Round and Round - Buses and the Clean Vehicles Directive
Awareness about climate change and air quality has increased recently and new national and EU-wide policy aims at reducing emissions from cars, buses and trucks. The next decade will bring a major shift from diesel and gasoline vehicles to cleaner alternatives. In this series of articles, we explore what that shift means to the energy sector, networks, fleet management, financing and recycling, among others.
In our first article, we highlighted different ways the transition towards clean bus fleets affect different stakeholders. In this follow-up article, we discuss how the EU sets out the path to sustainable transport in its Clean Vehicles Directive and what it means for the industry.
As part of the EU’s Clean Mobility Package presented in 2017, the revision of the Clean Vehicles Directive (CVD, EU/2019/1161) was adopted on the 2nd August 2021 and introduced targets for low- and zero-emission vehicles in public procurement. Adopting cleaner alternatives in public transport fleets is one of the low hanging fruit that can positively impact emissions generated by road transport. It is both the connection to the public sector that makes intervention easier and the scale of this segment of transport.
In 2016, road transport accounted for 72.9% of GHG emissions in transportation. Apart from passenger cars, buses form the largest category for powered road transport modes in terms of passenger kilometres with a share of 8.3% in 2017, according to the EEA. Buses are the most widely-used public transport option in the EU. Considering that public procurement accounts for roughly 75% of new buses, targeting bus fleets subject to public procurement is a fast way to decarbonise parts of road transport.
Through the Clean Vehicles Directive, the main factor in boosting demand for clean vehicles is the obligation to ensure sustainability in public procurement, with some flexibility as to how to fulfil the targets. The requirement that 50% of the minimum target has to be fulfilled with zero-emission buses will increase orders of electric buses, especially battery electric (BEV) buses. Other low-emission fuel technologies can be adopted in the remaining 50% to achieve the targets.
The EU intends to stimulate investments in the clean mobility market by providing policy certainty in form of binding targets. The domino-effect in the market caused by this legislative building block can already be seen with different market participants.
Financial investors and fleet lessors are keen to understand new bus technologies better. They want to be able to consider all related assets, such as batteries, within the scope of an investment decision, so they can identify and structure deals in the public transport space that take all changing parameters into consideration.
They are not alone in sensing potential opportunities in this space. Since battery electric vehicles epitomise the intersection of energy and mobility, the CVD is especially relevant for energy players. AFRY has recently assisted a renewable energy producer in investigating the opportunity to strike arrangements with operators of electric buses as a way to getting their electricity to market. Other examples include GB battery operator Zenobe, who combine their expertise in batteries with flexibly charging fleets of electric buses as part of their business model.
Cities all over Europe that are obliged to fulfil the CVD targets are opting for different technologic solutions:
- Berlin, a city with the ambition of zero-emission bus fleet of almost 1,500 by 2030, prefers the battery-electric solution and offers public transport bus rides with the largest e-bus fleet in Germany of currently 137 BEV-buses
- Electric double decker buses might soon be driving on the streets of Barcelona. The city recently published a tender for 210 electric and hybrid buses. The 210 e-buses include 24 double-decker buses powered by diesel-electric hybrid engines
- The UK’s first double decker fuel cell buses joined the London e-bus fleet in June 2021 in order to reach the target of zero-emission buses only by 2030 – zero emission hydrogen will be provided by an offshore windfarm feeding an electrolyser.
- Also betting on hydrogen, the city of Essen in Germany will switch over its entire fleet of over 250 vehicles to fuel cells until 2033.
As we have discussed, the term ‘clean’ is not limited to battery electric and fuel cell vehicles. It also includes technologies such as LPG (liquefied petroleum gas), LNG (liquefied natural gas) and CNG (compressed natural gas). This gives the obligated institutions and the market as a whole some room for maneuver, but it can turn out to be a blessing and a curse at the same time.
On one hand, this considers certain impeding factors such as supply chain limitations, budget or limited choice in regards to vehicle options. On the other hand, there is a risk of technology lock-in if public transport companies decide to go for low-emission solutions rather than zero-emission options. While buses in some countries have an average lifespan of under five years (e.g. 4.8 years in Austria), they are on the road for almost 20 years in others (e.g. 19.9 in Greece). This means that fleets deployed around 2030 could well remain in circulation beyond 2045 or even 2050. Furthermore, the calculation for a minimum procurement target is not done on annual basis but takes the reference period 2021-2025 and 2026-2030 into account and does not consider well-to-wheel emissions.
Policies will continue to push the market into a more sustainable direction. In order to understand which alternative fuel technology will win the race and stay on the road (hint: the cheapest one!), several factors, both political/regulatory and commercial, need to be considered in order to determine its cost and benefits.
In our next week’s article, we will have a more detailed look at this calculation. We will discuss the factors determining total cost of ownership of buses. This will provide an insight into how operators and investors may choose the optimal sustainable alternative technology for their bus fleet. .