodin and (Tian et al. 2016; Sjodin and Andreasson Andreasson 2000; Xie et al. 2006; Ma et al. 2000; Xie et al. 2006). In this study, we 2008; Niu 2011; Zhang et al. 2011; Athanasi- selected simulation modeling as the method adis et al. 2009), and it is reasonable to for calculating emissions in diesel buses. The assume that the Chinese standard, National simulation model can be roughly categorized IV, approximates to the European standard in two types based on driving condition or on Euro IV. average speed (Ma et al. 2008; Niu 2011; Zhang et al. 2011). • The diesel bus has a maximum load of 15 tons and complies with the National IV Our study uses an average speed model, the emission standard. The average driving speed COPERT model, to calculate the vehicular is 20 kilometers per hour on urban roads. emissions of diesel buses. The COPERT According to National Diesel Standard for model originated from a vehicle-emission vehicle use, the sulfur content of diesel is factor study carried out by the European 0.005 percent. Economic Area (EEA). Most countries of the European Union (EU) use the COPERT model • Based on information from the to calculate vehicular emissions, and the Shenzhen Meteorological Bureau, the Intergovernmental Panel on Climate Change average maximum temperature in the city in (IPCC) also adopted the COPERT model in its the past five years is 34.58°C while the lowest guidelines revised in 2006 (Athanasiadis et al. average is 6.02°C, and the average relative 2009; O’Driscoll et al. 2016). Engine technolo- humidity is 72.2 percent. gy and actual operating conditions in China Vehicle emissions considered in this model are comparable to those in Europe, and the comprised three parts: emissions during tailpipe emission standards in China are also stabilized (hot) engine operation, emissions formulated with reference to standards in during cold start, and fuel evaporation emis- Europe (CAERCT. U. 2014; Fan et al. 2015; sions. Therefore, the calculation model of Can and Xie 2010). Thus, it is widely accepted emissions of a diesel bus per 100 kilometers that COPERT model is more applicable to can be expressed (equation 7-2). situations in China, compared to other models like MOBILE model (Xie et al. 2006; Fan et al. 2015; Can and Xie 2010). In addition, the COPERT model requires relatively fewer input parameters, and can calculate multiple types of pollutants at the same time. Therefore, this study uses a modified COPERT model to calculate the tailpipe emissions of diesel buses. Environmental Impacts 105 Equation 7-2 Where: • Eoperation, i is the total emission of pollutant i from diesel bus during its running of 100 kilometers • Ehot, i is the hot emission per 100 kilometers of pollutant i • Ecold, i is the cold-start emission per 100 kilometers of pollutant i • Eeva, i is the fuel evaporation emission per 100 kilometers of pollutant i • i = 1, 2, 3, 4, 5, 6, 7 represents categories of pollutants, namely CO, NOX, VOC, PM2.5, PM10, CO2 and SO2. Our calculations did not include cold start and fuel evaporation emissions because of their small values compared to hot emissions. 7.1.2.2 GHG Emissions from Diesel Production Our calculations considered emissions from diesel fuel production of well-to-tank for the diesel bus to ensure emissions were comparable with the electric bus for which emissions from electricity genera- tion are included (table 7-2). Table 7-2 Emissions from the production of diesel used in transportation Fuel CO2 e (g/MJ) Region and Year Diesel MK 1 9.25-9.34 Sweden, 2011 Diesel EN 590 9.37-9.44 Sweden, 2011 Diesel 12.4 Spain, 2009 Diesel 9-24 Europe, 2012 Diesel EN590 14.2 Europe, 2010 Diesel 15.9 Europe, 2011 Diesel 14-17 International, 2004 The oil refinery is a complex process which involves several steps such as distillation, vacuum distillation, or steam reforming to produce a large variety of oil products such as diesel and petrol. Several studies have calculated the GHG emissions for variety of fuels, such as diesel, petrol, bitumen, and liquefied petroleum gas (LPG) (Ahlvik and Eriksson 2011; López et al. 2009; Baptista et al. 2010; Edwards et al. 2007; Lambert et al. 2012; Wang et al. 2004). 106 Environmental Impacts In this study, GHG emissions from diesel production take the medium value of the three European studies listed in table 6-2 (Baptista et al. 2010; Ahlvik and Eriksson 2011; Lambert et al. 2012), which is 15.8 carbon dioxide equivalent grams per megajoule. 7.1.3 Emission Reduction from Electric Bus Compared to Diesel Bus We calculated the emission saving per 100 kilometers after the deployment of an electric bus over a diesel bus (equation 7-3). Equation 7-3 7.2 Emission Results 7.2.1 Emission Calculation for an Electric Bus 7.2.1.1 Emissions from Battery Production The battery capacity for BYD K8 bus is 291.6 kilowatt-hour (kWh). According to CATARC’s market research in 2017–18 (CATARC 2018), the average carbon dioxide equivalent emission of battery production of LiFePO4 is 85 kilograms carbon dioxide equivalent per kilowatt-hour (CO2eq /kWh), which is the type of battery used in BYD K8. Thus, the amount of carbon dioxide equivalent emission from battery production is 24.786 tons. Batteries will be replaced every four years on average; thus, an electric bus’s eight-year life cycle will use two brand new battery packages, increasing the total emissions from battery production to 49.572 tons carbon dioxide equivalent. Considering that the total mileage run by an electric bus is about 8 times 66,000 kilometers and equal to 528,000 kilometers, the average emission from battery production per 100 kilometers is about 9.39 kilograms of carbon dioxide equivalent. 7.2.1.2 Emissions from Electricity Generation According to the 2019 Annual Report of China Electricity Industry Development (China Electricity Council 2019), the major pollutants from electricity generation include nitrogen oxide, carbon dioxide, and sulfur dioxide (NOX, CO2, and SO2) which come from coal-fired power plants. Figure 7-3 shows the share of energy source in electricity generation of China Southern Grid. Environmental Impacts 107 Figure 7-3 Energy source for electricity generation by China Southern Grid (2018) 4.15% 9.51% 49.03% 37.04% Coal Fire Hydro Nuclear Wind and Other Table 7-3 Emission factors from electricity generation (g/kWh), 2018 Emission Factor for Emission Factor for Pollutant Coal-based Power Plant* China Southern Grid NOx 0.19 0.093 CO2 841.00 412.342 SO 2 0.2 0.098 * Data source：2019 Annual Report of China Electricity Industry The average electricity consumption of an electric bus per 100 kilometers (that is,) is 100 kilowatt-hour for the SZBG. According to the statistics provided by the SZBG, electricity loss during charging can be controlled within 8 percent, which means that is 92 percent. The comprehensive line loss rate of China Southern Power grid is 6.31 percent from 2018 data (China Power Industry Annual Development Report 2019). Emissions from clean energy, such as hydropower, wind, and nuclear, are relatively low, and therefore not included inTable 7-4. The table shows the emissions from electric- ity generation, but excludes emissions that occur further upstream for instance, coal production. 108 Environmental Impacts Table 7-4 Emission of an electric bus from electricity consumption (g/100km) Pollutant Coal-fire Hydro power Nuclear power Wind Total Pollutant NOx 10.81 0 0 0 10.81 CO2 47838.42 0 0 0 47838.42 SO 2 11.38 0 0 0 11.38 The resulting GHG emissions of electric bus per 100 kilometers are calculated as in table 7-5. Table 7-5 GHG emission of an electric bus (g/100 km) Use phase Electricity Battery Total GHG Pollutant emission production production emission CO 2eq 0 47838.42 9388.64 57227.06 Note: Calculations included emissions from battery production, fuel production and vehicle- use phase. 7.2.2 Emission Calculation of Diesel Bus 7.2.2.1 Emissions from Diesel Production With the assumption that the energy density for diesel is 37.3 megajoules per liter, the GHG emission factor from the diesel production phase can be calculated as 589.34 carbon dioxide equivalent grams per liter (table 7-2). Data from the SZBG reporting indicate that the diesel consumption for buses is 40 liters per 100 kilometers (table 7-6). Table 7-6 GHG emission from diesel production for one diesel bus per 100 kilometers Diesel consumption Emission from diesel Pollutant Emission factor (g/L) per 100 km (L) production (g/100 km) CO 2eq 589.34 40 23573.60 Environmental Impacts 109 7.2.2.2 Emissions from bus driving Our study obtained emission factors for diesel buses and emissions for major pollutants for one diesel bus per 100 kilometers after inserting the value of parameters into the COPERT model (table 7-7). Table 7-7 Emission of a diesel bus when in operation Emissions for a diesel Pollutant Emission factor a (g/km) bus (g/100 km) CO 1.168 116.80 NOx 5.680 568.00 VOC 0.058 5.80 b PM 2.5 0.045 for PM 11.00 PM 10 0.045 for PM b 17.64 CO 2 855.295 85529.50 SO 2 0.025 2.50 Note: a. calculation from COPERT model b. PM in COPERT model is classified as PM2.5 and PM10 GHG emissions of one diesel bus per 100 kilometers, including the emissions from fuel production phase and use phase are shown in Table 7-8. Table 7-8 GHG emission of one diesel bus (g/100km) Pollutant Use phase emission Diesel production Total GHG emission (g/100km) CO 2eq 85529.50 23573.60 109,103.10 Note: Emissions from well-to-tank diesel production, and tank-to-wheel use-phase emission included 110 Environmental Impacts 7.3 Comparison of Results 7.3.1 GHG Emission Reduction of Electric Buses We conducted a comprehensive comparison for GHG emission with data on carbon dioxide equiva- lent emission from diesel production and lithium-ion battery production (table 7-9). During the use phase, a diesel bus generates 85.5 kilograms of GHG emission per 100 kilometers while the electric bus is emission free on the road. However, the GHG emissions of an electric bus appears earlier in the production stages, in electricity generation and battery production. The results show that the average GHG emission per 100 kilometers of an electric bus is slightly more than half of the emission from a diesel bus and the emission reduction is about 51.9 kilograms of carbon dioxide per 100 kilometers. Table 7-9 GHG emission per 100 kilometers of one diesel and one electric bus (gCO 2eq ) Emission reduction after bus Stage Diesel Electric bus electrification (gCO2eq /100 km) Use phase 85,529 0 85,529 Fuel production 23,574 47,838 -24,265 Battery production* Not applicable 9,389 -9,389 Total 109,103 57,227 51,876 * Note: This is a conservative calculation, since the battery displaces engines and other powertrain parts in a conventional diesel bus for which the emissions are not included in this calculation. With the unit carbon dioxide equivalent reduction per 100 kilometers, the lifetime GHG emission reduction of an electric bus (BYD K8) can be calculated for an eight-year lifetime and 66,000 kilome- ters annual mileage. The total GHG reduction could reach about 274 tons of carbon dioxide. BYD K8 represents about two-third of SZBG’s total electric bus fleet. On the assumption that the carbon reduction of BYD K8 represents the average reduction in all models of electric bus, then the annual GHG reduction of the SZBG from bus electrification would be 194,000 tons of carbon dioxide, with a total annual bus operation mileage of 374.11 million kilometers in 2018. Environmental Impacts 111 7.3.2 Air Pollutant Emission Reduction Battery electric vehicles produce zero tailpipe emissions, which specifically helps improve air quality in urban areas. Electric buses running on the road emit none of the smog-forming pollutants, such as NOX, and other pollutants harmful to human health. In addition, strict environmental control measures enforced on power plants in China have resulted in significant reductions in the pollutant emissions from coal-based power plants (table 7-10). Table 7-10 Comparison of emission of 100 kilometers for one diesel and one electric bus (g) a b Emission reduction after Pollutant Diesel Bus Electric Bus bus electrification CO 116.80 0 116.80 NO x 568.00 10.81 557.19 VOC 5.80 0 5.80 PM 2.5 11.00 0 11.00 PM 10 17.64 0 17.64 SO 2 2.50 11.38 -8.88 Note: a. Analysis of diesel bus includes emission when driving. b. Analysis of electric bus includes emission when driving (zero) and emission from electricity generation. With the results in table 7-10 and the assumption that the total driving mileage in an eight-year lifetime is 528,000 kilometers, we calculated the lifetime emission reduction of BYD K8 and the annual emission reduction of SZBG’s electric bus operations, which is the difference between a BYD K8 and a Yutong 10.5-meter diesel bus. The annual emission reduction from bus electrification is then calculated for the total number of buses in the SZBG fleet (table 7-11). 112 Environmental Impacts Table 7-11 Pollutant emission reduction of bus electrification Lifetime emission reduction of Annual emission reduction of SZBG Pollutant electric bus (BYD K8) (kg) from bus electrification (ton) CO 616.70 436.96 NO x 2941.98 2084.49 VOC 30.62 21.70 PM 2.5 58.08 41.15 PM 10 93.11 65.97 SO 2 -46.87 -33.21 The electric bus has significantly lower life cycle emissions than a conventional diesel bus because emissions are lower for electricity generation than from burning diesel. The amount of these emissions depends on the region’s electricity mix (figure 7-3). The electricity mix in Shenzhen is greener than the average China’s grid mix, with renewable energy having a share of more than 50 percent. The cleaner grid in Shenzhen contributes to a larger emission reduction for the electric bus operation. The annual emission saved from bus fleet electrification is significant, which indicates the high poten- tial of electric buses for tackling climate change and air pollution issues. However, not all pollutants are reduced after bus electrification. Sulfur dioxide formed through the combustion of coal in electricity generation increased because of a higher density of sulfur in coal than in diesel. In this context, it is worth mentioning that diesel emissions usually occur in an urban center where a larger population is likely to be exposed, while emissions from electricity production for electric buses occur in coal power plants in less densely populated areas. 7.3.3 Comparison of Emission Reduction between Different Regions in China Emission reduction is highly dependent on the grid mix of different regions. On average, most of the electricity in China comes from coal, which accounted for 60 percent of the electricity generation mix in 2018. However, regional disparities exist in relation to energy used. Table 7-12 shows the share of energy used in electricity generation in different regions of China. For example, China’s east coast and the north region are dirtier—more than 70 percent of electricity comes from coal firepower plant— by comparison. This is partly because of geographic limitation to install wind power generators and hydropower infrastructures and the economic reason that the northeastern parts of the country have historically relied on cheaper energy sources like coal. Environmental Impacts 113 Table 7-12 Share of energy use in the power grid in different regions in China (2018) Hydro Coal Fire Nuclear Wind & Solar South Region 37.04% 49.03% 9.51% 4.15% South West Region 12.47% 53.56% 0.00% 33.97% Central Region 40.91% 47.47% 0.00% 11.62% East Region 8.14% 71.45% 5.89% 14.51% North East Region 5.60% 64.84% 3.05% 26.52% North Region 1.99% 73.82% 0.30% 23.88% China Avg. 18.60% 60.20% 2.40% 18.90% Data source: 2019 Annual Report of China Electricity Industry Shenzhen lies in southern China, one of the cleanest regions relative to energy generation. Thus, the power supply for an electric bus results in a larger emission reduction in Shenzhen compared to other regions in China. Table 7-13 lists the carbon dioxide equivalent emission of electric bus per 100 kilometers by different regions in China, taking the same assumption that the electricity loss during charging is eight percent, and the comprehensive line loss rate1 is 6.31 percent. Table 7-13 Benefits of electric bus in different regions in China CO 2eq Reduction after bus electrification (g/100km) Electric bus (South Region) 51,876 Electric bus (South West Region) 47,451 Electric bus (Central Region) 53,399 Electric bus (East Region) 29,997 Electric bus (North East Region) 36,455 Electric bus (North Region) 27,686 Electric bus (China average) 40,978 114 Environmental Impacts Figure 7-4 Relationship between share of coal and benefits of bus electrification 6000 80% 60% 4000 40% 2000 20% 0 0% South South West Central East North West North China Region Region Region Region Region Region Avg. GHG benefits between electric and diesel bus (g/100km) share of GHG reduction from bus electrification share of coal in electricity mix (%) In our study, analysis shows that bus electrification reduces a significant amount of GHG emissions, but with variations in different regions in China. On average, an electric bus in China can reduce 37.56 percent of GHG emissions compared to a diesel counterpart from a life-cycle perspective. In regions utilizing higher share of clean energy in electricity generation—that is in the central region of China—the benefits of electrifying buses can increase up to 48.94 percent., In regions with high dependence on coal for example, in the northern region, electric buses can also be used as a method to achieve cleaner transportation, with about 25 percent, of GHG reduction compared to diesel buses (figure 7-4). This finding is significant since it shows that even under a very dirty electricity mix, electric buses are still cleaner than diesel buses. Notes 1 Loss of energy, across power lines, during the transmission of electricity. Environmental Impacts 115 References 10 Dér, Antal, et al. Life Cycle Assessment of Electric Vehicles in Fleet Applications. Fleets Go Green. Springer, Cham, 2018. 61–-80. 1 Ambrose, H. and A. 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Environmental Impacts 117 Chapter 8 Cost-Benefit Estimation 8.1 Introduction Criteria air pollution (CAP) emissions from diesel bus operation and power generation can harm human health, impair visibility, and damage buildings among many other negative externalities. GHG emissions from transport accelerate global warming and its negative impacts on the planet. China’s President Xi Jinping has announced at the United Nations General Assembly in 2020 that China will strengthen its 2030 climate target, peak emissions before 2030, and aims to achieve carbon neutrality before 2060. Every sector including the transport sector, which has the highest growth rate of GHG emission among all sectors in China,1 needs to take every effort both in policy guidance and technolo- gy transformation to achieve this ambitious goal. When evaluating the adoption of new technologies like battery electric buses, cost–benefit analysis helps present its social and environmental benefits making them comparable to traditional technologies that often have lower direct costs but high external costs on account of CAP and GHG emissions. When analyzing alternative technologies, the avoided emissions are benefits of the implemented environmentally friendly alternative. The damage–cost approach adopts a multistep damage function to analyze the effects on air quality from pollutant emission, the relationship between air quality and health effects, the causality of popula- tion exposure and population characteristics, the morbidity and mortality caused by the air pollutants, and the statistical life value to monetize damage caused. As each step involves uncertainty and assumptions, cumulatively, the results show high levels of variability. Therefore, the result is usually presented with a wide range, while the high end can be very high due to high statistical life value assumptions based on local salary levels, for example. In this study, we calculate the life cycle CAPs and GHGs emission benefits of BEB based on the cost analysis in chapter 6 and environmental assessment results from chapter 7. We include CAPs of PM2.5, PM10, NOX, VOC, and SO2; and GHGs of CO2, CH4, NO2 in the CO2eq. 118 Environmental Impacts 8.2 CAPs and GHGs We consider two strategies for assessing the damage costs of CAPs and GHGs. For GHGs, we adopt global GHG marginal cost in the estimation to account for its impact on climate change. CAPs valua- tion, on the other hand, should be based on local air quality impacts, city population characteristics, and statistical life value for residents. Shenzhen is leading Chinese cities on air quality and air emis- sion control. The annual average pollutant concentrations in Shenzhen from 2014 to 2019 (figure 8-1), are better than most Chinese cities, and have been dropping for PM2.5, PM10, NO2, and SO2. To account for the air quality and residents’ income benefits in Shenzhen, we adopted the EU’s 28 countries’ average damage cost for CAPs owing to the unavailability of local data. Figure 8-1 Annual average air quality in Shenzhen during 2014-2019 70 Annual Average Concentration (ug/m3) 60 50 40 30 20 10 0 SO2 NO2 PM10 PM2.5 CO O3 2014 2015 2016 2017 2018 2019 Source: Shenzhen Ecology and Environment Bureau, Shenzhen Environmental Status Bulletin 2014-2019, http://meeb.sz.gov- .cn/xxgk/tjsj/ndhjzkgb/ Note: The O3 statistic record changed from annual average concentration to 90 percentile concentration in and after 2017 and is not included here. Cost-Benefit Estimation 119 Based on analysis from the IPCC, the UNFCCC Paris Agreement states that world temperature should not increase by more than 2 degrees Celsius in 2100 compared to the pre-industrial levels and strong efforts should be made to stay within 1.5 degrees Celsius. China is a signatory to the Paris Agreement and has committed to reduce its GHG emissions. Shenzhen is one of the seven pilots for carbon trading markets in China. The trading price of carbon on the Shenzhen market in 2019 was 20–30 yuan per ton (USD 2.86–4.29/ton) (Slater et al. 2019), much lower than the amount from the US and the EU. The GHG emissions are global externalities and the market prices mentioned above are not high enough to achieve the goals of the Paris Agreement. In order to capture social benefits from reduced GHG emissions or costs from increased emissions in economic analysis, the shadow price of carbon is adopted in GHG accounting in World Bank financed projects.2 Instead of a central estimate, a range of values is used to justify the uncertainty and the need to consider the country context. From 2017 to 2050, the lower value of shadow price of carbon ranges from USD 37 to 78 per ton carbon dioxide equivalent and the higher value from USD 75 to 156 per ton carbon dioxide equivalent (figure 8-2). Figure 8-2 Shadow price of carbon in USD per 1 metric ton of CO2 equivalent (constant prices) Value of Carbon in USD / tCO2e (constant prices) 160 120 80 40 0 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 High Estimate Low Estimate Year 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Low 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 55 56 57 58 60 61 63 64 65 67 68 70 71 73 75 76 78 High 75 77 78 80 82 84 86 87 89 91 94 96 98 100 102 105 107 109 112 114 117 120 122 125 128 131 134 137 140 143 146 149 153 156 120 Cost-Benefit Estimation 8.3 Marginal Cost for Damage Estimation The CAP estimation should ideally be based on local data. However, environmental cost data avail- able for Shenzhen or Guangdong area are either focus on or cover only one or several specific pollutants (Zhang and Duan 2003; D. Huang, Xu, and Zhang 2012) (Li et al. 2019; Duan et al. 2019). Considering that the economy, air quality, and fleet composition of Shenzhen are similar to European cities (Sun et al. 2014), and that the European Commission (CE Delft 2019; Schroten et al., 2019) cost factor data are comprehensive reflecting all relevant environmental impacts including health effects, crop loss, biodiversity loss, and material damage, we used the EU 28 average cost factor for the transport sector for the CAP externality estimation as an approximation (table 8-1). We adopted the values for the price of carbon for 2017 to 2024 (table 8-2) from the World Bank Shadow Price of Carbon Guidance Note for the eight-year life cycle of BEB. Table 8-1 CAP cost from EU 28 Unit NOX VOC PM2.5 PM10 SO2 USD/ton 23856 1344 426720 24976 12208 Table 8-2 Shadow price of carbon (USD/tCO2eq) Year 2017 2018 2019 2020 2021 2022 2023 2024 Low 37 38 39 40 41 42 43 44 High 75 77 78 80 82 84 86 87 Cost-Benefit Estimation 121 8.4 Emissions and Benefits We concluded the environmental damages from CAP as calculated in chapter 7 and GHG over eight years from BEB and DB (table 8-3, table 8-4, and figure 8-3). Table 8-3 Estimated economic benefits from air pollutant emissions reduction for the bus fleet Pollutant NOX VOC PM2.5 PM10 SO2 Diesel bus (ton/year) 0.375 0.004 0.007 0.012 0.002 Electric bus (ton/year) 0.007 0.000 0.000 0.000 0.008 Difference (ton/year) 0.368 0.004 0.007 0.012 -0.006 USD per year 8772.9 5.1 3098.0 290.8 -71.5 USD per 8 years (i.e. life cycle) (with discount rate of 3%) 61118.6 35.8 21582.8 2025.8 -498.5 Table 8-4 Estimated economic benefits from the reduction of GHG emissions from the bus fleet Year 2017 2018 2019 2020 2021 2022 2023 2024 Low 1267 1301 1335 1370 1404 1438 1472 1506 High 2568 2636 2671 2739 2808 2876 2944 2979 Average (USD) 1917 1969 2003 2054 2106 2157 2208 2243 USD per 8 years (i.e. life cycle) 14434 (with discount rate of 3%) 122 Cost-Benefit Estimation Figure 8-3 Bus operation pollution damage from DB and BEB 80 Damage Value (USD Thousand) 60 40 20 0 NOX VOC PM2.5 PM10 SO2 CO2e DB BEB Figure 8-4 Economic benefits from BEB avoided CAPs and GHGs in 8 years 0.0%, VOC 2.1%, PM10 -0.5%, SO2 14.6%, CO2e 21.9%, PM2.5 61.9%, NOX Cost-Benefit Estimation 123 We assume the environmental benefits of BEB deployment as the avoided damage from DB pollution. This results in a total environmental benefit of one BEB over a lifetime of eight years over one DB of USD 98,699 of which 61.9 percent is from NOx reduction, 21.9 percent from PM2.5 abatement, and 14.6 percent from GHG emission reduction (figure 8-4). Figure 8-5 TCO and environmental cost of DB and BEB 3 Env. Cost, 815 2.5 Cost (thousand yuan) Env Cost, 124 2 TCO, 2170 TCO, 1796 1.5 1 0.5 0 DB BEB Note: Environmental cost is abbreviated “Env. Cost” in figure. The total cost of operating with DB including the environmental costs would be higher than that of BEB (figure 8-5)—demonstrating the high economic benefits of fleet electrification. The total subsidy that the SZBG received from the national and local governments for one bus was one million CNY (equivalent to about USD 0.15 million) in 2016. The benefits from CAPs and GHGs are 30 percent less than the subsidy. Government incentives in 2016 exceeded the environmental benefits with our conservative assessment, and the lowered subsidy in 2017 matched the benefits. However, at the introductory stage of the new technology, a lower subsidy may not be enough to stimulate the manufactures to invest in the uncertain industry. A higher subsidy is necessary to jump start a new technology, and it can later be reduced once the technology gets more competitive. 124 Cost-Benefit Estimation 8.5 Discussion subway system and other transportation modes. We evaluated the comparison of the same activity of DB and BEB on a one-to-one ratio. When other cities consider adopting Cost–benefit analysis provides a critical BEBs, the cost and benefit differences caused reference for designing and adopting effective by the fleet number and operation structure emission reduction policies, and to account for adjustment should be factored in. the negative externalities from the fossil fuel The monetized benefit from air pollutants consumption. We estimated the environmental emission is equal to about 70 percent of the benefits of the replacement by comparing BEB subsidy from the governments. The benefit with DB on the CAP and GHG benefits. Our supports the subsidies for incentivizing the result shows that air emission reduction transit fleet electrification. The benefit estima- benefits from the adoption of BEB in SZBG are tion is conservative since we did not include about 70 percent of the government subsidy. other benefits, such as noise reduction, As with our cost analysis, we kept the same passenger and driver comfortability improve- mileage, the number of buses, and passen- ment, grid stability improvement, easier data gers transported before and after electrifica- collection to improve bus operation, fleet tion. However, in practice, the numbers vary management, and monitoring. We are confi- on the operation. The transit bus lines were dent with the results that transit bus fleet restructured to accommodate the operation electrification brings significant economic and charging schedules; the number of benefits to local residents. passengers and distance of passenger travels was also affected by the operation of the city Cost-Benefit Estimation 125 Notes 5 Schroten, Arno, Huib van Essen, Lisanne van Wijngaarden, Daniel Sutter, Riccardo Parolin, David Fiorello, Marco Brambilla, et al. 2019. Handbook on the External Costs of Transport: Version 2019. http://publica- 1 Data from National Center for Climate Change tions.europa.eu/publication/manifestation_iden- Strategy and International Cooperation http://ww- tifier/PUB_MI0518051ENN w.ncsc.org.cn/yjcg/fxg- c/201801/P020180920510030806443.pdf 6 Sun, S., D. Bongardt, U. Eichhorst, M. Schmied, P. Wüthrich, and M. Keller. 2014. “Modelling Energy 2 Guidance note on shadow price of carbon in Consumption and GHG Emissions of Road Transport in economic analysis. The World Bank, November 12, 2017. China.” Technical Paper on GIZ CRTEM/HBEFA-China Model. GIZ, Beijing. 7 Tong, Fan, Chris Hendrickson, Allen Biehler, Paulina Jaramillo, and Stephanie Seki. 2017. “Life Cycle Owner- ship Cost and Environmental Externality of Alternative Fuel Options for Transit Buses.” Transportation Research Reference Part D: Transport and Environment 57 (December): 287–302. https://doi.org/10.1016/j.trd.2017.09.023 1 CE Delft. 2019. Handbook on the external costs of 8 Zhang, Shi-qiu, and Yan-xin Duan. 2003. “Marginal transport. https://www.cedelft.eu/en/publications/2311/han- Cost Pricing for Coal Fired Electricity in Coastal Cities of book-on-the-external-costs-of-transport-version-2019 China: The Case of Mawan Electricity Plant in Shenzhen City, China.” Journal of Environmental Sciences 15 (3): 401–12.entifier/PUB_MI0518051ENN 2 Duan, Yanran, Yi Liao, Hongyan Li, Siyu Yan, Zhiguang Zhao, Shuyuan Yu, Yingbin Fu, et al. 2019. “Effect of Changes in Season and Temperature on Cardiovascular Mortality Associated with Nitrogen Dioxide Air Pollution in Shenzhen, China.” Science of The Total Environment 697 (December): 134051. https://- doi.org/10.1016/j.scitotenv.2019.134051 Bibliography 3 Li, Jiabin, Yun Zhu, James T. Kelly, Carey J. Jang, Shuxiao Wang, Adel Hanna, Jia Xing, Che-Jen Lin, Shicheng Long, and Lian Yu. 2019. “Health Benefit 1 Alberini, Anna, Maureen Cropper, Tsu-Tan Fu, Alan Krupnick, Jin-Tan Liu, Daigee Shaw, and Winston Assessment of PM2.5 Reduction in Pearl River Delta Harrington. 1997. “Valuing Region of China Using a Model-Monitor Data Fusion Health Effects of Air Pollution in Developing Countries: Approach.” Journal of Environmental Management 233 The Case of Taiwan.” Journal of Environmental Economics (March): 489–98. https://doi.org/10.1016/j.jen- and Management vman.2018.12.060 34 (2): 107–26.https://doi.org/10.1006/jeem.1997.1007 4 Slater H., De Boer D., Guoqiang Qian, and Shu 2 Delucchi, Mark A, James J Murphy, and Donald R McCubbin. 2002. “The Health and Visibility Cost of Air Wang. 2019. “2019 China Carbon Price Report.” Beijing. Pollution: A Comparison of Estimation Methods.” Journal http://www.chinacarbon.info/wp-content/up- of Environmental Management 64 (2): 139–52. https://- loads/2019/12/2019-China-Carbon-Pricing-Survey-Report. doi.org/10.1006/jema.2001.0515 pdf 126 Cost-Benefit Estimation Part III even in about five years, considering only bus charging. If the charging station operator Key Findings: broadens its business to provide charging for other vehicles and ancillary services, the business could become profitable sooner or without subsidies. Land availability for the Total Cost of Ownership of installation of charging stations remains one of Electric Buses the key issues in Shenzhen and requires the careful planning and negotiation with the municipality. This should not be an after- In the case of the SZBG, government subsi- thought but a key consideration during the dies and the manufacturer’s full lifetime planning phase to avoid delays and service warranty played a significant role in making the disruptions. electric buses’ total cost of ownership (TCO) lower than the diesel fleet for the bus operating company. The TCO is 36 percent lower for Environmental Benefits of BEBs than for DBs; a promising and great Electric Buses statistic due to the lower energy and mainte- nance cost of the BEBs. However, if the subsidies are excluded, the TCO of BEBs is 21 percent higher than DBs. Electric buses have a high emission reduction potential for greenhouse gases as well as for Driving distance and operating lifetime are the air pollutants. The life cycle GHG emission of two major factors that could improve the TCO an electric bus is only about half of the emis- of battery electric buses without subsidies. sion from a similar diesel bus in Shenzhen. Extending the bus lifetime to fifteen years—as The SZBG reduces about 194,000 tons of is common practice in many countries around carbon dioxide equivalent per year because it the world—would result in the cost per kilome- has electrified its bus fleet. In addition, the ter for electric buses decreasing by 25 percent. emissions of CO, VOC, PM2.5 and PM10 are Likewise, increasing the annual driving zero for electric buses. The only air pollutant distance from 66,000 to 100,000 kilometers that is higher for BEBs is sulfur dioxide, formed would reduce the cost per kilometer by 18 through the combustion of coal in electricity percent. We, therefore, recommend that bus generation. While a cleaner power grid will companies extend the lifetime of the buses generate higher environmental benefits even and extend the warranty with the BEB manu- under a scenario of a grid mix with over 70 factures to capture more benefits for BEBs, percent electricity from coal, electric buses still and take advantage of the longer potential compare favorably with diesel buses in GHG lifetime of BEBs due to better technology. and CAP emissions. Charging Infrastructure Cost-Benefit Analysis The average cost for charging infrastructure is We observe that subsidizing electric buses 121,000 yuan per bus. As with the bus subsi- provides strong economic benefits while at the dies, government subsidies for charging same time making technology financially viable stations make it a profitable business. On for the bus operator, taking the results from the average, a charging station operator can break estimation of environmental benefits and TCO. Higher subsidies than the economic benefits are justified at the beginning because of electric buses being a new technology; but subsidies should be downscaled and phased out gradually once the technology gets to scale. If other benefits from bus electrification such as noise reduction, passenger and driver comfortability improvement, grid stability improvement and easier data collection to improve bus operation are included, the economic case for BEBs would only grow stronger.