In the coastal city of Gulfport, Mississippi, the state’s first fully-electric bus will soon be cruising through the city’s downtown streets.

The same goes for Portland, Maine—it just received a grant to buy that state’s first two e-buses, which are set to roll out in 2021. And Wichita expects to have Kansas’ first operating electric bus picking up passengers as early as this month after receiving a federal grant.

As cities and states across the country set ambitious mid-century climate change goals for the first time and as prices for lithium-ion batteries plummet, a growing number of transit agencies are stepping up efforts to replace dirtier diesel buses with electric ones.

Nearly every state has a transit agency that now owns—or will soon own—at least one electric bus, according to a recent report from CALSTART, a clean transportation advocacy group.

Demand for e-buses is outpacing manufacturers’ ability to supply them, resulting in hundreds of backlogged orders in the United States, said Fred Silver, vice president of CALSTART.  “Almost every state now has a program. So that is unique—it’s gone beyond interest in just a few states.”

The U.S. numbers are still small compared to the hundreds of thousands of electric buses in China, but they’re growing. There are about 650 e-buses on U.S. roads today, but that’s more than double the 300 that the clean energy research group BloombergNEF counted last year. And under current pledges by states, cities and urban transit agencies, at least a third of the nation’s nearly 70,000 public transit buses will be all-electric by 2045, according to a separate report from the U.S. Public Interest Research Group (U.S. PIRG).

So far, California leads the pack, with more than 200 e-buses in service and several hundred more in backlogged orders. Only five states—Arkansas, New Hampshire, North Dakota, South Dakota and West Virginia—have no transit agencies planning to operate electric buses or hydrogen fuel cell buses, another type of zero-emission vehicles.

Swapping diesel for electric buses isn’t as simple as pressing the starter button, though, and local transportation agencies are still feeling their way through the challenges. The upfront costs are still higher for electric buses than diesel; cities have to build out charging infrastructure to support them; and, in some cities, electricity rates have cut into the savings.

But urban leaders also see long-term benefits in fuel savings and for human health and the climate.

The transportation sector has become the largest contributor of greenhouse gas emissions in the United States, responsible for nearly 30 percent of total emissions across the country, according to Environmental Protection Agency data. Heavy-duty vehicles, which include passenger buses, garbage trucks and delivery trucks, account for about a quarter of the global warming emissions from vehicles. And the latest climate science makes clear that emissions from all automotive tailpipes must fall to zero by around mid-century to have a shot at avoiding catastrophic climate change.

“Transitioning transit bus fleets to zero-emission technologies over the next decade alone won’t solve climate change,” said Don Anair, the Research and Deputy Director for the Union of Concerned Scientists’ Clean Vehicles Program. “But it is a critically important step for cities.”

The Challenges and Benefits of E-Buses

Transit agencies tout electric buses not just for their climate benefits but also for their health benefits and long-term cost savings.

Inhaling diesel exhaust can cause respiratory diseases and exacerbate asthma. And refueling and maintenance costs for electric vehicles are typically cheaper than their internal combustion engine counterparts.

In Chicago, the city’s transit agency estimates that its two e-buses save the city nearly $110,000 a year in health care expenses due to less air pollution from diesel buses. The buses are also saving the city more than $24,000 annually in fuel costs and $30,000 annually in maintenance costs.

As battery technology has improved, so has the driving range of electric buses—many modern e-buses can now run all day without recharging. It has also made them more affordable. The average price of battery packs that power e-buses has dropped about 85 percent since 2010.

The upfront costs of the buses can still be prohibitive though. And transit agencies transitioning to electric fleets also need to build out charging infrastructure, which can cost a major city millions of dollars, on top of the steeper price for e-buses.

“An e-bus in the U.S. today probably costs around $750,000,” said Nick Albanese, a research associate with BloombergNEF who specializes in the electric vehicle market. “A diesel bus today is still only $550,000,” he said.

One way to reduce some of those upfront costs is by renting the batteries, Albanese said.

Proterra, the largest U.S. electric bus manufacturer, recently began offering battery leasing to help lower upfront costs of electric buses. “They’re allowing city transit agencies to purchase the bus shell and rent the battery through them,” Albanese said. “So, essentially, you’re turning the battery rental into a fuel cost.”

Some transit agencies have run into another challenge—high demand pricing from their local electric utility. In King County, Washington, the county’s electric buses saw higher per-mile fuel costs than its diesel fleet due, in part, to high electricity demand charges. The Denver area’s transit agency worked out an agreement with Xcel Energy this year after similar problems with demand charges on one of its routes.

The U.S. PIRG report urges agencies moving to electrify their fleets to work out deals in advance with utility companies since electricity is metered on volume as well as peak demand times, which can make the pricing of charging an e-bus more complicated than refueling a diesel one.

Funding Streams Emerge

The spike in electric bus programs across the country has come mostly from funding through an Obama-era grant program, which has financed clean energy transit projects in at least 38 states this year alone.

That grant program is set to end next year, but other programs underway could continue to fuel an electric bus expansion.

The Volkswagen “Dieselgate” settlement, which resulted from the automaker’s deliberate violation of U.S. clean air standards, made available billions of dollars for states to invest in zero-emission transportation and infrastructure. States including New Jersey, Colorado and Maryland have acquired dozens of new electric buses using that settlement money, according to the U.S. PIRG report.

In California, the state’s cap-and-trade program has also raised more than a billion dollars since 2013, part of which has been used to spur its electric bus fleet.

A new initiative among several New England and Mid-Atlantic states is aiming to create a new regional cap-and-trade program targeting transportation there by next year.

As of now, 12 states and the District of Columbia are working together to design that program, called the Transportation & Climate Initiative. In October they released its initial framework, though the details are still thin.

“They’re all working together on this process of designing a proposal,” said Pete Rafle, the communications director for the initiative. “But ultimately, each jurisdiction will make its own decisions on how to invest its portion of the proceeds from the auction of allowances.”

China Leads the World, By Far

While the U.S. steadily grows its electric bus fleet, its efforts have been dwarfed by China, home to 99 percent of the world’s electric buses. “They’ve gone from around zero e-buses back in 2010 to over 400,000 at the end of 2018,” Albanese said.

Out of the roughly 425,000 electric vehicles around the world today, China owns about 420,000 of them, according to BNEF, and the country’s municipal fleet is projected to rise to more than 600,000 by 2025. Much of that growth is because China mandates electric bus use at the federal level, unlike in the U.S. where cities and states are taking the lead.

The country also nationally subsidizes its manufacturing of electric buses, which has helped lower the costs of them worldwide. China is now shipping electric buses in mass to other countries, including the U.S.

“On that front, China’s efforts in the U.S. market have been really critical,” Albanese said.