Union Budget 2022: Battery Swapping Policy For EVs On The Anvil

Union Budget 2022-23 tabled in Parliament on 01 February 2022 has put a major focus on transition to electric mobility by providing for formulation of battery swapping policy for EVs.

“Considering the constraint of space in urban areas for setting up charging stations at scale, a battery swapping policy will be brought out and inter-operability standards will be formulated”, said the Finance Minister Nirmala Sitharaman, while presenting the Union Budget for 2022-23.

EV Charging Landscape

Abundant availability of EV charging infrastructure is a key driver for enabling higher adoption of electric mobility. A robust and well developed EV charging infrastructure alleviates the charge anxiety of users and increases off take.

The refuelling (charging) of EV batteries can be done in two ways: first, by charging the batteries inside the vehicle, using direct current (DC) or alternating current (AC); second, by replacing (swapping) the drained battery with freshly charged ones — which is commonly known as Battery Swapping.

Battery Swapping has caught global attention as this alternative is particularly useful for commercial vehicles that would like to minimise their downtime to the extent possible for refuelling of vehicles.

What Is Battery Swapping

Battery Swapping is an alternative battery recharging method in which a depleted EV battery is removed from the vehicle and replaced with a fully charged one.

Battery Swapping system consists of the battery charging system (normally plug-in arrangement) and the battery swapping mechanism which can be manual or autonomous. In the manual system, batteries are placed and removed manually, usually by hand. Manual swapping stations are modular and occupy a minimal amount of space. These are used for 2W and 3W battery applications, as the battery pack sizes are smaller and the weight can be handled by one or two persons.

However, in the autonomous system, robotic arms are used as swapping mechanism.

These are used for 4W and e-bus applications as battery packs are larger and heavier, and require mechanical assistance. These swapping stations are also more expensive and have a higher land requirement.

In battery swapping, the ownership of the battery is with a third party, who is liable for replacing the drained batteries with fresh/charged batteries. The third party also needs to ensure standardisation in batteries. Battery Swapping Stations act as a battery aggregator and charge batteries by availing electricity connection from either power distribution companies or through open access.

Advantages

Battery Swapping has some distinct advantages over plug-in charging. Batteries can be charged away from swapping point, allowing more freedom in setting up swap facilities.

EV recharging by this method is a straightforward and rapid process and can be completed in minutes. This ensures reduced waiting/charging time for vehicles and offers a promising alternative to increase the adoption of EVs in commercial segment.

Due to controlled charging conditions in swapping facilities, better monitoring of battery health can be done which leads to increased predictability of battery life. Slow charging also prolongs battery life as compared to fast charging done in conventional method.

In case of availability of sufficient on-route swapping stations, lower battery size could be used leading to lesser bus weight and cost. This could promote faster transition to public energy mobility and can be a game changer for Indian cities.

Battery constitutes approximately 25- 40 per cent of the upfront cost of an EV which acts as a key barrier to its widespread adoption. Battery swapping model allows one to take out the cost of battery from the upfront cost of EVs.

The cost can be reduced, and a better value proposition could be offered to consumers for adoption of EVs with prices at par or lower than ICE vehicles.

Battery Swapping is designed to eliminate range anxiety, which is the EV owner's fear that a charge point won't be available “on the road as it is easier to set up a dense network of swapping stations even in urban areas. Not just this, electric charging takes time and Indian cities do not have physical spaces that can accommodate hundreds of vehicles when EVs become mainstream.

Challenges To Adoption

Despite numerous benefits, battery swapping is also confronted with several challenges in its development as a mainstream charging method for EVs. A significant issue is the high cost of battery leasing over the life of the EV, which dissuades the customer from opting for swap facility.

The major challenge, however, is the cost associated with the swapping system, particularly for e-buses, due to requirement of a mechanised swapping system. Such systems also reduce flexibility of route design as buses may need to travel off-route for battery swapping.

Stakeholders Utility

Battery Swapping provides multiple advantages to all the stakeholders in the value chain. This can be comprehended from the following table:

How We Are Faring

India’s first battery swapping station for public buses (with capacity to charge 12 batteries at a time) was set up in October 2019 at Ranip, Ahmedabad.

The technology is being tried out for various EV segments, including e-2Ws, e-3Ws, e-cars and even e-buses. At present, battery swapping is considered a feasible solution for commercial EV fleets, especially in the e-2W and e-3W segments.

Battery swapping is thus rapidly emerging as a promising business model for commercial EVs with many companies entering into this arena (Sun Mobility, Lithion, E-Chargeup Solution, ACME, Amara Raja, OLA, Panasonic etc.).

OLA owns and operates a battery swapping unit for e-rickshaws in Gurgaon. Similarly, OLA has inked a partnership with India’s leading power distribution companies, BSES Yamuna Power Limited (BYPL) and BSES Rajdhani Power Limited (BRPL), to build a network of charging and swapping stations in Delhi NCR (mainly for e-2Ws, e-3Ws).

Indian Oil Corporation Limited (IOCL) and SUN Mobility announced the launch of a battery swapping facility for EVs at IOCL petrol pumps.

The Ministry of Road Transport and Highways (MoRTH) has allowed the sale and registration of EVs without batteries, which is a catalyst for battery swapping solutions.

Further, stakeholders are making large investments in developing the battery swapping ecosystem.

Several state governments have taken various steps to support battery swapping. For example, the Delhi Electric Vehicles Policy, 2020 mentions a 50:50 distribution of subsidy between the vehicle owner and energy operator.

Further, it provides for land allocation at bare minimum rental lease for the establishment of swap points and reimbursement of 100 per cent State GST (SGST) to the energy operators for purchase of advanced batteries to be used at swapping stations.

What Ails The Battery Swapping Ecosystem?

Despite significant regulatory incentives and economic benefits offered to the battery swapping ecosystem, the model is still at a nascent stage in India.

Standardization is the biggest bottleneck in the large-scale adoption of battery swapping in India. Standards ensure interoperability, i.e., it ensures batteries made by one company can be used by others.

A lack of interoperability is like having a separate petrol pump for Maruti and Hyundai vehicles. Without standardization of EV batteries, the swapping business model cannot be a success.

The Original Equipment Manufacturers (OEMs) fear risk to brand reputation from battery swapping. OEMs have concerns that any fire or other fatal accident caused as a result of plugging in faulty/sub-standard battery with their vehicle may severely tarnish their brand reputation.

This explains why the OEMs are not bullish on swapping. The same is reflected in their business model, as OEMs such as Renault have started giving the option of battery leasing to their customers, which ensures use of verified batteries in their vehicles.

Then there is the problem of proprietary battery technology, which is an USP for OEMs. Each manufacturer approaches the battery differently. Some like Tesla want it to be so intelligent that its operation and efficiency can be monitored remotely for best performance.

Standardisation will end all this. With India being in the early stage of the battery development value chain, standardisation would only add to the advantage of foreign players, notably Chinese and Taiwanese manufacturers.

Higher GST on separate battery (18 per cent) vs battery sold with EV (5 per cent) is another major concern, with manufacturers repeatedly expressing the desire for GST reduction on EV components.

So Why The New Policy?

As the battery swapping system is at a nascent stage, policy and regulatory measures are crucial to provide push to the development of the electric mobility ecosystem. Keeping in line with this, the Central government has planned the battery swapping policy for EVs.

The battery swapping policy with interoperability will boost the adoption of EVs as it will help allay the range anxiety and bring the EVs at par with ICE vehicles in terms of time taken for replenishment of fuel.

The policy would give a huge impetus to the EV industry by developing charging infrastructure and increasing the use of EVs in public transportation. It would motivate electrification of fleets for last-mile connectivity for both people and goods.

Though widely applauded by the industry, they want the policy to account large sums for for research and development. "The policies should take a holistic approach to ensure that there is a proper and adequate supply network of swappable packs and swap stations so that it works as if someone is fuelling their vehicle and is able to 'swap' in 2-3 minutes. Convenience, especially for the last-mile operators, gig economy players and home tests/collections is key," said Sambit Chakraborty, Board of Advisors, Indigrid Technology.

With the necessary foresight in place and proper stakeholder consultation, the proposed policy can an offer practical solutions to increase the adoption of EVs in the country.