Electric Avenue: Two Case Studies on the Economic Feasibility of the Electrification of Transportation (Solar Charging Stations in CA & University Buses in NC)

Abstract

The 2007 IPCC report solidified that global climate change is occurring due to the release of greenhouse gases (GHGs) by the anthropogenic activity of burning of fossil fuels. The effects reach beyond the realms of the environment and into health, public policy, national security and the economy. In the U.S., transportation is the largest energy user by end-use sector and I have chosen to focus on the electrification of transportation as one of the more promising approaches to the sector that addresses at the same time multiple facets of the environmental crisis. This is accomplished through the building of bottom-up, spreadsheet-based financial models because economic considerations are the main drivers of the adoption of these kinds of alternative solutions. Two types of solutions are considered: (1) solar charging stations for plug-in hybrid electric vehicles (PHEV) and electric vehicles (EV) in California, and (2) a comparative look at diesel hybrid vs. electric buses for Duke University. The Financial Feasibility Model (FFM) for solar charging stations in California shows there are many combinations of user-selected inputs that yield profitable investment outcomes. This is applicable for all three scenarios with Scenario 1 achieving the break-even point quicker than Scenario 2 and, in turn, Scenario 3 due to the higher upfront costs of the latter scenarios. The option of financing the project with user-specified loan parameters can yield added Net Present Value (NPV) if the interest rate for borrowing is below the discount rate. The FFM for university buses in North Carolina indicates that switching from traditional diesel buses employed on university campuses such as Duke to alternatives like diesel hybrid or electric buses also makes financial sense. Over the life of the service of the vehicles, a comparative cost-benefit analysis indicates that both technologies come out ahead of diesels with diesel hybrids breaking-even first before electric buses due to the higher upfront cost of the latter. While air quality, noise pollution, branding, public relations and other intangible assets have clear value, they are not included in both models due to the difficulty of assigning monetary values to such variables. The take away from the project is that both models use conservative parameters to underestimate the benefits for better financial decision-making for the stakeholders, that the results show that there are many avenues towards profitability and that these models are some of the first, if not the first, publicly-accessible of their kind.