Clean energy for clean transport in India
Co-written with Nitish Arora
India, the world’s fourth-largest renewable energy market and fifth-largest automobile producer, is also the world’s third-largest importer of oil. By switching to renewable energy electric vehicles, the country can save billions on energy imports, dramatically improve air quality in Indian cities, while tackling the climate crisis that is already affecting millions of Indians. . Key policies adopted now can have a huge impact on ushering in an era of clean transport in the country.
India has one of the lowest vehicle penetration rates of any major economy and has a unique opportunity to establish a sustainable electrified transport system. Electric vehicles (EVs) are steadily gaining ground in Indian cities and offer several benefits: improving air pollution, reducing oil import costs, and improving the demand profile for India’s beleaguered energy sector. Moreover, renewables and electric vehicles are also large-scale job generators for the future – potentially creating 13.8 million clean jobs by 2030 according to one estimate.
The Indian government, led by NITI Aayog, has proactively developed strong policy initiatives since 2018 to encourage the development of the electric vehicle ecosystem in India. Now, as the government seeks to change the Electricity Law and the National Electricity Policy, the time has come to think futuristically about greening the grid and, subsequently, the transportation sector.
Here are three policy levers that can help unlock the billion dollar opportunity to power electric vehicles with renewable energy.
- Facilitate the purchase of renewable energy by EV charging providers: Current electricity regulations in most states in India require a minimum threshold of one megawatt of standby power to purchase open access electricity. This minimum demand power threshold is problematic for EV energy operators who set up charging stations. The establishment of a dense network of battery charging or exchange stations implies that their energy demand would remain distributed. Therefore, allowing demand aggregation would encourage energy operators to source renewable energy to power electric vehicles, as was piloted in Delhi. In addition, the policy currently allows open access to renewable energy available only from the state and after paying the cost component to distribution companies (DISCOM) set by the state Electricity Regulatory Commission. (SERC). Relaxing or removing this clause in the state could lead to competitive market-based pricing and increase system efficiency.
- Encourage interstate commerce and the transmission of renewable energies, in particular for powering electric vehicles: In a positive move, India’s Ministry of Energy (MoP) has extended the exemption from charges on interstate renewable energy transmission until June 30, 2025. However, this exemption is only available for the electricity sold to entities with renewable energy purchase obligations. This stipulation often excludes energy operators who provide charging facilities for EVs. Since these transmission costs and transmission losses constitute a significant proportion (around 22 to 30%) of the unit cost of landed electricity tariffs provided by energy operators to group captive renewable energy producers (a captive group is an arrangement whereby a developer sets up a project for the collective use of several industrial or commercial consumers), extending this incentive to renewable energies to power electric vehicles can go a long way in providing an integrated solution to decarbonise the sectors of electricity and transport.
- Provide a power bank to energy operators: In electricity markets, âbankingâ is an accounting arrangement that allows a renewable energy production facility to âdeposit for later useâ the electricity it produces that is not. used by its buyer, or to âborrowâ the energy it needs to sell to the buyer if it is impossible to produce for a given period (ranging from 15 minutes to a year). Currently, bank charges and their criteria vary by state in India, ranging from two to ten percent of the electricity fed into the grid by renewable energy producers or withdrawn by consumers. To encourage EV energy operators to set up captive renewable energy installations, a more user-friendly policy could consider capping these fees at a lower range (preferably 2% of withdrawal energy) and encourage a coherent framework between the different SERCs. In addition, energy operators could benefit from energy banking services with DISCOMS for a period of one year at a minimum cost, in order to encourage the use of renewable energies to power electric vehicles.
The transition to electric vehicles in India is a major opportunity to jumpstart the economy, boost job growth, improve air quality and reduce carbon emissions. Although electric vehicles are cleaner even with the conventional electricity grid, pairing them with renewables can accelerate India’s decarbonization efforts.
Nitish Arora is an expert in electric mobility and clean energy and works as a consultant with the Indian program of the NRDC.