Big EV Opportunity: Sector gears up for electric vehicle charging infrastructure

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. Significant investments are required in the development of publicly available, fast-charging stations to support the massive EV growth. At the same time, the EV ecosystem would need smart charging solutions that provide network management, dynamic billing, energy savings, etc. All this translates into a huge opportunity for equipment and technology providers. 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 to meet the incremental annual sales. The industry has been responding positively to the new business opportunity. There has been a rush of activity in the sector, including several announcements in terms of new EV manufacturing and setting up charging infrastructure.

On the back of such ambitious targets, the auto industry is gearing up to draw up plans for electrification. Auto players are strengthening their existing portfolios with more launches, investing in research and development, and diversifying through tie-ups with component manufacturers.

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. However, to fully capitalise on the available opportunity, several challenges need to be overcome. Some of the barriers to the adoption of EVs include 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.

India can draw valuable lessons from global markets like the US, Europe, Japan and China, which have been early-adopter markets for EVs. These markets have been supported by government initiatives, funding and technology development.

Power Line takes 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 target to 2030. In addition to providing support and market visibility to private players, government agencies are procuring and developing charging infrastructure.

NITI Aayog, the government think tank that is assisting it in framing a comprehensive national EV policy, has released at least three reports this year presenting the global experience, projected future scenarios and a whole-system approach to mobility transformation. 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, three business models were suggested for EV charging stations without violating the existing provisions of the Electricity Act. 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.

At a recent Power Line conference, Aniruddha Kumar, joint secretary, thermal, Ministry of Power, noted that in order to enable private investments in creating charging infrastructure, the government is planning to treat them as deemed distribution licensees. This would allow direct purchase of power at a cheaper rate than buying from discoms at a higher rate, thus making it attractive while not violating the existing legal provisions.

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. Besides providing incentives and concessions to EV and battery manufacturing players and charging equipment firms, the state will amend the building bylaws for providing mandatory charging infrastructure in all high-rise buildings. It will also create a special purpose vehicle involving several state agencies to create charging infrastructure. 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. The panel has recommended the European combined charging system as suitable since it provides a combined AC and DC charging option. It is also suitable for smart grid application. The challenges to the adoption of this system will have to be resolved after consultation with the automotive industry.

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 sub-groups to resolve the issues related to the impact of EVs on the grid, charger standard specifications and the permissible business models.

Creating market demand

The government is leading by example by procuring EVs for its departments and agencies through Energy Efficiency Services Limited (EESL), a joint venture of four public sector units – NTPC Limited, Rural Electrification Corporation, Power Finance Corporation and Powergrid Corporation of India Limited (Powergrid). This will help in creating a market for EVs, new manufacturing capacity and an initial push.

EESL has a target to replace the 500,000 cars currently deployed through leasing arrangements by government departments and agencies with EVs over the next three to four years. EESL will provide EVs to the government at the same rate as it pays to the agency that is currently hiring the internal combustion engine (petrol/diesel) cars for the government. Therefore, there will no additional cost for government departments. EESL also plans to set up charging infrastructure that will be connected to the electricity meters of government offices to avoid any regulatory violation. This initiative to replace the entire government fleet is expected to result in fuel savings of 8,000 million litres, 10 million tonnes of carbon dioxide (CO2) reduction and Rs 282 billion of annual fuel savings.

“The plan to buy half a million electric cars within four years will attract a lot of foreign participants to set up manufacturing units for EVs in India. Further, the switchover to EVs will create a demand for 5 GWh of battery storage annually, which will attract the attention of large global battery manufacturers,” says Saurabh Kumar, managing director, EESL. As a part of this plan, in September 2017, EESL, on behalf of the government, invited bids for 10,000 EVs to cater to government offices. The proposal was to procure 500 EVs by November 30, 2017 under Phase I and the remaining 9,500 EVs under Phase II. The tender resulted in the lowest bid of Rs 1.18 million per vehicle (including GST), quoted by Tata Motors Limited, with a five-year warranty and a range of 130 km. Mahindra, the second lowest bidder, agreed to match the lowest bid made by Tata Motors, following which EESL gave it an order for 150 vehicles in Phase I. Meanwhile, Tata Motors agreed to supply 250 EVs in this phase.

Tata Motors and Mahindra have delivered the first units of Tigor EVs and e-Verito models respectively. The Phase I vehicles will be deployed in the national capital region (NCR) by January 2018. Based on this experience, EESL will come out with the Phase II tender after tying up with various states for the deployment of the remaining 9,600 EVs across the country.

In parallel with the 10,000 EV tender, EESL invited bids for 4,000 chargers (both AC and DC). However, to ensure adequate infrastructure for 400 EVs that the government is procuring in Phase I, EESL invited snap bids for 300 EV chargers. In response, 14 companies including ABB, Siemens and Bharat Heavy Electricals Limited (BHEL) submitted their bids. To be technically qualified, the companies have to get their chargers tested at IIT Madras. “Seven qualified bidders have been asked to set up 20-30 charging stations by mid-January 2018 to test their performance,” says Kumar. This will result in the setting up of 125 chargers – 100 AC chargers and 25 DC chargers – based on Bharat EV Charger specifications in the NCR. The AC chargers will have a capacity of 3.3 kW each with three charging points while the DC charger will be a 15 kW single charger. The slow AC chargers will take five to six hours while the fast DC chargers will take 90 minutes to charge batteries to its full capacity. These will be in the sub-100 volt range, given the existing manufacturers’ ecosystems operating in that range.

As new variants of EVs are introduced, migration to higher voltage charging systems will be required. A committee under the Central Electricity Authority (CEA) is working on framing charger standards. It has to be seen whether India-specific standards should be adopted or existing standards such as CCS of Europe, CHAdeMO of Japan or SAE of the US should be opted for. The government stand with respect to standards is clear that the technical specifications have to be aligned to best international standards for both chargers and EVs. Several existing and new players have made announcements to foray into EV manufacturing. Besides Mahindra and Tata Motors, which have delivered their EV variants in the market, BHEL is exploring EV manufacturing opportunities while JSW Energy has signed an MoU with the Gujarat government to set up a Rs 40 billion EV manufacturing facility in the state. Conventional auto players like Toyota and Suzuki plan to introduce EVs in India by 2020. Bosch has also announced plans to set up a manufacturing unit that would manufacture components and parts for EVs in India by 2018. Hero Future Energies also plans to foray into the battery storage business and set up charging stations.

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 of four-wheeler charging point requirement at 175,000-227,000 by 2020, with fast-charging points accounting for 10 per cent of the total. 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 first of these stations also has a battery-swapping facility and has been launched in collaboration with the ACME Group. These charging and swapping ports are exclusively reserved for Ola’s own fleet. In November 2017, Ola partnered with Indian Oil Corporation to set up the first charging station at the latter’s fuel station in the city.

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. The discom is in discussions with the Municipal Corporation of Delhi and the Delhi Metro Rail Corporation (DMRC) for acquiring land for these stations.

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. The agreement encompasses all major activities from design and execution to investment and operation of the infrastructure using a cloud-based system. 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.

Awadhesh Kumar Jha, vice-president, Fortum, underlines the company’s commitment to setting up 150-160 stations in six to seven cities. He believes that investor confidence levels will rise multifold should India seriously consider making amendments to the Electricity Act so that the EV charging business is considered as a service rather than a power resale. This, he says, has been done by California and Florida in the US through appropriate legislation. Even Norway, which has one of the highest EV penetration levels (at 25 per cent) in the world and where Forum is a leading player, considers EV charging as a service. Further, 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 quick charging stations and 89 are slower AC charging stations.

Another central PSU, 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. The 1.5 kWh batteries, which are based on standards recommended by the Ministry of New and Renewable Energy, will be procured at a swapping factor of about 1.5. It implies that for every 1,000 batteries on the road, Powergrid will procure 1,500 batteries. It is also in talks with Ola for testing different sizes of battery. 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. A major risk is that the battery-swapping model has not succeeded anywhere in the world. But these have been tried for cars only and not for three-wheelers, which operate on relatively smaller-sized batteries that are easier to charge.

Impact on the power sector

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. However, one of the major concerns of the rapid penetration of EVs is overloading of the existing infrastructure, which may adversely impact the grid, the health of the existing distribution transformers and the quality of the power supply to consumers. Therefore, adequate planning and infrastructure development commensurate with the growth of EVs is required.

The incentives for utilising power during off-peak hours should be enhanced to an extent that the cost of power during off-peak hours should be less than the residential tariffs. This will help in flattening the load curve, utilising the large energy storage capacity being set up because of e-mobility, and encouraging the use of public charging stations during off-peak hours. Anmol Jaggi of 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.

Huge investments will be required across the power sector to meet this additional demand. Jaggi is confident that the generation and transmission segments will be able to cope with the demand but augmentation of distribution transformers and network strengthening by discoms could pose a challenge. Besides charger standards, the CEA has been entrusted with the task of formulating grid standards (including on harmonics) to ensure that the grid is not adversely impacted due to EVs.

Key challenges and the way forward

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. Proper planning and scientific studies need to be undertaken to deploy charging stations based on geography, population density and traffic patterns, among other things. Further, standards for EVs, batteries as well as charging infrastructure must be evolved swiftly and aligned to global standards. This will ensure that India also benefits from the technology advances taking place globally given that EVs are at a nascent stage of development. Further, adequate investments must be made in R&D and more testing and certifying bodies need to be equipped.

Even in global markets where there is significant EV penetration, there are challenges due to the lack of adequate charging infrastructure. Also, EVs lag behind ICE vehicles in affordability and convenience. Despite this, the EV market is set to grow exponentially over the next two decades. 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 electric vehicles 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.