NITI Aayog's battery swapping policy is full of loose ends

Mumbai: There are number of loose ends in the draft battery swapping policy as drafted by NITI Aayog. The draft battery swapping policy is step in the right direction and has a number of encouraging developments, but there are a few loose ends that need to be investigated further and resolved after consultation. The policy provision allowing registration of Electric Vehicles (EVs) without batteries is a major step towards battery swapping adoption.

In its current form, the battery swapping policy covers OEMs operating under the FAME-II or ACC PLI schemes. The strategy will benefit high-speed charging vehicles with a minimum range requirement. In order to move away from the current subsidy paradigm, the proposed policy puts battery OEMs at the centre of the policy, acting as a single point of contact, and promises to make them subsidy recipients as well.

Talking to Bizz Buzz, Venkat Rajaraman, Founder & CEO of Cygni Energy says, "What's missing is that the policy doesn't account for lower capacity or smaller EVs, despite the fact that these lower-range, smaller-capacity EVs are more prevalent on the road today."

Safety through ensuring quality is of utmost importance in the current scenario, and the policy in its draft format is focusing on the same, which is much appreciated. The policy places a strong emphasis on battery safety, security, and data collection, which is a very positive step.

It specifies the need for smart BMS and smart monitoring systems, as data analysis will be important in the on-road deployment of these critical components in an EV. Despite the fact that 80 per cent of BMS are imported, this will lead to the development of domestic BMS and related equipment. In the same breath, it requires IoT-enabled batteries, allowing for remote monitoring and real-time data collection.

The policy mandates all the battery manufacturers to come up with a Unique Identification Number (UIN), very similar to what was stipulated for the solar panel industry. The battery capacity, the voltage, and all other pertinent battery details will be embedded/linked as part of this UIN.

The policy also mandates that the swapping operators will have to store the battery usage history. This is a huge step in the right direction.

According to Rajaraman, "These features will need a lot of technology development and deployment for the EV ecosystem." Several challenges remain to bring battery swapping into mainstream.

The success of BaaS will depend on devising efficient ways to address interoperability of batteries and software for battery management system, financing for the battery inventory (for use in vehicle as well as a back-up in charging/swapping station), initially low captive demand and risks due to evolving battery technology for EVs. Currently, the battery packs of EVs are not standardized among different vehicle brands, models and segments, which makes them incompatible. Further, the EV battery technology is at an evolving stage and will witness progress towards more efficient and economical alternatives. This coupled with low captive demand initially increases the financial risk for stakeholders in the BaaS business model, especially for the battery providers, says a study by Kotak Institutional Equities.

The policy will create a level-playing field across business models involving the sale of EVs with fixed or swappable batteries. It proposes to provide the demand-side incentives offered under existing or new schemes for EV purchase to be made available to EVs with swappable batteries eligible under this policy, the tariff for supply of electricity to battery charging stations (energized by exclusive electricity connections) will be at par with that of the EV public charging stations and land for public battery swapping stations to be made available at promotional rates at par with the public charging stations.

The draft policy, once approved, will accelerate the transition towards green mobility. It addresses some of the key technical, regulatory, institutional and financing parameters that will help develop battery-swapping ecosystems.

Once notified, it will remain valid till FY2025 and will be reviewed/extended thereafter by the Ministry of Power. The policy will be rolled out first for e-2Ws and e-3Ws in phases, with all metropolitan cities (population more than 4 million as per 2011 census) adopting it in year 1-2 after the rollout and all other major cities – state capitals, UT headquarters and cities with population greater than 0.5 million (as per Census 2011) adopting in 2-3 years of rollout.

The total cost of ownership (TCO) will be favourable for e-2W with a battery-swapping system as compared to e-2W with a fixed battery besides ICE vehicles. However, several challenges remain before this idea catapults electric vehicles (EVs) into the mainstream, mainly related to interoperability of batteries and software for BMS among OEMs and safety aspects.

Battery swapping will accelerate transition to green mobility. Sandeep Gupta, an analyst with Kotak Institutional Equities, says, "Niti Aayog's draft battery-swapping policy, once approved, will reduce the upfront cost of ownership of EVs, vehicle downtime and space requirements – some of the key barriers for mass adoption of EVs in India."

Battery swapping falls under the broader umbrella of Battery as a Service (BaaS) business model. It decouples the EV and its battery (30-40 per cent of the vehicle cost) by enabling the use of the battery as a service, without ownership of the battery and thus significantly lowers upfront costs. BaaS will need to ensure interoperability between EVs and batteries for the successful mainstreaming of battery swapping as an alternative. This will significantly help reduce the vehicle downtime required for charging of vehicles and evaporate the problem of range anxiety.

TCO will be more favourable given lower upfront costs for EV without battery, feel the analysts. An analysis of total cost of ownership for e-2W without battery versus Honda Activa FI implies breakeven of 1.8 years compared to 2.8 years for Ola Electric S1 Pro. For purchasing a e-2W without battery, consumers will pay Rs27.6k lower as compared to Ola Electric S1 Pro after considering (1) 30 per cent lower upfront cost and (2) 60 per cent lower incentives for e-2W without battery as compared to Ola Electric S1 Pro. Instead, the customer will have to pay monthly rental cost of Rs1-1.1k as battery rental cost assuming 3.5 years of payback on capital investment for battery manufacturers. Since breakeven for a customer is less than 2 years, economics of e-2W without battery is even more favourable as compared to e-2W with battery.