E-bus Deployment Model for ERP

Proposed Structure of this Public Private Partnership (PPP) Model

The project will be leveraging a New-Refurbish-Finance-Bulk-Fees model. To convert the current public utility buses to electric vehicle (EV) buses with the appropriate charging infrastructure leveraging both supported financing and subsidies from the party purchasing the emission reduction credits will require commercial coordination that may be best handled by a new private entity working closely with the municipal government or state-owned entity and relevant transport authorities. Given the potential for negative impacts to the business of bus operators, engaging an independent new entity, and a non-profit organization as is assumed in this model, to execute the project activities may enable better cooperation and buy-in from all parties involved.

Table 1: Model Attributes

Proposed risk allocation of the Public Private Partnership Model

Key features of PPP structure

• Private sector entity to design, build, finance, operate and maintain public transport project via a long-term agreement with the ministry/ government or state-owned entity
• The private sector entity acts as the implementation partner, and is responsible for all activities related to the implementation, management, monitoring and reporting of the project over the project crediting period
• In exchange, private sector entity can earn the fees from public transport use by end users as well as EV charging services
• Ministry offers long term concession agreement to the private sector entity operating company in exchange for receiving a portion of proceeds from emission reduction credit (ERC) sale
• Potential to include financiers in this PPP structure in exchange for portion of ERCs earned in this project

Expected ERC end use

• End use can belong to project developer as part of additional revenue stream

Key considerations/risks for proposed project

• Extensive stakeholder engagement required to ensure buy-in from operators of public transport as well as any other relevant stakeholders
• Need to consider any regulatory requirements of minimum domestic company involvement according to local company law
• Need to work with grid operators to ensure stable good energy grid capabilities to withstand increased electricity consumption from use of electric vehicles
• Demand for EV public transport will need to be high to justify project build out (e.g., increased public transport modal share from private vehicle usage)
• Stable political environment key to enable smooth execution of large-scale public transport project
• Partnering with a service provider for the project’s marketing, sales and pricing is needed to identify potential offset buyers, negotiate contracts, and secure good target price per tonne to enable the financial viability of ERC generation
• Contracting a monitoring, verification and reporting (MRV) service provider with experience in conducting MRV and preparing the necessary documents for generating ERCs in a voluntary carbon market standard will reduce risk of registration and issuance delays or bottlenecks, and strengthen credibility of project’s carbon integrity quality

Figure 1: Financing and Activity Flows for the Model

Case study: Bangkok E-Bus Program, Thailand

Project description

The program aims to introduce electric vehicles for privately-owned public transport in Thailand’s capital Bangkok to reduce GHG emissions on a broader scale. Energy Absolute will enter into agreements with privately-owned operators of scheduled bus routes in the Bangkok Metropolitan Region with the objective to replace 100% of the existing internal combustion engine bus fleets. A charging station service network for these e-buses will be implemented.

The program will replace the use of 500 conventional (diesel & natural gas) buses with e-buses on a substantial number of existing and new privately operated bus lines that provide a regular, scheduled service. The daily bus ridership in Bangkok serves up to 800,000 to 900,000 passengers.

Targeted results

Expected ERCs from the program will be a minimum of 500,000 tonnes. The climate protection measure will contribute significantly to improving the air in the capital is expected to pioneer the electrification of Thailand’s mobility sector.

Figure 2: Structure of Case Study PPP

Thailand and Switzerland signed a cooperation agreement on climate action under Article 6 of the Paris Agreement on 24 June 2022. This bilateral agreement regulates the cooperation between the two countries and establishes the legal framework for the implementation of climate protection activities by the KliK Foundation. The internationally transferred mitigation outcomes (ITMOs) achieved with KliK Foundation’s financial support are transferred in accordance with the bilateral agreement and used to meet Switzerland's emission reduction target under the Paris Agreement. The cooperation agreement ensures that the ITMOs, in addition to Thailand’s unconditional nationally-determined contributions (NDCs), meet the highest standards of quality, environmental integrity, sustainable development goals (SDGs) and human rights. To avoid double counting, Thailand commits to increase its emissions balance by the amount of ITMOs transferred to Switzerland.

Cooperation under the bilateral agreement leads to investments in climate mitigation technologies. The goal is to foster more efficient and more innovative businesses as well as more modern and cleaner technologies in Thailand. Until 2030, the KliK Foundation expects to support climate mitigation technologies in Thailand with $100 million (M)¹.

The experience to be gained from this KliK-supported Mitigation Activity will provide valuable insights on digitalized MRV systems for carbon programs and support infrastructure creation. In doing so, it will support greater NDC mitigation ambition for Thailand. Carbon finance by the KliK Foundation from the purchase of around 500,000 tonnes of ITMOs until 2030 shall be used to level total cost of ownership differential between baseline buses and the program e-buses.

Summary of the model financials

Assuming a similar project context of replacing 500 diesel-powered buses with E-buses, the project’s Net Present Value (NPV) only considering non-ERC inflows through other revenue streams or cost savings enabled by the project – is negative at $ 11 M. With ERC cashflows, total project finances improves to have a positive NPV of $ 2M. Generating ERCs is crucial in this type of project as it enables it to generate a positive cash flow in the long term. These projects may also find it difficult to be executed due to typically high upfront capital requirements (e.g., replacement of total bus fleet). ERCs can be effective in establishing market attractiveness for investors looking to finance green projects as well as obtain ERCs.

Table 2: Summary of sources of inflows and outflows and key assumptions

Table 3: Net cashflows summary (in USD)

Footnote 1: All prices are expressed in United States Dollars (USD)