Electric vehicles can help boost the sagging power sector – and reduce pollution too
Radha Krishna Tripathy | January 9, 2018
A NITI Aayog report says India has the potential to save about $60 billion in petrol and diesel costs if it goes in a big way for electric vehicles. There are challenges, no doubt; but the advantages far outweigh the negatives. Not only will an electric vehicle programme save billions in foreign currency outflow, it will give a new lease of life to the power sector – especially in renewable sources.
Currently, demand growth in the power sector is slow. Very few power purchase agreements (PPAs) are being signed. Hence, many power projects are stalled and new power projects are not coming up. Power generation has taken a hit, adversely affecting the economy and job growth. On the other hand, the government has set a huge target for power generation from renewable sources: 175 GW by 2022, of which 100 GW has been set for solar power, 60 GW for wind-based sources, and 15 GW for other renewable sources. (For an idea of what a gigawatt is, an average nuclear plant generates about a gigawatt, while it would take 400 average wind turbines of about 2.5 MW to produce the same.) Solar projects are being awarded due to government push, but distribution utilities are not buying enough from them. They cannot be faulted, for the demand is low.
To push demand growth would require massive government programmes and major reforms initiatives. The ‘Make in India’ initiative may push demand for power a little bit, with new industrial and commercial setups coming up in the country, this will not be enough. In this scenario, it is important for the government to find such a solution to creating that demand that is at the same time sustainable in the long run – financially, socially, and environmentally. The solution should also be aligned with the sustainable development goals of the country.
With this perspective, the idea of moving completely to electricity vehicles (EV) by 2030 is a welcome step. The writing on the wall is clear for all stakeholders. There is a clear motive from the government side, and there is enough time to cope with the change. Vehicle manufacturer would have to strategise their business plans to move to manufacturing electric vehicles.
There are multiple benefits for all stakeholders. For the government, it would help fulfill its target of reducing crude and petroleum imports by 10 percent by 2022. The move to electric vehicles will create less demand from the transport sector, and though there’s emphasis on discovering domestic reserves of oil and gas, the switch will help reduce imports. There may be initial shock for the oil companies, but they have ample time to adjust with the new norms and change their long-term strategy by exploring opportunity in the new paradigm.
It would also help the government to generate direct and indirect employment through upward and downward streams of the electric vehicle value chain, such as creating new charging infrastructure, battery manufacturing, battery swapping, etc. It will also help in attracting foreign investment in the country to make their manufacturing base here and thus may boost the Make in India initiative. The R&D requirement in battery technology may eventually open up the research sector in India with government help and support.
The government would strive to make batteries affordable for accelerated adoption of electric vehicles for the masses. Most importantly, it will help the government achieve its target of reducing overall carbon footprint by 30 to 35 percent by 2030 by increasing renewable capacity additions to the country. It will act as a catalyst to increase the solar capacity generation in the country as the demand will be led by the electricity requirement coming from the transport sector for vehicle charging.
This would also help the power sector in multiple ways. A large fleet of electric vehicles would naturally consume more electricity. This would require more electricity to be generated to supply the charging stations. This would help create the much needed power demand and hence more capacity addition. On the generation side, clean coal technology based power generation may see a comeback as base loads. This would also help solar power generation with generators having comfort of power demand revival as distribution companies would more likely to enter into long-term PPAs with them. Alternatively, it would also spur in more and more captive generations based on solar to fulfill the demand from the transport sector. Solar-based individual charging stations can also be a reality in India.
It would come as a boon to the distribution companies that are already struggling with huge debt in their balance sheets. Such an initiative would help their business as they would be preferred among others to build in the charging infrastructure and provide the electricity to users on payment basis. Even if the government decides to build the infrastructure on PPP basis or any other modes, the sale of power would be through the distribution companies, which would definitely boost their revenue prospects.
Last but not the least, consumers and society at large who are struggling with the growing menace of pollution in cities and suburban areas would get much needed relief. One of the major polluters in the cities is the transport sector with growing fleets added day by day to existing number of petrol- and diesel-driven vehicles. A move towards electric vehicles would certainly help in lessening the pollution level and increasing the hope for fresh air to the community. There might be initial hiccups due to the move from oil and gas to electric vehicles and difficulties owing to the infrastructure availability and other operational and commercial constraints. But largely, it would get an overwhelming support from the consumers.
So, despite all the challenges in terms of operational and commercial constraints and debates around the viability of the oil and gas sector, possible job losses, this is an opportunity India cannot afford to lose or waste time on.
The transport sector has a huge opportunity and with government incentives and support, they would do well in changing their strategy and adopt the new technology faster. Research and consulting agencies need to come up with new ideas and models to showcase how best it can be implemented and in what way. A synergy between all stakeholders with proactive government policies and actions will definitely see electric vehicles being the prime mode of transport in India by 2030, or even before.
Tripathy is a senior fellow at the CUTS Institute for Regulation and Competition, New Delhi.
(The column appears in the January 15, 2018 issue)
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