Electric school buses just might be the breakout vehicle-to-grid (V2G) technology in the United States. At least, that’s how Duncan McIntyre, CEO of Highland Electric Transportation, sees it. 

McIntyre, who founded renewable energy procurement and analysis marketplace Altenex in 2011 and sold it to Edison International in 2015, started Highland Electric two years ago to build a “business entirely around the school bus electrification market.” 

The idea is to replace the upfront and ongoing costs of EV buses and charging infrastructure with a fixed annual fee, equal to or less than a school district’s current budget for owning, fueling and maintaining their existing diesel-fueled fleets. Highland finances the arrangement and recoups the investment by finding ways to earn money from the new fleet’s battery capacity when the buses are not on the road. 

A major part of that equation relies on tapping their energy storage capacity for soaking up low-cost overnight or midday power — and more importantly, discharging it during grid-stressed evening peaks. That’s the big difference between V2G technologies, which actively tap EV batteries, and the far more common “V1G” approach of simply throttling or halting EV charging to reduce grid impacts. 

Out of all the EVs out there, “we think electric school buses are the killer V2G app,” McIntyre said in an interview last week. Not only do the nearly 500,000 school buses in North America spend most of their time parked, “they’re idle in the middle of the day, they’re idle in the evening, and they’re idle all summer,” a schedule that fits almost perfectly with emerging grid needs. 

Why V2G has been slow to take off 

Vehicle-to-grid isn’t a novel technology in the U.S. One of the most widespread V2G technology platforms today was initially developed at the University of Delaware back in 2007. San Diego-based Nuvve has built that foundational technology into a platform orchestrating EV grid services in Europe, Japan and the U.S., including a commercial V2G operation in Denmark that’s been running for four years

Europe is home to multiple V2G projects actively bidding into energy markets. But in the U.S., V2G opportunities have been limited by a number of factors, said Jacqueline Piero, Nuvve’s vice president of policy. Adding bidirectional power flow adds complications that state interconnection regulations and U.S. grid operator market structures aren’t designed to handle. 

But these bottlenecks have started to open. California recently revised its interconnection rules to include V2G systems, laying the groundwork for broader adoption, she said. Mid-Atlantic grid operator PJM has followed up its University of Delaware V2G pilots with tests with BMW and General Motors and is participating in a pilot launched by Virginia utility Dominion Energy. 

In March, Highland Electric Transportation landed its first deal with the city of Beverly, Massachusetts to supply Thomas Built Buses’ electric buses powered by Proterra’s electric drivetrains and charged with Proterra’s 60-kilowatt charging stations. Highland is working with utility National Grid to tap its lucrative energy storage pay-for-performance incentives, and it is also exploring opportunities from grid operator ISO New England’s emergency response program, McIntyre said.

Nuvve, which announced plans this week to go public via a special-purpose acquisition vehicle reverse merger, has recently started bidding stationary battery capacity from the University of California at San Diego's microgrid into California state grid operator CAISO markets, as a precursor to tapping the microgrid's growing EV fleet. But not all EVs are well suited to taking part in V2G to moneymaking opportunities, Piero noted. First and foremost, EVs have “a primary use that can’t be compromised” — serving the transportation needs of their owners. 

Most U.S. EV charging systems today offer incentives for EVs to charge with cheap and plentiful off-peak energy and to avoid charging when grid demand is at its peak. That will be critical to managing the grid impacts of an EV fleet that’s set to grow to tens of millions of vehicles in the coming decade. 

But EVs may not have much excess battery capacity and can face significant customer and automaker resistance to adding stress to a battery whose long-time health is critical to maintaining vehicle range and value.

School buses, by contrast, can carry batteries with excess capacity to provide to the grid. Proterra’s 220-kilowatt batteries for Thomas Built school buses are capable of more than 4,000 cycles over eight years, which means that “more than half of their use case could be for use as a grid asset,” CTO Dustin Grace said.   

Most EVs also charge at unpredictable times and locations, making it hard to align their capabilities with the constructs of the traditional energy market and utility programs. EV fleets, by contrast, offer scale that multiplies their value and a single owner that can commit them to being available when they’re most valuable to the grid. 

Utilities and public-private partnerships are targeting the electric school bus opportunity

School buses fill a unique niche in the world of fleet vehicles, Piero noted. First of all, they’re an almost completely North American phenomenon, as most other countries rely on public transit or other transportation methods for students. 

Second, they’re owned by school districts or city and county agencies open to a variety of public-private partnerships. Nuvve has been participating in California Energy Commission-funded school bus V2G pilot projects in the Southern California school districts of Torrance and Rialto, partnering with bus maker Blue Bird

An electric school bus still costs about $120,000 more than its diesel equivalent upfront but will save its owner about $170,000 to $240,000 in lifetime fuel and maintenance costs, according to a 2018 report from the U.S. Public Interest Research Group. Multiple avenues are emerging to bridge the resulting gap between upfront costs and long-term payback. 

The California Energy Commission’s School Bus Replacement Program has dedicated $94 million to help cover conversion costs for eligible districts or agencies. States including Vermont, Minnesota, Arizona and Michigan have set aside EV bus funds from their shares of Volkswagen’s $2 billion Dieselgate settlement. Proterra has a $200 million credit facility with Japan’s Mitsui to finance leases of its electric bus batteries. 

Utilities are also funding electric school buses to meet state or internal transportation electrification and decarbonization goals and to expand into a new class of capital investment. The biggest such undertaking to date is in Virginia, where utility Dominion Energy has won regulator approval to deploy 50 electric buses

However, allowing utilities to use ratepayer funds to engage in EV markets can create concerns around potentially anti-competitive practices. Dominion has yet to win Virginia lawmakers’ backing for a plan to expand its program to 1,000 electric school buses by 2025, with competing bills proposing state block grants or other funding mechanisms to open the market to non-utility competitors. 

But most states have allowed utilities to invest in infrastructure to enable EV charging while keeping the charging itself open to multiple parties, a model that could be applied to utility V2G investments. A  five-year electric bus pilot program funded by the VW Dieselgate settlement in Michigan with Proterra and utility DTE Energy will include tests of their V2G capabilities to provide backup power to buildings during emergencies. 

Utility Arizona Public Service is also exploring the potential to partly finance electric school bus fleets for school districts in exchange for gaining access to their batteries for grid services during off-hours. 

Judson Tillinghast, APS product development and strategy leader, noted in a recent interview that the day-to-day availability of electric school buses for V2G aligns well with the state’s solar-driven supply-demand imbalances. “There are some correlations here that really make sense in terms of a partnership.” 

(Image courtesy of Arizona Public Service and Advanced Energy Economy)

As a company centered on financing school bus V2G values, Highland is opposed to allowing utilities to own the vehicles themselves, McIntyre said. But, he added, “We might argue that the utilities could own the batteries and treat them as distributed energy resources to support the grid.” 

Highland is actively developing about two dozen more deployments similar to its deal with Beverly, he said, though he wouldn’t disclose where they are located. Nor did he provide specifics on the “really big-balance-sheet companies” that are providing the capital behind its contracts, though he did say the deregulated business arm of a Fortune 500 electric utility is among them.