Time to usher in the EV revolution

The air quality in our cities is deteriorating at an alarming rate. Today, 14 out of the 15 most polluted cities in the world are in India. Left unchecked, we are staring not only at severe health costs but also losing highly skilled work force to migration abroad.

Transportation is an outsized contributor to this situation, if not the sole one. Battery electric vehicles (BEVs) are an integral part solution to this problem, which justifies strong public support for their adoption. However, despite generous tax subsidies, and other forms of support, adoption is not occurring at the pace and scale needed to have a meaningful impact on oil imports and urban air quality. Also, subsidies have proven unsustainable even for the wealthy countries (e.g. Norway). Nevertheless, there is reason for optimism. The basic point here is that policymakers should recognise some new realities, and tweak our policies to take full advantage of such facts.

Two recent economic developments justify an even more aggressive but a smarter policy agenda. First, is the dramatic reductions in the global cost of battery storage. The last decade has witnessed a six-fold reduction in the international price of Li-ion storage batteries (about $1000 per kilowatt hour (kWh) in 2010 to about $170 per kWh in 2018).

This has substantially mitigated the disadvantage of BEVs in terms of upfront cost and propelled them ahead of other zero emissions technologies, the most notable being hydrogen fuel-cells. Indeed, BEVs cause pollution during power generation, and during battery production and disposal. It is, therefore, imperative we decarbonise electricity and ensure the batteries are environmentally sustainable.

Second, is the fall in cost of solar and wind electricity as evidenced in the prices discovered in repeated auctions by the Solar Energy Corporation of India.

So, what is a smarter way to ushering in the electric vehicle revolution? A central feature of such an approach is targeting electrification of those vehicle segments that offer the greatest environmental and socio-economic return on investment.

The basic reality is that more intensive the utilisation (i.e., more kilometers/day) of a BEV, greater are its fuel cost savings and environmental benefits. This means a focus on commercial vehicles over private household vehicles. In contrast, BEV policies world-over have prioritised adoption by private households.

City bus fleets are the ideal first segment for full electrification given their straightforward charging infrastructure demands (install fast chargers at bus stations). A study by University of California Los Angeles (UCLA) and Lawrence Berkeley National Lab (LBNL), concludes BEVs would not only improve air quality but also increase ridership and revive loss-making bus agencies. Alongside buses, taxi fleets (Uber, Ola, Merucabs etc), and short- and medium-haul light commercial trucks and delivery vans that mostly operate within city-limits are ripe for electrification right away.

Realising this dream hinges foremost on the establishment of a widespread, reliable, network of fast-chargers within cities and along highways, which is the second key task for government. This is a class and uncontroversial role for government, especially for new industries in their infancy, for the large benefits that accrue to society and are not fully appropriable by private investors.

Therefore, as important as vehicle subsidies might be, this should not compromise expenditure on creating infrastructure. For until such an infrastructure is in place, it is hard for private businesses and households to delay adopting new technologies.

Research by LBNL and UCLA shows also that both the physical footprint and the amortised cost per mile of a reliable fast-charging network for a large city are modest and decline dramatically with scale and intensive utilisation.

While city bus fleets followed by other intra-city commercial vehicles are the simplest and cheapest to electrify first given their well-defined range of use, with more than 50 per cent of India’s oil consumption is for long-haul trucking and more than 80 per cent of the bus fleet plying on inter-city routes, we also simultaneously need to begin electrification of highways.

Below are five concrete yet broad policy interventions to realise the vision above.

100 per cent EV pilots: We need to select a few major cities and select major state and national highway corridors to serve as pilots that demonstrate both the technical feasibility and economic viability of 100 per cent electrification of city buses and commercial taxi fleets and a reasonable share of inter-city buses and trucks. The cost of these pilots can be reduced by aggregating demand from all across the country and centrally procuring and allocating the vehicles and infrastructure equipment at scale using public auctions.

Building of infrastructure: Having identified the locations for pilots, the next step is to fund the building of the fast-charging infrastructure. In fact, at this stage it is prudent to somewhat over-build this infrastructure to ensure reliability and ease of access at the expense of being under-utilised given the high stakes of this venture. It is also essential to ensure that this infrastructure benefits from the revolution in renewable electricity markets.

Subsidy targeting: To reduce the total burden on public finances, the subsidy regime needs to be reformed to ensure that the vast majority of the vehicle subsidies are directed to high-mileage vehicles with a substantial portion allocated to city bus fleets given the environmental imperative and their potential to revive public transportation. At the same time, there is merit to continuing some support to adoption by private households in both the two- and four-wheeler markets.

Industry buy-in: In order to ensure that the public investments in infrastructure and subsidies are put to their full and best use, we should require that both public transportation agencies and private operators of commercial vehicles (taxis, buses and trucks) commit to mandatory targets for electrification of a certain share of their total annual kilometres travelled or serviced to be derived from BEVs.

Make in India: The above efforts must be complemented with supporting policies to ensure that in the long run we do not end up swapping oil imports and fuel insecurity for battery imports. This could be achieved by using a combination of carefully designed mandates and targeted subsidies that balance strategic objectives and flexibility for private industry.

Put simply, we suffer a petroleum addiction problem, one that will be hard to shake off. But we have never had a better chance to forge a sustainable future, one that is not captive to a scarce, toxic, and inequitable natural resource whose future is under our feet and not over our heads.

The writer is Associate Professor, Institute of the Environment and Sustainability & Dept. of Urban Planning, UCLA

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