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Schools Welcome Electric Buses, but Aren’t Sure About Owning Them

Generous federal funding will help school districts convert their fleets of aging, polluting diesel buses. But the complex financial question they face is whether to own or lease them from a third party.

An electric school bus at a charging depot in Montgomery County, Md. (Highland Electric Fleets)
When Tim Shannon became the director of transportation for Twin Rivers School District in 2014, he inherited what he calls the “oldest, most decrepit fleet in the entire nation.” Buses were continually breaking down, but Shannon didn’t have much of a budget to replace them. But a meeting with a self-described electric bus evangelist clued him into a range of ways the California school district could get funding for buying new buses — provided they were electric.

A lot of meetings, supportive letters from politicians and at least one 280-page grant application later, Twin Rivers ended up at the forefront of switching to electric school buses, with 57 buses on the road, almost 40 percent of its entire fleet.

Electric school buses have been slow to take off across the country, despite their benefits: cutting greenhouse gas emissions, avoiding diesel air pollution around students as well as lower operating costs. But the up-front cost has held otherwise willing school districts back. Prices for electric school buses can be as much as three times as traditional diesel buses.

But the number of electric school buses on the road in the U.S. is going to explode in the next few years. Passed in 2021, the Infrastructure Investment and Jobs Act set aside $5 billion in federal funding for alternative fuel school buses, at least $2.5 billion of that specifically for fully electric buses. Before 2022, the World Resources Institute estimates the grand total for electric school bus grants — both state and federal — totaled just over $400 million, more than half of that awarded in California.

The first round of the new federal funding is about to be awarded through an EPA lottery rebate program for buying new buses and installing charging infrastructure. Interest in the program was exceptionally high. The EPA says it received 90 percent of the applications for fully electric buses and “given overwhelming demand” doubled the amount of money awarded through the rebate program this year to $1 billion.

But not all the applications were from school districts. Some applied with fleet companies to purchase buses on behalf of the schools they’d run as part of a contract with the district, as long as they did so for at least five years.

School districts looking to run electric buses face a choice: buy outright or contract with a third party to manage their way into electric transportation, including new businesses exclusively focused on electric buses — but may not be eligible for funding.

Among these new leasing models is one offered by Highland Electric, a Massachusetts company that inked a deal with Montgomery County Public Schools (MCPS) in 2021 for what will become the largest deployment of electric school buses. The Washington, D.C. suburb’s 1,300 bus fleet covers a sprawling district with five bus depots. As of the beginning of this school year MCPS has 22 electric buses on the road, and expects to have 66 more delivered by the end of the year.

Under the deal, Highland purchases and owns the buses, is responsible for the maintenance, as well as installing and managing the charging infrastructure. MCPS pays a yearly fee under a four-year contract, with the option to continue.

“They’re taking a bet,” Michelle Levinson, a manager at WRI’s Electric School Bus Initiative, says of companies like Highland. “They wrap a full fleet transition in. So they are basically taking those future savings when we anticipate the total cost of ownership to be lower in later years of the deal.”

Levinson says getting external help on managing the new buses and their infrastructure is especially meaningful for school districts in a crunch or that run their bus fleet through local “mom and pop” contractors.

“Suddenly you have to become an electricity expert,” she says. “This is very uncomfortable territory for a fleet manager who's already dealing with existential bus driver shortages.”

Chris Cram, MCPS’ communications director, said the district sought a leasing provider, despite owning all of their diesel buses, because it’s a cost-neutral relative to running diesel buses and because they expect to be able to fully electrify their fleet within 10 years this way.

Zum, a school transportation provider, has a different service model that offers a mix of school buses, small buses and more ride-share-style vehicles as part of their contracts, which includes schools in Oakland, Calif.

Some larger traditional contracted bus companies are also getting in on offering some of the technical assistance needed to start an electric bus program from scratch.

Ben Harri, transportation director at St. Paul Public Schools in Minnesota, put in a rebate application for two district-owned buses, and 22 buses contracted with their largest fleet operator, First Student.

If St. Paul’s schools are awarded the rebate, Harri expects to work with First Student’s existing electrification team on charging infrastructure and route planning.

“They're actually running 115 electric buses in Quebec,” Harri mentions, saying experience running buses in a northern climate in winter was important to him.

Third-Party School Bus Providers

But without ownership, schools that lease EV buses could miss out on the same value the contracted companies are counting on across the life of the deal. A district that owns their buses would recoup any fuel and maintenance savings directly, as well as potentially benefit from using bus batteries to power or balance the grid when they are not in use, Levinson says. That’s something that Twin Rivers is currently negotiating with their local utility and is the basis of a utility-run pilot program in Virginia.

The funding in the rebate program this year didn’t automatically push districts WRI worked with toward owning the buses or not, Levinson says. The EPA has not yet provided a breakdown of how many applications were directly from districts.

But the idea of other companies managing their electric school bus transition is attractive even to schools already ahead of the curve. At Twin Rivers, Tim Shannon applied to buy more electric buses under the rebate program, but says if he was starting now, he’d definitely go with a managed model.

Ownership was “just a model we had to take” to replace an exceptionally old, dirty fleet, and given the funding options in California at the time. Having someone take on the liability and the maintenance costs of buses sounds far better to him.

“Maybe if you're only getting three buses and that's all you're ever going to get, [ownership] might be the way to go,” Shannon says.

In East Cleveland, Ohio, Dr. Ann Spurrier, grants manager for the town’s school district, applied for four electric buses. The district had previously looked into going electric when they needed to buy new buses, but it was cost-prohibitive.

“It was complicated by the fact we just purchased three brand new diesel buses,” Spurrier says, adding that the school currently has four old buses they don’t need, which will be scrapped as part of the rebate application. Until just this year the school had seen declining enrollment.

But they never considered anything but buying the buses outright, Spurrier says, and have already started planning for the infrastructure.

East Cleveland doesn’t outsource, she says, including security and food service, because the current superintendent doesn’t like breaking up unions. Bus drivers were also asked to give input on which electric bus style they felt most comfortable driving before they applied.

The particular needs of the school district also dictate whether they are owning or contracting for their first electric buses.

One of the reasons St. Paul Public Schools went with applying for only two owned buses versus 22 on contract were unknowns about how the buses’ charging times would work with their schedule.

“We're running throughout the entire day,” Harri says, “I wanted to gather some more information for ourselves before really getting into it.”

Even in East Cleveland, a city of four-square miles, infrastructure concerns modified their rebate application.

“I was gonna go whole hog and maybe go [for] six,” Spurrier says. “But our kids travel farther than [the bus’ range] routinely for field trips, for athletic events.

“You have to maintain at least a couple of diesel buses in order to make those trips happen until we have a state infrastructure to charge buses,” she says, adding that once charging infrastructure is more robust in Ohio, the school district would absolutely switch to all electric buses.

Taylor Kate Brown is an independent journalist focused on local and state climate action. She's previously worked for The San Francisco Chronicle and the BBC and publishes a weekly newsletter, The Planet You Save May Be Your Own.
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