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Business News/ Opinion / Views/  EV battery swapping: It’s time to step on the accelerator
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EV battery swapping: It’s time to step on the accelerator

India’s policy should offer a level playing field for various EV battery swappers to compete

Given the nascency of our battery-swapping market, policy measures should facilitate the phased development of a swapping ecosystem that is linked to the EV market’s stage of maturityPremium
Given the nascency of our battery-swapping market, policy measures should facilitate the phased development of a swapping ecosystem that is linked to the EV market’s stage of maturity

A key announcement in this year’s budget was about introducing a battery swapping policy and creating interoperability standards to foster India’s electric vehicle (EV) ecosystem. Then in April 2022, the Niti Aayog published a draft battery-swapping policy. Such signals of support for the development of a battery swapping ecosystem are commendable. So far, the focus at the national level has largely been on creating a widespread network of EV charging stations, with limited attention given to developing battery-swapping infrastructure. The emergence and successful piloting of battery swapping solutions provides an opportunity to facilitate an environment that is solution agnostic, offers a level playing field for different potential solutions to compete in the market, and ensures a portfolio of options for EV users.

Key requirements of a policy framework: The country’s final policy, which will incorporate inputs from stakeholder consultations, should consider five key aspects. First, given the nascency of our battery-swapping market, policy measures should facilitate the phased development of a swapping ecosystem that is linked to the EV market’s stage of maturity. Second, the policy must take a targeted approach, identifying priority vehicle segments and enabling an accelerated adoption of swapping solutions in those segments where battery swapping could have the most value. Third, the policy must find a balance between standardization and encouraging innovation. Fourth, the policy should provide equitable growth opportunities for multiple technologies, solutions and business models, and let the market pick the winner among these. Finally, the policy must offer flexibility to various stakeholders, including state governments, to devise battery-swapping ecosystem development strategies that are best suited to their needs.

Standardization and interoperability: The approach to standardization should first entail identification of aspects which can and cannot be standardized. The key benefit of standardization (and the resulting interoperability) is that it has the potential to shift battery swapping from an existing business-to- business (B2B) endeavour to a business-to- consumer (B2C) experience. This translates to ease of use and access and also to multiple options for an EV user. However, standardization is a long process that requires a consensus among several battery and vehicle manufacturers.

Additionally, setting watertight requirements through standardization may stifle innovation. Therefore, standardization must follow a measured approach in which, to begin with, some fundamental aspects of battery swapping can be standardized. For instance, in Delhi’s recent tender for charging and battery-swapping stations, vendors are required to type test their solutions for basic parameters like verification of performance and safety functions and environment tests. In China too, swapping standards pertain to safety. Institutional mechanisms should be set in place to create a consensus on battery pack dimensions, connector standards, labelling of batteries, the determining of minimum performance standards and communication with the grid.

Design of incentives: The draft policy recommends incentives for swappable vehicle models. For administrative ease, the policy should encourage vehicle and swapping operators to apply for incentives as a consortium in which incentives are transferred to the lead member. The impact of revenue-sharing recommendations like 1/kWh made by the ministry of power in its recent guidelines on charging infrastructure must be studied further in the context of battery swapping. This is because fixed charging uses energy only while vehicles are charged, while battery-swapping stations need to keep fully charged batteries in anticipation of demand.

Regulatory changes: The draft policy recommends decreasing the goods and services tax (GST) rate for lithium-ion batteries from 18% to 5%. As this measure falls under the purview of the GST Council, the policy could propose an alternative where state EV funds and/or funds from the FAME-II corpus are used to refund battery-swapping operators for this GST difference. The policy should also consider incorporating battery-swapping stations in the planning/design stage of public and semi-public infrastructural assets in urban areas, including in the development plans of cities.

Additionally, since battery charging and battery-swapping stations can be located separately, the policy should encourage states to form rules for the safe transportation of batteries and provide guidelines for forming these rules. Finally, the draft policy recommends setting up a single window clearance system that includes the issuance of trade licences. The final policy, however, should provide clarity on the status of battery swapping as a delicensed activity. If a trade licence is indeed required, the policy should identify the issuing authority and the process for issuing it.

In India, battery swapping can evolve as a fit use case for two- and three-wheelers, which together comprise more than 80% of all automobiles in the country. Therefore, an enabling battery-swapping policy will be critical for us to accelerate India’s e-mobility transition. At the same time, the policy that we adopt should be mindful of the nascency of the battery-swapping ecosystem in India and therefore avoid constraining various aspects of the swapping value chain into watertight standards.

Akshima Ghate & Shijoy Varughese are, respectively, managing director and consultant, RMI India 

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Published: 12 Jul 2022, 10:38 PM IST
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