Electrification is poised to turn school buses into money-making arbitrage assets

Across much of the U.S. this summer, as temperatures soared nearly every afternoon, air conditioners clicked on again and again, sending electricity demand through the roof. Just north of Boston, the normally temperate coastal city of Beverly was no exception. Since the Fourth of July, the city has experienced nearly 20 days when temperatures crested 90 degrees Fahrenheit, 10 degrees above the average high.

When electricity demand surged, the city’s small fleet of electric school buses sprang to life, sending electricity stored in their massive batteries back into the grid to prevent brownouts and blackouts. So far, the buses have contributed 10 MWh of electricity on 30 separate occasions to National Grid, the regional utility, according to Highland Electric Fleets, which supplies and manages the buses.

The test, while small, hints at the massive potential for school buses to stabilize a grid that’s being increasingly threatened by extreme weather wrought by climate change. There are nearly half a million school buses in the U.S., and many of them sit idle for more than 18 hours per day, a number that’s even higher in the summer.

“These electric buses can do a lot more” than diesel buses, said Sean Leach, director of technology and platform management at Highland. “They can move the students however many times a day they need to, and then in other times of the day, they can become resiliency assets to support the community.”

Today, there are only a few thousand electric school buses in the U.S. But that’s about to change. States like Maryland and Maine have laws mandating their adoption, and others like Colorado and New Jersey have been running pilot programs. In addition to being cheaper to operate over time, the buses don’t pump out pounds of diesel pollution next to vulnerable children’s lungs.

With the passage of the Bipartisan Infrastructure Law, the frontrunners now have access to $5 billion to accelerate their rollout.

“The money that’s out there now to fund the school bus projects is extremely significant,” Leach said.

Oftentimes the upfront cost of the buses plus the required infrastructure makes the transition financially challenging for school districts, especially smaller ones. But even larger districts can have a hard time justifying the one-time expenses. In response, companies like Highland, which has raised $253 million, are rolling out what are essential subscription services for electric buses.

In Highland’s case, the company provides the buses, upgrades depot infrastructure, manages charging, trains drivers and techs, supplies the electricity and reimburses for repairs. Electric vehicles tend to cost more upfront, but their running and maintenance costs are significantly lower over the life of the vehicle. Companies like Highland bear the upfront cost and then recoup their investment through subscription payments over time. The goal, Leach said, is to “give all that to them for the same price or less than what they would pay for a diesel bus.”

Drivers have been pleased with the buses, too — anecdotally, kids aren’t as rowdy because they don’t have to talk as loudly to be heard — and using buses as backup batteries could sweeten the deal further. Electric utilities and grid managers often pay large customers hefty sums to reduce demand on the grid during hot weather so they don’t have to fire up their peaker power plants that only turn on during times of peak demand, which tend to be the least efficient and some of the most polluting.

“At the end of the day, they’re looking to not use peaker plants. And if you have a certain number of buses at depot, that’s a peaker, and it’s one that doesn’t really make much noise and there’s no emissions,” Leach said. Schools that participate in the programs are eligible for discounts in the contract, he said.

The buses Highland uses, Thomas Built Buses’ Saf-T-Liner C2 Jouley, each have about 201 kWh of available battery capacity, and they can charge and discharge at up to 60 kW. The more buses in a depot, the larger and longer an event they can respond to. Each bus battery holds enough energy to power about seven average homes for one day.

Leach said that typically they’ll receive notice of a grid event the day before, though sometimes they’ll have only a few minutes to respond. Their software, which they’re developing with Synop, another startup we’ve covered, can respond within minutes to demand spikes, and the buses can switch from charging to discharging instantaneously, he added. Currently, there’s still a bit of manual intervention that happens, but in a couple of weeks, Leach expects the process will be fully automated.

The whole process requires specialized vehicle-to-grid, or V2G, chargers. Those chargers and the infrastructure to support them are more expensive, but responding to grid events is lucrative enough to make it more than worthwhile.

Though the company has been testing the setup in Beverly, Leach said its largest V2G deployment will be in Montgomery County, Maryland. There, the company is rolling out new buses in batches, and by next year, Highland will be managing more than 80 buses across the county with a total storage capacity of 16 MWh.

Highland and Synop’s software monitors each bus on its route and at the depot, identifying which ones can be used to supply power to the grid without compromising their ability to get students to school. Leach said they also monitor battery health on the buses so they can balance wear and tear across the fleet.

As more school districts move to electric buses, the storage potential will rise in kind.

“At the end of the day, it’s similar to what Tesla is doing with their Powerwall fleet,” Leach said. “Unlike Tesla, we have a much more predictable use pattern for our buses. We have larger batteries scattered all over the place with a giant utility connection going to them. So we have a much better idea of how much power we have available and when and we can work with utilities to make sure it’s deployed at the right times.”