India’s first tender for electric buses, which resulted in orders for 5,450 of them, has made the world sit up and take notice because no other country has bulk-ordered these many.  

The Government of India-owned CESL, which is mandated to promote e-mobility, concluded this tender earlier this year, by aggregating demand from five States and putting out one single tender. Tata Motors bagged 5,000 buses, Olectra 300 and VolvoEicher 150. The juice of the tender was halving of the bus running cost to between ₹39-45 a km — which the State transport undertakings would pay the manufacturer-operators for running the buses on specified routes —compared with ₹85-90 for conventional diesel buses. 

The buzz this has created around the world was palpable at the recently-concluded COP27 climate conference, where there were ample references to India’s e-bus programme, especially because CESL is now tasked with rolling out 50,000 e-buses in multiple tenders. 

Now, the Maharashtra government wants to come out with its own tender for 5,000 buses, for which it has obtained an in-principle approval from ADB for a $400 million loan. 

Carbon credits 

At a conference in the India pavilion at COP27, many experts mentioned ‘payment security’ as the single biggest risk in bidding against e-bus tenders.  

Against the backdrop of the poor financial health of the state transport undertakings, the big concern is what if the STUs don’t pay up.  And that is where carbon markets enter the frame.  

Mahua Acharya, CEO of CESL, who is also an expert in carbon markets, said that one solution to the issue of payment security is to sell carbon credits and put them into a payment security fund. 

She said that each bus would potentially get 22 carbon credits per year because e-buses save carbon dioxide emissions that would have otherwise have happened from diesel buses. In the ‘voluntary market’ (where companies such as Google, Apple and Shell volunteer to buy carbon offsets to meet their own net-zero emissions targets), each carbon credit could sell for $10. Each bus could earn about ₹18,000 a year. 

Acharya’s idea is to put this money into a fund, which could pay the e-bus operator in case the STU failed to pay. 

Governments could be a big purchaser of carbon credits. The market segment in which the buyers are under an obligation to buy carbon credits is called ‘compliance market’ (as opposed to ‘voluntary market’, where the buyers purchase credits voluntarily, without being obliged to do so.) 

The compliance market is still evolving, as the rules for it have just been hammered out. In the compliance market, the credits would sell for much more. Last year, the International Monetary Fund recommended that the price for a carbon credit should be $75, if global emissions should come down as required. 

Therefore, carbon credits from e-buses could earn more robust sums, nourishing the possible ‘payment security fund’. 

There is more good news. The ‘22 credits per bus per year’ calculation is if the e-bus batteries are charged with conventionally generated electricity. If they are charged with renewable energy generated electricity, each bus could earn 55-60 carbon credits. That would make e-buses more attractive not just environment-friendly-wise but also financially. 

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