PAYS: A Financing Model for School Bus Electrification

As more school districts are looking to electrify their bus fleets, they are struggling to afford the costs associated with electric school buses. Although electric buses provide many benefits to public health and school districts, including 500% greater fuel efficiency, cost savings from fuel and maintenance, and will eventually cost less over the course of their lives than diesel-fueled buses, the upfront costs today on average are $240,000 more than a diesel bus when including the charging infrastructure. Many school districts have very tight budgets, making that extra initial expense difficult to manage without outside help.

One solution is to involve the electric utility using the Pay As You Save (PAYS) system from the Energy Efficiency Institute. The model would allow utilities to invest in the charger and battery for a bus. The utility’s investment is recovered through a charge on their monthly electricity bill, and when the cost of the equipment is paid off, the District owns the bus, battery, and charging station. The monthly payments are capped at an amount that is less than the district’s estimated monthly savings on fuel. The battery and charging station are covered by the manufacturer’s warranty. The PAYS system is currently in use in several cities and towns across the country for building efficiency upgrades and there is an opportunity to expand the program to school buses.

Where programs based on the PAYS model have been offered, it has succeeded in unlocking access to those who have historically been locked out of energy efficiency programs due to lack of credit, capital, or the requirement of homeownership. Instead of asking customers to pay a large upfront cost to ensure future savings, it delivers savings from the start, even with a monthly charge on their bill. Since PAYS is not a loan in the traditional sense, it is available to people regardless of their credit score as long as they are in good standing with their utility provider. The immediate savings could make it especially attractive to school districts and bus companies, which often don’t have the ability to make energy efficiency investments that do not deliver in the short-term.  

In New York City, an electric school bus pilot program spearheaded by City Council Member Rafael Espinal is planned to launch in the fall of 2019. The pilot will include up to four buses with $1.25 million in City funding secured. With PAYS financing, that same amount could secure at least 20 electric buses to help the city transition to an all-electric school bus fleet.  

An electric school bus pilot currently running in White Plains is funded in part by Con Ed, the same utility provider that services New York City, signaling clear interest in school bus fleet electrification. Utilities are exploring paths to accelerate vehicle electrification and are uniquely poised to offer an innovative financing solution such as PAYS for clean school buses. PAYS can be combined with other sources of funding for electrification, allowing NYC to potentially leverage public funds like the Volkswagen settlement with Con Ed investments.

This solution could accelerate school bus electrification while unlocking utility investment for any cost-effective EV investment. PAYS for Clean Transport recently received a feasibility study grant. Clean Energy Works, a non-profit that connects school districts with utilities, plans on using the grant in Lima, Peru, where they are engaged in a feasibility study of the potential for PAYS to finance the city’s transition to electric buses. The success of that project will determine its expansion to other cities and countries.

With its potential to accelerate the electrification of New York City’s school buses, PAYS is an option worth considering.