Mar 5, 2021 | Tim Victor

Fleet Electrification and ESAs: Let’s Get Together

Part 1: Building a Fleet Electrification Platform based on Resilient yet Flexible Infrastructure

The monumental transition to Zero Emission Vehicles (ZEV) will fundamentally transform the way we think about energy and it has only just begun.

Today, there are twelve states that set goals to increase ZEVs, with California mandating all transit authorities transition to Zero Emission Buses (ZEB) by 2040. The high up-front cost of the ZEB transition combined with low revenue due to COVID-19 has created a capital constrained environment with many agencies resistant to a rapid transition. Additionally, the complexity of planning, designing and procuring novel charging infrastructure can create a state of confusion on what the right way to move forward is. Enter: The Energy Services Agreement (ESA).

An easy way to describe an Energy Services Agreement is to think about a Power Purchase Agreement (PPA) with additional asset management services. In the context of a transit authority’s transition to a ZEB fleet, the ESA allows a third party to own, operate, and maintain the new infrastructure. This drastically simplifies the transition for the transit authority as they now have a partner dedicated to providing low-cost, dependable energy for the new charging infrastructure. Additionally, the risk associated with utilizing new technologies is shifted away from the transit authority.

The Zero Emission Bus market has matured rapidly in the past few years, but the integration of vehicles, chargers, and other infrastructure is still in its infancy. The combination of a nascent market and a mandated short timeline to transition creates a scenario for the transit authority with a lot of uncertainty. With an ESA through a trusted long-term partner, transit authorities can de-risk the process of their fleet transition. The long-term partner can support the transit authority as they choose their lineup of vehicles but more importantly have the expertise to provide the right infrastructure to support the new vehicles. 

Since electricity is the fuel source for electric buses, transit agencies now rely on utilities to procure their fuel which requires an in-depth understanding of electricity rate tariffs and does not allow the transit authority to have total control of their fuel supply chain. Utilities are generally great at providing reliable electricity for their customers but in the past few years, new challenges have threatened that legacy. In California, wildfires are growing in both magnitude and frequency forcing utilities to pre-emptively shut off power to prevent huge damages. Rolling blackouts have even occurred in LA for the first time in nearly 20 years due to the warming climate. All of this means that the switch to electricity for fuel can carry some additional risks for transit authorities.

The ESA structure allows a transit authority to deploy resilient and cost-effective infrastructure effectively eliminating any risks associated with the dependability of utility electricity. Additionally, their ESA partner can take on the risk of nascent technology and build a platform for growth that can be aligned with the transition plan of the transit authority. One method of building this modular yet resilient system is to base the infrastructure on a microgrid platform. The microgrid platform allows flexibility of system design while providing resilient and clean power during a utility outage. Flexibility is the key here as there are many different charger, software, and vehicle companies with a lack of a clear leader in each category. Working closely with a microgrid partner, a transit authority can create the fleet of buses and associated charging system they need that ensures interoperability between each piece.

Over the term of the ESA, new advancements in technologies or new market leaders could be able to provide a better solution for an aspect of the system. If the ESA partner built the system on a microgrid platform built for flexibility, then pieces of the system can be upgraded to provide higher performance with minimal economic consequences. The decision to enact an ESA with a long term partner provides a transit authority an opportunity to build the system that works for them in the most economical, resilient, and sustainable fashion.

In Part 2 of the “Fleet Electrification and ESAs: Let’s Get Together” series, we will explore the concept of deploying efficient capital for these long term electrification projects.

If you are interested in hearing more about how an ESA paired with a microgrid platform can benefit your electric fleet, contact Tim Victor.