SimpleCycle: Electrifying bike shares Team Members: Casey Maue, Timothy Stillinger, Sinclair Vincent Faculty Advisors: Emily Cotter, Gary Libecap Master of Environmental Science and Management The Bren School of Environmental Science & Management, University of California, Santa Barbara April 2014 SIMPLECYCLE As authors of this Eco-E Project report, we are proud to archive this report in the Bren School’s library of Eco-E Projects. Our signatures on the document signify our joint responsibility to fulfill the archiving standards set by the Bren School of Environmental Science & Management. MEMBER NAME MEMBER NAME MEMBER NAME The mission of the Bren School of Environmental Science & Management is to produce professionals with unrivaled training in environmental science and management who will devote their unique skills to the diagnosis, assessment, mitigation, prevention, and remedy of the environmental problems of today and the future. A guiding principal of the School is that the analysis of environmental problems requires quantitative training in more than one discipline and an awareness of the physical, biological, social, political, and economic consequences that arise from scientific or technological decisions.. The Eco-E Project fulfills a core requirement for the Master’s of Environmental Science and Management (MESM) Program. The project is a three-quarter activity in which small teams of students conduct customer discovery research to develop a business model for a new environmental venture, in addition to focused, interdisciplinary research on the scientific, management, and policy dimensions of a specific environmental issue. This Eco-E Project Final Report is authored by MESM students and has been reviewed and approved by: ADVISOR ADVISOR DATE Brief Description In 2012, Americans drove over 2.7 trillion miles in private motor vehicles (cars). The dominance of cars in the U.S. transportation system, particularly in urban areas, contributes to several significant environmental and public health issues including transit-related inactivity, air pollution, and climate change. The focus of this Eco- Entrepreneurship project was to develop a business that takes urban cars off the road by helping individuals to bike more often. Our proposed business is to augment existing bike share systems in U.S. cities with a network of peripheral stations containing portable electrification units (EUs) that can be attached to individuals’ personal bikes and bike share bikes, converting them into electric bikes. These EUs will also be made available at existing bike share stations, thus leveraging the current infrastructural network to extend the serviceable area of the bike share and increase connectivity. Our service will create value for both the managers and operators of bike shares by increasing overall system usage and revenues. By providing individuals with reliable access to electric power for bike trips, SimpleCycle lowers the current barriers to biking, giving people access to a cheaper, healthier, and more convenient form of transportation. i Table of Contents Brief Description .................................................................................................... i Executive Summary ............................................................................................... 1 Environmental Problem ......................................................................................... 6 Dominance of Cars in the U.S. Transportation System ...................................................6 The Environmental Impacts of Urban Motor Vehicles ....................................................8 i. Transportation-Related Inactivity ............................................................................. 9 ii. Urban Air Quality and Human Health ..................................................................... 11 iii. Mobile Source Air Pollution and the Physical Environment ................................... 15 iv. Traffic Congestion ................................................................................................... 19 Increasing Urban Biking as a First-Best Policy Solution ................................................. 20 i. Federal Policy Solutions .......................................................................................... 20 ii. Local Policy Solutions .............................................................................................. 22 Business Model Environment .............................................................................. 24 The End of the Car Culture .......................................................................................... 24 Access Versus Ownership & the Sharing Economy ....................................................... 27 The Internet of Things ................................................................................................ 28 Market Opportunity & Industry Trends ....................................................................... 28 Business Model Development ............................................................................. 31 Initial Customer Problem Hypothesis .......................................................................... 31 Customer Discovery Methods ..................................................................................... 34 Business Model 1: Bike-Enabled Ride Sharing (Individual) ........................................... 41 Business Model 2: Bike-Enabled Ride Sharing (Employer) ............................................ 43 Proposed Business Model .................................................................................... 45 Overview of Organizational and Ownership Structure of Bike Shares ........................... 45 SimpleCycle: Electrifying Bike Shares .......................................................................... 47 i. Business Model Concept ......................................................................................... 48 ii. Customer Segments and Value Propositions .......................................................... 49 iii. Key Partners, Activities, and Resources .................................................................. 57 iv. Revenue Streams and Cost Structure ..................................................................... 59 v. Market Size ............................................................................................................. 60 vi. Target Cities ............................................................................................................ 62 vii. Financial Projections for Launch in New York City ................................................. 64 Environmental Benefits ....................................................................................... 71 Introduction ............................................................................................................... 71 How SimpleCycle Produces Benefits............................................................................ 71 ii i. Caveats .................................................................................................................... 71 ii. Methods .................................................................................................................. 72 Results ....................................................................................................................... 75 i. Greenhouse Gases .................................................................................................. 75 ii. PM2.5 ........................................................................................................................ 75 iii. Ozone ...................................................................................................................... 76 iv. Gasoline and Traffic Congestion ............................................................................. 77 v. Health Benefit of Biking .......................................................................................... 77 Discussion .................................................................................................................. 78 Next Steps ........................................................................................................... 79 Works Cited ........................................................................................................ 81 Appendices ......................................................................................................... 87 Appendix 1: The Electrification Unit ............................................................................ 87 Appendix 2: Financial Model Assumptions .................................................................. 89 Tables and Figures Table 1: Average Daily American Travel Behavior .................................................... 7 Table 2: Percent of Total Government Transportation Expenditures by Mode (Average 1995-2009) .............................................................................................. 8 Figure 1: Environmental Impacts of Motor Vehicle Transportation ........................... 9 Table 3: Population-Weighted Contributions to Air Pollution by Sector .................. 12 Figure 2: Major U.S. Cities, Air Pollution Emissions, and National Ambient Air Quality Standards Non-Attainment Zones ......................................................................... 13 Table 4: Cost and Usage of Recent Bike Infrastructure Projects