Budget, Electricity and Electric Vehicles

One of the most important questions surrounding the electrification of transport in India is about the cleanliness of the source of electricity. Though every electric vehicle has zero tailpipe emissions, it is important to check how the electricity is generated. The cleaner the electricity generation source, cleaner is the electrified transport.

Though we have made a lot of progress in renewable energy recently, the bulk of the generation is still coal based thermal power. There is not enough leeway for sustainability in an energy future where electric vehicles are powered from fossil fuel based electricity generation. There are of course a few merits to electric vehicles even in the current power scenario due to enhanced efficiency improvements in drive train design. Nevertheless, I tried to read this year's budget provisions with respect to electricity and electric vehicles to see how it translates to the clean transportation goal. These are the three things I found interesting.

Cleaning the grid

1. The budget straight forward talks about an investment of` 22,000 crores to the power and renewable energy sector in 2020-21. Secondly clean and affordable energy is a segment identified under the proposed 100 lakh crore investment for infrastructure projects in the next five years.
2. In order to attract investment in the power sector, a concessional corporate tax rate of 15% will be extended to the new domestic companies engaged in the generation of electricity.

Apart from the two above, I found it refreshing to read that the government is considering closing down of thermal plants which have emissions above preset norms and putting the land to an alternative use. The background for this is that the implementation phase for the Nationally Determined Contributions under the Paris agreement will begin next year.

Smart Metering

One of the basic preconditions for economic progress for any nation is assuring universal energy access. Bringing electricity to every household is essential for electrification of transport as well. However, it is impossible without making changes the current ecosystem governing electricity generation. The trouble is that most important stakeholder, the electricity distribution companies (DISCOMs) have weak spots with respect to reduction of losses in the ageing network that is demanding upgradation.

There is no question about the fact that financially strained DISCOMS need assistance to achieve the electrification goal. There has been on good amount of on-ground initiatives for the promotion of advanced metering infrastructure for making the electricity distribution grid smart in the country for a while. The continuation in policy to promote “smart" metering was expected in the budget.

On the other hand, I was pleasantly surprised to read about the reference to consumer choice of their power supply. This was perhaps a teaser to the changes that is soon to come to the electricity act. Currently, electricity distribution is still a licensed activity and the electricity market and dispatch are centralised processes. However, there has been progress on pilot schemes involving block chain based distribution solutions. Hence, I feel implications on consumer choice could be about creating a pathway for a distributed and transactive electricity future.

Smart meters and transactive energy markets are important tools for clean transport from the perspective of integrating vehicles to the grid. I believe, this lays the ground work for 'smart' charging, and using electric vehicle batteries as a flexible energy storage solution.

Electric Vehicles

The straight forward provision with respect to electric vehicles is about the continued commitment to the FAME scheme with an outlay of 693 crores for 2020-21. The most noticed one perhaps is on the customs duty rates revision. A hike is proposed as shown below for imported components to promote domestic manufacturing.

(Changes in import duty for electric vehicles, Source: Inc42)

This move should result in an increase in the cost of some of the current electric vehicle models such as Hyundai Kona and MG cars which source components and batteries from China. The cost of buses where parts are manufactured and imported from China will also increase. However, the end goal is to bring down costs by encouraging localisation.The main purpose of the move is to prevent the dumping of low-quality products in the market. This also seems like a right step in right direction

Weighing against the demands from the industry

In the past financial year the auto industry was in for a tail spin due to reduction in sales. Electric vehicle market is still nascent, and has many hurdles. One of the demands from the EV industry was to encourage private adoption of electric vehicles. Additionally they called for measures with respect to battery- such as access to financing and GST reduction. The budget is silent about the above two demands from the industry. However, the expectation was on import duty reduction, was quashed directly.