Home Cover Story EV to boost electricity demand in the next decade

EV to boost electricity demand in the next decade

EV to boost electricity demand in the next decade

India Ratings expects the cost of EVs to reduce with an increase in production, says Divya Charen C.

India Ratings and Research (Ind-Ra) estimates that had all the vehicles been electric in FY17, around 500 billion units of incremental electricity demand would be from road transport. This is in comparison to the actual electricity supply of 1,433 billion units, including captive supply of 197 billion units in FY17 as per Central Electricity Authority. Although the electric vehicle (EV) market and its ecosystem are at a primitive stage, the EV market is prepared for an eventful journey and the agency expects the government’s thrust to be reminiscent of the renewable power sector.

The estimated electricity requirement for EVs has been arrived at by using diesel and petrol consumption data for FY17 and share of fuel usage across vehicle categories provided by the Petroleum Planning and Analysis Cell in its reports “Industry performance review March 2017” and “All India study on sectoral demand of diesel and petrol 2013”. Fuel efficiencies of commercially available electric and gasoline vehicles have been assumed for the analysis.

Annual electricity requirement for road transport in the forthcoming decade will depend on the extent of adoption of EVs, increasing transportation requirement, improvement in efficiencies of EVs and share of various transportation modes. One third of the 500 billion units of the estimated energy for road transportation in FY17 is attributable to two wheelers and cars had all of them been electric.

Ind-Ra observes the government’s repeated focus on reducing oil imports and believes that this focus on oil replacement is likely to continue in the long term. Niti Aayog’s drafted three-year energy policy highlights the potential for electrification in transportation (EVs), cooking, agriculture and industries. In the current demand starved situation, indicated by a plant load factor of around 60 per cent for coal plants in FY17, any sign of growth in electricity demand will provide hope to energy generators.

A collaborative report by Niti Aayog and the Rocky Mountain Institute called “Transformative mobility solutions for all”, highlights ways of incentivising EVs, sharing and encouraging mobility as a service concept. Currently, the government incentivises purchase of electric and hybrid vehicles under the scheme Faster Adoption and Manufacturing of Hybrid and EVs in India. As per Press Information Bureau, 148,275 electric/hybrid vehicles have received support under this scheme until 30 June 2017. EV penetration is dependent upon the range of EVs, battery cost, battery life and infrastructure for charging, battery swapping and battery disposal. Rapidly dropping battery costs have led to increased adoption of EVs in China and the US. The comprehensive long-term strategy of the government in terms of deployment targets, charging infrastructure, gaps in battery supply chain, regulatory concerns on motor vehicle and electricity supply sides and incentives for manufacturing, among others, would aid the advent of EVs.

Energy Efficiency Services Limited is finalising suppliers through the tendering process for 10,000 EVs with a five-year warranty to replace a portion of government-owned vehicles. The lowest purchase price of these EVs inclusive of GST was quoted at Rs 1.12 million. Ind-Ra expects the cost of EVs to reduce with an increase in production.

EVs may provide a boost to the solar rooftop sector, particularly domestic customers, who may be incentivised to secure energy for transportation. The agency also believes that the EV segment would open up an opportunity for a new kind of public-private partnership such as building infrastructure for charging points. Business models and regulatory frameworks will emerge and evolve in this domain.

Divya Charen C is a senior analyst at India Ratings and Research Pvt Ltd.

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