The government of India set itself an ambitious goal to shift to electric vehicles (EVs) by 2030. It is estimated that up to $60 billion can be saved and emissions reduced by 37% by this transition alone. This is in line with its commitment to the Paris Climate Agreement. Another target is to increase the share of non-fossil based energy resources to 40% of installed electric power capacity by 2030. But at present, India is the world’s third largest importer of oil. Coal-based power production makes up more than half of the total power production in India. In order to increase the aggregate demand for electric power and reach the targeted emission levels, the government needs to intervene in the market and nudge the automobile manufacturers towards electric vehicles. While there are numerous advantages, there are also many towering challenges.
There is a rationale behind considering electric vehicles as a solution for pollution and climate change. They run on electric motors that do not need any fuel like in internal combustion engines. Thus, they do not lead to emissions of nitrogen oxide and carbon dioxide. Electric vehicles are also energy efficient as they have only 20 moving parts against 2000 moving parts in traditional vehicles. The only disadvantage with electric motors is the proportion of the weight they make up in an electric vehicle. Therefore, producers need to distribute the weight of motors along the length of the cars. The permanent magnets, present in most of the EV motors, functions as field magnet which is responsible for the rotational motion of it. Currently, rare-earth materials are used as permanent magnets which are scarcely available in India and are subjected to constant price volatility. So, they should also invest in R&D to discover a lightweight permanent magnet that can be used in the electric motors.
Batteries make up the half the cost of the EVs. Lithium-ion (li-ion) batteries similar to those used in smart phones are also used for EVs. Since India does not produce li-ion batteries, companies making battery packs are exclusively dependent on imports from China. Moreover, India does not have enough lithium reserves for manufacturing lithium-ion batteries. Procuring lithium reserves for energy storage is going to play a role in energy security tussle between the countries. Chinese firms have already acquired lithium assets in countries like Bolivia, Australia and Chile, with an eye to controlling the global market for lithium imports. It is also estimated by Council of Energy, Environment and Water (CEEW) that India alone would require about 40,000 tonnes of lithium to manufacture EV batteries in 2030, which is much higher than the current annual global lithium production of 32,000 tonnes.
Another material that makes up the major portion of batteries is cobalt, which is used as cathode material of li-ion batteries. In order to tackle the supply side constraints, government of India needs to invest heavily on alternative and viable technologies like sodium-ion batteries with cathode materials other than cobalt. Also, recycling plants must be set up for lithium ion batteries. However, there is an encouraging trend in lithium battery prices which have plummeted from $600/kWh in 2012 to $250/kWh in 2017 and EV batteries prices are projected to come down to 18% of EV by 2030.
Another major shortcoming in this ambitious plan is the lack of charging infrastructure. Charging infrastructure can comprise of home charging, battery swapping and public charging stations. While home charging facilities are not-viable for average citizen and battery swapping is not feasible for regular commuters, the public charging stations could facilitate long range drives and can be used for seamless transformation away from traditional gas stations. Energy firms like NTPC and BHEL have already sensed the potential of this market by anticipating the fresh demand for electricity that will be created with introduction of electric vehicles in the market. They have begun tapping into the shares of start-ups and MNCs that are working on charging infrastructure in India, which is projected to be 90 billion units of electricity. There is an impediment to the growth of charging infrastructure in form of the Electricity Act, which allows only licensed distribution companies to sell electricity in public spaces. The private companies or even government entities cannot set up charging infrastructure according to current regulations.
Electricity is considered as a good at the point of sale and a service while distribution and transmission. As of now, only distributors like Andhra Pradesh State Electricity Board (APSEB) are permitted to set up charging stations. The Electricity Act must be amended for allowing any other bodies to set up charging stations. Moreover, there is no standard global charging technology that can be used in India. China, Japan, and the EU have created their own charging technologies which would be very expensive for India to purchase. Therefore, the government and private sector should also invest in safe and cost effective charging technologies.
Along with EVs and charging infrastructure, an impetus must be given to local renewable energy production and a safe nationalized electric grid. India has plans to achieve 175 GW (100 GW of solar power) of renewable energy capacity by 2022, which is viable given the climatic conditions here. At the 2017 Connected Vehicles conference, Ashok Jhunjhunwala of IIT Madras said, “Solar panels covering 0.5 percent of Rajasthan can generate power for 330 million EVs.” Government of India has also set up many solar power plants like Kamuthi solar power plant, and Kurnool Ultra Mega Solar park, with capacities comparable to that of world largest. Regardless of tariffs imposed by the government, the solar panel industry is yet to realize its potential. Many of the solar projects in the country import solar panels from China as it is low cost.
India is one of the largest producers of motor vehicles, set to cross the mark of five million cars by 2020. The auto industry is also estimated to provide direct and indirect employment to around three crore people. But this will also necessitate upgrading the skills of the present workforce to avert massive job losses in the near future. Global players could flood the market with EVs even before local industries could adapt to the new policy shifts. Less number of parts in EVs and low maintenance cost could also imply loss of jobs in assembly line and automobile component industry.
At present, there are only around 25,000 electric cars sold in India annually. Mahindra & Mahindra Ltd. is the only automaker producing a fully electric car (Mahindra e2o and vertigo) in the country, while Maruti Suzuki India Ltd. and Toyota Motor Corp. offer hybrid versions like Ciaz and Ertiga. In order to increase aggregate demand and stimulate job growth in Indian market for electric vehicles, a state-run firm Energy Efficiency Services Ltd. (EESL) floated a tender for procuring 10,000 electric cars for government officials in various states. The government has also launched Faster Adoption and Manufacturing of Hybrid and Electric vehicles (FAME) scheme, which provides incentives for purchasing electric vehicles that are two wheeler, three wheeler autos, four wheeler passenger vehicles, light commercial vehicles, and buses. The government has also set up National Electric Mobility Mission Plan (MEMMP) to develop efficient and eco-friendly electric and hybrid vehicles technologies by 2020.
As per the findings of Feedback Business Consulting Services' Multi-Client Mega Trend Report, lower operational costs of EVs could drive more and more commuters towards fleet cars or even public transport which can significantly lower the pollution levels in metro cities. However, it should be noted that a recent pilot project by Ola in Nagpur failed to take off because of lack of charging infrastructure, less response by commuters, and high battery costs.
The government should take a leaf out of the books of Netherlands and Norway and incentivize people to use electric vehicles. Gradually, these can be placed in a lower tax slab than traditional vehicles. There should be guidelines related to the type of charging technology (AC or DC) to be used by the automobile industry. DC chargers are preferred for faster charging and lesser transportation losses. The government also needs to address the susceptibility of imported electrical vehicle components to hacking as mentioned in a NITI Aayog report (2017, May). Indigenous battery technologies like those that were created by ISRO must also be encouraged. A concept ‘mobility on demand’ wherein fleets of lightweight electric cars are placed in charging stations can spur the usage of electric cars by commuters. Perhaps it would be better to move to electric cars in phases, initially promoting the use of alternatives like hybrid cars and fuel cells. Though it seems like a humongous and arduous task, small steps towards spreading awareness and cost-effectiveness can spur the demand for EVs.
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