How to Think about Fleet Replacements

One of the first areas in considering fleet replacement is evaluating the equipment life stage. You should research the complete history of your vehicles and the types of rebuilds and overhauls by component type. Steel-wheeled vehicles can have lifespans of 30 years with only two major component rebuilds. Buses have lifespans in the 10- to 12-year range. Still, there are examples of fleets at 15 years, which is possible in moderate climates and with lower-than-industry averages for Vehicle Miles Traveled (VMT) on an annual basis.

Let’s consider the influence of diesel pricing: empirically, increases in diesel prices do not materially affect total bus fleet costs as much as increases in maintenance costs because labor and materials out-influence fuel costs. Fuel prices will fluctuate over the life of a bus, and technology improvements have caused the amount of fuel needed to support a vehicle mile of travel to drop for many years.

Also, increases in maintenance costs per year tend to reduce the optimal replacement age, especially if certain vehicle parts are no longer readily available and re-engineering is required. Increases in the utilization of the fleet and fuel economy have a similar impact on total fleet costs – both factors will add more recurring costs.

Public transportation improvements are important to agencies, the municipalities they operate within, and to customers. Transit riders always appreciate new buses and trains, particularly the amenities and safety features, including communication systems, real-time information, Wi-Fi, state-of-the-art lighting, ADA accessibility, and seating comfort.

Vehicle purchase-price changes have a significant impact on the optimal replacement age. Fleet managers must consider two critical tradeoffs when making replacement decisions to minimize total costs over a certain time horizon.

First is age, of course. As buses and rail vehicles age, the per-mile operating, and maintenance costs increase. Replacing old vehicles with new ones reduces recurring costs but significantly increases capital costs. There is usually an optimal replacement age (lifecycle) that minimizes the total net cost over a planning time horizon.

The second tradeoff in a bus-relevant environment is related to vehicle type. Vehicle purchase price and per-mile operating, maintenance, and fuel costs vary across bus types (conventional diesel, hybrid, electric trolley, etc.), bus size, bus designs, and operating environments (congested vs. non-congested routes, topographically variable vs. flat routes, and extreme temperatures vs. moderate climate). There is an ideal bus type available from manufacturers for a transit agency given operating environments.

For rail fleets, the decision-making is marginally different in that the life span is often heavily influenced by the type of rebuild or overhauls undertaken to the vehicles. Some fleets have been overhauled in the 10-to-12-year range of their life spans, and with only specific components targeted. In contrast, others have had complete rebuilds of all components in this age range, potentially extending the useful life of the asset another 8 to 10 years. Some rail fleets undergo multiple overhauls to extend life past 20 years, and several transit agencies have rail fleets in excess of 30 years of age.

When contemplating fleet changes by transit agencies, whether long-term or short-term (less than five years), it often makes sense to integrate changes with a new fleet. Expansion and extensions of routes typically require additional fleet vehicles.

Bus systems are often evaluated for network efficiencies, coverage pattern changes due to demographic and employment changes, and the balancing of feeder, express, and local routes. Other considerations include stop consolidation, addressing equity in service, and right-sizing passenger capacities for routes and trips. There is an opportunity for a transit operator to re-fleet to meet these goals.

Rail networks can make geographical coverage changes as well, extending lines and introducing new stations. Although these changes are more capital cost-intensive, the service profile is often modified and improved.

Transit agency targets for reduced carbon emissions (greenhouse gases) and state/regionally set mandates can influence decisions to re-fleet. Some agencies set future dates for cleaner technology use like zero-emission buses. Rail mandates can include all electric locomotives or electric multiple units in a corridor.

Some states have laws that prohibit funding for diesel equipment by a future year, which has the same strategic impacts for decisions on acquiring replacement equipment. These regulations may also prohibit the opportunity to include the full range of useful life or performance considerations for transit agencies.

The emergence of more significant fuel or propulsion power efficiencies provides the opportunity for a fleet replacement. Hybrid diesel-electric buses introduced in the late 1990s as a replacement technology for diesel buses were more efficient than straight diesels, obviously cleaner for the environment, but more expensive.

Bus manufacturers are now undertaking new designs since the introduction of the fully electric bus occurred over 15 years ago now in the U.S. There are several considerations that accompany introducing any new technology, and with Zero Emission Buses there is the foundational approach to introducing charging equipment, re-tooling at maintenance facilities, training the fleet workforce, and re-thinking the overall operation of provision of service which has been institutionally in place for operations – both transportation and maintenance for several decades.

Introducing a new fleet with a different propulsion system creates a series of logistical decisions on operations. For example, where to maintain and store the new fleet? Transit agencies with large fleet replacement plans and multiple existing maintenance facilities can exercise flexibility over how to deal with new fleet intake and how to attain steady-state full fleet operational support.

Facility requirements for new all-electric fleets require a careful evaluation of power needs, distribution feeds, and tariff rates through negotiation and possible new relationships with local energy providers. Some transit agencies have invested in infrastructure to support fleets of electric buses, including building transformers and substations on their property.

The most apparent technology change for rail fleet operations is in the propulsion area, transitioning from diesel to fully electrified service on a line or a network. Air quality and sustainability improvements that come with the elimination of diesel propulsion are being recognized throughout the U.S. Large agencies such as Caltrain in northern California and Metrolinx in Toronto have already embarked on this path, with the MBTA in Boston committed to electrification of its regional rail network in phases.

Changing over from diesel to electric fleets is primarily a procurement business decision. The overall implications for electrification and necessary capital investments should include infrastructure, notably for overhead catenary system elements, third rail, and power and switching substations. Moreover, in North America, there are dual power-mode (diesel and electric) locomotives hauling push-pull equipment (in Montreal, New York, and New Jersey for example) that allow for one set of equipment to operate over both electrified and non-electrified territory. Finally, recent advances in battery technology, as pioneered in Europe, provide another way for vehicles to become flexible enough to operate in a dual power-mode configuration.

Funding for new fleets has traditionally been available through federal programs – Buses and Bus Facilities Grant Program (5339(a)), which is formula driven, and the Low Emission/No Emission Vehicles Grant Program (5339(c)), which is discretionary and has evolved to support new technologies for both bus and rail vehicles.

The proposed Infrastructure Investment and Jobs Act Bill proposes a new Carbon Reduction Program to invest in projects that support lowering transportation emissions. Eligible projects include transportation electrification and electric vehicle charging, public transportation, including bus rapid transit, infrastructure for bicycling and walking, intelligent transportation systems (ITS) improvements, and infrastructure to support congestion pricing.

The bill would authorize funding specifically for electric vehicle charging (from the Highway Trust Fund) over five years. This would be a new competitive grant program to build out alternative fuel corridors and electric vehicle charging infrastructure, and alternative fueling infrastructure in communities across the country.

The bill would also create a new Electric Vehicle Formula Program to provide money for states to build electric vehicle charging infrastructure. Through specific highway reauthorization language, electric vehicle charging would become eligible for funding through the existing Surface Transportation Block Grant Program (STBGP) and would allow the purchase of zero-emission vehicles in the Congestion Mitigation and Air Quality (CMAQ) Improvement Program. So, there may be several new funding mechanisms at the federal level within a few months of the passage of the Infrastructure Bill.

In conclusion, there are many decisions that require answers before re-fleeting, including the local context of an agency’s strategic goals, the business case for undertaking a major investment decision, and securing a funding mechanism for both new vehicles and the accompanying infrastructure.

For more information, watch our free, on demand INSIGHTS webcast entitled, “When to Electrify: Decision-Making Factors for Rail and Transit Electrification.”