The economics of public transport electrification: The charging dilemma

The electrification of public transport has the potential to mitigate greenhouse gas emissions and support the electricity system, however this potential depends on how intra-day charging interfaces with grid emissions and wholesale prices. Our paper explores these trade-offs by using boundary analysis to evaluate a least-cost tariff-based aggregate bus fleet charging strategy and comparing it to charging strategies that either minimise indirect greenhouse gas emissions, or minimise wholesale price exposure, based on the metropolitan Melbourne bus network. We develop a novel two-state fleet charging optimisation model, that allows us to perform a counterfactual analysis across 5 years of historical (2017–2021) and 5 years of modelled (2022–2026) changes to wholesale electricity prices and emission intensities in Australia's National Electricity Market, in response to the three charging strategies. We find that current Australian commercial tariff structures with high daytime volumetric usage and demand charges mute climate and wholesale market signals. By charging to minimise greenhouse gas emissions over bill savings, the fleet can achieve (on average) a further 33.4% reduction in indirect emissions but incurs a 103% increase in annual electricity bills. Alternatively, by charging to minimise wholesale price exposure, the fleet can achieve (on average) a 13.4% reduction in indirect emissions while incurring a 69% increase in electricity bills. Improving the temporal alignment of commercial electricity tariffs with wholesale prices should thus simultaneously reduce indirect emissions and wholesale electricity costs. This necessitates urgent tariff reforms to allow relevant wholesale price signals to pass through to commercial EV and BEV operators.