Buy America and the Electric Bus Market

Buy America and the Electric Bus Market

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August 6, 2018
Buy America and the Electric Bus Market
Buy America requirements are an integral aspect of federal
bus fleets, most likely using battery electric buses, by 2030
transportation funding. In a series of statutes, Congress has
and 2040, respectively.
required that federally funded highway, public
transportation, aviation, and intercity passenger rail projects
Figure 1. U.S. Transit Buses by Fuel Type
use U.S.-made manufactured goods. But determining
whether a product is made in the United States is not
always simple. A current controversy over how Buy
America applies to battery-powered buses illustrates the
challenges.
Various agencies within the U.S. Department of
Transportation apply different Buy America laws and
regulations to different types of projects. The Federal
Transit Administration (FTA), which provides grants to
public transportation agencies, requires that transit buses
acquired with federal public transportation funding undergo
final assembly in the United States and that at least 65% of
the cost be manufactured domestically. This threshold rises
to 70% for buses delivered in FY2020 or later. In terms of
buses, the regulations were drafted for vehicles that have
engines and transmissions and are powered by liquid fuels.
Current rules may not readily apply to battery electric buses
that operate exclusively on electricity.

The Search for Alternatives to Diesel
Source: CRS, based on U.S. Department of Energy, Alternative Fuels
Data Center, and American Public Transportation Association
Until recently, the operation of battery electric buses in U.S.
(APTA) Fact Book and Appendix, 2017.
cities was seen as a long-term prospect because of their
relatively high cost, range limits, and recharging
Note: “Other” includes buses propelled with electricity and
infrastructure needs. But with technological improvements,
propane.
public transportation agencies have begun to show interest
in electric buses to replace vehicles powered by diesel and
Battery electric buses typically have lithium ion batteries.
other fossil fuels. This interest is especially strong in places
They are typically expensive to purchase, costing as much
with serious air quality problems. FTA provides substantial
as $300,000 more than conventional diesel buses, and
support to transit agencies to purchase buses. Federal funds
require additional investment to build a recharging
can be spent on most types of bus technology; the choice of
infrastructure. On the other hand, electric buses are quieter
technology is up to the transit agency concerned.
than internal combustion engine vehicles, may have lower
operating costs due to the absence of engines and
Transit buses typically operate over short distances with
transmissions requiring maintenance, and have low, or zero
fixed routes and frequent stops. Twenty years ago, 95% of
direct, emissions. The range an electric bus can travel on
the buses in service were powered by diesel fuel (Figure 1).
one charge has in the past been a limiting factor, but newer
More recently, transit agencies have integrated buses fueled
models can travel more than 200 miles, still short of the
by compressed natural gas (CNG), liquefied natural gas
300-400 mile range for typical transit operations. A study
(LNG), and biodiesel into their fleets. Since the end of the
by Carnegie-Mellon University found that when social
last recession, the share of lower-emission hybrid buses—
costs, such as the health effects of diesel emissions, are
including diesel buses with electric motors—has also
taken into account, battery electric buses have lower costs
increased, rising from just under 5% of buses in use in 2009
than conventional diesel buses over the typical 12-year life
to nearly 15% in 2016.
cycle of a transit bus.
There were 300 battery electric buses in operation
Electric Battery Supply Chain
domestically at the end of 2017, less than 0.5% of the
Unlike conventionally powered buses, battery electric buses
65,000 buses in public transit agencies’ fleets. However,
do not have engines or transmissions to power them.
some forecasts suggest a rising interest in battery electric
Instead, large batteries and an electric motor are used for
technology. The two biggest transit bus systems in the
propulsion. The batteries are manufactured with thousands
United States, Los Angeles Metro and New York City
of small lithium ion cells that are combined into
Transit, have announced plans to move to zero-emission
increasingly larger groups—in some cases called cassettes,
blocks, and modules—through welding and other
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Buy America and the Electric Bus Market
techniques. Sensing, cooling, and battery management
of the bus. The cost of a bus subcomponent, in turn, is
system technology is added before modules are wired into a
considered domestic if it is manufactured in the United
large pack (Figure 2). Three companies manufacture
States no matter what the origin of the elements that go into
electric buses in the United States: China-based BYD, U.S.-
it—the sub-subcomponents. Waivers are available in
based Proterra, and Canada-based New Flyer.
certain circumstances, such as when a material is “not
produced in the United States in sufficient and reasonably
In most cases, manufacturers import lithium ion cells to
available quantities and of a satisfactory quality” (49 C.F.R.
create batteries in the United States. The development of a
§661.7), but these can be cumbersome to obtain.
domestic electric battery industry was a priority of a 2009
stimulus law grant program designed to increase U.S.
By one estimate, a battery pack accounts for about 26% of
capacity for producing electric batteries. The slow pace of
the cost of making an electric bus. To date, FTA has not
electrification of the much larger U.S. passenger vehicle
deemed the use of imported cells contrary to Buy America
market, however, has not produced economies of scale that
rules, possibly because they are considered sub-
would allow U.S. cell producers—including those who
subcomponents that are substantially transformed into
could produce cells for electric buses—to be competitive
packs with modules, coolants, and sensors in U.S.
with Asia-based manufacturers. A few cell manufacturers,
manufacturing plants. The agency is planning a review to
including U.S.-based XALT Energy, have reportedly begun
examine the determination of components, subcomponents,
to make some cells for buses in the United States.
and manufacturing processes in the production of battery
electric buses. Furthermore, FTA officials have indicated
Figure 2. Inside an Electric Bus Battery Pack
they may propose revised Buy America regulations in 2019
that might take account of newer technologies such as those
used in battery electric buses. These rules might give bus
manufacturers and transit agencies greater confidence that
battery electric buses are compliant. Bus manufacturers
must provide a certificate of Buy America compliance to
federally funded transit agencies in the procurement
process.
Congress could consider various options to support the
domestic manufacturing of battery electric buses, battery
packs, and battery cells. Lawmakers concerned about the
importation of battery cells could express their concerns to
FTA as it reviews and updates its regulations and
compliance procedures. Congress could also consider
legislation to require FTA to update its regulations to more
fully consider changes in bus technology. Alternatively, the
Buy America statute could be amended to make it more
Source: Proterra.
likely that cells and other parts are manufactured in the
Notes: Electric buses may have up to eight battery packs under the
United States. In the pending FY2019 Transportation-HUD
floor or on the roof of the bus. This is an older Proterra model.
appropriations bills, the House and Senate have each passed
slightly different restrictions that would for one year
The U.S. market for electric buses is small, but international
prohibit FTA funding for rail cars or buses subsidized by
factors may affect the pace of U.S. vehicle electrification by
the Chinese government. Under both bills, if FTA were to
reducing the cost of buses abroad. Growing demand for
determine that BYD receives such subsidies, its U.S.
electric buses as large cities such as London and Paris seek
battery electric bus sales could be affected.
to electrify their public transit systems may drive down
costs as manufacturers reach economies of scale. China’s
U.S. transit agencies purchase approximately 6,000 full-size
commitment to dramatically increase the electrification of
buses per year. While changing statutes and regulations to
its transportation network will most likely create those
discourage importation of bus battery cells might support
economies of scale for buses (as well as passenger cars);
domestic battery manufacturing, it could constrain the
reportedly, more than 15% of the 608,600 buses in China
availability of bus technology used in much larger public
are already battery electric, and Beijing hopes to establish
transit markets abroad. Such limitations could also lead to
export markets for them.
higher prices for battery electric buses sold in the United
States, potentially reducing the number of such buses transit
Buy America Issues
agencies could purchase.
Under current FTA rules, compliance with the requirement
that 65% of the cost of a bus be of domestic origin is
Bill Canis, Specialist in Industrial Organization and
determined by the origin of bus components. A bus
Business
component is considered domestic if it is manufactured in
William J. Mallett, Specialist in Transportation Policy
the United States and if at least 65% of the cost of its
subcomponents is from domestic manufacturing. If that is
IF10941
the case, 100% of the cost of the component is then
considered domestic when calculating the domestic content
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Buy America and the Electric Bus Market

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https://crsreports.congress.gov | IF10941 · VERSION 3 · NEW