The public transport sector in Ecuador has been one of the most affected sectors in the country by the pandemic. Initially, there was a significant drop in demand since in order to reduce infections the confinement of the population was imposed and mobility restricted.
The country’s current situation reflects its vulnerability to the health emergency, but its essential role is also clear for economic recovery and the search for solutions to create more resilient and sustainable cities.
The city of Guayaquil has been a pioneer in the country with the arrival of the first twenty electric buses that set an example for other cities to lay the foundations for a sustainable recovery and reach decarbonisation commitments under the Paris Agreement.
The pandemic is pushing the construction of more sustainable and resilient cities
As economic activities resume and the majority of the population in Ecuador uses public transportation, adequate measures should be taken to minimize the risk of infection and to use public transportation safely.
It is also necessary to invest in non-motorized transport such as walking and cycling, redistributing public space on the streets for the benefit of these means of transport over car use. This scenario can be seen as an opportunity generated by the pandemic in terms of greater citizen awareness of the benefits of clean air.
From the public policy sphere, these measures can be used for transformation, as the national and local governments seek to reduce emissions from combustion engines and, therefore, promote non-motorized means and promote the use of clean technologies such as electric buses.
In Ecuador 84% of final energy consumption comes from fossil sources, of which the transport sector consumes 56%, making it the sector responsible for the highest proportion of greenhouse gas (GHG) emissions and poor air quality.
Efforts to achieve this transition to clean energy require close collaboration between national policies and local programs.
In March 2019, Ecuador submitted its first Nationally Determined Contribution (NDC). It describes different decarbonisation actions that can be promoted by different levels of government to achieve a common goal: reduce GHG emissions by between 9% and 21% by 2025, and amplify the health and quality of life benefits.
Cities play a fundamental role in reaching national decarbonization commitments. Guayaquil is highly polluted mainly due to its growing vehicle fleet. However, it is a pioneer with the arrival of the first twenty electric buses in Ecuador.
This technological leap began in October 2017 when through the support of the IDB, the Ministry of the Environment of Ecuador prepared a Nationally Appropriate Mitigation Action (NAMA) specific to the transport sector, which includes the reduction of GHG emissions in transport of passengers in Quito, Guayaquil and Cuenca. This NAMA was included in the NDC as part of the mitigation action lines.
What made progress in Guayaquil possible and what lessons can be drawn?
In order for electromobility projects to be successful, a joint and coordinated effort by private and public actors is required, each with defined responsibilities in the transport, financial and energy sectors. At the same time, governance in these processes requires an articulated coordination of incentives so that the change towards electric mobility solutions is profitable.
In Guayaquil, the national government and its entities, the municipality through the Municipal Transit Authority ATM, the Urban Transport Company Saucinc SA, the BYD bus provider and the Public Bank through the National Financial Corporation (CFN) aligned to achieve implementation.
In 2018, the CFN presented “Electric Mobility Financing”, a financial product intended to facilitate the replacement of internal combustion vehicles by electric vehicles and the installation of necessary charging infrastructures. This product would cover 70% of the costs of new projects and up to 100% of expansion projects.
The cost range would go from USD 50 thousand to USD 20 million, with an interest rate of 7.5%, adjustable every 90 days and for a term of up to 15 years. Thus, the CFN provided an adequate term to the useful life of the batteries of the electric buses, allowing the project to be profitable in the long term.
18 of the 20 units acquired by Saucinc S.A. were financed through a CFN loan of USD 7.6 million and a total investment of USD 8 million. In turn, the company benefited from exemption from tariffs and VAT. It is estimated that, over a period of 15 years, this energy transition will avoid the consumption of 2.9 million gallons of diesel, a fiscal saving of USD 8.27 million, and a consequent significant reduction in environmental impact.
With a private investment of USD 600 thousand dollars, in November 2019 the first electricity station in Guayaquil was inaugurated. The electrolinera is located on land of 5,400 square meters granted by the National Government. Electric buses can fully recharge their battery in three and a half hours, at an average cost of US $ 24, at 8 cents per kw / h. The cost of energy benefits from a differentiated rate granted by ARCONEL, the electrical regulatory company. BYD was also in charge of the construction and now of the operation of the electricity station under a 20-year concession scheme.
The IDB is promoting electromobility in Ecuador
The Municipality of Guayaquil seeks to continue promoting electromobility, extending it to other bus routes, opening up the possibility of including electric taxis and a slow-charge network at different public and private parking spots.
In order to replicate this successful project, the IDB is in the stage of preparing credit and non-reimbursable technical cooperation through a co-financing program with the Clean Technology Fund (CFT), which would deliver the funds to CFN to continue with the financing of electric buses.
Local implementation of the NDC is key Ecuador’s sustainable recovery
The proposed financing model would allow replicating the success of Guayaquil, and offers the opportunity for this and other cities in the country, determined to have cleaner air and committed to reducing their emissions, to join in the implementation of electromobility projects.
The project has shown that public intervention must be consistent with sustainable development. In a scenario of recovery from the pandemic, the environment does not have to be sacrificed and a transition is possible for more inclusive, sustainable and resilient cities.
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