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awan Goenka, president of Mahindra's automotive and farm equipment sectors, stands next to Mahindra's concept electric sports car 'Halo' after its unveiling during the Indian Auto Expo in Greater Noida,
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Why success of electric vehicles in India rests on the overhaul of the power sector

If electric vehicles (EVs) must make economic sense to customers, charging them should cost less than a third of what it does now, says India’s biggest homegrown cab-hailing company.

Power used for EVs should be billed at Rs5 per kilowatt-hour (kWh), not the current Rs17.7, for financial feasibility, Ola said in a report released on Tuesday. 

Learning from its EV pilot in the western city of Nagpur, the Bengaluru-based firm said that electricity currently accounts for over 30% of the total cost of operating an EV.

“Although the cost of electricity shrunk significantly post the implementation of special EV tariff in October 2018, it continues to be unfavourable for the economics to work,” said the report by the Ola Mobility Institute, the company’s research wing for mobility solutions.

The power sector isn’t ready

The power industry in India has not kept pace, though.

“India would need to overhaul its power grids and sub-stations to have a dedicated capacity for the EV industry. Special thrust is needed to promote such industries,” Harkiran Sanjeevi, deputy director general of Niti Ayog told Quartz.

India has only over 350 public EV chargers compared with around 57,000 petrol pumps, according to a Bloomberg New Energy Finance report. In comparison, China had over 200,000 charging points by the end of 2016.

By 2030, a city like Delhi could require around 300,000 fast chargers, presuming a 30% EV penetration into an estimated car parc (number of cars or vehicles in a given area) of 10 million, Praveer Sinha, managing director of Tata Power Delhi Distribution, wrote in a blog.

This is expected to put immense pressure on the electricity grids, already under stress due to the huge subsidies to the agriculture sector, high rates of theft, and pilferage.

“Global experience also suggests that the distribution systems are generally quite loaded and not enough spare capacity is available to support charging infrastructure. A similar situation exists in Indian cities where adding banks of chargers is possible only with the upgrading of distribution networks,” Sanjeevi said.

An EV with a daily commuting distance of 30–40 km needs 6-8 kWh of energy, equivalent to the daily power needs of a small household. If 80% of India adopts EVs, the total power demand could touch 100 Terawatt-hour or about 5% of the total electricity demand of India by 2030, according to Anumita Roy Chowdhury, executive director for research and advocacy at the Center for Science and Environment.

This presents unique challenges for power utilities, which will need to increase production and resolve the issue of too many people charging at the same time from a single grid.

This additional burden can be managed only by deploying intelligent tariff and pricing solutions, with minimal network investment.

Another solution deployed by states like Maharashtra is a variable tariff structure called time of use (ToU). It means power tariffs will be cheaper at certain times of the day when the demand is usually low.

This helps shift consumption to off-peak hours and, thus, balance demand. But the ToU is not widely practiced in India unlike in countries like Sweden and the US. The government has now also relaxed licensing norms (pdf) for individuals to offer electricity chargers.

Seize the opportunity

A majority of the power supply will have to be sourced from power grids, especially for commercial EVs. High demand from EVs presents a lucrative opportunity for power grids to improve their financial strength.

Overall electricity demand from large-scale adoption of EVs implies an additional revenue of $11 billion by 2030, according to a study by Ernst & Young (pdf).

“In fact, EVs present a flexible demand on the grid, which can help de-carbonise the power grid by helping the integration of renewables,” non-profit Shakti Sustainable Energy Foundation said in a report in 2018.

Integrating power generation from renewable sources with conventional grids in order to meet EVs’ demand is key. If India wants to see an effective reduction in pollution levels through EVs, the sector cannot be seen in isolation, Rahul Tongia, who was the technical advisor to the government of India’s smart grid task force, told Quartz.

A vehicle running on electricity may be considered clean, but it is not really a zero-emission vehicle if the power source is coal. India generates a majority—about 65%—of its energy demand through coal.

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