Dominion Virginia Power’s Electrifying Bus Announcement: Thoughts on This Potentially Game-Changing Move

by A Siegel (cross posted from Get Energy Smart! NOW!)

Last Friday, Dominion Virginia Power announced a major electric school bus (EV bus) program: to replace 100% of the diesel-fueled school buses (roughly 13,000), in its service area, by 2030 with EV buses. This is a potentially game-changing initiative that could rapidly drive down EV bus prices and open the door for rapid moves elsewhere in the country. (An analogy: could this do, via economies of scale and setting up a real market, for EV buses what Germany did for solar panels?)

The Dominion program merits excitement … but it also raises some questions. This post will

• provide an overview EV bus benefits,
• outline the Dominion Program
• ask questions and provide some thoughts

EV Buses are (ever so much) better than diesel buses

School bus electrification represents one of the strongest and fastest acting ‘win-win-win’ clean-energy moves. Benefits include:

• Improvements in
  • Student educational performance
  • Health (children and rest of community)
  • Local air quality
  • Bus performance
  • Utility service performance (batteries for grid stability and backup)
  • Satisfaction with bus services
• Reduced
  • Air pollution — local to global
  • Noise pollution
  • Bus service costs
  • Total energy costs (not just for school system)

Wow, we can boost educational outcomes, have healthier people and planet, reduce noice, improve electrical grid performance, increase customer (user) satisfaction … all for a lower cost. Why aren’t all our buses electric?

With all these benefits, the fundamental challenge is what so many “energy smart” options face: significantly upfront costs with lower total ownership costs. In other words, even though the buses’ cost to own (CtO) is lower, the cost to buy (CtB) is higher. And, that sticker price is hard to swallow.

Exacerbating this “green-eye shade” challenge are numerous system and process challenges like slow decision-making processes in the face of rapid technological change (EV buses weren’t a real option even a few years ago) and conservative (bureaucratic) approaches leery of taking risks. With that in mind, the cost hurdle is one that few have chosen to leap. Dominion’s proposal takes this upfront cost challenge on directly — and removes it from local school district decision-making.

And, one of the true game-changing potentials of the Dominion plan isn’t ‘just’ the buses in Virginia but that such a substantial program, over a decade-long period, will create enough of a market to get serious manufacturers building electric school buses and the large number will rapidly drive down per unit costs (and thus reduce, significantly, that upfront purchase challenge).

Dominion Virginia Announced Plan

Dominion’s plan is ambitious — in timing and scope. In short, over a ten-year period, Dominion is proposing to upgrade/and or replace 13,000 diesel school buses in its Virginia territory with electric school buses — and pay 100% of the “cost to upgrade from diesel to electric.” This fast-tracked program plans to have 50 electric buses on the road by the end of 2020, 200 buses per year for the next five, and well over 1,000 per year for the rest of the 2020s. Dominion will cover initial costs out of its cash reserves and seek rate base adjustments to cover additional costs in the future (peaking at $1/month per customer).

Announced just before Labor Day, Dominion is opening applications September 5th and closing applications for initial 50-bus demonstration project by early October.

Dominion is offering to cover 100% of the incremental cost for the electric buses along with any/all necessary infrastructure upgrades (such charging and vehicle-to-grid infrastructure). School systems will save money through reduced energy and maintenance costs. It appears Dominion will retain ownership of the battery systems and the ability to leverage bus batteries — when they are not in use for transportation — for grid services.

Issues / Questions / Concerns / Considerations

As a long-time proponent of electrifying school buses (whether as plug-in hybrids or, more recently, straight EV), this announcement had/has me jumping and cheering from the bleachers. Wow. This could change the game in seriously tangible way in Virginia and across the nation!

As a long-time observer (and, well, dissatisfied customer) of Dominion Energy and its climate denial ways, skilled leveraging of The Virginia Way for excess profits, gaming of “green” with (extremely) low quality Renewable Energy Credits (RECs), efforts to undermine distributed clean-energy and clean energy options, slow-rolling of offshore wind, etc., alarm bells are ringing. Is this too good to be true? What is hidden in the fine print? The following are some initial thoughts, reflections, comments that will — hopefully — be considered by government officials, citizens’ groups, third-party organizations, and Dominion in the plan’s evolution and execution.

Will EV buses run on clean electrons? Dominion Virginia’s electric mix is heavily fossil-fuel-generated: coal and, increasingly, fracked gas (where Dominion makes money off the gas, the transportation of the gas, and the electrons from burning the gas). While an EV running off this mix is far better than a diesel on local air pollution and likely better in regional/global pollution than a diesel bus, those calling for EV buses with climate pollution and carbon (and methane leakage) pollution reduction in mind know that the situation would be much better if the buses were running off clean (solar, wind, hydro, nuclear) electrons. Dominion, as with the Atlantic Coast Pipeline, is fighting hard to lock in long-term polluting fracked-gas-fired electricity projects on the backs of their ratepayers. Will Dominion leverage a 13,000 bus program for increased carbon-intensive electron sales? Or, will involved school districts (and Governor Northam and/or a Democratic Party-controlled legislature in 2020) secure commitments for Dominion to assure clean electrons for the clean buses?

Rapidity at odds with responsible government decision-making
Announced publicly on August 30, Dominion is opening applications for the program on September 5 and will close “in early October”. For such a major project, with such significant implications, with almost none of the school districts having considered it seriously, this is incredibly fast track — and enough of a fast track that government entities are likely to be at a real disadvantage in negotiating and dealing with Dominion on how to move the program ahead.

While a serious advocate for EV buses as “the right choice” and wishing accelerated action on climate change, this six-week period between announcement and end of applications is too tight. On first blush, it seems designed to have Dominion in the driver’s seat moving too fast for reasoned and reasonable oversight and due diligence on the part of government agencies and decision-makers. It should be extended … perhaps just by 45 days or so … while, on the government side, the Governor’s office should rapidly convene a specialist’s task force to delve into details and work with local communities and Dominion to identify and resolve potential(ly contentious) issues.

Request for Proposal / vendor selection
The Dominion proposal puts essentially all substantive decision-making with Dominion Energy staff. Are school districts/government agencies comfortable that a potentially opaque Dominion process will select their school bus manufacturer for decades to come? The battery provider? The V2G (vehicle-to-grid) technology? What is the appropriate set of roles and relationships in what will be perhaps the most significant public-private partnership in the Commonwealth for the decade (plus) to come? How will government officials (facilities’ directors? transportation officials? contract specialists? others …) play a role in these processes?

Prioritization of grid? District needs?
Dominion’s proposal has an initial plan for 50 buses to be in operation before the end of 2020. School systems will have to apply to be part of the program and “the final decision being evaluated on the locational benefit the batteries will bring to Dominion Energy’s electric system.” Honestly, there is logic for this. Yet, the “electric system” benefits are only a (small) part of the true benefit equation. How do school district priorities (and enthusiasm, willingness to pay part of the costs, …) play into the equation? Environmental justice issues?

True fiscal implications? There is much uncertain, at this time, as to the actual financial implications. Here are two thoughts/issue areas.

What are school districts giving up in the bargain?
There is a huge bargain for school districts here: Dominion will cover 100% of the extra costs for EV buses (both the buses and V2G infrastructure) and the school district’s will have significantly lower bus operating costs with better performing students. YEAH!

However, there are business reasons for Dominion to propose this program (beyond the massive one of transferring transportation energy use from oil firms (not Dominion revenue) to electrons (Dominion’s business) and government decision-makers should have a sense of those ‘reasons’ before this project goes forward and how those impact local government/the school districts. For example:

• Many large electricity consumers have significant ‘demand charges’. Batteries, behind the grid, can be used to manage electricity demands from the grid and lower this costs. Since Dominion will own the batteries, this financial benefit won’t be there.
• Amid heavy demand periods, places that can reduce their demand on the grid (by reducing energy usage, running generators, or using stored electrons) can generate significant revenue.
• Batteries, hooked to the grid, can provide significant ‘grid services’ — such as maintaining/improving the grid quality and this service has a calculable (commercially viable) value. Again, since Dominion will own the batteries, this potential financial benefit stream won’t be there.
• Batteries can be used for arbitrage: buying electrons when cheap and plentiful, and selling them back when more valuable. Again, since Dominion will own the batteries, this potential financial benefit stream won’t be there.
• Batteries can be used to enhance the value of on-site (renewable energy) generation, potentially reducing costs by using those on-site electrons to run operations rather than buying from Dominion. Again, since Dominion will own the batteries, this potential financial benefit stream won’t be there.

There are serious value streams here … there is a bottom-line financial set of reasons that an electric bus program is attractive to Dominion. Those reasons don’t preclude this from being a smart ‘win-win-win-win’ for students, community budgets, pollution reductions, and Dominion stockholders. It just is incumbent on government decision-makers to understand the full context of the deal before running after something with decades of implications.

Actual financial requirements from rate-payers:
Dominion is taking the initial $26M out of its cash reserves (from excess profits) for a 50-bus demonstration project. (Note: for a separate post, the first year program should be bigger than 50 buses … perhaps 3-5 times larger, with rapid ramping of the program in the years to come.) Stated is a projected required for a $1/month service charge to support the program over the long-term. With about 2.6M customers in the relevant service areas, this translates into about $30M a year in additional charges. With a plan for 13,000 buses over a ten year period, perhaps in the range of over $2B (uncertain how fast, far prices will fall) in total acquisition costs just for the buses (perhaps another $100M or more for charging infrastructure), is this an honest figure (based on Dominion’s assessment of value streams to “the electric system”) or will there be a call for significantly higher charges once the program is locked in and well underway?

To be clear, the benefits in terms of street-level pollution reduction (diesel fumes and noise) likely have a benefit of over $12 per household per year in any event, but some sense of ‘true’ long-term fiscal implications are worth understanding before locking in any form of long-term commitment.

Why is Dominion understating payoffs?
Here is a scratching the head issue space. While Dominion does discuss many benefit streams (reduced carbon emissions, grid services, reduced energy costs and maintenance costs, improved safety), any serious student of the implications of moving from diesel to electric will understand that there is a significant understatement of value streams. Not mentioned, for example, are:

• Reduced asthma rates, cancer risks, and other health issues —
  • While Dominion states that the EV buses air quality inside the bus is 6x better than that of diesel buses, there is no exploration of the implications of such improved air quality (inside and outside the bus.
  • Let’s be clear, diesel fumes from school buses have very serious health impacts on children while also causing harm to adults.
• Improved student test scores
• Reduced noise pollution, reduced particulate pollution, reduced ground-water pollution
• Improved customer satisfaction (note: that is in the short kick-off video)

Now, an honest accounting of societal value would put those first two bullets (improved health and student performance) well above district maintenance savings. They are, bluntly, ‘big deal’ items and should be part of ‘selling’ the program. (“Your child will be healthier … test scores will go up … graduation rates ill improve …” All truthful, high-value items.)

Why wouldn’t Dominion wish to make the strongest case as to “why”?

Some concluding thoughts

Let’s be clear: YEAH! A week ago, few outside Dominion had any idea of how major and potentially game-changing this proposal would be. The benefits of electric buses are huge … for the ratepayers, the students, the communities, for the planet, for … Even if school districts were not to, over a decade period, save a penny, an accelerated move to all electric buses would be the right thing to do.

And, having Dominion making profits from doing the right thing is, well, something to applaud — even with a standing ovation. As per above, there are reasons for alarms bells and concerns.

However, as per the questions and issues above, thoughtful and responsible governance should mean going into this with eyes wide open … and working hard (and fast) to gain understanding of real implications across the board to foster a program that delivers for the common good while allowing business to profit reasonably from their competent management and execution of such a program.