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