"Solar + Ola! = Sola!" ... the coming energy-transportation nexus in India

This is part of a set of articles: "Distributed / Rooftop Solar in India: A Gentle Introduction: Part 1","Rooftop Solar in India: Part 2 {Shadowing, Soiling, Diesel Offset}", "Rooftop Solar in India: Part 3: Policy Tools... Net Metering etc..." "Solar Economics 101: Introduction to LCOE and Grid Parity" , "Solar will get cheaper than coal power much faster than you think..", "Understanding Recent Solar Tariffs in India", "How Electric Scooters,... can spur adoption of Distributed Solar in India," "Solar + Ola! = Sola! ... The Coming Energy-Transportation Nexus in India", "UDAY: Quietly Disentangling India's Power Distribution Sector", "Understanding Solar Finance in India: Part 1", "Back to the Future: The Coming Internet of Energy Networks...", "Tesla Model 3: More than Yet-Another-Car: Ushering in the Energy-Transportation Nexus", "Understanding Solar Finance in India: Part 2 (Project Finance)", "Ola! e-Rickshaws: the dawn of electric mobility in India", "Understanding Solar Finance in India: Part 3 (Solar Business Models)" . 

Have we heard this before? Solar is VERY expensive.... (c. 2010-2015)

Have we heard this now? Energy storage /Electric Vehicles (EVs) are VERY VERY expensive now... (c.2015 -)

Funnily enough it is both true and false.

First may indeed be "expensive" now or in the past, but it can become cheaper sooner than you think (i.e in 5-10 years) thanks to pioneering companies like Tesla, financial innovation ushered by the likes of SolarCity, SunEdison & our own government, inexorable technology trends & learning curves driving down the costs of solar, Li-Ion batteries and EVs. (Here are more gory numbers on battery types/amortized costs.) To first approximation solar was expensive in 2009, but is approaching grid parity now, similarly energy storage and EVs are expensive now, but will be where solar is today by 2020 (i.e. 4-5 year lag w.r.t solar).

Secondly, Information Technology (IT), Internet of Things (IOT) and mobile & cloud based software innovations can take physical assets and make them more productive by increasing their utilization/yield and / or share the assets across users, time, use-cases etc. In our IT world, we call this "virtualization" and "cloud computing": take physical memory and make virtual memory magic out of it; ... or ... take physical vehicles and make uber / ola! fleets out of them ! Recently OlaShare and UberPool introduced ridesharing to further improve asset efficiencies, and lower per-user-costs. Guess why GM, the venerable car maker invested in Lyft, the upstart ridesharing startup ? There is a not-so-subtle shift happening from owning vehicular assets (like a car) to renting mobility services. Autonomous vehicles (in developed markets were road discipline exists!) and Electrification of transportation are the other two big factors.

Coming back to India. Crude oil (and gas) accounts for about 40% of all of India's imports; and over 75% of imports for the oil-sector. This import dependency will grow as the economy grows. Beyond this import dependency, there is a growing public health concern due to smog: witness the odd-even scheme in Delhi, Supreme Court push towards CNG vehicles and lower sulphur content in diesel.

Beyond these "sticks", I believe four positive forces or "carrots" will drive the adoption of Solar + EVs in India, and faster than you think:

#1  Solar (and renewable) energy will become far cheaper than today. Cheaper solar will mean that the "fuel" for EVs, i.e. kWh can be obtained far cheaper than the equivalent energy in a litre of diesel or petrol. For example, a diesel genset (approximation of a diesel engine in a car) yields ~3 kWh/litre, and costs about Rs. 45-47, i.e. Rs. 15/kWh (or 25 c/kWh). Even the grid electricity at homes averages Rs. 6/kWh; and solar will beat it relatively soon thanks to natural learning curves and innovation.

What does low cost of solar mean for EVs? Its like ~free petrol for your electric vehicle! Solar and storage (in the form of EVs) are complements - like shoes and socks - if the cost of one goes down, the (latent) demand for the other goes up. And if the cost of BOTH go down? They will reinforce a virtuous demand up-cycle. THAT is what is going to happen and will become obvious by the 2020 time frame.

#2. Over 70% of Indians use two wheelers. Two wheelers (cycles/bikes, scooters, motorcycles) are easier to electrify than four wheelers: they require less energy storage, and go further. In a brilliant, but simple arithmetic analysis, David MacKay shows that a 2-wheeler vehicle is ~10-20X more energy efficient (3-5 kWh/100p-km depending upon peak speed) than a decent 4-wheeler with one person in it (80 kWh/100p-km). This is also obvious from common experience in India: if you look at ads on TV in India, motorcycles are advertised at 80-100 km/litre of petrol whereas cars do 10-20 km/litre; and scooters are 40-50 km/litre. Mahindra Reva (now part of Mahindra & Mahindra) is of course a pioneer in electric cars in India and for export markets.

In India, Hero Electric has been introducing electric scooters, and recently mentioning scooter-taxi type models on their web sites. Others like TVS, BSA, BPG, EKO are also offering products. A couple of prominent e-Scooter startups include Ampere (Ratan Tata has invested here) and Aether (Tiger Global and Flipkart founders have invested here). Gogoro has been making waves in Taiwan; Zero is making high performance electric motorcycles in the developed world. Electric bikes/cycles are growing in popularity in Europe, US and Australia (Madrid and Copenhagen have introduced e-bike sharing). Once you move over to Li-Ion EV battery, and engineer them well, electric scooters/bikes will perform far better than fossil-fuel bikes; just like Tesla's cars outperform cars at the same price range. With time, you can get BETTER performance at a LOWER price, and that will be compelling to drive transition.

#3. The rise of mobile-enabled shared transportation (Ola, Uber, Meru, metros, buses, autos, rickshaws), and e-commerce logistics/commercial vehicles in India where the asset owners will value total cost & value of ownership beyond just the capital cost. If capex is high (but declining), and opex is low (see #1 on cost of solar energy and cost-per-mile declining rapidly vs diesel/petrol energy costs), the total cost of ownership (vs fossil fuel vehicles) will cross over faster than just the capital-cost cross-over.

The picture I have used for this article is an Electric Rickshaw (e-rickshaw) , since I believe it is the symbol of "disruptive innovation"in this market as described by Clayton Christensen. It is a product that looks inferior and appeals to a lower-price, lower margin sub-segment, but over time, it will become better due to technology/learning curves and annex other parts of the market (eg: 3-wheeler autos, nano-cars and beyond). With a solar roof, it can partially charge the battery (and as I described earlier, 2-3 wheelers require smaller batteries - 1-2 kWh for example for a 1-2 hp engine, which a 500 Wp solar panel system can charge, assuming 5 kWh/kWp/day).

A number of companies have announced e-Rickshaw products around the Rs. 1 lakh price point (is this the real Nano ?!): Lohia Auto, GEM Auto (Goenka's), Su-Kam (an inverter maker), OK Play (a toy maker !). What is striking is the diversity of players introducing these e-rickshaw products. Governments are starting look at it more seriously for subsidies and other promotion schemes etc. Recently in Delhi area, Smart-E has introduced a last-mile feeder service to Delhi metro using these kinds of e-rickshaws (starting to look like white colored autos), and providing employment to women drivers.

Another startup providing a niche service is Lithium, co-founded by the redoubtable Ashwin Mahesh, providing transportation services to IT companies in Bangalore using Mahindra Reva e2o. We will soon see the 2-wheeler share programs and/or use of 2-wheelers in the logistics / e-commerce delivery space (your flipkart guy will be on an e-Bike, perhaps with a swappable battery like in Gogoro).

By 2017-18, I forsee that the mainstream shared transportation companies (eg: Ola!, Uber, and autos etc) rolling out or adopting EV fleets. [Update: In March 2017, Mahindra and Ola! announced a trial in Nagpur with Electric cars as Ola fleet taxis. ]

On the public transportation side, electric and hybrid buses are still expensive, but starting to appear in India (eg: Modi inagurated a retrofitted e-bus) and abroad (eg: Proterra, BYD K9 in China). [Update: Ashok Leyland has launched a bus called "Circuit" in Chennai. More on e-Buses in a future article.]

If you look at metro transport: all metros are already electrified, and increasing going solar at station rooftops and buying open-access solar. You will see a similar trend in Indian railways, i.e. increasing substitution away from diesel engines to electric engines, solar procurement (both rooftop, open access, and using railway land and electrical infrastructure), and rooftop solar on trains.

#4 Fintech will enable new ways of financing and delivering more capital and lower cost of capital for the energy-transport nexus. With the emergence of payment banks, mobile wallets, p2p financing, international remittances, blockchain technology, fintech intermediaries of all kinds are going to be big wild card. With 930M+ aadhar card holders (targeting 1B by March 2016), and an "Open India Stack" as Nandan Nilekeni puts it to enable entrepreneurs, we should expect lots of interesting asset financing innovations for solar / EVs in the coming years.

The really interesting aspect of this is the new business models that will become possible which will be necessary for the success of EVs. I will have more to say on this in future articles. Watch this space! [Update: I have written several articles on cashless finance, eg: leveraging Universal Payments Interface (UPI) etc. ]

These are admittedly baby steps or the "tip of the iceberg". By 2020, we will see a significant combination of solar + electrified transportation.

Isn't it obvious, now? i.e. now you can say "Solar + Ola! = Sola!" to this new future...

Post-article UPDATE: On April 5th 2016, Ola! announced e-rickshaws, in a "Stand Up" India event.

Post Article Update: In March 2017, Mahindra & Mahindra and Ola! started a pilot in Nagpur with Mahindra e2o Electric Vehicles in Ola! fleet taxis, as part of a multi-modal fleet.

Post Article update: Chetan Maini, the founder of the pioneer Reva (now a subsidiary of Mahindra) is now driving a solar + electric charger/battery swap network venture (SunMobility).

If you like this article, please also see other articles: "Distributed / Rooftop Solar in India: A Gentle Introduction: Part 1","Rooftop Solar in India: Part 2 {Shadowing, Soiling, Diesel Offset}", "Rooftop Solar in India: Part 3: Policy Tools... Net Metering etc..." "Solar Economics 101: Introduction to LCOE and Grid Parity" , "Solar will get cheaper than coal power much faster than you think..", "Understanding Recent Solar Tariffs in India", "How Electric Scooters,... can spur adoption of Distributed Solar in India," "Solar + Ola! = Sola! ... The Coming Energy-Transportation Nexus in India", "UDAY: Quietly Disentangling India's Power Distribution Sector", "Understanding Solar Finance in India: Part 1", "Back to the Future: The Coming Internet of Energy Networks...", "Tesla Model 3: More than Yet-Another-Car: Ushering in the Energy-Transportation Nexus", "Understanding Solar Finance in India: Part 2 (Project Finance)", "Ola! e-Rickshaws: the dawn of electric mobility in India", "Understanding Solar Finance in India: Part 3 (Solar Business Models)" . 

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