A misguided push towards electric vehicles
The government’s stress on clean energy is commendable but it should let the market decide the winning technology
Electric vehicles (EVs) seem to be gaining in prominence as part of the renewable energy zeitgeist. Late last month, Nagpur became the first Indian city to have an electric cab fleet—with about 100 EVs from the Mahindra stable and around 100 e-rickshaws from Kinetic linked to the Ola transport aggregator platform. Days later, the state-run power giant NTPC set up its first EV charging stations in Delhi and Noida. Importantly, these are not isolated initiatives; they are underwritten by broader policy shifts.
For instance, power minister Piyush Goyal has announced that government officials and agencies will soon be using only EVs. Public buses are also expected to go electric. Road transport and highways minister Nitin Gadkari has promised a national EV policy before the end of the year while the government’s think tank, Niti Aayog, has already put out a road map for India’s mobility transformation that has three core elements: “shared”, “electric”, and “connected”. The goal, according to the power minister, is to have no diesel or petrol car sales in the country by 2030.
That’s an ambitious and well-intentioned goal, no doubt. Mainstreaming electric vehicles will require an overhaul of the country’s energy and transport infrastructure. For example, EV charging stations will have to be set up on a war footing, and electricity generation will have to improve significantly even as its piggybacks on the push for solar energy. EV technology (especially the battery) will have to become much cheaper before it can perform well in a price-sensitive market like India.
If these challenges can be tackled effectively and India can leapfrog to EV technology, then of course, the benefits to be had are numerous. Environment-friendly EVs will reduce air pollution, lower India’s dependence on imported oil, and contribute to the fight against climate change. According to the Niti Aayog report, switching to EVs as part of the larger “shared, electric, and connected” mobility paradigm will cut India’s energy demand (from the road sector for passenger mobility) by 64%, its carbon emissions by 37%, and save the country $60 billion in energy bills by 2030.
However, questions are already being raised about the government’s strategy of putting all its eggs in the EV basket. For example, hydrogen-powered fuel cells offer an equally eco-friendly option. Both are zero emission, and the hydrogen-powered fuel cells can in fact be recharged faster; they also give more mileage than the lithium-ion batteries commonly used in EVs today. Certainly, fuelling stations for hydrogen-powered fuel cells are much more expensive—but in that case why not push for CNG vehicles? They are cheap, almost as clean as EVs, and the related infrastructure is already in place.
But the issue here is not a specific technology against another. The question is: why is the government deciding the winner?
In its report, Niti Aayog recommends that to push EVs, the government must subsidize the EV industry while penalizing conventional cars. It calls for lowering taxes and interest rates for loans on EVs while limiting the sale and registration of conventional cars, and using taxes from diesel and petrol car sales to create electric charging stations. It also suggests the government open a battery plant by the end of 2018. Goyal has claimed that the plan is to let market forces decide how the EV industry will shape up and that the government is only offering a helping hand until the industry can find its feet. But this is just semantics. The government has made its choice.
Governments generally do not have a good track record when it comes to picking tech winners. For example, after the 1970s energy crisis in the US, the Carter administration pumped millions of dollars into thermal solar technology which did not yield any viable commercial results even as the old photovoltaic cell technology continued to evolve. Later, corn-based ethanol was all the rage and the government again put good money into developing a market for it but eventually it too collapsed. In 2009, the Obama administration gave its first loan guarantee of $535 million to a start-up solar panel manufacturer, Solyndra, which at that time was considered to be sure-shot winner. And indeed, it worked for a while—the copper indium gallium diselenide thin-film technology was effective and the company met its cost-reduction targets. However, when silicon prices plummeted and conventional solar options became cheaper, Solyndra had to shut shop in 2011.
These examples indicate the many risks associated with the government picking the winner—a job that is better left to the market and industry. However, this is not to say that the government should have no role at all. Let’s not forget that the Internet, for example, came from US military funding, while the hybrid tech sector in Japan’s automobile industry owes its success to government funding.
The issue is the kind of support the government is offering. Instead of trying to pick winners, the government should focus on building an enabling business environment that supports research and innovation. Thus, instead of pumping money into one project or firm, it should support clean energy research in general. That way, the government does its part in steering the policy ship towards clean energy while still being technology-agnostic.
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