The two publications CSE has brought out identify the current challenges, barriers and gaps, and recommend the pathways for a rapid transformation:
The case for electric: Building scale and speed of zero emissions mobility
(Download here: https://www.cseindia.org/policy-brief-the-case-for-electric-10967)
Electric Bus: Towards zero emissions commuting (Download here: https://www.cseindia.org/electric-bus-10969).
The policy reviews have highlighted that each vehicle segment has its unique set of challenges and opportunities that needs to be addressed with a roadmap. Other policy levers need to be strengthened as well to ensure faster growth and ambition.
- E-two-wheelers – quicker scale is possible: The Niti Ayog says 70-80 per cent electrification of the two-wheeler fleet is possible; it also contends that price parity with IC engines can be achieved quicker. Already, sales are picking up due to high petrol prices. FAME II performance criteria (linked to minimum range per charge, minimum top speed, defined energy efficiency, minimum acceleration, and higher number of charging cycles etc) need to be taken forward.
- Personal e-cars – need proactive industry and reliable charging: Central FAME incentives are not available for personal cars, though some state governments have provided fiscal and non-fiscal incentives. The key barriers today include the limited number of electric car models available, range anxiety of consumers and inadequate charging infrastructure. Personal e-cars can achieve scale with reasonable OEM prices, fiscal and non-fiscal support, diverse model availability, and adequate charging infrastructure. Testing methods of cars need to be improved as well to reduce the gap between certified range and on-road performance.
- E-buses – link with the scale of public transport operations: CSE’s additional in-depth analysis of the e-bus programme shows that the FAME II scheme for buses aims at aspects like improved coverage, setting up deployment targets, dedicated fund allocation, etc. The new amendment has mandated Energy Efficiency Services Limited (EESL) to aggregate demand for e-buses (and three-wheelers) for deployment in Mumbai, Delhi, Bengaluru, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat and Pune, as well as support charging. This approach of EV growth centres and demand aggregation for concentrated effort can help reduce cost and create a learning curve for other cities.
- However, more reforms are needed to allow different operational models for state transport corporations (STUs) to flexibly adopt the most efficient strategies, promote more charging options for buses, and adopt city-level e-bus deployment plans including routing and driving patterns and e-bus oriented transit infrastructures like depots, terminals, bus stops, etc. Says Mohanty: “In fact, the e-bus segment requires special attention as the pandemic has led to massive losses in ridership and revenues and increased the viability gap funding requirement by nearly 70 per cent.”
- It is a good sign that e-bus procurement has become more service-oriented -- STUs have begun to specify service needs instead of only the details of the vehicles. But given the current funding pattern, there is not much scope for service guarantees. More staggered funding can assure that. The whole subsidy amount under FAME II capital incentive (up to 40 per cent of the total bus cost) is paid within six-seven months of bus operations. This can be staggered for a longer operational period and be linked with performance. More efforts are needed to quicken price parity and make the total cost of ownership comparable with ICE buses, point out CSE researchers.
- Fleet delivery and ride hailing – an opportunity: The phenomenal increase in last-mile deliveries across urban e-commerce and ride hailing services has been identified as the priority focus. This sector requires a combination of mandate- and industry-led voluntary targets for rapid electrification. What is needed is stronger incentives to manage last-mile urban freight and deliveries; linking incentives with e-kilometers based on odometer reading; increase in EV models for this segment; and addressing permit concerns related to cross-sector usage of vehicles like two-wheelers.
- Need zero emissions vehicle (ZEV) mandate: While incentive-based strategies are in place and can be further strengthened, a ZEV mandate can provide certainty in the market; encourage investors; offer flexibility to the industry to develop plans to achieve targets; ensure robust supply and larger model availability; and address skewed costs, among other things. A ZEV mandate is a revenue-neutral strategy for the government and can leverage market competition to promote ZEVs. This can also free up government capital for EV promotion and charging infrastructure.
- India can consider a credit trading mechanism to provide an incentive to
- manufacturers to build EVs, win ZEV and emission credits, get a fresh revenue stream from banking and trading over-compliance credits. Linking energy efficiency and range with the ZEV mandate will ensure that low emissions and higher calibre vehicles will receive higher credits. Global experience has shown that a combination of target, ZEV mandate and incentives can be a game changer.
- Localisation plan cannot work without a mandate for scale: The production-linked incentive (PLI) of Rs 18,000 crore for batteries – target of 50 GWH and linked to the National Mission on Transformative Mobility and Battery Storage, 2019 -- has potential. But local manufacturing needs matching demand from the EV sector, as PLI incentives are disbursed on the basis of incremental sales from domestic units.
- Five years of the PLI scheme is too short a period to get adequate commitment from manufacturers. There is uncertainty around the volumes of sales, evolving battery chemistries etc. Investment can be a risk if support structures and roadmaps for demand creation are unclear. In fact, the 30@30 target will require much larger battery capacity – a cumulative addition of 824.7 GWh in 2030, as per the estimates of International Council on Clean Transportation.
- Need a tighter fuel efficiency benchmark: India has implemented fuel efficiency standards only for cars and these corporate average fuel consumption standards are too weak to push electrification. Car companies have not only met but also exceeded the current requirement of fuel efficiency and standards and as per IEA/1CCT evaluation, the average fuel consumption of new light-duty vehicles sold in 2018 are roughly 9 per cent ahead of the target for that year. Industry has comfortably achieved the weak target. The current fleet is only 7 per cent away from meeting the next target in 2023. ICCT estimate shows that only 1-2 per cent electrification of major carmakers can meet Stage 2 fuel efficiency targets easily. This will have to be addressed immediately especially as car industry is asking for delay in stage 2 standards.
- Need financing strategy: The 2021, NITI Aayog - Rocky Mountain Institute study has estimated that for 70 per cent electrification in 2030 cumulative capital cost needed is expected to be Rs 19.7 lakh crore by 2030. Currently, the barriers include high financing cost, limited financing options for customers, conservative approach of banks and non-banking financial institutions as there are concerns around performance and resale value of EVs. There are special challenges for two/three-wheeler fleet operators who need high daily vehicle usage to justify their business model viability to financial institutions. Moreover, daily renting system of 3 wheelers and small cargo vehicles makes repayments difficult. It is necessary to increase access to low-cost financing, and priority sector lending mandates. State policies, interest rate subvention, product guarantees, vehicle performance and resale values among others are important.
- Need proactive industry: As this transition is inevitable, it is necessary to develop EV policy as also an industrial development policy and vehicle industry needs to leverage new market opportunity to build scale. Simplicity of the EV technology has brought new players in the market. E-2 wheeler manufacturing is dominated by them which is also leading to innovative business model. Also in the e-bus segment 74 per cent of the total e-bus supply order under FAME II has gone to new players.