Gearing Up for EVs

Industry recommendations on potential business models and tariff structures

In line with its objective to shift to an all-electric car fleet by 2030, the government is reportedly in the process of formulating the country’s first-ever policy on electric vehicles (EVs) and charging infrastructure. The policy will cover EV charging and its feasibility, including the regulatory framework, technical standards and tariffs, among other things. Power Line invited industry experts to share their views on the potential models for EV charging, the appropriate tariff mechanisms and the key policy enablers for promoting EV penetration in the country. Excerpts…

What kind of a model should be adopted for EV charging infrastructure, ownership (distribution licensee owne d, franchise based or third-party ownership) and operations?

Debi Prasad Dash Director, India Energy Storage Alliance

  Debi Prasad Dash

India has a significant market potential for batteries and EVs. Our analysis projects the EV market potential for India to be around 77 million between now and by 2030, which translates into an energy storage market capacity of around 800 GWh. At present, most of the charging stations in India are owned by government utilities and public sector undertakings in pilot mode. Further, Energy Efficiency Services Limited (EESL) and the state distribution companies have floated a few tenders to install charging stations across India. Considering the fact that the public-private partnership (PPP) franchise model has worked out successfully around the world, it can be highly recommended for India since the electricity market is regulated as far as selling energy is concerned. In this business model, the share of discom would be the electricity tariff set by the state regulators. Further, partnerships can be promoted by providing land incentives and encouraging setting up of PPP models at government locations. The government can also provide incentives to its employees for charging at specified locations.

In addition, EV batteries can be charged/ discharged (vehicle to grid) and thus can potentially move across regions. Hence it is essential to appropriately classify the privately developed charging infrastructure for delivering/trading energy. Under the existing regulatory scenario, only utilities can sell electricity. In line with the renewable purchase obligations wherein state electricity regulatory commissions monitor the discoms, there should be a mechanism to incentivise the setting up of charging infrastructure.

Anish De, Partner, Head of Strategy and Operations, Infrastructure, Government and Healthcare, KPMG India

Anish De

  • The third-party ownership model should be encouraged for setting up EV charging infrastructure. If done by a distribution licensee, it should ideally be done with third-party partners, which may be franchisees. However, much will depend on the legal framework under which this happens.
  • Demand can be segmented into three buckets: Public charging (dedicated stations/hubs/kerbside/parking lots); home charging; and destination charging (hotels, malls, etc.). The distribution licensee-owned or franchisee model will be more suitable for public charging infrastructure, which would be set up in cities and on highways. Pricing can be a combination of pass-through plus the service charge. Home charging would require business-to-consumer (B2C) capabilities in the form of door-to-door sales, installation and maintenance, and the involvement of an asset management company (AMC), which may be more suitable for independent private players/start-ups. Likewise, destination charging at hotels and malls may require flexible models/innovations where customers can charge their vehicles (either for free or priced into services such as grocery bills and hotel bills).
  • In a nutshell, for public charging, distribution licensees will have to make the first move and commit initial capital for conducting pilots to establish economic viability of the different operating models. A PPP looks workable in the immediate term. Franchisees can be critical to the faster scale-up of the charging network. Home charging can be driven by start-ups (post regulatory amendments though).
  • The charging infrastructure is not only about setting up hardware, which is the EV supply equipment (EVSE), but also involves components like software and system integration elements, which are equally important. The seamless communication of EVSE with the battery management system of the EV and with the utility for grid-related parameters and billing is important. A number of web-based applications are also emerging to facilitate the access to, use of and payment for EVSE. Herein, we believe third-party providers focusing on this space will be able to drive more innovation and provide better customer service.
Rahul Tongia, Fellow, Brookings India

Rahul Tongia

Charging stations are an important component of EV solutions, but most people only think of public or open-to-all charging stations. A lot of initial charging will be private, whether via fleets or individuals (especially in the case of low voltage, end users). There will be many use cases and each may be optimal with different charging solutions. The need is for neutral policies that would enable all solutions and business models, and then leave things to the market. In case of market failures, or a need for policy interventions, the government will have a role to play. Other roles, of course, relate to standards.

What are the tariff mechanisms required for promoting EVs?

Debi Prasad Dash

The Government of India has clearly decided to prioritise EVs. Energy storage is a key component of this and there are a number of ways in which EV adoption could prove to be transformative for the grid. First, EVs could present substantial load for the grid, which in the past year has become surplus on generation. Second, with better tariff structures and the use of right storage technologies in EVs, we could also use EVs for distributed storage, and provide grid balancing services through the vehicle-to-grid and vehicle-to-building models. This transformation can also help in not only greening the transportation fleet by reducing diesel/ petrol consumption and associated emissions, but also greening the grid if EVs are used for better integration of renewable resources into the grid.

A way to make EV charging a success is to ensure a lower cost (rupee per kWh) in comparison to gasoline-powered cars. On the other side, retail marketplaces, which have installed EV chargers, have seen an increase in business as customers tend to shop while charging their cars. Besides retail marketplaces, community parking spaces and public transport depots have to be considered for setting up EV charging infrastructure as vehicles remain idle for long durations at these places.

At present, various Indian states are planning to introduce a special tariff for EV charging. Recently, Delhi notified Rs 5.50 per kWh for low tension consumers and Rs 6 per kWh for high tension consumers. Although the other state electricity commissions have not notified their official orders, the utilities have sought tariffs of around Rs 6 per kWh in their tariff petitions to state regulators.

Anish De

  • The tariff for charging EVs is currently classified under the commercial category (except in Delhi). Creation of a separate EV consumer category and setting a tariff similar to that for retail customers would contribute in bringing parity between EVs and conventional vehicles in terms of the total cost of ownership.
  • Rebates during non-peak hours can be considered.
  • Public charging stations may use pretty standard pass-through plus the service charge. Home charging would be as per the current tariff for retail customers. Destination charging could be free/discounted to increase traffic/footfall at hotels/malls.

Rahul Tongia

Electricity tariffs for EVs need to be a win-win for both the consumers and utilities. For consumers, it is rather easy – one can compare EV charging with petrol/diesel (or CNG) and see what price points are viable. The good news is that even commercial tariffs are cheaper than the fuel costs today. But they need to be that much cheaper to cover upfront battery costs. The calculation depends on how many kilometres one drives in a year. Even free power is not cheap enough if one does not drive much, yet has a large battery pack. From the utility perspective, power should never be sold below cost and, in fact, it should be ensured that no one uses power at the peak (especially in the absence of peak power pricing). Ultimately, they want more power to be used when the grid is in surplus, which happens maybe during the night now, but could possibly happen even during the day as solar power grows. This inherently suggests that a dynamic tariff is best for EVs.

What are some of the key policy enablers needed to scale up EV charging infrastructure in India?

Debi Prasad Dash

The key to having an efficient infrastructure begins with comprehensive planning. NITI Aayog has already proposed a consultation for EV charging. Similarly, standardisation and interoperability are key to developing pan-Indian charging infrastructure. The Bharat charger standards, notified by the Department of Heavy Industries (DHI), have already proposed a common standard for both the charging and payment mechanisms. To ensure interoperability, standardisation can be adopted in the range of battery size, plug technology, payment standards, etc. without hampering the existing systems. If global trends are an indication, software will play a major role in convenient charging and last-mile connectivity, and encouraging people to opt for plans that are compatible with multiple service providers. It will help utilities and service providers to map the supply-demand from EVs and provide suitable incentives.

A key drawback in the government’s current EV initiatives is the lack of a single-point nodal agency for all the programmes and policies. Considering the fact that the EV landscape is evolving in India, it is acceptable that various policies and schemes are mooted by different government ministries and agencies. However, going forward, it would be ideal to have a single ministry/nodal agency that would be responsible for all EV-related policies and projects. An example would be the UK’s Office for Low Emission Vehicles, which is an exclusive agency working on the electrification of transport while being a part of the Department of Transport and the Department for Business, Energy and Industrial Strategy.

Anish De

  • Regulatory amendment to allow third-party charging infrastructure players to resell electricity/provide energy services to consumers.
  • Enable open access for charging infrastructure providers to procure power from third-party/captive sources and other renewable energy producers.
  • Ministry/DHI to announce multistandard specifications suited for different EVs, which have to be followed by charging infrastructure providers.
  • Purchase of power through open access without applying the cross-subsidy surcharge.
  • Hardware standardisation has to be focused upon.
  • Beyond these, EV sales are the fundamental enabler to set up/scale up charging infrastructure. Hence, some initiatives to kick-start the market, as is being done now through EESL, would be helpful. However, this should only be an initial demand booster and should not slow down the other policy, tariff, regulatory and other measures identified.

Rahul Tongia

Compared to other countries, land is a major issue for personal vehicle charging and for setting up charging stations in India. Many vehicles are parked on the street, and so where do we get the overnight charging? Suppose a reasonably fast charger takes 30 minutes, even then, that is eight to ten times the time it takes to fill a regular petrol/diesel tank. This means longer lines, or a much larger space requirement for charging stations.

 

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