Electric buses rev up the race to net zero

Each of Australia's state and territory governments has now set targets to shift bus fleets from diesel powered to zero emissions technologies by 2050¹, using either electric or hydrogen-powered technology. At the same time, some private-sector operators are making similar commitments to take their fleets to zero emissions.

This has triggered a race among manufacturers, suppliers and operators, who are battling competitors from other geographies and a crunch in the global supply chain to deliver tens of thousands of new vehicles to Australia over the next couple of decades².

"It's a massive undertaking, but everyone recognises that this switch will have a meaningful impact on our country's carbon footprint," says Chris Moldrich, General Manager Asset Finance and Business Financial Assistance at CommBank.

The challenges to adopting new technologies on a compressed timeline are many, with each segment of the ecosystem facing its own barriers. Bus manufacturers need access to batteries and other components, which means finding capacity in global production lines or creating domestic supply to deliver on transitioning Australia's 100,000-strong bus fleet³.

For operators, a key challenge centres around housing charging infrastructure, either by sourcing larger greenfield depot sites or upgrading existing facilities. Operators are also redesigning operating routes to ensure services can be maintained within battery supply constraints.

The measure of financing required to achieve the transition is significant. For Australia's eastern states alone, it means replacing more than 21,000 buses over the next 20 years, at a cost of around $15 billion, assuming an average electric bus price at $700,000, according to estimates from GoZero Group Management based on public transport fleet numbers⁴.

"This is why we're working very closely to support our clients with access to capital to facilitate their net zero transition," says Jane Thomson, General Manager Major Client Group NSW at CommBank.

CommBank customer GoZero, a manufacturer and integrator of zero emission solutions and vehicles for business and government fleets, recently finalised $80 million in asset finance facilities with CommBank. The financing is being utilised in part to source and ultimately replace existing diesel charter coach services with electric buses for independent schools in Sydney through its GreenSchools1000 initiative.

Stephen Cartwright, CEO of GoZero, says the school sector is just one key segment they have an eye on to support as the nation looks towards 2050.

"We're starting to build our exposure in other bus segments, and in other states outside of New South Wales. Charter companies, corporates, RSL clubs, worksite charters; they all have large fleets in each state that need to transition to electric by 2050," he says.

"We're about to send three hydrogen fuel cell electric buses to the Tasmanian government, and a number of our electric buses are operating in Brisbane now, both at the airport and doing government services. We have a smaller footprint in the other states, but clearly our ambition is to get much larger, much faster in those jurisdictions."

The challenge with some interim targets set for as soon as 2030, is being able to do enough, quickly enough.

It is especially tricky in Australia where our smaller market can make us a lower priority for global supply partners. In addition, our specifications are different from those overseas, meaning we have major supply chain issues to contend with.

GoZero is hoping to address this in part by increasing their manufacturing capacity.

"As soon as we can, we'd like to establish manufacturing operations in Queensland and Victoria, in addition to the factory we already operate in New South Wales, and expand our engineering, procurement, design and R&D capabilities. We want to continually innovate our bus designs so that we deliver solutions and new models for the Australian market, that are world class, and manufacture the materials we need for these fleets to transition by 2050."

Thomson says the bank is also focused on all aspects of this transition.

"There will be a need to not just transition the fleet to lower emission technologies but also to upgrade depots and charging infrastructure."

"The bank is very focused on all aspects of the transition and the technology shift. We know there will be a significant financing need to implement these changes. and we want to provide this customer base with this crucial support.  As a bank, we have a $70 billion Sustainability Funding Target to achieve by 2030, and supporting the electrification of the Australian bus sector on and working with customers like GoZero is an important part of that," Thomson says.

Moldrich says while the upfront costs for electric buses are higher, the Total Cost of Ownership (TCO) is actually lower than for diesel buses, so the long-term economic benefits far outweigh the initial costs. "Electric buses, at between $700,000 and $1 million each, can have an upfront cost up to 30 per cent higher than for diesel buses. Lenders need to recognise and help address the challenge of making a large upfront investment in both the bus and the charging infrastructure that will take time to deliver return."

"CommBank has a dedicated focus to ensure our business customers are supported with our expert advice and tailored, sustainable finance products, as we look towards a lower emissions economy, and greener future," Moldrich says.

This article was originally published in The Australian Financial Review (Nine Publishing) on 11 March 2024.