Niti Aayog’s battery swapping policy provides direction, but lacks a constructive roadmap

The Niti Aayog released the first draft of the Battery Swapping Policy 2022 on April 21, 2022, to improve interoperability and push for faster adoption of electric vehicles (EV) in the two-wheeler and three-wheeler segment.

This segment has competitive prices compared to others. It also constitutes about two-thirds of vehicles registered and can thus play a critical role in faster adoption of EVs.

Battery swapping standards aim to de-link charging and battery usage to reduce charging downtime immensely and increase vehicle operations. The scope relies on smaller vehicles with smaller battery packs that can be easy to swap. Other advantages include time, space and cost efficiency.

The policy prescribes:

• Minimum technical and operational requirements for swapping
• Ways for direct and indirect financial support to providers and users
• Adoption of business models to encourage private sector participation and affordable financing
• Focus on reuse and recycling of batteries
• An institutional framework for on-ground implementation for swapping infrastructure

Institutional framework

Interestingly, the policy talks about a level playing field around the implementation of battery-swapping service, instead of a very prescriptive policy framework. This allows industry to leverage their strength, including cost economics of setting up of capital infrastructure and timely adoption.

The government will ensure a roll out of services facilitated by setting up a nodal agency. This will integrate the role of different state-level agencies in delegating, coordination and network distribution.

Adoption is envisaged in two phases: Phase I will focus around metropolitan cities with a population greater than four million and Phase II will focus on other major cities.

For battery swapping to be a viable solution, essentially users should be able to purchase vehicles without a battery. 

According to the Union Ministry of Road Transport and Highways’ circular RT-11036/72/2017, such vehicles can be registered on type approval certificates issued by accredited testing agencies. And in such cases, owners need not specify any battery specifications.

Technical aspects

Interoperability definitely has been the key word in battery operations. The policy rightly targets to bring technical uniformity to make this practical.

It prescribes batteries using Advanced Chemistry Cells with performance equivalent or higher than Faster Adoption and Manufacture of (Hybrid and) Electric Vehicles or FAME II specifications. Batteries will have a unique identification number for effective battery cycle monitoring. 

Electricity consumption will be the major operating expenditure for batter charging stations (BCS) and battery swapping stations (BSS) for which, the tariff regime will be applicable under existing or future time-of-day tariff regimes as stipulated by the appropriate commission.

The policy also mandates state authorities to facilitate documentation within five days of application through a single window clearance portal. This will bring huge momentum to otherwise slow processes of setting up capital infrastructure and land allotment.

The policy also allows an individual or entity to set up a BSS at any given location for at least two EV original equipment manufacturers (OEM). This is to enhance the network of energy providers.

It also prescribes only certified agnostic swapping stations to be set up according to Section 3 of the Union Ministry of Petroleum standards on charging infrastructure.

Data sharing aims for transparent communication and non-restrictive data sharing guidelines. There are multiple OEMs with industry standards on battery and vehicle controllers, battery chargers, swapping and open communication protocol.

Amendments to the policy in the future can be a matter of concern where it is favourable for some OEM. It is ambitious but an overall good attempt to classify data to improve ease of access and availability.

Financial aspects

Business models will be an interesting arena to keep a watch on how different service providers come under a single umbrella. The policy encourages industry collaboration and has not mandated strict technical operation requirements for interoperability.

It leaves enough space for evolving market dynamics. It provides flexibility for end users at both business to business (B2B) and Business to customer (B2C) interactions. It also stresses on the fact that among all stakeholders, it is the battery provider that has a non-negotiable role in the ecosystem.

It doesn’t talk about additional incentives, but proposes utilisation of prevailing demand side incentives under eligibility criteria based on performance as prescribed under Fame II to ensure superior EVs on road.

Technical and operational requirements will be key for providing subsidy to battery providers in the swapping ecosystem. It suggests an appropriate subsidy multiplier to battery providers to account for overall battery requirements.

Bringing cost parity has been a popular demand. Hence, the policy asks for a decision on the reduction of differential tax rates on Lithium-ion batteries and Electric Vehicle Supply Equipment (EVSE). According to the current Goods and Services Tax regime, taxes on batteries and EVSE are 18 per cent and five per cent respectively.

Additionally, it prescribes rigorous testing protocols to avoid breakdown or unwanted risk from temperature increase. The battery management system of batteries must be self-certified and should meet safety requirements of batteries in vehicles.

The policy, by and large, shows direction. But due to nascent market dynamics, it lacks a constructive fixed roadmap for setting up of Battery as a Service or BaaS infrastructure.

Currently, the space is very nascent and there are multiple industries and OEMs. But, in time, there can be further amendments. With the suggested level playing field and options for setting up an interoperable EV ecosystem with regulated tariff, it will be a competitive market.

The provision of setting up independent energy operators can definitely improve a user’s access. But this can be challenging in terms of setting it up and power distribution companies’ (DISCOMs) capacity.

Since heavy CapEX at present favors B2B provisioning of infrastructure, it will be interesting to observe the business consensus and market perception around it.