BSOG Reform Drives Transition to Zero Emission Buses

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Reshaping BSOG for a Net-Zero World
Daniel Hayes
18th June 2019
Institution for Mechanical Engineers, London
Project Manager

Contents
1. BSOG Reform Context
2. UK Zero Emission Bus fleet target (?)
3. BSOG LCEB incentive reform
4. Driving demand for biofuels
5. BSOG base incentive reform to £/km
17 June 2019 THE LOW CARBON VEHICLE PARTNERSHIP

BSOG Workshop Context
LowCVP proposals on BSOG:
• Focusing on English Bus market only (not incl. London)
• Proposals to update BSOG LCEB, support for biofuels and switching to £/km basis
Context
• Declining Bus Patronage & 25 % decline in annual new bus registrations (retrofitting instead?)
• RTZ Strategy sets 2040 target for all new cars/vans to be zero emission
• When can the English/UK Bus market achieve 100% Zero Emission Fleet?
• Changes to BSOG now will affect procurement over next 10-20 years

Proposals
1. Update BSOG LCEB incentive; increase support for ZE technologies, decrease
incentive for efficient diesels (ASAP)
2. Drive biofuel uptake by decreasing support for diesel through Base BSOG rate
3. Shift to £/km incentive by slow transition away from diesel over next 30 years

RtZ objective: How to flip market to ZE?
➢ Continue to provide capital support for ZE vehicles and supporting infrastructure
(ULEB Scheme)
➢ Increase BSOG support for ZE technologies vs diesel
➢Provide infrastructure funding to local authorities that can be used to support bus
➢ Maintaining current support is crucial to help combat decline in bus
➢Set a date for all new buses to be Zero Emission?

How soon can UK achieve 100% ZE Bus Fleet?
0
2000
4000
6000
8000
10000
12000
14000
16000
2020 2025 2030 2035 2040 2045 2050
No.ZeroEmissionBuses
Examples of Zero Emission Bus Targets
London
Wales
Brighton & H Buses
Netherlands
California
Copenhagen
UK - Current Rate
California - 12,000 by 2040
London - 8,000 by 2037
Netherlands - 5,100 by 2030
Current UK rate of 100 ZE buses / year =
3,500 by 2050
Brighton - 250 by 2030
Wales - 1900 by 2028

Start Date Target Year Starting no. ZE buses Fully ZE bus fleet
No. of new
ZE Buses/Year
No.
Transition
Years
London 2025 2037 500 8000 577 13
Wales 2020 2028 0 1900 211 9
Brighton & Hove Buses 2023 2030 0 250 31 8
Netherlands 2025 2030 0 5100 850 6
California 2029 2040 1000 14000 1083 12
Copenhagen 2019 2025 41 273 39 6
England/ UK? ? ? ? 40,000 ? ?

UITP EU Urban Bus estimate:
2020: 24.2% new sales are ZE
UITP Source

UK ZE Fleet by 2040? 2045? Or 2050?
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2020 2025 2030 2035 2040 2045 2050
No.ZEBuses
UK - Current Rate
UK - Gradual Rate
UK -2040 @ 15 year (Match
California)
UK - 2045 @ 15 year life
UK - 2050 @15 yr life
UK - 2050 @20 yr life

All new buses in UK are Zero Emission in…..?
ZE Fleet by what date? Start Date Target Year
Starting no. ZE
buses
No. ZE buses in
2050
New Bus /
Year
No. Transition
Years
UK - Current Rate 2020 2050 500 3000 100 30
UK - Gradual uptake 2020 2050 500 40000 1317 30
UK - 2040 @ 15 year life
(Match California)
2025 2040 800 40000 2613 15
UK - 2045 @15 yr life 2030 2045 1500 40000 2567 15
UK - 2050 @15 yr life 2035 2050 2000 40000 2533 15
UK - 2050 @ 20 yr life 2030 2050 2000 40000 1900 20
Note: UK New Bus Market = 2,000 - 2,500 new buses per year

Where are we now? Updating BSOG LCEB
(£14,000)
(£12,000)
(£10,000)
(£8,000)
(£6,000)
(£4,000)
(£2,000)
£0
Euro VI Diesel DD Battery Electric DD Plug in Hybrid DD Full Parallel Hybrid DD Efficient Diesel DD Biomethane DD Hydrogen DD
Annual BSOG payments by vehicle technology: Base BSOG + BSOG LCEB rate (40,000 miles annually)
LCEB BSOG
Base BSOG
• Efficient diesels most attractive in terms of BSOG payments
• Zero emission technologies receive least financial support
• Operators need price parity on cost of fuel to start transition to more sustainable fuels/technologies – BSOG
has key role to play

Efficient Diesels are now standard for majority
Diesel, 18750,
85%
Efficient
Diesel, 1900,
9%
Diesel Hybrid
excl London,
900, 4%
Biomethane ,
225, 1%
Battery
Electric, 134,
1%
Hydrogen , 0,
0%
English Bus Fleet Technology Mix in 2019
Diesel, 15300,
70%
Efficient Diesel,
5000, 23%
Diesel Hybrid
excl London,
800, 4%
Biomethane ,
450, 2%
Battery
Electric, 350,
1%
Hydrogen , 45,
0%
English Bus Fleet Technology Mix in 2021
• Majority of new bus registrations are now efficient diesels with LCEB/LEB certification
• Clean Air Zones will drive push for Euro VI diesel in short term (as least expensive option)
• LCEB structure is perpetuating diesel powertrain + no current time bounding on LCEB support

Efficient Diesels will impact BSOG budget
Diesel,
£150,264,122.63
, 82%
Diesel Hybrid
excl London,
£10,647,077.89 ,
6%
Efficient Diesel,
£20,954,487.98 ,
11%
Biomethane ,
£2,015,420.40 ,
1%
Battery Electric,
£511,344.00 ,
0%
Hydrogen , £- ,
0%
Estimated budget split of BSOG in 2019
• Assuming same size bus fleet and total mileage performed… existing LCEB incentive results in increasing
BSOG budget
• Efficient diesel support increase from c£21m in 2019, to c£55m in 2021
• Total BSOG budget increases by around 4.5% by 2021, with no shift change in ZE technologies
Diesel,
£122,615,524.06 ,
64%
Diesel Hybrid excl
London,
£9,464,069.23 , 5%
Efficient Diesel,
£55,143,389.43 ,
28%
Biomethane ,
£4,030,840.80 , 2%
Battery Electric,
£1,335,600.00 , 1%
Hydrogen ,
£171,720.00 , 0%
Estimated Split of BSOG in 2021 with current LCEB incentives

Proposal 1: Update BSOG LCEB Incentive
Update BSOG LCEB Incentive to improve case for more ZE miles and greater GHG savings
Timeframe: As soon as possible - 2021 ?
Summary:
• Remove support for LCEBs / models with no LEB certificate
• Increase support for ULEB, Zero Emission Capable ULEB and Effective Zero Emission Bus
• Decrease support for LEBs
• Time limit support to 5 years
• Adjust incentives over time to align with Road-to-Zero Ambition

Scottish BSOG ‘LCV’ incentives
ELIGIBILITY THRESHOLD
BAND * RATE LEB CERTIFICATION ULEB CERTIFICATION Technologies
A Low Emission
Bus
5 pence/km 15%-35% saving vs Euro V 15%-29% saving vs Euro VI Efficient Diesels
B
Ultra Low
Emission Bus
(ULEB)
10 pence
/km
36%+ saving vs Euro V 30%+ saving vs Euro VI
Diesel-Hybrids,
Biomethane
Zero Emission
Capable ULEB
15 pence/km
36%+ saving vs Euro V
& 2.5km zero emission
range with geo fence
capability
30%+ saving vs Euro VI
& 2.5km zero emission
range with geo fence
capability
Diesel-Hybrids with
2.5km ZE range
C Effectively Zero
Emission Bus
(EZEB)
30 pence/km
36%+ saving vs Euro V
& 50km zero emission
range
30%+ saving vs Euro VI
& 50km zero emission
range
Hydrogen, Battery
Electric

Scottish BSOG ‘LCV’ incentives
• Incentives are limited to 5 years since first registration of vehicle
• Incentives are reviewed every 3 years
•Biomethane buses to receive 10p/km
• Budget remains constant c£51m
• Decrease in support for efficient diesels used to increase support for ULEB and ZE buses

Comparison BSOG ‘LCV’ incentives
English BSOG
(£/km)
Scottish BSOG
(£/km)
% Change
Change over
100,000kms annually
Change over 5 years,
100,000kms annual
Fleet of 25 buses
Fleet of 1,000
buses
LEB £ 0.06 £ 0.05 -17%
-£
1,000.00
-£
5,000.00
-£
125,000.00
-£
5,000,000.00
ULEB £ 0.06 £ 0.10 67%
£
4,000.00
£
20,000.00
£
500,000.00
£
20,000,000.00
ULEB + 2.5
km range
£ 0.06 £ 0.15 150%
£
9,000.00
£
45,000.00
£
1,125,000.00
£
45,000,000.00
ULEB + 50km
range
£ 0.06 £ 0.30 400%
£
24,000.00
£
120,000.00
£
3,000,000.00
£
120,000,000.00
• Operators with large fleets of efficient diesels will lose out
• 10-15% Fuel efficiency of efficient diesels mean they pay for themselves over 5 years
• Dramatically increases attraction for ZE vehicles

Impact on Efficient Diesels (LEBs)
-2.8%
-3.4%
-4.0%
-4.6%
-5.2%
-5.9%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10
Costdifferencebetweencurrentandnew
BSOGLCEBincentives(%)
Miles per Gallon
Impact of Scottish BSOG incentive on Effecient Diesel at varying MPGs
• 17% reduction in base rate of BSOG LCEB support (6p/km – 5p/km)
• Efficient diesels will become 3-6% more expensive to run
• Routes with higher MPGs (higher speed / less congested) will lose out more

Impact on Diesel Hybrids (ULEBs)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10
CostdifferencebetweencurrentandnewBSOG
LCEBincentives(%)
Miles Per Gallon
Impact of Scottish BSOG incentive on cost of Diesel Hybrid at varying MPGs
• 67% increase in base rate of BSOG LCEB support (6p/km – 10p/km)
• Diesel Hybrids will become 10 – 20% more affordable to operate
• Routes with higher MPGs (higher speed / less congested) will benefit the most

Impact on Biomethane Buses (ULEBs)
• LowCVP have agreed to class buses running on 100% biomethane are ULEB for BSOG purposes, but still do not
qualify for capital grant funding
• 67% increase in base rate of BSOG LCEB support (6p/km – 10p/km)
• Biomethane buses will become 15 – 27% more affordable to operate
• Routes with lowest fuel consumption (higher speed / less congested) will benefit the most
0%
5%
10%
15%
20%
25%
30%
60 55 50 45 40 35
Fuel Consumption (kg/100km)
Impact of Scottish BSOG incentive on Biomethane at varying fuel consumption (kg/100km)
Purchase through Green Gas
Certificate
Purchase via RTFO approved

Impact on Diesel Hybrids + 2.5km ZE Range
(ZEC ULEBs)
• 150 % increase in base rate of BSOG LCEB support (6p/km – 15p/km)
• Diesel Hybrids + 2.5 ZE range will become 23 – 48% more affordable to operate under new rates
• Routes with higher MPGs (higher speed / less congested) will benefit the most
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10
LCEBincentives(%)
Miles per Gallon
Impact of Scottish BSOG incentive on cost of Extended Range Diesel Hybrid at varying
MPGs

Impact on Electric Buses (Effectively ZEB)
• EVs will be 61 – 632% more affordable to operate under new rates
• Routes with lower fuel consumptions (higher speed / less congested) will benefit the most
0%
100%
200%
300%
400%
500%
600%
700%
0.5 1 1.5 2 2.5 3
LCEBincentives(%)
Energy Consumption (kWh/km)
Impact of Scottish BSOG incentive on Battery Electric Bus at varying energy consumptions (kg/100km)
Battery Electric - No Battery Replacement
Battery Electric - 80k Battery Replacement

Impact on Hydrogen Buses (Effectively ZEB)
• Hydrogen will be 35 – 63% more affordable to operate under new rates
• Routes with lower fuel consumptions (higher speed / less congested) will benefit the most
0%
10%
20%
30%
40%
50%
60%
70%
6 6.5 7 7.5 8 8.5 9 9.5 10 10.5 11
Impact of Scottish BSOG incentive on Hydrogen at varying fuel consumption (kg/100km)

Scottish LCV incentives impact on BSOG budget
• Assume same size bus fleet and total mileage performed… If DfT adopted Scottish LCV incentives, there
would be a reduced impact on current BSOG budget (but still an increase)
• Total BSOG budget increases by 2.8% by 2021, but ZE technologies now very attractive
• Efficient diesel support increase by c£21m is offset by decrease in base diesel fuel consumption by -£28m
Diesel,
£150,264,122.63
, 82%
Diesel Hybrid
excl London,
£10,647,077.89 ,
6%
Efficient Diesel,
£20,954,487.98 ,
11%
Biomethane ,
£2,015,420.40 ,
1%
Battery Electric,
£511,344.00 ,
0%
Hydrogen , £- ,
0%
Estimated budget split of BSOG in 2019
Diesel,
£122,615,524.06 ,
65%
Diesel Hybrid excl
London,
£12,135,269.23 ,
6%
Efficient Diesel,
£42,105,389.43 ,
22%
Biomethane ,
£5,175,640.80 ,
3%
Battery Electric,
£6,678,000.00 ,
4% Hydrogen ,
£858,600.00 , 0%
Estimated Split of BSOG in 2021 with Scottish LCV
incentives

New incentives will not be sustainable forever
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Proposed reduction in incentives 2020-2040
Low Emission Bus Ultra Low Emission Bus Zero Emission Capable ULEB Effective Zero Emission Bus
2021-25 2026-2030 2031-2035 2035-2040
LEB (£/km) 0.05 0 0 0
ULEB
(£/km)
0.1 0.05 0 0
ZEC ULEB
(£/km)
0.15 0.15 0.1 0
EZEB (£/km) 0.3 0.25 0.2 0.1

Proposal 2a & 2b: Biofuel uptake
Drive demand for biofuel uptake by reducing Base BSOG rate for fossil fuels
Timeframe: 2025 onwards
Summary:
• Incrementally decrease support for fossil diesel & gas over time
• Maintain current rate of Base BSOG support for biofuels
• Biofuels become more attractive over time compared to fossil

Proposal 2a: Drive uptake of biofuels - gradual
Fuel Incentive
Diesel 34.57p / litre
Biodiesel /
HVO
34.57p / litre
Natural Gas 34.57p / kg
Biomethane 34.57p / kg
2019
• Slowly decrease support for diesel from 2025
• 7% year on year decrease, ends in 2038
• Keep support for biofuels constant
£-
£0.050
£0.100
£0.150
£0.200
£0.250
£0.300
£0.350
£0.400
2021 2023 2025 2027 2029 2031 2033 2035 2037 2039
£/litreor£/kg
Axis Title
Decrease in BSOG support for fossil fuels, ending in 2038
Diesel (£/litre) Biodiesel / HVO (£/litre)
Natural Gas used as road fuel (£/kg) Biomethane (£/kg)

Proposal 2b: Drive uptake of biofuels - stepped
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
2021 2023 2025 2027 2029 2031 2033 2035 2037 2039
£/litreor£/kg
Steppred Decrease in support for fossil fuels
Diesel (£/litre) Biodiesel / HVO (£/litre) Natural Gas used as road fuel (£/kg) Biomethane (£/kg)
• Stepped decrease in support for fossil fuels – 25% every 5 years
• Diesel support ends in 2040
• Keep support for biofuels constant

Proposal 3: Switching Base BSOG to £/km
Shift to BSOG support system based on vkms travelled rather than fuel consumed @ 15.8 p/km rate .
Timeframe: 2030 onwards
Summary
➢ £/km support will drive operators to adopt most fuel efficient technologies
➢ £/km will encourage city centre operators to increase number of vehicles / frequency of service
➢ Incentive will reduce support for city centre services
➢ Will increase support for rural services
➢Continue to support dead mileage (with limitation based on current % vs live mileage)
➢ Aligns with LCEB incentive and future mechanisms such as road user charging

Proposal 3: £/km incentive – Scottish Experience
2009: High kilometres per capita compared with England – 20% higher spend – unsustainable BSOG spend
exceeding budget.
April 2010: Transport Scotland take over BSOG from DfT for Scottish services, BSOG rate was reduced from
41.21 – 37.5p/litre diesel (-9%)
2011: Scottish Green Bus Fund Introduced, fuel saving technologies much more likely to benefit urban
operators
April 2012: Switch from 37.5p/litre diesel to 14.6p/km, dead mileage payments removed
➢ 10% of new Bus Investment Fund was allocated to parachute payments to support operators who lost
funding under new changes. Still some significant losses for urban operators, especially those with high % of
dead mileage – circa 20%.
➢ Bus Stakeholder Group formed to look at all future changes across bus (CPT, major bus operators and TS)
➢ Base BSOG rate has been reduced to 14.1p/km, then to 10.1p/km currently (static budget not linked to
inflation)
➢ vkms have increase 2% over last 5 years, passenger journeys have fallen 8%

Proposal 3: Impact on Diesels
-£40,000.00
-£30,000.00
-£20,000.00
-£10,000.00
£-
£10,000.00
£20,000.00
£30,000.00
£40,000.00
4.5 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10
DifferenceinBaseBSOGreceivedover5
years
Miles per Gallon
Diesel buses: Difference in annual Base BSOG support from shift to £/km incentive, with varying MPGs, over 5 year period
• Average equivalent Base BSOG rate of 15.8 p/km
• Routes with MPGs of 6.1 or below will receive less Base BSOG support, city centre services
• Routes with MPGs of 6.2 or higher will receive more Base BSOG support, favouring rural services
• Incentive favours adoption of hybrids/efficient diesels, therefore fuel savings

Proposal 3: Impact on Biomethane Buses
• Average equivalent Base BSOG rate of 15.8 p/km
• All Biomethane buses would benefit compared to current Base BSOG Support
£-
£5,000.00
£10,000.00
£15,000.00
£20,000.00
£25,000.00
£30,000.00
£35,000.00
£40,000.00
£45,000.00
£50,000.00
60 55 50 45 40 35
DifferenceinBaseBSOGreceivedover5
years
Impact of shift to £/km incentive on biomethane buses with varying fuel consumptions, over 5 years, excluding LCEB
support

Proposal 3: Full Audit of all operators required
0
100
200
300
400
500
600
700
800
900
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Commercial Vkms travelled, Metropolitan Area vs
Non-Met Areas in England
English metropolitan areas English non-metropolitan areas
0
20
40
60
80
100
120
140
160
180
200
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Vkms supported by local authority in England
English metropolitan areas English non-metropolitan areas
• More vkms already performed by commercial operators in non-metropolitan areas
• Significant decrease in subsidized routes outside of metropolitan areas
•A full audit of all operators prior to change to £/km would be required to ensure desired outcome is
achieved and identify winners & losers

Suggested timeline for BSOG Reform in England
2021 (latest) – LCEB incentive updated to support ZE and renewable fuels
2021 – 2030: Continue vehicle and infrastructure grant schemes
2025
➢ Reduce support for diesel vs biofuels
➢ Review incentive rates for LEB/ULEB/ZEB
2035
➢ All new buses registered must be zero emission – (15 years for replacement of entire bus market
to zero emission by 2050)
2035/2040
➢ BSOG Support for diesels withdrawn
2050
➢Fully Zero Emission Bus Fleet

Next Steps
➢ Formal Feedback on 3 proposals + model (Friday 28th June)
➢ Review model to ensure accuracy with current financial variables
➢ Share formal paper with proposals written up (Monday 8th July)
➢ Host workshop/meeting if required – Late July/Early August
➢ Submit final recommendations to DfT by end of August

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