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Home » Industry Last Published: Thu, Nov 16 2017. 04 46 AM IST

India’s electric vehicle drive: Challenges


and opportunities
The shift to electric vehicles has caught the imagination of policymakers and industry,
but speed bumps in policy and corporate landscape remain

Utpal Bhaskar

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An electric vehicle charging station run by Tata Power Delhi Distribution Ltd at
Maurice Nagar in Delhi. Photo: Pradeep Gaur/Mint

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New Delhi: The year 2017 will be remembered as a significant one for
defining India’s mobility architecture. From big ticket announcements on
the marque Ahmedabad-Mumbai high-speed rail project to Hyperloop,
India has seized its moment in the sun to announce big plans for finding
next generation transportation solutions.

But nothing has caught the imagination of the industry and policy makers
quite like the government’s ambitious plans for a mass scale shift to
electric vehicles (EVs) by 2030 so that all vehicles on Indian roads by
then—personal and commercial—will be powered by electricity. While the
transformative push for electric vehicles has become a cause célèbre for
India and the world, it presents challenges along with opportunities.

With Volvo’s July announcement that it would phase out the internal
combustion engine and manufacture only electric or hybrid vehicles by
2019, many believe India’s EV moment has arrived. It won’t be long before
major automakers in India follow Sweden-based Volvo’s lead in phasing
out internal combustion engines and electrifying their line-ups to meet the
2030 deadline.

Silver bullet

There are multiple narratives in this fast evolving scenario. From solar
power developers and lithium ion battery makers to automobile
manufacturers of marque badges, everybody seems to have thrown their
hats in the ring. India’s Maharatna and Navratna companies such as

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NTPC Ltd, Bharat Heavy Electricals Ltd (Bhel) and Power Grid Corp. of
India Ltd, all want a piece of the EV pie in order to remain relevant in the
uncertain and evolving energy landscape of the country.

For energy firms, setting up a charging infrastructure is an attractive


prospect, given the lucrative market potential projected to be around 90
billion units (BU) of electricity. For comparison, India generated 1,107 BU
in 2015-16.

Electric vehicles are also expected to help generate fresh demand for
electricity —the lack of which is weighing down the entire power
sector—and also help in resolving the stressed assets conundrum.

Any uptake in demand for power will help improve the financial viability of
these stressed power sector projects. This in turn would improve the per
capita power consumption of around 1,200 kWh—one of the lowest among
the large economies.

“In a world in which renewable


energy has a very high India, as part of
penetration, India has the building a green
opportunity to be independent
and provide cheap power to its
economy, is aiming
people in ways that are quite for renewable energy
different than say in an capacity of 175 GW by
economy that is built upon oil 2022
and gas,” David Sandalow,
fellow at Center on Global
Energy Policy at Columbia University, said at a conference in New Delhi in
September.

India, the world’s third-largest energy consumer after the US and China, is
working towards building a green economy and plans to achieve 175
gigawatt (GW) of renewable energy capacity by 2022 as part of its
commitments under the global climate change accord. Of this, 100GW is to
come from solar.

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“This industry (EV) is starting to take off. And it’s still a tiny percentage of
the overall vehicle market but it’s starting to reach an inflection point
where it can have I think a very significant impact globally,” said
Sandalow, who was acting under secretary of energy during former US
President Barack Obama’s term.

Such a shift to renewable energy makes imminent sense for India which
paid Rs4.16 trillion to buy 202.85 million tonnes of crude oil in 2015-16.
“Particularly in a high solar resource country like India, it is a very good
strategy for providing transportation,” Sandalow said.

EVs as a storage

The fates of solar power and electrical vehicles in India are likely to be
closely interlinked, given that EVs have batteries that can offer a storage
solution to India’s clean energy push.

Solar power generated during the day needs to be stored in batteries. The
storage capability of EV batteries could help with grid balancing,
complementing the National Democratic Alliance government’s push for
solar power.

With lithium battery prices having nose dived from $600 per
kilowatt-hour (kWh) in 2012 to $250 per kWh in 2017, the solution is
becoming economically viable. The EV industry is betting on a further drop
to $100 per kWh by 2024.

“Another related emerging


technology is of electric Niti Aayog has
vehicles that can also double up recommended
as a storage device. Suitable
application of time-of-the-day
offering fiscal
tariff mechanisms will be incentives to EV
applied to encourage EVs to manufacturers and
store-up renewable energy discouraging
when it is available in excess of
demand,” according to India’s
privately-owned
petrol- and diesel-

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draft national energy policy. fuelled vehicles


With plans of reducing the cost
of charging stations by half to around Rs1 lakh each, comparisons are been
made to the yellow coloured public call office booths which took telephony
to India’s remote corners in the eighties and nineties.

“By and large, we see electricity emerging as the primary source of energy,”
said power and new and renewable energy minister Raj Kumar Singh last
month at a conference. “When we were discussing mobility, somebody was
telling me that electric mobility is more efficient than mobility by petrol or
diesel. The only thing which is required is for the prices of the battery
storage system to come down. So, that is a future which I see that gradually
we will move towards electric mobility. Now, that will require investments
in storage systems (and) in electric vehicle manufacturing,” Singh added.

End of oil

Policy think-tank Niti Aayog has recommended offering fiscal incentives to


EV manufacturers and discouraging privately-owned petrol- and diesel-
fuelled vehicles. These are potentially far-reaching moves for India’s
mobility, energy and environment needs and could spell the end of the
internal combustion engine as we know it.

India’s policy mandarins have also thrown their weight behind EVs,
impressed by their 20 moving parts as against 2,000 in traditional petrol
or diesel vehicles.

The draft national energy policy states: “EVs are an area of huge interest to
India as it holds the potential of reducing the demand for liquid fuel.”

“The advent of EVs will have helped curb a rise in share of oil and
environment friendly gas would substitute oil in many uses,” it adds.

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This could be bad news for West Asian oil economies and Russia, which
have been buffeted by low crude oil prices. Any demand dip from China
and India, which together accounted for half of the 1% growth in global
energy demand in 2016 according to the BP Statistical Review of World
Energy, will also have wide geopolitical ramifications.

“Geopolitics of energy for the past century has largely been the geopolitics
of oil. And that’s for good reason because the geopolitics of oil has really
shaped international politics and international dynamics,” added
Sandalow, who is co-author of the paper The Geopolitics of Renewable
Energy.

That’s set to change with the advent and growing dominance of clean
energy sources such as solar and wind.

“There is a number of mechanisms that we identified in which we think


geopolitics may well change as a result of renewable power. An obvious one
is that as oil and gas revenues decline, oil and gas producers will have less
power,” said Sandalow.

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“Variability surrounding future battery technology, government policies,


consumer preferences, and other developments related to personal
transportation markets casts a great deal of uncertainty on the long-term
effects that battery electric and plug-in hybrid vehicles may have on
worldwide energy consumption,” the US Energy Information
Administration said in a report last month.

Quite understandably, the promotion of electric vehicles is a strategic goal


for India’s National Democratic Alliance government, which is keen to cut
the country’s oil imports.

However, there are some who believe that global oil consumption may
increase further.

“We have to make very big decisions but the conversion to practice will
anyhow take a very long time. Actually at the moment, I am more afraid
that the consumption of oil will still increase,” said Kimmo Tiilikainen,
Finland’s minister for environment, energy and housing, in an interview.

On India’s plans for a mass scale shift to EVs by 2030, he said, “It’s a very
ambitious target but if you don’t have ambitious target you won’t see the
change.”

Finland is no stranger to ambitious targets. The Nordic country decided to


cut the use of fossil oil by half by 2030 and also set a target of 38% share of
renewables in the country’s energy mix by 2020. It has already reached the
40% mark.

India’s game plan

State-run firm Energy Efficiency Services Ltd (EESL) has been tasked with
the job of triggering early adoption of electric vehicles. The newly-created
firm, which made a name for itself by reducing the price of LED lights for
home lighting by 86%, floated a tender for procuring 10,000 electric cars,
the largest such procurement in the world.

Tata Motors Ltd won the EESL contract, with Mahindra and Mahindra Ltd
matching its bid and winning 30% of the order.

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“There is a need to kick-start the market and that is what we have done
with this 10,000 vehicles tender. It’s a trigger in many ways,” EESL
managing director Saurabh Kumar said in an interview before the EV bid
results were declared.

The vehicles will be procured at a per-unit price of Rs11.2 lakh with the aim
of laying the foundation for a mass shift to EVs by 2030.

EESL’s business model is to make these vehicles available on lease to the


government and its agencies for around Rs45,000 per month, which is
Rs5,000 less than what is currently paid for petrol and diesel cars.

“This model in the government


can actually do wonders,” said EESL floated a tender
Kumar. for procuring 10,000
Sending a clear signal that electric cars, the
India is firmly moving towards largest such
electric vehicles, the goods and procurement in the
services tax (GST) Council has
set a tax rate of 12% for electric
world
vehicles, compared with 28%
plus cess for petrol and diesel cars and hybrid vehicles.

The Indian auto industry was also warned by the government in


September to switch to production of vehicles running on non-polluting
alternative fuels or risk being overtaken by inevitable policy change. Ashok
Jhunjhunwala, a professor at the Indian Institute of Technology, Madras,
who is spearheading the government’s EV programme, declined to
comment for this article.

Investors’ rush

From Finnish state-controlled energy utility Fortum which plans to


develop EV charging infrastructure in India, to billionaire Sajjan Jindal’s
JSW Group which is exploring a partnership with China’s Zhejiang Geely
Holding Group Co. to make EVs, the list of investors drawn to India’s EV
sector is quite long.

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Swiss stock exchange-listed Leclanché SA also plans to partner with SUN


Mobility for developing battery storage solutions.

From China’s Zhuhai Yinlong New Energy Ltd, which plans to set up an EV
manufacturing plant in Punjab, to BP Plc, which is planning to leverage its
partnership with Reliance Industries Ltd to explore unconventional
mobility solutions, nobody wants to be left behind.

“It (EVs) is gaining a lot of momentum. There is a lot of talk,” said Malcolm
Wrigley, country manager, India, for French energy firm Engie SA, in an
interview.

To a question on whether Engie would be interested in setting up EV car


charging infrastructure in India, Wrigley said, “That certainly is on the
agenda.”

Currently, Mahindra & Mahindra Ltd is the only automaker selling a fully
electric car in the country, while others including Maruti Suzuki India Ltd
and Toyota Motor Corp. offer hybrid versions.

Lithium and the China overhang

Despite the euphoria surrounding India’s EV programme, speed bumps in


the policy and corporate landscape remain. One such hindrance is that
India does not have enough lithium reserves for manufacturing lithium-ion
batteries. This could lead to a substantial change in the country’s energy
security priorities, with securing lithium supplies, a key raw material for
EV batteries, becoming as important as buying oil and gas fields overseas.

This is easier said than done, given that Chinese firms are already
acquiring assets in countries such as Bolivia, Australia and Chile, which
have substantive lithium reserves, trying to establish a monopoly on
lithium reserves. With China overtaking the US last year as the world’s
biggest electric car market, there have been concerns about supply shocks.

“In the world of high renewable


energy there are materials Currently, Mahindra
other than oil where there may

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be opportunities for cartels. For and Mahindra Ltd is


example, lithium or rare earth
metals or others where states
the only automaker
might have power and might be selling a fully electric
able to exert them in different car in the country
ways,” cautioned Columbia
University’s Sandalow.

In 2010, China exploited its monopoly on the global production of


rare-earth minerals and banned exports of rare earths to Japan. In
response to a query about the absence of lithium in the country, EESL’s
Kumar said, “Almost everything in our life now has a semi-conductor.
Does (the) semi-conductor get manufactured in India?”, adding, “Yes, I
completely agree with you that there have to be urgent steps taken.”

Indian firms have also warned about the EV story going the solar module
way with most solar power developers sourcing modules and equipment
from countries such as China, where they are cheaper.

“This (lack of battery manufacturing in India) is a real problem. India is


not able to get its act together quickly enough to get into the
manufacturing of all these new sunrise industries,” said Sumant Sinha,
chairman and chief executive officer (CEO) of ReNew Power Ventures Pvt.
Ltd. “Even on batteries, the same thing is going to happen. Already, China
is making massive investments at massive scales, and we are still thinking
about it,” Sinha added.

But some believe that the limited availability of lithium in India will not be
a deal breaker. “Lithium (cost) is only 7% of the battery cost, first of all. In
another 10 years’ time, there will be some recycling of lithium surely,” said
Sohinder Gill, corporate director of Society of Manufacturers of Electric
Vehicles (SMEV), a lobby group.

“Those are not going to be in the world of future blackmailing factors. They
may be price adjustment factors,” added Gill, who is also chief executive,
global business, at Hero Eco Ltd, manufacturer of electric vehicles.

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Supply concerns have, however, been reinforced given India’s recent


military standoff with China in the Doklam region of Bhutan.

There have been instances in the past when India stopped giving
clearances to telecom equipment imported from China over security
concerns.

“It’s not going to be a make or break situation. The whole world will need
lithium. From that point of view, there will only be differential of Chinese,
making it much cheaper for themselves than for others. That could
happen,” maintained Gill.

India also needs to have a solution ready for these vehicles after their
battery life is depleted. With e-mobility coming up as government mission,
Kumar said, “I am pretty sure that these are the elements that the mission
will be looking at some point of time.”

Policy conundrum

An effective charging infrastructure is required which takes care of ‘range


anxiety,’ and the necessary regulations around creating the ecosystem for
electrical vehicles to operate smoothly.

Another issue is whether to go for AC (alternating current) or DC (direct


current) chargers. While an AC charger takes around six hours to charge
an EV, DC chargers are faster and take around 40 minutes to one hour to
fully charge a vehicle.

Also as per the regulations for electricity sales in the country, under The
Electricity Act, 2003, a distribution licence is required to distribute power
from respective state electricity regulatory commissions (SERCs). Given
the number of regulators involved, it makes sense for a pan-India license
but that would require a lot of heavy lifting including a comprehensive
review of existing laws and regulations.

“There are certain regulatory pieces which needs to be fine tuned and the
biggest one according to me is the fact that today as per the CERC (Central
Electricity Regulatory Commission) regulations it is only a distribution

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licensee that can sell power,” said EESL’s Kumar.

“So, right now you have distribution networks which are owned by the
discoms (distribution companies) primarily. In some cities, it is privately
owned and you would need some sort of a protocol to establish how a
private player can come in and be involved in that,” Engie’s Wrigley said.

The government is conscious of


the uphill task and is setting in According to the
place liberal rules for charging norms under
stations to power electric
vehicles, Mint reported on 21
preparation,
October. According to the government and
norms under preparation, private institutions
government and private that set up charging
institutions that set up charging
stations for captive use need
stations for captive
not possess an electricity use need not possess
retailing licence. an electricity retailing
Another related risk is that of
licence
EV charging leading to a surge
in electricity demand which in turn may put at risk India’s already
stretched electricity distribution networks. “So what you will have to do
which is known as ‘managed charging’. So, in certain hours even if you
want to charge you can’t charge or you will be able to do the charging in
limited areas,” said Praveer Sinha, CEO and managing director at Tata
Power Delhi Distribution Ltd. The utility, which distributes electricity in
North Delhi, plans to invest Rs100 crore to set up 1,000 charging stations
by in the next five years (bit.ly/2qr3C4i).

“The EV loads will be very intermittent and very high,” added Sinha.

This calls for careful planning in the backdrop of India’s worst blackout
that left nearly 620 million people across 19 states and three Union
territories without electricity for hours together in July and August of
2012.

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The Indian EV industry maintains that a lot needs to be done to achieve


the 2030 target. “Integration is not happening. Cohesion is not there. We
quickly need to get our act together from the macro point of view,” said
Gill.

While the NDA government plans to put an EV policy in place by the year
end, its overtures to electric car maker Tesla Inc. to set up a factory in the
country have failed to deliver results. The Palo Alto, US-based company,
which has been cool to India’s offer of land near a major port to facilitate
exports, has decided to set up its own manufacturing facility in China.

However, India is unperturbed.

“It’s rare for an opportunity of this scale to present itself. I would rather
prefer domestic manufacturers to make use of this splendid opportunity
that India offers,” said a senior minister involved in evolving India’s EV
paradigm, speaking on condition of anonymity.

First Published: Thu, Nov 16 2017. 04 01 AM IST

TOPICS: INDIA ELECTRIC VEHICLES INDIA EV POLICY

ELECTRIC VEHICLE INFRASTRUCTURE CHARGING STATIONS

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