Co-authored with Nitish Arora
India, the world’s fourth-largest renewables market and fifth-largest in automobile producer, is also the world’s third-largest oil importer. By transitioning to renewable energy powered electric vehicles, the country can save billions on energy imports, drastically improve air quality in India’s cities, while combating the climate crisis already impacting millions of Indians. Key policies enacted now can have a far-reaching impact in ushering a clean transportation era in the country.
India has one of the lowest vehicle penetration rates of any major economy and has a unique opportunity to establish a sustainable electrified transportation system. Electric vehicles (EVs) are steadily gaining traction across Indian cities and offer several benefits: improving air pollution, reducing oil import costs, and improving demand profile for India’s beleaguered power sector. Moreover, renewable energy and electric vehicles are also large scale employment generators of the future – potentially creating 13.8 million clean jobs by 2030 according to one estimate.
The Indian Government, led by NITI Aayog, has proactively developed strong policy initiatives since 2018 to encourage the development of the EV ecosystem in India. Now, as the government is looking to amend the Electricity Act and the National Electricity Policy, the time is right to think futuristically about greening the grid, and subsequently, the transportation sector.
Here are three policy levers that can help unlock the billion-dollar opportunity of powering EVs through renewable energy.
- Make it easier for EV charging providers to procure renewable energy: Current electricity regulations in most states in India require a minimum threshold of one megawatt of power on standby to contract electricity through open access. This minimum threshold of power demand is problematic for EV energy operators that set up charging stations. Setting up a dense network of charging or battery swapping stations implies that their energy demand would remain distributed. Which is why allowing aggregation of demand would encourage energy operators to source renewable energy for powering EVs, as has been piloted in Delhi. Additionally, the policy currently allows for open access to available renewable energy only from within the state and after paying the cost component to distribution companies (DISCOMs) as fixed by State Electricity Regulatory Commission (SERCs). Relaxing or removing this in-state clause could lead to market-driven competitive pricing and drive in systemic efficiency.
- Encourage inter-state trading and transmission of renewable energy especially for powering EVs: In a positive move, India’s Ministry of Power (MoP) has extended waiver of charges on inter-state transmission of renewable energy to June 30, 2025. However, this waiver is available only for electricity sold to entities that have renewable purchase obligations. This stipulation often excludes energy operators that provide charging facilities for EVs. As these transmission charges and transmission losses form a significant proportion (approximately 22-30%) of the landed per unit cost of electricity tariffs sourced by energy operators from group captive renewable producers (group captive is an arrangement through which a developer sets up a power project for the collective use of multiple industrial or commercial consumers), extending this incentive for renewable energy sourced for powering EVs can go a long way in providing an integrated solution to decarbonize electricity and transportation sectors.
- Provide power banking facility for energy operators: In power markets, “banking” is an accounting provision that allows a renewable energy producing facility to “deposit for later use” the electricity it produces that is not used by its off-taker, or to “borrow” the energy it needs to sell to the buyer in the event of its inability to produce for a given duration (ranging from 15 minutes to one year). Currently, banking charges and its criteria vary across states in India, ranging from two to ten percent of electricity injected into the grid by renewable energy producers or withdrawn by consumers. To encourage EV energy operators to set up captive renewable energy facilities, a friendlier policy could consider capping these charges at a lower range (preferably at two percent of withdrawal energy) and encouraging a consistent framework across various SERCs. Moreover, energy operators could be given power banking facilities with the DISCOMS for a one year period at minimum charges, to encourage use of renewable energy for powering EVs.
Transitioning to EVs in India is a major opportunity for revving up the economy, spurring job growth, improving air quality, and reducing carbon emissions. Although electric vehicles are cleaner even with conventional grid power, pairing them with renewable energy can accelerate India’s decarbonization efforts.
Nitish Arora is Electric Mobility and Clean Energy Expert working as a consultant with NRDC’s India Program.