Subject Cost – Benefit Analysis Topic Electric Bus System.pdf

Benefit-cost analysis - Depreciation of electric motors not included Benefit Cost Market-priced No price Market-priced No price - Increase revenue | - Reduce air - Initial investment

NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATION PROGRAMS

SUBJECT: COST —- BENEFIT ANALYSIS

TOPIC: ELECTRIC BUS SYSTEM

Instructor: Dr Hoang Thi Thu Ha Grade: Investment Economics CLC 62

Table of contents

OPTION 1 "GREEN ENVIRONMENT MEMBER" APP eo 4

1, Project OVELVICW Ẻ ốổ((‹djdđgŒAAg 4 1.1 ProJect descrIptIOH ccnnnnnnnn HH HH HT HH HH cá 4 1.2 Benefit-cost anaÌySI1§ cccnnnnnnn HH HH nh nh HH HH cá 6

2 Plan impact aSseSSMEeNt 00 ma 7 PIN c8 icon on ra 7 2.2 Measure costs — benefits have no market pTIC€ che 7

3 Benefit-cost cash flow from a soelo-economie perspective (CBA) 10 3.1 Social Perspective (CBA) LH HH HH Ho HH HH Hà tt ch 10 3.2 Private Perspective (FA) ác ch HH HH HH HH HH HH ch 11 OPTION 2 TOUR AROUND HANOI CÍTY 2 1222 1 na 12

1, Project OVEIVICW n Ỏ _Eă sneenieneeneeneees 12 1.1 ProJect descrIptIOH các nn SH HH HH HH TH HH HH HH ra 12 1.2 Benefit-cost anaÌySI1§ cccnnnnnnn HH HH nàn HH HH HH ra 13

Pu 0i oể nh < aaa 14 2.1 Market price cost - DenefT các HH HH HH H1 HH HH HH tàn 14 2.2 Measure costs — benefits have no market pTIC€ (che 15

3 Benefit-cost cash flow from a soelo-economie perspective (CBA) 18 3.1 Social Perspective (CBA) LH HH HH Ho HH HH Hà tt ch 18 3.2 Private Perspective (FA) ác ch HH HH HH HH HH HH ch 19 CONCLUSION Q.0 1211 11 1 22 112111111111 11t ra 21

INTRODUCTION The situation of environmental pollution caused by traffic emissions in Hanoi city is a serious issue According to research by the World Health Organization, Hanoi is among the 30 cities with the most severe air pollution in the world Traffic emissions, especially fine particulate matter PM2.5, are the main cause of air pollution in the city Many residents have to wear masks when they go out to protect their health This also has a negative impact on the health and quality of life of people in Hanoi The government and local authorities are making efforts to reduce traffic emissions and improve air quality to protect the health and lives of the people

The electric bus project is an optimal solution to address the air pollution caused by traffic emissions in urban areas today Electric buses are equipped with lithium-ion batteries to operate instead of traditional buses that use internal combustion engines This type of battery allows electric buses to travel long distances without emitting exhaust gases, reducing the negative impact on the environment and human health Moreover, using this type of battery, electric buses also save on operating and maintenance costs compared to other buses that use internal combustion engines The bus can travel up to 260 km ona single charge and is environmentally fnendly, emitting

no exhaust and producing less noise pollution Electric buses especially save energy, reduce operating costs, and ensure traffic safety

Figure 1 Project illustration

Therefore, with the desire to contribute to solving the air pollution problem in cities, along with the social issues that need to be developed further, the following electric bus project proposals will be proposed for investment and widely implemented

It is an effective and environmentally friendly solution for cities

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OPTION 1 "GREEN ENVIRONMENT MEMBER" APP

Purpose: Electric buses help reduce air pollution, on the roof of the car is installed with

a solar battery system to serve some needs on the car such as speakers Phone charger for passengers, wifi at the same time take advantage of the hot weather in our country Bus charging station with solar battery system on the roof

- Area: Hanoi city and surrounding areas

- General general: Building applications on smart mobile phones (1OS and Android operating systems) for all electric buses in Hanoi

Figure 3 GOBUS Application Interface - Green Journey

Figure 4 Smart magnetic card integrated with the app on the phone

+ Suggest places to visit and entertain near the bus stop

- Opening hours: 5h00 - 22h30 every day

Table I Service price list

Register as a member on the app Free

Fees for making magnetic cards 50.000VND/ pax

Membership registration (monthly) 60.000VND/ pax

No membership registration (monthly) 100.000VND/ pax

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© Magnetic card: Use citizen ID, Passport — Register as a card (Both online and offline) — Top up the card via bank — Scan on the car

- At each bus station, there will be an information counter and QR code to download the

app for customers

Conclusion: The combination of the project and this type of service is mainly aimed at residents or temporary guests working under projects for a long time in Hanoi city

1.2 Benefit-cost analysis

- Depreciation of electric motors (not included)

Benefit Cost

Market-priced No price Market-priced No price

- Increase revenue | - Reduce air - Initial investment | - Causing

from bus services | pollution cost congestion every

- Reduce costs by | - Reduce traffic - Application time the car enters using electricity congestion maintenance and | and leaves the instead of gasoline | - Minimizing upgrade costs station

- Increase revenue | social disparities - Advertising and | - Noise when from membership | - Reduce noise marketing building charging card activities pollution expenses stations

2 Plan impact assessment

2.1 Market price cost - benefit

- Revenue from using applications and membership cards: VND 94.2 billion/year

- Benefits from reduced maintenance costs compared to regular buses: VND 3.4 billion/year

- Benefits from saving on buying and operating personal vehicles: VND 20 billion/year

- Benefits from increasing revenue for recommended locations on the application: 12 billion VND/ year

2.1.2 Market-priced costs

The project serves 18 bus routes within Hanoi with a total of 40 vehicles

* Tnitial investment cost:

- The cost of buying electric buses, importing buses (not domestically produced) at bus prices is 5 billion / unit, including 15% import tax

- Cost of charging station construction: 6 stations, 120 billion VND/station

- Application construction cost: VND 2 billion

- Initial staff training cost: VND 3 billion

* Annual operating cost:

- Cost of paying staff: 500 employees with a salary of 96 million VND/year

- Cost of maintenance of charging station (1 time/year): 0.5 billion VND/year

- The cost of maintaining and upgrading the application is equal to 25% of the initial cost: VND 0.4 billion/year

- Wifi cost (5 million/car/year): 0.2 billion/year

- Additional training costs for employees (1 time/year): VND 0.5 billion/year

2.2 Measure costs — benefits have no market price

2.2.1 Benefits without market price

- Reduce air pollution: using a random assessment method through surveying the

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willingness to pay for a clean air quality 6% cleaner than the city's current air quality

On average, each household 1s willing to pay 30,000 VND / month for improving the air environment

— The total price willing to pay to improve the air environment of 2.2 million households (in Hanot city) in a year 1s: 2,200,000 x 40,000 = 88 billion VND / year

- Reduce noise pollution: using random assessment methods through surveys of willingness to pay to reduce noise pollution by 2% compared to today On average, each household is willing to pay 10,000 VND/month for improving noise pollution

— The total price willing to pay to improve the noise pollution quality of 2.2 million households (in Hanoi city) in a year 1s: 2,200,000 x 10,000 = 22 billion/year

- Increase the prestige of the city government: judging by the method of changing output (output), this benefit is shown by more visitors to the city According to estimates, the revenue from attracting tourists to the city since the project came into operation, on average increased by 28 billion VND per year

- Increase passengers’ satisfaction in both mental and physical health: fakes through cost savings on medical examinations Through the survey, since the project came into operation, on average, only health check-up costs are saved VND 6 billion / year

2.2.2 Costs without market price

- Causing congestion every time the bus enters and leaves the station: using the method

of changing output (output), 1t is estimated that traffic congestion at bus stations has reduced the income of commuters passing through the stations by an average of VND 0.7 billion / year Therefore, 0.7 billion VND/year is the cost of causing traffic congestion

- Noise when building charging stations: using a random assessment method by surveying 40 people living around the charging station construction area The average result of willingness to accept compensation to live in the area near the charging station construction site 1s 0.2 billion VND/year So VND 0.2 billion is the cost of causing noise due to charging station construction

Table 2 Cost-benefit breakdown table (Unit: billion VND)

Oper Sum 81,52 49,65 ating | 2 — 15

costs Cost of paying staff 48 48

The cost of periodic

additional training for 0,5 0,5

employees Causing congestion every

time the bus enters and 0 0,05

leaves the station

Sum 591,8 577,12

Benef | 2 — 15

it Revenue from services 319,2 96,6

Benefits from using

electricity instead of 175 175

gasoline

Benefits from savings on

buying and operating 0 20 personal vehicles

Benefit from increased

revenue for recommended places on

Corporate Income Tax = 319.2 x 10% = 31.92 (billion VND)

3 Benefit-cost cash flow from a socio-economic perspective (CBA)

3.1 Social Perspective (CBA)

- Investment cost:

+ Cost of buying electric bus: VND 200 billion

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+ Cost of charging station construction: VND 120 billion

+ Application construction cost: VND 2 billion

+ Staff training costs: VND 3 billion

+ Cost due to noise when building charging stations: VND 0.2 billion

— Total investment cost = VND 325.2 billion

- Annual operating costs:

+ Cost of paying staff salary: 48 billion VND/year

+ Charging station maintenance costs: VND 0.5 billion/year

+ Application maintenance and upgrade costs: VND 0.4 billion/year

+ Wifi cost: 0.2 billion VND/year

+ Periodic additional training costs for employees: VND 0.5 billion/year

+ Costs caused by buses causing congestion when entering and leaving the station: 0.05 billion VND/year

— Total annual operating costs = VND 49.65 billion/year

-Benefit:

+ Benefits from using electricity instead of petrol: VND 175 billion/year

+ Benefits from reducing maintenance costs: VND 3.4 billion/year

- Benefits from saving on buying and operating personal vehicles: VND 20 billion/year

+ Benefits from increasing revenue on recommended locations on the app: 12 billion VND/vear

+ Benefits from reducing air pollution: 88 billion VND/year

+ Benefits from reducing noise pollution: VND 22 billion/year

+ Benefits from increasing the prestige of the city government: VND 28 billion/year + Benefits from increasing customer satisfaction: VND 6 billion/year

+ Income tax: VND 31.92 billion/year

— Total annual benefit = VND 577.12 billion/year

Net annual benefit = 577.12 - 49.65 = VND 527.47 billion/year

Inflation 3%, government bond rate of return 10%, income tax 10%

— Social discount rate: (10 — 3)*(100% — 10%}E 6.3%

> NPV = 5.042,81 - 325,2 = 4.717,61 > 0

Conclusion: The project should be approved for investment

3.2 Private Perspective (FA)

- Total initial investment: VND 325 billion

- Total annual cost: VND 81.52 billion/year

- Total annual benefit: VND 591.8 billion/year

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— Annual net benefit: 591.8 - 81.52 = 510.28 billion VND/year

Suppose the discount interest rate is 6% / year (take year 1 as the base)

Unit (billion) CBA FA

Year Nominal Real net Nominal Real net

Net CPI Net CPI

Benefit benefit Benefit benefit

- Opening hours: From 5:00 am to 22:00 pm every day

Table 3 Approximate Price

- Famous tourist destinations: Bat Trang pottery village, Co loa village will appear on

the website, posters, brochures and have their own routes and activities for travelers to have the best experience Listed price: 10.000vnd In addition, those who want to return

to their hometown can also join the trip (The price 1s stated on table 3.1)

- At each station, information counters will be installed (supporting travelers, solving problems .) and ordering snacks (bread, shrimp noodles, water, ) (Fee)

- Guide: will accompany the group to the attractions, there is a fee according to the day

- Increase the prestige of the city government and the tourism industry

charging stations

- System operating costs

- Website and marketing costs

- The cost of wear and tear of fixed

Benefit Cost

Market-priced No price Market-priced No price

- Revenue from - Reduce - Initial investment | -Reduced prestige, tourism and environmental costs market share of transportation pollution - Cost of building | competing travel

companies with more expensive

prices

—Workers may lose their jobs because they cannot compete (increased

experience and

satisfaction when

experiencing cultural diversity

-Infrastructure

construction costs,

rest stops -Personnel costs

risk of

unemployment)

- Noise when building charging stations

- Causing

congestion every time the car enters and leaves the

station

2 Plan impact assessment

2.1 Market price cost - benefit

- Benefits from reduced maintenance costs compared to regular buses: VND 6.4 billion/year

- Benefits from saving on buying and operating personal vehicles: VND 40 billion/year

- Benefit from reducing traffic accidents, knowing that the number of deaths in traffic

accidents when there are long-distance buses is reduced by 12 people / year and the value of a life is 7 billion VND, equivalent to 84 billion VND / year

2.1.2 Market-priced costs

The project serves 26 bus stops at 26 famous tourist destinations around Hanoi within a radius of less than 60 km

* Initial investment cost:

- The cost of buying electric buses, importing 50 buses (not domestically produced) at the bus price of 8 billion / unit, including 12% import tax

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