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Electric Vehicles

adoption: potential
impact in India
A Power and Utilities perspective
June 2016
Executive summary: putting These benefits are expected to provide a net positive economic
impact of approximately INR200 billion1 to the P&U sector by
it all together 2022 which will further increase with time. The EC benefit
to the Indian P&U sector is expected to be in addition to the
Electric vehicles (EVs) present an impactful and beneficial benefits from other structural improvements currently taking
cross-cutting opportunity to the Indian Government. Among the place. The realization of this economic value will depend on
various sectoral intersections, a critical, and a net positive, one effective implementation of an ecosystem to improve EV
is the interaction with the Indian power and utilities (P&U) sector. adoption along with measures to maintain grid absorption. This
complex cross-sectoral implementation plan would also need to
Arrival of electric mobility is expected to help the P&U sector be assessed for and mitigated against risks, the most prominent
realize net cost and revenue benefits from both the demand and of which are the incapability of the grid to absorb mass EV
the supply side. A summary of these benefits is tabulated below. charging and customer perceptions around electric mobility.

Aspect Net revenue benefit Net cost benefit

Supply-side EVs and a charging infrastructure could present Increased overall base-load demand can enable
(power utilities) substitute demand to reduce cross-subsidization higher plant load factor (PLF) in conventional
losses to utilities and bring in additional revenue. generation, produce an effective channel for
renewable energy (RE) peak power and avoid
losses due to inadequate RE power evacuation.

Demand-side Second life for EV batteries can propagate energy With high demand for batteries, integrated battery
(utility consumers) independence, leading to revenue generation supply chains and markets for ancillary services
through net metering. will develop, leading to reduced storage cost for
customers.

Global investment in EVs shows


an upward trend
Business opportunities in clean mobility, increased government
cognizance, reduced costs due to pace of research and rising
economies of scale, and changing consumer perceptions are
paving the path for mass-scale production and envisioned
demand of EVs in the coming years. Global EV sales were
estimated at 462,000 in 2015 and EVs will constitute 35%
(41 million) of new car sales by 2040.2

According to IEA estimates, the US (39%), Japan (16%) and


China (12%) are currently the prominent EV stock-holding
markets globally. The key differentiator in these countries is
the increasing collaboration among several stakeholders: state
and federal agencies (for public funding), non-profit groups
(to advocate for improved policy), utilities (to co-promote
and co-develop the requisite charging infrastructure) and
automakers (to continue to improve vehicle efficiency and model
availability). Their policies and implementation approaches will
be considered as those of the first mass movers.

1. Rough estimate, involving publicly-available data and informed assumptions.


2. Bloomberg New Energy Finance (BNEF).

2 | EV adoption: potential impact in India


EVs in India: low current penetration not yet be considered mainstream in India, but with the segment
gaining the attention of both domestic and foreign investors,
but significantly high cross-sectoral indications point to a growing momentum and a possible
disruption.
impact
India is currently estimated to have 0.4 million electric two This accelerated and upcoming EV development is set
wheelers, 0.1 million e-rickshaws and a few thousand electric to disrupt a variety of stakeholders, as depicted below.
cars certainly miniscule compared to the automotive fleet in It presents a complex program with linkages across the energy,
India, which increased by 20.5 million in FY16 alone3. EVs may manufacturing, consumers, and government sectors.

Exhibit 1: Economy-wide interactions among various sectors and stakeholders

Government
and
regulators

D in Cha
R& pu frast rging
ks, rch ru
b rea ort ase ctu
Tax sup
p su re,
Battery bsi
dy
Consumers
manufacturers Increased access to
storage technologies
dit

Cr
ud
re
tc

ei
mp
or

Subsidized tariff, discom losses


p

or
ex

t,

dependence
New supply

s,

Reduced
re
ay

gy ble
chains

ta

olo
lid

hn relia e
ils

Tec ion, ervic


ho

t s
ub
x

ova les
Ta

inn er sa
sid
e ,
ve ing

f t
y

a
re nc
nu
St

al ala
or

ion b
ag

dit rve
e
co

EV and OEM Oil and gas


ad d cu
st
s

a
Lo

Ch g
inf a
ras rgin gin lue
an
tru g
ctu Ch gy va
er ns
re en chai

Power and
utilities

As part of a programmatic series of analyses by EY, this paper focuses only on the interaction between the EV and the power and
utilities (P&U) sector.

3. Society of Indian Automobile Manufacturers (SIAM)

EV adoption: potential impact in India | 3


EVs stand to bring net positive EVs charging in the afternoon or late nights can absorb RE
peak power with base-load functioning to meet the rest of
economic impact to the P&U sector the demand. This will, in turn, reduce the net load dipping in
the current scenario and help maintain a leveled load curve.
in India A leveled load curve would result in cost savings for the entire
The P&U sector in India is undergoing rapid transformational value chain with higher utilization of base-load capacity (lower
developments reducing dependence on imported coal, rising fixed cost/unit) and lower requirement for expensive peaking
energy independence with renewables, reducing PLFs and capacity.
national grid integration to name a few.
Revenue diversification for discoms
Electro-mobility stands to positively address several structural High aggregate technical and commercial (AT&C) losses and
issues faced by the P&U sector as well as accelerate battery an increase in industrial and commercial captive generation
storage developments. The resulting net benefits on both the have resulted in heavy cumulative losses for financially weak
cost and the revenue side of demand and supply will in turn have discoms, which are struggling to buy sufficient power to meet
a positive economic impact on the P&U sector. demands. Higher electricity consumption due to demand from
EVs would help bridge the regulatory assets on the balance
Higher demand during RE generation peak hours sheets of discoms in the long term (with consumption over
The Comptroller and Auditor General of India (CAG) estimated the current regular usage being charged at a higher tariff
the losses of Tamil Nadu States wind farms at INR2.04 bracket) and help contain cross-subsidization losses due to
billion due lack of power evacuation during 200714.4 With industrial captive capacity. Smart meters can help discoms
overnight and afternoon charging, EVs can be a potential confirm/help/support accurate billing and reduce technical
solution to increasing demand during low-demand hours, and commercial losses (including those due to inaccurate
which is also when renewable energy generation peaks. As RE billing and theft).
capacity multiplies in the country, EVs can act as a mass
distributed medium of storage to level the load curve and Discoms are estimated to have incurred losses of INR3,800
provide sufficient evacuation of RE power. billion in FY15. Assuming an electric vehicle has a 100 KWh
battery size, annual additional demand for 6 million EVs
Renewables combined with EVs as storage can effectively is expected to be 93 TWh, leading to an additional annual
offer what can be considered as distributed base-loads, thus revenue of INR990 billion.
providing an efficient solution to maintaining grid stability
with intermittent renewable energy.

Exhibit 2: Indias projected load curve (with 20 GW solar


generation)

Actual demand Net load


225
Demand met during (GW)

220
215
210
205
200
195
190
0 2 4 6 8 10 12 14 16 18 20 22 24

Hour of the day


Source: NLDC

4. CAGs Union Civil Performance Renewable Energy Report 2015

4 | EV adoption: potential impact in India


Improving utilization of existing domestic Reduction in energy storage cost
coal capacity Currently, high storage cost is considered to be the Achilles
Lower industrial demand has resulted in declining Plant Load heel for extensive renewable development. High demand for
Factor (PLF) for domestic coal plants over the past few years batteries will lead to the development of integrated battery
(according to CEA, PLFs ranged between 57.6% and 66.86% supply chains, which are bound to considerably lower the
in FY16). costs of storage. Lower storage costs will in turn help lower
landed renewable energy costs and make its evacuation more
Exhibit 3: PLF trend for coal plants in India efficient. Within the US and China, the adoption of EVs has
led to the setting up of battery manufacturing: China has
80 76.8
16.7 GWh of battery capacity commissioned and 35.1 GWh
73.3
75 69.9 in development. Similarly, the US has 3.8 GWh of capacity
PLF (%)

70 65.5 commissioned and 36.2 GWh in development.


65.1
65
60
Exhibit 4: Declining battery costs and rising energy density
55
201011 201112 201213 201314 201415 Battery cost (US$/Kwh) Energy density (Wh/L)

Source: Central Electricity Authority (CEA) 700 900


600 800

Energy density (Wh/L)


Battery cost ($/KWh)

700
Though industrial demand is expected to increase in the 500
600
medium term and a number of coal sector reforms are being 400 500
undertaken, the introduction of EVs can further improve 400
300
utilization. In the long term, EVs can help provide demand 300
200
assurance when energy efficiency and demand response 200
measures are in place. 100 100
0 0
2011 2012 2013 2022E
EY estimates that an addition of 67 million EVs on the road
by 2020 will need approximately 712 GW of installed coal Source: Analyst reports
capacity. But with most of the charging done in non-peak
hours, the utilization of base-load capacity will increase. With the adoption of EVs, several new services around
This will assist in meeting the additional demand without charging infrastructure, such as build and maintenance, new
necessarily adding further new capacity. Additional capacity battery swapping centers, expansion of battery production/
utilization can also bring down the cost of generation of assembly centers and battery recycling, will also come up.
coal power the Government of India estimates that for an This will assist in mainstreaming storage to the Indian P&U
increase in PLFs from 60% to 90%, the cost of power will sector.
decrease by INR1/unit5.

5. Ministry of Power, Government of India

EV adoption: potential impact in India | 5


Propagation of distributed generation and energy P&U measures needed to absorb
independence
Batteries used in EVs usually have a vehicle lifetime of only
EV adoption
810 years, but they have significant capacity and lifetime The P&U transition and orientation toward EVs will have
remaining for alternative uses, primarily in the energy storage to be collaborative and multi-phased. The sector will need
sector. This potential second life for EV batteries is a clean to experiment with various business models to address
energy game changer for two reasons: it can provide cheaper issues around the availability and reliability of the charging
storage for RE capacity and reduce the overall landed EV cost infrastructure.
for the consumer.
Charging infrastructure development and
Cheaper storage, combined with net metering and
renewables, has a huge potential in encouraging distributed
standardization
generation, reducing dependence on discoms and setting- India needs to develop and standardize a charging
up commercial-sustainable microgrids in difficult-to-reach infrastructure to confirm/help/support that the use of EVs in
remote areas through the national grid. This edge-of-the-grid the country picks up. Charging, and possibly fast charging,
generation is also expected to provide technical stability to infrastructure must be deployed or retrofitted in residential
the distribution network. areas and public spaces gas stations. It is also critical to place
standardization frameworks for the charging infrastructure
(including voltage norms and open protocols).
Exhibit 5: Capacity and revenue of second-life batteries in
world markets: 20142022
Japan, which had fewer than 5,000 charging stations three
7000 800 years back, now has more charging stations (~40,000)
6000 700 than gas stations (~34,000). This rapid expansion can be
5000 600 attributed to a massive federal subsidy plan (US$1 billion) and
500 collaboration between the four largest automakers in Japan
$ million

4000
MWh

400 for execution. Such a unique PPP model can help hedge
3000
300 investment and execution risks.
2000 200
1000 100 Such case studies imply that the successful implementation
0 0 of a charging infrastructure blueprint depends on the
16 17 18 19 20 21 22 23 24 25
20 20 20 20 20 20 20 20 20 20 implementation of the right business model. Utilities and
other private players can use existing examples from
Nameplate capacity Usable capacity Revenue around the globe to ascertain which business models and
Source: Navigant Research which technical specifications (batteries for both charging
station storage and battery swapping centers) will work best
Overall, given these benefits, EVs stand to have a net positive for them.
economic impact of around INR200 billion on the P&U sector
in India by 2022. This can contribute substantially to the
turnaround of the Indian P&U sector as depicted below.

Exhibit 6: Economic benefits to Indian P&U sector by 2022


with EV adoption

Indian P&U
2.90 sector can see
4.00
a turn-around
from EVs alone
INR '000 Billion

2.00
1.10
-3.80 0.20
0.00
Net Losses Net Revenue Net Cost Net Economic
Benet Benet Benet
-2.00

-4.00
2015 2022 Scenario

Source: EY Analysis

6 | EV adoption: potential impact in India


Improving reliability and propagating through with decision-makers at the board level across the industry
public transportation Advising clients across the world on large transformation
Initial EV adoption within public transport and by the programs, delivering bottom-line results, innovation,
Government will help initiate investment in the charging operational excellence and customer service improvement
infrastructure. It is necessary to provide fast high-voltage Preparing business plans and analyze impact of the electric
charging points, and bus depots, parking areas and metro vehicle market
stations are ideal for setting up charging points for buses Developing a network of electric buses and vehicle to grid
and shuttles. Battery-swapping stations should also be experimentation
made available for buses/public transport vehicles plying
Providing end-to-end support in the creation of an electric
continuously for long durations.
charging infrastructure

City-wide pilots (not localized to certain areas but spanning Provide assistance in implementing pilot projects for electric
the length and breadth of the city) would be necessary mobility and EV infrastructure
for effective implementation in a phased manner. Identifying new revenue streams for utilities focusing on
The Government can involve private players for setting up electric vehicle growth
charging infrastructure on a bidding basis or a PPP basis. Recommending/advising motivators supporting uptake of
electric vehicles
However, the implementation of an ecosystem conducive to
EV adoption entails substantial risks. The electric grid must be
made resilient enough to absorb the variable loads from both
renewables as well as EVs. Timely technical and regulatory For a conversation on how EY can help in
measures must be implemented to avoid any grid instability. developing an electric vehicles strategy,
Another inherent risk is the possibility that investment in the please contact:
charging infrastructure may not provide adequate returns if
there is insufficient EV adoption in the country. A major issue Sudipta S. Das
that must be taken care of while developing the charging Partner, Advisory
infrastructure is to maintain standardization in charging points. sudipta.das@in.ey.com
+ 91 33 6615 3430
About EYs Electric Vehicle initiatives
Shuvendu Bose
EY Global Automotive and Power & Utilities Center have created Executive Director, Advisory
a dedicated team focused on the electric vehicles evolution, shuvendu.bose@in.ey.com
which will create tremendous opportunities for the entire + 91 124 671 4083
economy. It brings together a worldwide team of professionals
to help you succeed a team with deep technical experience Ajeya Bandyopadhyay
in providing assurance, tax, transaction and advisory services. Director, Advisory
The sector teams work to anticipate market trends, identify ajeya.bandyopadhyay@in.ey.com
their implications and develop points of view on relevant sector + 91 33 6615 3510
issues. Ultimately, this team enables us to help you meet your
goals and compete more effectively. Kanv Garg
Senior Manager, Advisory
EY has convened leading stakeholders in the global electric kanv.garg@in.ey.com
vehicle community to discuss the critical issues in the + 91 124 443 5779
electrification of transportation. Some of the key areas where EY
is leading industry discussions, include: Shikhar Gupta
Advising Governments and regulators on policy and engage EY Global Power and Utilities analyst
shikhar.gupta@in.ey.com
+ 91 124 470 1233

Shivapriya B
EY Global Power and Utilities analyst
shivapriya.b@in.ey.com
+ 91 124 619 2510

EV adoption: potential impact in India | 7


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About EYs Global Power & Utilities Sector


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EYs Global Power & Utilities Sector brings together a worldwide team of
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