Introducing electric buses in urban areas: Effects on welfare, pricing, frequency, and public subsidies

We study optimal degree of bus system electrification for Stockholm's longest high-frequency bus line. We evaluate the welfare effects of opportunity and depot charging fleet configurations with batteries charged during dwell times at terminal stations or during the operating pause in the bus depot, respectively. Electric buses (e-buses) significantly reduce carbon and health damaging emissions of transit services. However, e-buses are presently not welfare improving, because their lower external costs do not offset the higher supply costs (e.g., capital cost of charging infrastructures and batteries). Instead, we find that optimising bus fares and frequencies and road pricing is more effective in improving social welfare and carbon emissions. E-buses significantly reduce surplus of bus operators, which thus are reluctant to adopt these technologies without direct public support. Sensitivity analysis shows that: (i) technological developments to substantially reduce capital costs can make e-buses perform well from a social welfare perspective; (ii) efficiency gains obtained in the operation of the service, e.g., by optimizing on-board conditioning systems, but also bus routing and driving style, can have a greater impact on the cost performance of e-bus fleet configurations than simply reducing capital costs. An argument for ebuses is the efforts in coordinating a transition to electrified vehicles, aiming at reducing the risk of futile investments in charging infrastructure.