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In 2005, more than 60 percent of the 9.7 billion transit passenger trips in the United States were provided by buses, approximately 84 percent of which are powered by diesel combustion engines. In response to air quality and health concerns as well as rising fuel costs, a growing number of transit agencies are turning to hybrid-electric buses, which consume less energy and produce significantly fewer emissions by combining an internal combustion engine with an electric motor.
Currently hybrid buses carry a large price premium over conventional diesel buses. The average price of a 40-foot hybrid bus typically ranges from $450,000 - $550,000 when compared to $280,000 - $300,000 for a conventional diesel bus. The price variation in hybrids is due to the order volumes and individual specifications of transit agencies.
However the price differential for hybrids can be offset by various federal incentives and grant programs. Assuming that a standard diesel bus costs $300,000 and a hybrid bus costs $500,000, the incremental cost of purchasing a hybrid is $200,000. The federal Clean Fuels Grant Program covers 90 percent of the incremental cost of alternative fuel buses, including hybrids. In addition, the Federal Transit Administration (FTA) covers up to 80 percent of the purchase price of a standard diesel bus.