Look­ing at TCO anew

A Bloomberg New En­ergy Fi­nance re­port puts the spot­light on To­tal Cost of Own­er­ship (TCO).

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A Bloomberg New En­ergy Fi­nance re­port puts the spot­light on To­tal Cost of Own­er­ship (TCO).

TCO or To­tal Cost of Own­er­ship is at the core of ev­ery com­mer­cial ve­hi­cle op­er­a­tion. It in­flu­ences, and is in-turn in­flu­enced by ev­ery as­pect of the op­er­a­tion. It is in­flu­enced by the tech­nol­ogy that goes into the mak­ing of the ve­hi­cle; on the in­fra­struc­ture, on driver be­hav­iour and a hist of other fac­tors. In­flu­enced by the medium of propul­sion, whether it is elec­tric or IC en­gine-based, TCO is dear ev­ery fleet op­er­a­tor, to ev­ery man­u­fac­turer, and to ev­ery end user since it is what makes for a prof­itable busi­ness propo­si­tion. If this calls for a look at TCO anew, a re­port by Bloomberg New En­ergy Fi­nance, called ‘Elec­tric Buses in Cities’ delves into TCO in a man­ner that not many seem to fol­low. One may ar­gue that there is more to a TCO than meets the eye, the fact is, the dis­ad­van­tages of lig­nite-based power gen­er­a­tion ver­sus a cleaner BSVI IC en­gine need to be weighed as nau­trally as can be.

In the case of elec­tric propul­sion, the equa­tion for to­tal TCO will need to take into ac­count the seem­ingly high bat­tery costs and lack of charg­ing in­fra­struc­ture. The TCO may not make a pos­i­tive prospect in an elec­tri­cally pro­pelled ve­hi­cle, nor will it con­trib­ute to a strong en­vi­ron­men­tal case de­spite zero tailpipe emis­sions

were the bat­ter­ies charged by elec­tric­ity that was ob­tained from burn­ing lig­nite. Amid the de­bate con­cern­ing elec­tric, gas and con­ven­tional fu­els, the Bloomberg New En­ergy Fi­nance re­port men­tions that near to 2030, city elec­tric buses will cost as much as those that are pow­ered by a diesel en­gine. The re­port fore­casts that bat­tery costs on the fi­nal price of a bus will fall to eight per cent from 26 per cent in 2016. This is how­ever hedged against strong de­mand, and in which case, the bal­ance in mar­ket value could be reached in 2025. Cit­ing the dif­fu­sion of elec­tric buses in China, the re­port men­tions that the price of a 250 kWh bat­tery pack will fall from USD 150,000 in 2016 to USD 38,000 in 2030. It also fore­casts a sim­i­lar price cut in the case of a more pow­er­ful 350 kWh bat­tery pack.

The achieve­ment of par­ity with an en­dother­mic mo­tor will take a cou­ple of years longer how­ever, the re­ports states. It draws at­ten­tion to the fact that a 250 kWh elec­tric bus charged overnight at the de­pot and deal­ing with an av­er­age jour­ney of 166 kilo­me­tres a day is al­ready cost com­pet­i­tive in com­par­i­son to a diesel bus. Peg­ging the run­ning cost of an elec­tric bus at USD 0.99 per kilo­me­tre com­pared to USD 1.05 per kilo­me­tre for diesel, the re­port, in the case of gas, pegs it at USD 1.19 per kilo­me­tre. In the case of a ve­hi­cle with larger 350 kWh bat­tery, the costs are pre­dicted to be­come quite com­pet­i­tive, al­beit with a slow charg­ing sys­tem rather than a pan­to­graph. This is ar­rived at by tak­ing into ac­count a travel range of over 220 kilo­me­ters per day. The cal­cu­la­tions are based on var­i­ous fac­tors like spe­cific value of bat­ter­ies, which is said to vary sig­nif­i­cantly from one year to the next; the price of elec­tric­ity, which varies sig­nif­i­cantly from one coun­try to an­other, and the price

of diesel that is a fac­tor of price per bar­rel.

Stat­ing that ICE pow­ered buses no longer of­fer an eco­nomic ad­van­tage in con­di­tions of use typ­i­cal of a pub­lic ser­vice in ur­ban ar­eas, and even over shorter dis­tances awhen the fastest and the more ex­pen­sive recharg­ing tech­nolo­gies are con­sid­ered, the re­port men­tions that pub­lic trans­port com­pa­nies couldo opt for this in­vest­ment as a leap of faith, and es­pe­cially after tak­ing into ac­count the level of ex­pe­ri­ence with elec­tric buses in mar­kets that are less ma­ture, or are yet to reach a cer­tain op­ti­mum level. Stress­ing on lack of his­tor­i­cal data and ex­pe­ri­ence re­quired, the re­port men­tions that the less ma­ture mar­kets will have to in­vest in charg­ing in­fra­struc­ture. This, the re­port states, will take a toll on the ex­pen­di­ture of the com­pa­nies in­volved. Stat­ing that the per­for­mance of an elec­tric ve­hi­cle will be in­flu­enced by lit­tle known or of­ten vary­ing fac­tors like change of weather and driver be­hav­iour, the re­port says that it would also have an ef­fect on the level of au­to­ma­tion. Point­ing to the guar­an­tees for bat­ter­ies of­fered world­wide by man­u­fac­tur­ers, the re­port termed the same as het­ero­ge­neous since they could span from five, six, seven to 10 years, as well as up to four thou­sand cy­cles.

The find­ings and ob­ser­va­tions in the Bloomberg re­port come at a time when McKin­sey has brought out its re­port, which fore­casts the year of par­ity in TCO be­tween elec­tric and diesel buses will be at­tained by 2023. Ad­vo­cat­ing tht the breakeven point come sooner than later, the re­port sheds light on where and how buses will profit from low TCO ir­re­spec­tive of what tech­nol­ogy they are pow­ered with. With In­dia jump­ing on the elec­tric ve­hi­cles band­wagon to cut down ve­hic­u­lar pol­lu­tion, es­pe­cially in the ur­ban ar­eas, TCO is clearly set to be the de­cid­ing fac­tor.

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