The urban transport is responsible for almost 34% of the global gas emissions. Decarbonization of the urban transport sector is one of the main challenges for government authorities in cities in Latin America, which need to address a strong commitment to tackling climate change, and plan the EV expansion in urban fleet use in the next five years.
We can already see significant accomplishments throughout the region in cities like Santiago and Bogotá, however electric mobility development in Latin America is still in its early stages and is considered to be slow. What are the main challenges?
Key players and stakeholders in the region joined GRI Club to discuss electric mobility development in Latin America, including Fernando Saka, Executive Director at the DPTM (Metropolitan Public Transport Directory in Santiago); Francisco Lopez, Energy Undersecretary of Chile; Gastón Oróstegui, Country Manager for Costa Rica and Mexico at Globalvia; Lauro Neto, COO at Lactec Institute; Liljana Sekerinska, Senior Transport Specialist, Latin America and Caribbean at The World Bank; Lina Escobar, Chief Demand Officer at the UPME (Mining and Energy Planning Unit in Colombia);and Felipe Ramirez, CEO at Transmilenio.
Although Latin America has had great progress towards strengthening regulatory and incentives in the eMobility segment, which shows clear efforts and commitment from public policies, GRI Infra members agree that we still face three key challenges in the sector: the high cost of technologies, the structure of current public transport sector and how it works; and the public sector's capability to finance electric mobility.
The crisis of the COVID-19 pandemic has brought uncertainties regarding projected demand and budget restriction in the public sector.
Looking at international experiences, the one thing in common in successful cases is a strong and deep sense of purpose committed to decarbonization. It's a long term investment. For instance, China is the most solid example of the use of electrical vehicles in the public transportation system, where there is also a huge incentive from the academic and public sector, additionally to the whole industry chain focused on electric mobility, with more than 40 different brands of electrical buses.
Chile has committed itself to turn the whole public transport fleet into electric by 2040, and there are currently more than 800 eBuses in operation in the country.The highly praised financial model in Chile consists of the ownership of the buses from operation and maintenance services in a PPP model. The government is responsible for operation and maintenance while the private sector is responsible for the supply contracts.
According to Chilean authorities, the country's business model has the following structure:
In Bogotá, this is also a well known successful business model, which basically allows more players in the bidding process with shared risks. For the first time, the market watches non-traditional players taking part in discussions about financing eBuses projects, which creates a wide range of opportunities for government authorities to design new business models.
Of course, it's not an easy task to apply this model to all Latin American countries due to the complexity of the players involved, considering the large scale of the market:, for instance, Buenos Aires has more than 200 different operators and 9,000 buses, while Mexico City has over 30,000 buses. It's safe to say that it's not a simple task to approach and shake the existing urban transport system.
The International Finance Corporation (IFC) has been carrying out studies to support Brazilian municipalities to design suitable business models to move forward with electric mobility projects. They provide advisory services offering technical, financial (bankability) and institutional
It's also important to highlight IFC's Electric Mobility Working Group in emerging markets. According to them, the municipal administration's credit quality is a very important issue to take into consideration and, taking a closer look at the Chinese model, where 90% of the fleet is electric, the sources to finance this are mostly public investment.
GRI members agreed that the population should be engaged in the cause of decarbonization. From the local government side, public policy has to be transparent and guarantee low prices and taxes for clean combustible, to help the transition to a cleaner technology.