Context

In order to meet its decarbonization goals, India will introduce a new policy for battery swapping to boost sales of electric vehicles (EVs).

Background

• This was a part of the 2022-23 Union Budget’s focus on sunrise opportunities, energy transition, and climate action.
• A battery swapping policy will be brought out and interoperability standards will be formulated.
• The private sector will be encouraged to develop sustainable and innovative business models for ‘Battery or Energy as a Service. This will improve efficiency in the EV ecosystem.
• The move to come out with a policy on battery swapping is essentially an extension of the government’s scheme for e-buses to swap drained batteries with fully-charged ones at depots across key metros, as a part of its ambitious plan for a mass shift to electric vehicles by the year 2030.

Analysis

Key Takeaways from the policy

• Lowering of cost: A battery is also the most expensive part of an EV and swapping allows companies to offer it as a service through lease or subscription models, bringing down the cost of owning and operating the vehicle.
• Incentive to owner: The government is likely to offer EV owners an incentive of up to 20% of the total subscription or lease cost of the battery and this will be in addition to what they already get for buying clean vehicles.
• In 2019, India set aside 100 billion rupees ($1.3 billion) to promote EVs by giving incentives directly to buyers, but only about 10% of this has been used. Incentives for battery swapping will likely be given from the same fund.
• Uniform standards: The government will also define battery design and charging standards for companies that want to set up swap stations. This is to ensure the batteries can be used across EV models of different automakers.
• The idea is that if one company sets up a battery swap station, vehicles of another company should be able to use the same battery and service. Disruption will only come with scale.
• Infrastructure: The government’s move to assign infrastructure status to the clean energy storage sector is expected to help the sector access credit.
• Facilitating credit facility: Data Centres and Energy Storage Systems including dense charging infrastructure and grid-scale battery systems will be included in the harmonized list of infrastructure. This will facilitate credit availability for digital infra and clean energy storage.
• Building storage: The Economic Survey called for a focus on building storage for intermittent electricity generation from solar PV and wind farms.
• Linking with PLI Scheme: In addition to this, the Budget also proposed an additional Rs 19,500 crore for a production linked incentive scheme in the solar sector for manufacturing of high-efficiency modules, to facilitate domestic manufacturing for the goal of 280 GW of installed solar capacity by 2030.
• Awareness: It will create new avenues for companies to venture into the business of battery swapping, he said, adding, additionally, creating special clean zones will further accelerate the adoption of EVs and spread awareness amongst the citizens.
• Sustainable business models: The private sector will be encouraged to develop sustainable and innovative business models for battery and energy as a service is a great boost to co-develop the battery swapping and EV charging ecosystem.
• Extension of FAME Scheme: What was missed was an explicit statement of the extension of the FAME scheme and how it can support the expansion of the charging network in India to help facilitate the switch from petrol and diesel-based vehicles to EVs.

Government’s initiative Government seeks to achieve the target of electric vehicles to make up 30 % of new sales of cars and two-wheelers by 2030. India has launched the National Electric Mobility Mission Plan (NEMMP) and Faster Adoption & Manufacturing of (Hybrid &) Electric vehicles in India (FAME India), to build a sustainable EV ecosystem. FAME SCHEME FAME India is a part of the National Electric Mobility Mission Plan. Main thrust of FAME is to encourage electric vehicles by providing subsidies. The FAME India Scheme is aimed at incentivizing all vehicle segments. Two phases of the scheme: Phase I: started in 2015 and was completed on 31st March 2019 Phase II: started from April 2019, will be completed by 31st March 2022 The scheme covers Hybrid & Electric technologies like Mild Hybrid, Strong Hybrid, and Plug-in Hybrid & Battery Electric Vehicles. Monitoring Authority: Department of Heavy Industries, the Ministry of Heavy Industries and Public Enterprises. Fame India Scheme has four focus Areas: Technology development Demand Creation Pilot Projects Charging Infrastructure Objectives of FAME Scheme: Encourage faster adoption of electric and hybrid vehicles by way of offering upfront Incentives on the purchase of Electric vehicles. Establish a necessary charging Infrastructure for electric vehicles. To address the issue of environmental pollution and fuel security.

Way Ahead

The government will give $6 billion in incentives to companies to build clean vehicles and produce batteries locally as it plans for electric cars to make up 30% of total private car sales by 2030 and for electric motorcycles and scooters to make up 40% of total sales