Big EV Opportunity

Sector gears up for electric vehicle charging infrastructure

India’s commitment to its climate goals is reflected by the notable actions being taken for transition to a low-carbon economy. After announcing massive renewable energy targets, the country has set yet another  ambitious target – to move to 100 per cent electric vehicle (EV) sales by 2030. The National Mission on Electric Mobility Plan (NEMMP) is aimed at achieving the sale of 6-7 million hybrid and electric vehicles every year from 2020 onwards. This will also help the country reduce the burden on the exchequer through a reduction in oil imports while reducing its carbon footprint. According to a recent report by NITI Aayog, making the country’s passenger mobility shared, electric and connected can cut its energy demand by 64 per cent and carbon emissions by 37 per cent.

To make the EV plan viable, one of the crucial components of the EV ecosystem is the charging infrastructure. In terms of outlay, the NEMMP envisages an investment of Rs 200 billion-Rs 230 billion. To meet the 2030 target, annual investments of Rs 3 billion-Rs 4 billion in charging infrastructure alone are required.

On the back of such ambitious targets, the auto industry is gearing up to draw up plans for electrification. For the power sector too, the government’s EV push provides a number of opportunities. EVs are expected to open up additional areas of revenue generation for discoms. For gencos, which are struggling with low power offtake, EVs would drive up power demand and allow them to improve capacity utilisation. Some of the barriers to the adoption of EVs are high financial risks for the industry, high cost of ownership for consumers, lack of charging infrastructure, policy and regulatory hurdles, undeveloped battery swapping infrastructure, lack of adequate focus on R&D in batteries, EV components and domestic manufacturing, as well as lack of awareness. A stock of the recent developments that have taken place in this space in India as well as the future outlook for the segment…

Policy and regulatory developments

The government has been taking several initiatives to promote faster adoption of EVs. These include the NEMMP 2020, the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) scheme (formulated as part of the NEMMP), and schemes such as green urban transport and urban green mobility that promote e-mobility in public transport. Recently, the government announced its plans to provide up to Rs 1.05 billion in grant funding to smart cities for the purchase of EVs. The government plans to spend nearly Rs 1,800 billion in EV infrastructure under various programmes to meet the 2030 targets. In addition to providing support and market visibility to private players, government agencies are procuring and developing charging infrastructure.

The government recognises that there are legal challenges in the expansion of charging infrastructure as the Electricity Act, 2003 prohibits the sale of electricity by companies other than distribution licensees. According to a September 2017 study on the impact of EVs on the grid conducted by the Forum of Regulators, the existing discoms can set up such infrastructure. Other interested players can either partner with discoms under the franchise model or set up battery-swapping shops. As per Aniruddha Kumar, joint secretary, thermal, Ministry of Power, the government is planning to treat EV charging stations as deemed distribution licensees.

States are also coming up with their own policies to attract investments. The governments of Maharashtra, Karnataka, Telangana and Andhra Pradesh have either already come out with policies or have announced or are framing draft policies for promoting e-mobility. In September 2017, Karnataka became the first state to roll out the Electric Vehicle and Energy Storage Policy, 2017. It provides incentives and concessions to EV and battery manufacturing players and charging equipment firms. Andhra Pradesh, which is keen to become the hub for EVs and is in the process of framing its EV policy, signed an MoU with Toyota Kirloskar in November 2017 to introduce high-end EVs in the state. The first set of cars will be delivered for trial in the second half of 2018.

At least a couple of state regulators have clarified their stand on EV chargers in recent tariff orders. In its 2017-18 tariff order, the Delhi Electricity Regulatory Commission (DERC) introduced a flat rate of Rs 5.50 per unit for EV charging stations. The DERC notes that EVs can be charged from any metered connection and the tariff would be charged for that relevant category. Meanwhile, the Maharashtra Electricity Regulatory Commission, in its multi-year tariff order (2016-17 to 2019-20), has defined the tariffs to be paid by the charging stations (under the commercial category) but has not defined the tariff that the charging stations will charge their consumers. Tata Power, which installed its first EV charging station in Mumbai in August 2017, is currently allowing free-of-cost use.

While fast-paced expansion of EV charging infrastructure is essential, establishing appropriate standards is equally important to ensure uniformity across the country. To begin with, in November 2017, the government accepted the suggestion of the Committee of Standardisation of Protocol for EV Charging Infrastructure to have uniform infrastructure (Bharat EV Charger AC-001 and Bharat EV Charger DC-001) to enable all EV models by different manufacturers to be charged at any station. According to Kumar, the government plans to soon announce the formation of a steering committee to resolve policy-related issues. This committee will have three subgroups to resolve the issues related to the impact of EVs on the grid, charger standard specifications and the permissible business models.

Recent developments in EV charging infrastructure

So far, the majority of EVs in the country are being charged at home. However, public chargers are being set up in some cities. The NEMMP estimates the four-wheeler charging point requirement at 175,000-227,000 by 2020. For e-buses and e-rickshaws, the estimates are 300-500 points and 11,000-18,000 points respectively. At present, there are over 200 EV charging points (mostly for cars) across the country. Several of them have been set up under the under FAME programme. Mahindra Reva Electric Vehicles Private Limited has set up 25 charging stations at six different locations in Bengaluru as a pilot project under FAME.

Several new charging points have come up outside the programme as well. In May 2017, Nagpur became the first city with electric mass mobility when taxi aggregator Ola launched its fleet of 200 EVs, including taxis, buses, e-rickshaws and autos. It invested Rs 5 billion in EVs and charging infrastructure. It is currently setting up 50 charging points across four strategic locations in Nagpur. The NCR has been witnessing a lot of activity in the charging infrastructure space. In addition to the charging ports set up by the incumbent discoms – BSES Yamuna Power Limited has 31 ports and Tata Power Delhi Distribution Limited (Tata Power-DDL) has five stations – NTPC has set up EV charging stations at its offices in Noida and Delhi. NTPC plans to set up more charging stations and supply electricity for the e-mobility business. Tata Power-DDL has announced its plans to invest Rs 6 billion to upgrade its power transmission network and install 1,000 EV charging stations over the next five years.

In October 2017, the state-owned NBCC (India) Limited signed an MoU with Fortum Oyj, a Finnish clean energy firm, to set up charging infrastructure across India at all upcoming NBCC projects. Fortum has installed the first 22 kW AC charging station on a pilot basis at NBCC’s premises in New Moti Bagh in New Delhi.

In November 2017, NITI Aayog released a quick pilot proposal, prepared in collaboration with AC2SG, to develop EV charging infrastructure in Delhi. This proposal includes 55 locations with 135 charging stations, of which 46 are DC fast-charging stations and 89 are slower AC charging stations. Further, Powergrid has collaborated with DMRC to provide battery-swapping facilities for 500 e-rickshaws, which offer last-mile connectivity around the Gurgaon metro stations (with each trip being in a 5-6 km radius). For this, it has tied up with Smart-e, a DMRC authorised aggregator of e-rickshaws in Gurgaon. Powergrid will set up a central charging station and five swapping points at the metro stations in Gurgaon. Given that there is no precedent in the swapping arrangement for three-wheelers in the world, this will be a first-of-its-kind experiment. The Rs 100 million pilot will take two to three months to fructify.

The way forward

The EV programme will complement India’s renewable energy growth plans as EVs can be leveraged to balance the grid. With an increase in volumes and technology advances in EV batteries, storage costs are expected to come down. Also, vehicle-to-grid technologies would help EV owners to feed energy back into the grid and help energy providers meet demand during peak periods.

Anmol Jaggi, Director, Gensol Consulting estimates the additional demand for power at 115,000 MW, assuming 75 million EVs will come on the road by 2030. This is based on the assumption that there will be a substantial improvement in the mileage of EVs from 10 km per kWh at present to 16.4 km per kWh in 2030 owing to an improvement in battery efficiency, and that each car travels 25 km per day. Another consulting firm, ICF International estimates an additional electricity demand of 4 per cent to 17 per cent (or 140-630 TWh) by 2035, depending on the level of EV penetration.

As the EV market expands and more players enter the segment, greater clarity is needed on certain technical and regulatory aspects such as the interoperability of charging stations, tariffs for EVs and stations, standards for charging station communications, payment settlement options, business models for charging (battery leasing or swapping) and pass-through of investment costs. Standards for EVs, batteries as well as charging infrastructure must be evolved swiftly and aligned to global standards. Further, adequate investments must be made in R&D and more testing and certifying bodies need to be equipped. Also, EVs lag behind ICE vehicles in affordability and convenience. However, government policies along with declining battery prices will encourage automakers to set competitive prices for EVs, which may spur demand and offset downside risks from infrastructure challenges.  Also, battery EVs are likely to account for the majority of sales, over plug-in hybrid vehicles, from 2025 onwards. EVs are expected to be at par with ICE vehicles in terms of costs by 2025 given the efforts to lower battery costs and improve their affordability.

The domestic industry is gearing up to meet the future demand even as the government is pulling out all stops to give an impetus to the nascent EV industry. The challenges notwithstanding, it is certainly exciting times ahead as the country gets set for a transformation in its mobility landscape.

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