NITI Ayog has recently released a draft policy on battery swapping for two-wheeler and three-wheeler vehicle segments. The draft has come after Finance Minister Nirmala Sitharaman announced during this year’s Budget session that the government is set to deploy a battery swapping policy and interoperability standards to reduce the cost of electric vehicles (EVs), encourage speedy adoption amongst buyers, and improve efficiencies in EV ecosystem. It has also come amid cases of EVs bursting into flames, causing anxiety amongst potential buyers. The draft is up for consultation and NITI Ayog has invited comments on it until June 5.
What is Battery Swapping?
Battery Swapping is a mechanism that involves exchanging charged batteries for discharged ones from a battery swap station. Battery swapping stations have been successfully operating in countries such as Taiwan and China. Battery Swapping falls under Battery-as-a-Service (BaaS) model that allows buyers to purchase as EV without a battery and pay a regular subscription fee to the battery service providers throughout the vehicle lifetime.
It is the most popular alternative to charging stations. The former takes less time and increases range. Additionally, it reduces consumer anxiety in battery life as battery swapping makes batteries last longer when compared to supercharging which reduces battery life. While usually BaaS comes at a monthly service charge rate, it significantly reduces the cost of ownership of EVs. Considering that batteries make up at least 40 per cent of the total cost of EV, battery swapping reduces purchasing cost quite significantly.
Battery Swapping has completely revolutionized the EV industry by helping overcome some of the biggest limitations of EV. The technology has picked up steam in India as well in an effort to decarbonize high greenhouse gas intensive sectors such as transportation and energy.
How Promising is the Draft Battery-Swapping Policy?
NITI Aayog released the Draft Battery Swapping Policy in April 2022. The policy proposes incentives to EVs, subsidies to companies manufacturing swappable batteries, standards for interoperability measures, and a BaaS model, among other measures.
As per the draft, only batteries using Advanced Chemistry Cells (ACC), with performance equivalent or superior to EV batteries stipulated under the FAME-II scheme will be supported. This will prevent cheaper and low capacity-low speed EVs from being a part of the battery swapping ecosystem. The policy also mandates all swappable batteries to be equipped with a IoT-based Battery Monitoring System with remote monitoring and immobilization capabilities. A rigorous testing protocol will also be adopted to avoid unwanted temperature rise at the electrical interface. To allow traceability across the battery lifecycle, a Unique Identification Number (UIN) will be assigned to all the batteries at the manufacturing stage. Similarly, UIN will be assigned to each battery swapping station. It also proposes to install battery swapping stations at several locations such as retail fuel outlets, parking areas, malls, and general stores.
The draft policy has suggested that the GST Council consider reducing the differential across the tax rates on Lithium-ion batteries and electric vehicle supply equipment. Currently, the tax rate on the former is 18 per cent, and 5 per cent on the latter.
The policy also proposes to offer the same incentives available to electric vehicles that come pre-equipped with a fixed battery to electric vehicles with swappable batteries. The policy states that “the size of the incentive could be determined based on the kWh (kilowatt hour) rating of the battery and compatible EV”.
Two Phases for development of battery swapping networks have been proposed by NITI Aayog. In the first phase i.e., within 1-2 years of finalising the draft policy, all metropolitan cities with a population of more than 40 lakhs will be prioritised for the development of battery swapping networks. In the second phase, all the other major cities with population greater than 5 lakhs will be covered. The policy requires state governments to ensure that the Battery Charging Stations (BCSs) are provided with concessional power tariffs and other regulatory incentives for battery swapping services. It also proposes to bring BCSs under existing or future time-of-day (ToD) tariff regimes so that the swappable batteries can be charged during off-peak periods when electricity tariffs are low.
The policy action roadmap by NITI Aayog holds the promise of enabling faster EV adoption in India and providing a level playing field to all market players.
This has been authored by Bhavya Tyagi.
