Financing instrument and amount

On-bill financing for electric public buses

Background

In 2017, Santiago, Chile introduced a public transport electrification project aimed at electrifying 25% of the city’s public bus fleet by 2025. An innovative on-bill financing scheme was introduced to finance the new electric buses. Metbus, one of Santiago’s private bus operators, collaborated with Enel, an Italian utility company, and BYD, a Chinese vehicle manufacturer on a pilot project to introduce electric buses. The pilot proved a success and was expanded to make Metbus the largest deployer of electric buses in Santiago.

Approach

Metbus, one of Santiago’s private bus operators, collaborated with Enel, an Italian utility company, and BYD, a Chinese vehicle manufacturer. Enel acted as the financial agent and energy provider, and leased BYD’s electric buses to Metbus for a period of 10 years. Metbus was responsible for operating the buses and providing basic maintenance, while BYD was in charge of the more sophisticated maintenance, including battery packs. Metbus also had an agreement with BYD whereby the manufacturer would be responsible for any fines incurred if the buses do not meet performance.

An innovative on-bill financing scheme was introduced to finance the new buses. The utility (Enel) would cover the upfront cost of purchasing new electric buses from BYD using internal funds or debt financing. The bus service operator (Metbus) will lease the buses from the utility with no additional upfront cost over buying a diesel bus. Instead, the cost is recovered through a fixed tariff on the bus operator’s monthly electricity bill with the payments to Enel administered through a Financial Administration Agency that is part of Santiago’s broader public transportation system and responsible for the distribution of funds in the system. The tariff is calibrated to ensure the estimated operating cost of an electric bus is comparable or less than a diesel bus. Once the utility’s costs were fully recovered, Metbus would own the bus and chargers.

Results

The pilot project started with two BYD buses and was a success, with the operating cost of an electric bus calculated at USD 0.10/KM, compared to the costs of a diesel bus, at USD 0.43/KM. Building on the pilot’s success, Metbus worked with Enel and BYD to add an additional 100 buses to its fleet in 2018. This increased by a further 183 buses in 2019 and a further 150 buses in 2020, making it the largest deployer of electric buses in Santiago, Chile.

With a fleet of 400 buses, Metbus has contributed to a reduction of close to 20,630 tonnes of CO2, marking an approximately 5% decrease compared to 2018 levels. Beyond this, operators have reported the frequency and reliability of electric buses are on par or superior to those of conventional buses, highlighting the benefits of an electric bus fleet. Maintenance and operational costs are also lower for electric buses as compared to diesel buses.