The economics of public transport electrification: A case study from Victoria, Australia

We investigate the economic, climate and electricity market implications of public bus fleet electrification based on the Melbourne Metropolitan region. We employ a novel fleet-level analysis, under tariff-based least-cost depot charging to compare the total cost of ownership (TCO) over 12 years of battery electric vehicle (BEV) against diesel bus fleets in a transitioning power sector. We also estimate impacts on electricity demand and carbon emissions, across purchase years between 2022 and 2039. We find that while the upfront costs of BEV bus fleets are considerably higher than diesel, they are more economical to operate in the long run, although our calculations are sensitive to diesel price assumptions. Electricity prices only have a minor impact on the TCO of BEV buses. Using a power sector transition scenario that mirrors Australia's Glasgow (COP26) commitments of netzero economy wide emissions by 2050, we find that purchasing a BEV fleet in 2022 (0.42 MtCO2e) results in 74% less operational greenhouse gas (GHG) emissions than an equivalent diesel fleet (1.6 MtCO2e). If grid decarbonisation beyond 2022 would not proceed, BEV bus fleet emissions (at 2.03 MtCO2e) would be 27% higher than diesel. This suggests that an average 27% reduction of night-time grid emissions (over the next 12 years) is required for BEV buses to have lower emissions than diesel. One of our key policy recommendations is to cooptimise power and transport sector transitions by ensuring greater pass through of wholesale market pricing signals.