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Group: PAYS® for Clean Transport – Q&A

Clean Transport

Is it possible to implement an electric bus purchase where one part (the batteries) is acquired by one legal entity and another part (the rest of the bus) is acquired by another legal entity?

Yes, battery lease options are available in some countries in which the bus service provider buys the bus with its own capital, minus the value of the battery, which is capitalized separately. The bus service provider then pays for the battery lease through an operating agreement. To further underscore that the battery and bus have…

When the bus manufacturer sells a bus, would it implement one purchase-sale contract with two buyers, or two purchase-sale contracts, one for each of the parties?

PAYS experience in the field of building energy upgrades implements one purchase-sale contract for each of the two parties – because they are two different payments to the solution provider. Separately, the utility offers the bus service provider a PAYS tariff agreement, and that document establishes the pathway to ownership of the grid-connected equipment for…

Does the PAYS model envisage potential retrofitting of batteries on buses to convert them from diesel to electric?

No. A new electric bus is more cost effective than buying a diesel bus and then tearing out its engine and tank to make a custom retrofit for that particular chassis, with little or no warranty coverage. While there are a handful of retrofit electric bus producers, the supply chains for retrofit conversion buses are…

Would loan financing extended by capital providers to a utility for a PAYS investment be on the utility’s general corporate balance sheet?

A fundamental principle of PAYS is the ability to shift liabilities from bus service provider to utility balance sheets. As with its other investments, the utility would be obligated to repay its creditor regardless of the performance of its investments, and as with other investments, the utility’s own risk exposure is low because it would…

What is the role of capital providers?

External capital may be required in three cases: Alternative capital source. If the utility cannot (or prefers not to) finance the purchase of the batteries and charging infrastructure internally, it may seek external capital to provide the financing required. This could be done privately through a bespoke financial instrument, which could include a public debt…

What happens if the bus service provider does not meet its obligations under the terms of the PAYS tariff?

Non-payment of the cost recovery charge can be treated similarly to other charges for utility services, including disconnection of service in case of non-payment. Even if the bus service provider encounters financial difficulties, or is not particularly creditworthy, it is less likely to not pay its electricity bill than other financial obligations because that would…

What does the bus service provider supply?

The bus service provider supplies the upfront capital for the purchase of the electric bus only (not including the batteries or charging infrastructure), paying a price approximately in line with the purchase cost of a diesel bus. Once the bus is in operation, the bus service provider commits to paying the tariff to the utility…

Why are utilities typically better counterparties than bus service providers?

Making (creditworthy) utilities the centerpiece of the transaction has several advantages: Cost-effectiveness: Utilities are typically much larger and better capitalized than bus service providers, and they access debt markets on a regular basis, at a lower cost of capital and lower transaction cost. Counterparty risk: By lending to a utility, a capital provider holds counterparty…

Is the value of grid services provided by an EV included in a PAYS tariff?

The benefits provided by grid connected batteries do have value, and that value should not be conditional upon the source of financing for the battery.

Who owns the batteries and charging equipment for the buses?

At the outset, the utility owns the batteries and charging equipment. At the point at which the utility has recovered its costs, its cost recovery charges end, and ownership of the batteries and charging equipment moves to the bus service provider.

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