There are three main components of capital cost: the costs of purchasing new buses, rebuild cost, and the cost of building a new CNG fueling station for the fleet option with CNG buses.
The base case project period (vehicle lifetime) of three kinds of buses is the same at 15 years. We used the actual CityBus vehicle replacement schedule, so the analysis is not a head to head comparison of pure systems, but a comparison of how CityBus would be impacted by the decision to replace buses with each alternative bus type. Each year, some of the existing buses need to be retired and replaced by the same number of new buses to keep the total number of buses in the fleet the same. CityBus provided us the price which CityBus Corporation would pay for each type of new bus, which is $600,000 for hybrid diesel-electric bus, $450,000 for CNG bus, and $400,000 for standard diesel bus, respectively, in 2012 dollars (Personal communications with the CityBus Chief Executive Officer, Marty Sennett, and other CityBus officials, 2012). Meanwhile, based on the recent data from CityBus Corporation, they predicted the annual price increase rate of bus price is 5% in nominal terms (Personal communications). In the life span of the project, 65 of the existing buses in the fleet (73 buses) need to be replaced. However, because of the limited budget of the CityBus Corporation and the higher price of hybrid buses, if the corporation wants to change to hybrid buses, fewer hybrid buses can be added to the fleet, and the rest need to be replaced by standard diesel buses. So in the hybrid bus option, or option 1, only 32 hybrid buses will be purchased, and the remaining 33 will be replaced by standard diesel buses. The details of the replacement for the three fleet options are shown in Table 1.
Table 1. Number of buses purchased each year for the three fleet options.
| ||Option 1 hybrid project||Option 2 CNG project||Option 3 diesel only|
|Year||Hybrid bus||Diesel bus||CNG bus||Diesel bus|
For every transit bus, in the middle of its life span, at the eighth year after it is purchased, the engine and transmission need to be rebuilt. Although the rebuild cost of engine and transmission system in the hybrid bus is the same as the other two types, which is $19,000 in 2012, the battery in the hybrid diesel-electric bus also needs to be replaced at this time. So the fleet needs to pay the additional battery replacement cost for hybrid diesel-electric buses, which is $40,000 in 2012. For all these three types of buses, the annual increase rate of rebuild cost provided by CityBus Corporation is 3% in nominal terms (Personal communications). We did not reduce the battery replacement cost through time, as we do not have confidence in the available projected rates of technical change in battery costs. However, as will be clear below, even if we had used battery replacement costs half the stipulated value, it would not have changed the basic results.
Another important capital cost is the cost to build a new CNG fueling station. Before the CNG transit bus is implemented in the fleet, a CNG fueling station must be built. This cost, which is estimated at $2 million (Personal communications), would happen at the beginning of the first year and needs to be amortized under a certain amortization rate to evaluate the annualized cost. Because the discount rate and the amortization rate used in this study are the same at 5%, the amortization of this cost has no impact on the NPV calculation of the cost in the CNG option. If more favorable financing terms were to become available to CityBus, it would make the CNG option more attractive.
Moreover, due to the environmental benefits of using CNG buses, CityBus Corporation may have the opportunity to get a grant from the federal government or Indiana State government to cover part of the cost of building the CNG fueling station. The study evaluates three different grant fractions, 10%, 50%, and 100% in the sensitivity analysis.
In the fuel cost part, the total mileage of the fleet is fixed at 1.8 million miles every year. After communicating with CityBus, the distance of the route from the fuel station is usually not so long that each kind of bus can finish the route without coming back to the fuel station (Personal communications). So in this study we assumed that all these three kinds of transit buses in the fleet traveled the same distance, which means the percentage of each kind of bus in the fleet equals the percentage of mileage travelled by each kind of bus every year. Fuel cost of each type of bus is calculated by the price of the fuel multiplied by the fuel used for that type of bus. The annual fuel cost of each fleet option is calculated as the summation of each kind of bus's fuel cost in that year.
In this analysis, the initial diesel and CNG price in 2012 are $3.11 per gallon and $1.5 per DGE, respectively (Personal communications). After regressing the historical annual prices of diesel and crude oil from 2000 to 2011 , the correlation between them is 0.996, which means crude oil price and diesel price have the same price growth rate. We used U.S. Department of Energy (DOE)  projections of crude oil price from 2010 to 2035. DOE also forecasts retail diesel prices, but we wanted to use the wholesale value, without taxes and distribution costs, so it was better to calculate the rates of change directly from the crude oil forecast. The DOE reference case was used as the growth rate of diesel price in the base case study. The CNG price is mainly comprised of two parts: natural gas wellhead price and transmission/distribution cost. After regressing the U.S. historical annual transmission/distribution cost, which equals CNG retail price minus natural gas wellhead price, from 2000 to 2011 and the consumer price index (CPI) from 2000 to 2011, the result shows that the correlation between transmission/distribution cost and CPI is 0.939, which means the growth rate of transmission/distribution cost is highly correlated with the general inflation rate. The growth rate of the wellhead price is taken from the Henry Hub spot natural gas price projection from U.S. Energy Information Administration (EIA) Annual Energy Outlook 2012 . According to Clean Cities Alternative Fuel Price Report, the conversion factor between CNG price and wellhead price is 7.236, which means 1 mmBtu natural gas converts to 7.236 diesel gallon equivalent (DGE) CNG fuel . Using this factor we can estimate that, in 2012, the wellhead price of CNG is $0.52 per DGE and the transmission/distribution cost of CNG is $0.98 per DGE. Figure 1 presents the price projections of diesel (/gallon) and CNG (/DGE) in nominal terms. From 2013 to 2018, the average annual growth rate of CNG price is 3.9%, while the price growth rate of diesel is 4.9%.
Two kinds of emissions included in this study are carbon dioxide (CO2) equivalent and PM10 (particulate matter [PM] with a diameter of 10 μm or less). CityBus Corporation uses ultra-low sulfur diesel (ULSD) as the fuel to follow a mandate which took effect in 2010 in the United States requiring all the diesel fuel refined to be ULSD (Personal communications). An important emission caused by transit buses is PM. Passengers and bus drivers are among the most vulnerable groups of people with immediate and long-lasting exposure to these small particles . In our analysis, we decide to use the PM10 emission estimates by Wayne , which is from the average PM10 emissions for the buses during 2007 to 2009. The PM10 emissions for hybrid, CNG, and standard diesel bus are 0.020, 0.013, and 0.022 g/mile, respectively.
With these emission factors, the amount of Greenhouse gas and PM10 emissions of each fleet option could be estimated. Greenhouse gas emissions are typically calculated in the units of carbon dioxide equivalent (CO2e). In this study, three of the main Greenhouse gases are calculated, which are CO2, CH4, and N2O. In order to convert them to CO2e, the gas's global warming potential (GWP) need to be used. From the 2011 report of U.S. Environmental Protection Agency (EPA), if the GWP of CO2 is set at 1, the GWP of CH4 and N2O are 21 and 310, respectively . According to data from U.S. EPA, CNG transit bus releases 1.966 g CH4 per mile and 0.175 g N2O per mile. For the standard diesel bus, the emission factor is 0.0051 g per mile for CH4 and 0.0048 g per mile for N2O . For the diesel hybrid bus the factors are 0.0039 and 0.0037, respectively.
We use the shadow price of avoiding these two pollutants to calculate the environmental cost. For CO2 equivalent emissions, a carbon tax could be applied as its shadow price. Currently, there is no carbon tax leveled nationwide in the United States. Previous studies [13, 14] suggested a carbon tax at a range from $55 to $110 per ton of carbon, which is equivalent to $15 to $30 per ton of CO2 when divided by the factor 3.67. For PM10 emission, the report “Transit bus life cycle cost and emissions estimation”  estimated that the shadow price of PM10 emission is $6367 per ton in 2006 dollars. After adjustment by the historical inflation from 2006 to 2011, the social cost of PM10 is $7384 in 2012.