Scottish Zero Emission Bus challenge fund

The aim of the Scottish Zero Emission Bus Challenge Fund (ScotZEB) is to support swift, and significant, change in the bus market in favour of zero-emission technologies. This will support the Scottish Government’s purpose to create sustainable and inclusive growth. In particular, the fund aims to support the National Outcomes relating to the Economy, the Environment, and Fair Work and Business.

By supporting the swift transition to zero emission vehicles and infrastructure, the fund will help to achieve targets to reduce greenhouse gas emissions, contribute to the delivery of Low Emission Zones, encourage inward investment and growth in the supply chain of zero carbon vehicle and energy solutions in Scotland, with associated employment, economic and social benefits. 

ScotZEB is a new challenge fund focussed on supporting innovative business models designed around the characteristics and opportunities presented by zero-emission buses and associated charging or refuelling infrastructure. Bidders are strongly encouraged to put in place arrangements with partners or collaborators, to minimise the level of subsidy being requested. This may involve, for example:

  • collaborations across multiple bus operators to get the financial benefits of scaled demand for new buses
  • collaborations with non-bus vehicle operators or Local Authorities to get the benefits of scaled up demand for hydrogen
  • partnerships between energy companies, operators and financiers to use the charging infrastructure to generate new revenue streams
  • partnerships between financiers, manufacturers to purchase buses for leasing to operators
  • or a range of other possibilities

Phase 2: Indicative guidance

Following a review of Phase 1 of the Scottish Zero Emission Bus Challenge Fund (ScotZEB) changes are being made to Phase 2. ScotZEB Phase 2 will open for bids in spring 2023. It is being preceded by a Market Transition Scheme that aims to support the development of collaborative, innovative, ambitious and competitive bids.

This indicative guidance provides indicative guidance for those intending to develop bids for ScotZEB Phase 2. Amendments to this indicative guidance may be made. Detailed and final guidance on eligibility, criteria, quantum and levels of funding, and timing will be published in early 2023. 

Aim of ScotZEB Phase 2

ScotZEB Phase 2 is being designed to provide capital funding to forward-thinking companies to disrupt the bus market, and help make zero-emission vehicles the default choice for all operators from now on – that includes operators of public service buses, home-to-school buses, community buses, transport-to-health buses and tourist and private-hire coaches. 

Effective private financing is key to making zero emission buses and coaches, and infrastructure, affordable to all operators. Financing that aggregates ownership to generate greater buying power, spreads the cost of these assets over their full useful lives and takes away the risk and complexity of these assets from those operators not equipped to deal with these issues are all essential considerations, and bids that provide solutions to these issues will be favoured. 

Expected eligibility for ScotZEB Phase 2

The following bodies will be eligible to bid for funding from ScotZEB Phase 2:

  • Battery-As-A-Service, Fuel-cell-as-a-service or Bus-As-A-Service Providers
  • Coach Companies
  • Energy Companies
  • Finance Organisations
  • Infrastructure as a Service Providers
  • Local Authorities
  • Public Service Bus Operators
  • Repowering Companies
  • SME Bus Operators
  • Community Transport Providers

Others may be added to this list in due course.

ScotZEB Phase 2 funding will support the acquisition of battery-electric and/or hydrogen fuel-cell buses or coaches operating in Scotland for:

  • Public service routes
  • Home to School transport
  • Community transport
  • Transport to Health and Social Care
  • Private hire coaches
  • Tourist coaches

and the charging or refuelling infrastructure for the vehicles listed above. We strongly encourage bids to set out how the charging or refuelling infrastructure will also be made available to other fleets/vehicle operators, and so support the wider decarbonisation of transport.

Eligibility for ScotZEB Phase 2 is not dependent on prior application to the ScotZEB Market Transition Scheme.

Anticipated funding available and timescales

It is anticipated that ScotZEB Phase 2 will be available for drawdown during financial years 2023/24, 24/25, and 25/26. As with ScotZEB Phase 1, this fund will be capital-only. There is no commitment to allocation of funds and the decisions will be made by Ministers based on a combination of the value-for-money represented by bids and wider Government budget considerations.  

Caps on subsidy per bus and for infrastructure will be confirmed closer to launch. Subsidy will be lower than those applied for ScotZEB Phase 1.

Subsidy Control

The maximum grant level represents the maximum level of Scottish Government or other public funding aid allowable for ScotZEB. Scottish Government will operate ScotZEB in accordance with the United Kingdom’s obligations in relation to subsidy control under Chapter 3 of Title XI of the EU-UK Trade and Cooperation Agreement (as well as other international agreements to which the UK is subject, including arising from membership of the WTO).

No other forms of Scottish Government or public aid can be used towards the same eligible costs beyond these limits. Buses acquired through ScotZEB are not eligible for any additional revenue funding as offered under the previous Scottish Ultra-Low Emission Bus Scheme (SULEBS).

All bids must identify the sources of all funding being used. Bidders must ensure that the way they fund their project is compatible with WTO FTAs, especially if receiving aid outwith ScotZEB. Where aid is received from more than one public source for the same eligible costs, the bidder must notify this to Transport Scotland to ensure the maximum aid intensities allowable under this fund are not exceeded. 

Bidders must confirm they are not currently the subject of a recovery order following a decision by a court, or other competent body (including international bodies such as the European Commission, or panel or committee constituted under the EU-UK Trade and Cooperation Agreement) declaring any subsidy incompatible with the EU-UK Trade and Cooperation Agreement or any other international or domestic legal obligation relating to subsidy control. Should the bidder become subject to a recovery order during the period of the grant they must notify Transport Scotland immediately and no further aid will be made whilst the recovery order is in force.

Phase one awards

ScotZEB phase one has offered awards of £62 million to nine bus operators and local authorities for 276 buses and associated charging infrastructure.

Bus Operator* Award offered Number of buses**
Bluebird Buses Ltd £3,066,547 13
Craig of Cambeltown Ltd £2,409,294 10
Dumfries and Galloway Council £633,934 4
Ember Core Ltd £5,562,126 26
Fife Scottish Omnibuses £7,329,923 32
First Aberdeen Ltd & First Glasgow No1 Ltd £18,599,858 74
Highland Country Buses Ltd £5,834,978 25
Houston Coaches £368,413 4
McGills Bus Service Ltd £9,086,933 41
Shuttle Buses Ltd £485,955 5
Stirling Council £595,404 3
Western Buses Ltd £8,029,890 39

* This table shows the operators who have been offered awards. There are more operators than there were bidders, as all the bids from Stagecoach owned operators were treated as a single bid.

** A variety of bus sizes, from minibuses to double decks, are being supported. All awards also include support towards the charging infrastructure, in some cases the charging infrastructure will support a greater number of vehicles than the number of buses shown in the table

Please note: ScotZEB Phase 1 applications closed at midnight, 29 November 2021.


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