Castalia’s blog
The many options available to New Zealand’s Regional Councils make it difficult to identify the best way to procure new bus service operators. New bus technologies offer substantial opportunities to reduce emissions, but the question is, at what cost? Castalia is very happy to have collaborated with the New Zealand Transport Authority to help guide those councils and bus companies.
Our fully customizable zero-emission bus cost model and accompanying report help Regional Councils weigh the costs and benefits of different bus technologies for bus fleets. Decisionmakers can use the model to easily compare different bus technology options by the total cost of ownership (TCO) per kilometer on a purely financial basis while also considering the impact of greenhouse gas emissions and other harmful emissions from existing diesel buses.
Excitingly, in the process of designing and testing the model, our research revealed that Regional Councils can decrease costs for riders and achieve their climate goals. This is because zero-emissions buses already cost less on a purely financial TCO per kilometer basis than diesel buses. Further, zero-emissions buses have considerable additional health and environmental benefits from the perspective of society as a whole as a result of reduced greenhouse gas emissions and reduced impact of harmful emissions on the health of New Zealanders. Battery electric buses (BEBs) also offer significant financial and emissions savings compared to other bus technologies, including hydrogen fuel cell buses (HFCBs).
Regional Council decision-makers can use the model to easily compare the six most relevant bus technologies for NZ, shown in the diagram below. Crucially, the model also allows regional councils to weigh the costs and benefits of retiring existing diesel buses early, replacing existing diesel buses at the end of their useful lives, or replacing diesel buses on their exiting routes now and repurposing those buses to expand public transport options to induce more Kiwis to use public transport.
Regional Councils face diverse circumstances from hilly, densely populated Wellington to flatter, more spread-out Christchurch. As a result, the model is designed to be easily customizable to match the characteristics of the routes that the bus must serve.
As shown in the figure below, the model evaluates three types of routes with three terrain options for three different bus sizes. It also allows for conducting sensitivity analysis on key inputs such as fuel cost and bus capital cost.
Regional Councils face diverse circumstances from hilly, densely populated Wellington to flatter, more spread-out Christchurch. As a result, the model is designed to be easily customizable to match the characteristics of the routes that the bus must serve.
As shown in the figure below, the model evaluates three types of routes with three terrain options for three different bus sizes. It also allows for conducting sensitivity analysis on key inputs such as fuel cost and bus capital cost.
The figure below shows an actual dashboard output for a sample scenario for two-axle buses on an urban, high-density, short-distance bus route over flat terrain. The figure shows the TCO per km of different bus technologies with and without considering the cost of emissions.
The light blue bars, which show the TCO per km without considering the cost of emissions, show that BEB is the least expensive technology at $1.04 per km. Further, the figure shows that it is least expensive to either retire diesel buses immediately and scrap them or use them to induce “mode shift” rather than replacing them at the end of their useful life.
When the model does consider the cost of emissions—represented by the grey bars in the figure below—replacing diesel buses with BEB immediately and scrapping the existing diesel buses is the least cost option on a TCO per km basis. In fact, the TCO per km is negative when considering the cost of emissions because the model accounts for the value of the avoided emissions that come from scrapping the diesel bus early. Hence, the social value of health and environmental costs avoided by taking a diesel bus off the road early completely outweigh the cost of buying and operating the new BEB.
*The negative number for TCOs where existing diesel buses are replaced early reflects the finding that the health and environmental benefits of replacing diesel buses early are so great that they outweigh the costs of operating the bus compared to the BAU.
We look forward to working with interested parties to apply this exciting new model and share the results of our work!
The Study Report and the model are both available in New Zealand Transport Agency’s website.
The Study Report is available here: Zero Emissions Bus Economic Study
The model is available here: Zero Emissions Bus Model
Read more about our transportation work:
Hydrogen Modelling Study in New Zealand
Feasibility and Structuring of Ninh Binh—Bai Vot Expressway, Vietnam
New Zealand’s water infrastructure landscape will undergo significant changes with the introduction of the “Local Water Done Well” policy, replacing the previous “Three Waters” regime. At the heart of this transition lies an alternative water reform originally proposed by “Communities 4 Local Democracy,” a framework that our team at Castalia had the privilege of advising on. This framework was adopted as an election manifesto policy by the largest party in New Zealand’s recently elected coalition Government.
Global Water Intelligence Magazine published an article in March 2024 on the challenges and opportunities presented by this reform. Some local authorities have praised the Castalia-designed reform model as it maintains the local oversight of water services. Others are concerned that the new reform could increase water tariffs by 20%. This is against the backdrop of the previous Government’s “Three Waters” regime that proposed four, and later 10, regional corporations with large forecast capital expenditure. The new Government’s proposed reform aims to strike a balance between retaining accountability to local communities and ensuring water services are delivered on a financially sustainable basis while achieving managerial, operational, and capital project sequencing efficiencies (where available).
Local Water Done Well proposes to maintain managerial and finance responsibilities under local governments while clarifying the central government’s regulatory role, with improved enforcement to address water quality, financial performance, and environmental outcome issues. It will require councils to develop robust plans for future capital expenditure needs. The new policy also provides local authorities with options to create viable water management configurations rather than imposing a one-fits-all approach.
The first stage of this regime is expected to be signed into law in mid-2024 and allows councils to establish new council-controlled organizations to deliver water services. A second bill will be introduced in December. The bill will create a new range of financing tools and allow the creation of financially independent council-owned water providers. Councils will be able to establish joint-owned utilities or choose to remain independent based on each utility’s managerial and financing needs. As Castalia’s CEO David Ehrhardt said to GWI, the new policy is “all about options that local authorities can choose from, not about forcing solutions on them.”
Our Managing Director, Andreas Heuser was appointed Chair of the Government’s Technical Advisory Group (TAG). The TAG will advise the Government in preparing the policy and legislation to implement Local Water Done Well.
Download GWI’s article here: New Zealand Utility Reform Struggles with Cost of CAPEX.pdf
Globally, the water sector emits more than 2 billion tons of CO₂e annually, which corresponds to 5% of total global emissions. This is more than double the yearly emissions of the aviation and maritime sectors combined.
Additionally, there are 1.6 billion people who don’t have access to safe drinking water, and 2.8 billion people who don’t have access to safe sanitation3. The number of people who lack access to safe water and sanitation increases every day due to climate change, rapid urbanization, and lack of finance in the water sector.
Castalia and The University of Colorado collaborated on a research project to assess how voluntary carbon markets can help in reducing emissions from the water sector while contributing to the achievement of SDG 6, ‘safe water and sanitation for all’. The work was commissioned by The Sustainable Markets Initiative, WaterAid’s Resilient Water Accelerator, HSBC, VCMI, and Gold Standard.
As part of the study, we assessed the potential of emissions reduction in various water sub-sectors. According to our findings, if we maximize the use of voluntary carbon markets in the sub-sectors with the highest verifiable potential for emissions reductions, we could achieve over 445 million tons of CO₂e emissions reduction annually. This could yield $1.7 billion in carbon revenues annually, potentially mobilizing an additional $10.6 billion over the next 10 years for water sector investment.
In 2021, the global voluntary carbon market transacted 500 million tons of CO₂e. Materializing the full potential for voluntary carbon credits from water services could almost double the size of the global voluntary carbon market.
Using voluntary carbon markets for water also has co-benefits such as increasing access to water, boosting water sector resilience, improving sanitation, and preserving aquatic ecosystems.
To encourage the collaboration of relevant stakeholders to support WaterAid’s Resilient Water Accelerator Initiative, Castalia’s Chief Executive, David Ehrhardt, presented the potential of voluntary carbon markets to reduce emissions in the water sector during the COP 28.
You can access Castalia’s COP 28 presentation here: Voluntary-Carbon-Markets-for-the-Water-Sector
References
1. GWI. “Mapping Water’s Carbon Footprint,” 2022; Page 26. Greenhouse Gas Protocol. “GHG Protocol Agricultural Guidance Interpreting the Corporate Accounting and Reporting Standard for the Agricultural Sector.” https://ghgprotocol.org/sites/default/files/2022-12/GHG%20Protocol%20Agricultural%20Guidance%20%28April%2026%29_0.pdf
2. McKinsey. “Agriculture and Climate change,” 2020; Page 6. https://www.mckinsey.com/~/media/mckinsey/industries/agriculture/our%20insights/reducing%20agriculture%20emissions%20through%20improved%20farming%20practices/agriculture-and-climate-change.pdf
3. Emission from aviation and maritime transport sector is around 938.14 million tons CO₂e (2020). Ourworldindata.org. “Greenhouse Gas Emission by Sector, World.” https://ourworldindata.org/emissions-by-sector
4. UN Water. “WHO/UNICEF Joint Monitoring Program for Water Supply, Sanitation and Hygiene (JMP) – Progress on household drinking water, sanitation and hygiene 2000 – 2020,” 2021. https://www.unwater.org/publications/who/unicef-joint monitoringprogram-water-supply-sanitation-and-hygiene-jmp-progress-0.
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