With India planning to reach 30 per cent electric vehicle (EV) penetration by 2030, there is an urgent need to develop a sustainable EV ecosystem across the country. This would require an adequate charging infrastructure and a supportive regulatory framework. Greater EV penetration may also drive the demand for renewable energy, which could be used to power EV charging stations. Key industry experts talk about the opportunities, challenges and outlook for the EV industry in India and the role of renewable energy in its growth…
What are the potential opportunities for various renewable energy players in the EV ecosystem and what are the associated challenges?
Around 3 million cars are being sold annually in India at present and this number is expected to reach 10 million by 2030. If the country reaches its 30 per cent EV penetration target, it would translate into 3 million EVs in India in a decade’s time. This is a huge opportunity for the industry. For serving 3 million EVs every year, roughly 30,000 chargers would be required.
With the increasing penetration of renewable energy, it is also quite likely that charging stations will draw a higher proportion of renewables-based power from the grid. However, renewable energy sources are intermittent generation sources. Hence, energy storage is a key requirement for continuous generation. This is where EVs fit really well. EV batteries can be charged from solar power during the day, whereas surplus energy in the battery can be transferred into the grid during peak hours provided bidirectional batteries and chargers are used.
Renewable energy players will get a huge benefit with the launch of EVs in the market. These vehicles will need electricity to run and renewable energy integration is a must to fulfil this demand. With options like sale of power through open access, renewable energy generators can directly supply power to charging point operators. The challenging part is when they already have a commitment with the charging point operator and are unable to deliver the guaranteed power for some reason. To mitigate these issues, operators can adopt energy storage solutions, which will not only provide them backup power but many other added benefits.
The link between renewable energy and EVs is not so straightforward. As we know, solar output is somewhat predictable, while wind power output is unpredictable. Unfortunately, in the medium term, the swing producer as well as the night-time producer for India will be coal. Of course, we should do as much as possible to match the charging time with the supply of green power. Battery swapping is a possibility but seems to make sense only for niche segments like fleet vehicles and public transport.
Which user segments will be the early adopters of EVs? How will this affect renewable energy demand?
Considering the overall macroeconomics of the country, the commercial fleet industry will be the earliest adopter of EVs in India. This will be true in the two-wheeler, three-wheeler and four-wheeler segments. The belief that buses should be the first to adopt EVs, followed by three-wheelers, two-wheelers and four-wheelers, is prevalent in the industry. However, I believe that all of them will simultaneously adopt EVs. My hypothesis is that EVs will be initially adopted in urban areas with the aim of reducing air pollution. Commercial vehicles that run over longer distances will be the first to adopt them. In the next four to five years, when battery costs come down, the operating costs of EVs will be just 30-40 per cent of the cost of internal combustion engine (ICE) vehicles. Then, even private owners will find EVs affordable.
Neeraj Kumar Singal
Since EVs are much costlier than ICE vehicles at present, they will be initially reviewed on the total cost of ownership (TCO) model. The TCO model will suit those consumers who have a daily usage of more than 100-150 km like commercial car fleets, transport undertakings and corporate transit solutions. Hence, these will be the early adopters of EVs.
By connecting charging stations with renewable energy and energy storage solutions, we can promise a 100 per cent green mode of transport. The renewable energy demand, in this case, may not be much. However, for battery swapping stations we can use renewable energy to recharge batteries.
Dr Rahul Tongia
Some of the early EV adopters in terms of energy volume are likely to be public transport and commercial fleets. This is a good thing because they can figure out their own charging infrastructure. Two- and three-wheelers in the EV segment may also grow simply because the absolute price differential is not as much as battery sizes are relatively modest. China has been effectively selling only electric two-wheelers for many years. In a larger population, people buying a second vehicle could be a niche consumer segment. While I do not have data on what percentage of vehicles will fit this bill, we have to remember that a niche in India is bigger than that in many countries in Europe.
What are the demand and supply expectations for EVs and the related charging infrastructure?
The outlook is quite positive for the entire sector as it is just a matter of time before consumers decide to move to EVs. The price of charging is very important as it should be affordable and tailored as per the purchasing power of the targeted customers. EVs are sure to come in a big way in India, and are expected to reach an inflection point in 2024 when battery prices become more affordable. Today, we talk about batteries while a few years from now we might have fuel cells in EVs, especially in buses, trucks and other heavy vehicles.
Neeraj Kumar Singal
EVs will witness higher demand only when they get greater impetus from automakers. This is widely considered a chicken-and-egg conundrum. However, the segment will get a boost when major automakers like Maruti and Hyundai start manufacturing EVs on a large scale in India, keeping in mind the need of the market. I personally feel that 2020 will be the deciding year for the EV market. This is when the BS IV norms will be introduced, which will increase the cost of ICE vehicles, and the battery price will also come down to make EVs a viable solution. After 2020, the EV market will grow at a compound annual growth rate of more than 15 per cent.
Dr Rahul Tongia
There are three main aspects that will determine whether the grid can handle EVs – energy requirement, instantaneous electricity demand and infrastructure, both local (last mile) and charging. This assumption excludes the uncertainty regarding demand, grid conditions and power sources, and charging technologies (especially fast charging). With planning, the grid should not be a bottleneck for EVs.
Studies by Brookings India estimate that even with the increase in EV penetration by 2030, the electricity demand by EVs would be about 4 per cent of the total demand (this calculation excludes freight and intercity buses). The bad news is that when we plug in an EV, it can create an instantaneously high demand on the grid, which is made worse through fast-charging technologies, in an extreme case, if everyone would plug in simultaneously, like on a Friday evening, it would collapse the grid. Thus, sooner rather than later, we have to move towards a different time-of-day (ToD) pricing mechanisms, both for EV charging and renewable energy. This is distinct from ToD for consumers.
Who should be responsible for creating charging infrastructure? What should be the preferred business models?
Private investors and PSUs should be responsible for creating charging infrastructure. Government agencies should not be involved in the business part of it and there should be no subsidies for operators. It should be a level playing field for both private investors and PSUs. Incentives can be offered to consumers buying EVs.
The working population of the country (between ages 25 and 50 years) is more likely to use EVs either through cabs or private vehicles. They are more inclined towards using digital platforms or a do-it-yourself approach. Charging stations would only require plugging the vehicle into the charging port, while payments would be managed through a digital application. Hence, we believe in setting up unmanned charging stations, with smart chargers. At such stations, users can not only make online payments, but can also see nearby charging stations, their availability and pricing. A bouquet of services including pay-as-you-go, monthly subscription, royalty based programmes and prepaid services will be provided to customers.
Neeraj Kumar Singal
Like the telecom industry, the charging infrastructure market should be left open for private players. The role of the government and discoms must be limited to taking inputs from the industry. Private companies will be able to develop, operate and maintain the charging infrastructure much better than others as they are more flexible in operations, finances, demand aggregation and infrastructure development.
It is too early to comment on the business models because the industry is still waiting for firm guidelines from the government, high voltage cars from automakers, financing schemes, etc. So as and when automakers start manufacturing electric cars, different business models will evolve.
Dr Rahul Tongia
Charging infrastructure is a complex problem, and presents a chicken-and-egg situation. It need not be a bottleneck as in the short run commercial fleets and other consumers with flexible charging requirements will be able to take care of their own needs. Many consumers would be able to manage with overnight slow charging, which will be the cheapest in terms of infrastructure, and utilise existing connections via a simple 15A alternating current point.
The real challenge will not be in the short run when volumes are low, but when local distribution upgrades are required for end-user connections, distribution transformers, or even feeders. Now is the time to begin the analysis and conversations on how to solve this problem. This can even become an opportunity when we realise that EVs are not a burden for the grid but in fact a benefit. They can be synced with power supply conditions so that even higher tariffs are viable for consumers, especially as battery prices continue to fall. India has a lot of potential for growth in EVs and improvement in power supply. With effort, these can synergise and be as clean as possible.