How India can ride on Battery Swapping towards a low-carbon future

On 1st February 2022, the Union Minister for Finance and Corporate Affairs – Govt. of India, Smt. Nirmala Sitharaman while presenting the Union Budget 2022-23 in Parliament announced the proposal of bringing out Battery Swapping Policy and inter-operability standards to give a leg up to faster EV adoption. Within three months from that announcement, NITI Aayog has issued a draft Battery Swapping Policy after an extensive pre-draft stakeholder consultation. Not only this new Policy could be a pathbreaking intervention towards accelerating EV adoption in the country, particularly in electric two- and three-wheeler segments, it can potentially position India as a lighthouse country on the global EV map for effectively promoting and implementing battery swapping. Hence, it is worth studying how the draft Policy fares. Here is my take on the key attributes of the draft.

• At the outset, it is important to gauge the outlook of a policy. In terms of laying out the Vision and the Objectives, the draft Policy stands out. The Vision rightly emphasizes the need to catalyze large-scale EV adoption (to realize the goal of 30% EV sales by 2030) through a path of “efficient and effective” utilization of “scarce resources” that are more than just raw materials. It also puts customers at the heart of this policy making.

The draft Policy also sets appropriate Objectives, covering all the necessary aspects, which would not only help jump-start the sector, but also enable an ecosystem to flourish. The sight set towards adopting technical standards, an issue which is often viewed with cynicism by market players, is particularly praiseworthy. The draft Policy has played a masterstroke by outlining the principles/ contours for developing technical standards that balance the need for interoperability of battery-swapping components, necessary to scale adoption, and the importance of giving room for innovation. The draft Policy also aptly highlights the importance of forging partnerships to create ecosystems for battery-swapping that delivers “integrated services to end users” – critical for mainstreaming battery-swapping as a solution to cater to EV charging demand. Recognizing the need to maximize usable battery life and recycle end-of-life material for future-proofing battery-based markets, the draft Policy highlights this important part of the battery-swapping value-chain.        

•  A policy has an important role to provide appropriate definitions of key terms because these often have far-reaching implications as far as implementation of the policy provisions is concerned. It is evident that the draft Battery Swapping Policy pays due attention to defining the necessary terms and has handled it very well -- to avoid misinterpretation, confusions and conflicts.
• Again, the draft Policy scores high in outlining the scope. It covers all critical elements of a battery swapping ecosystem and its cross-sector linkages. In doing so, the draft Policy has ensured that it does not overstep into domains of other policy instruments. It duly focuses on connecting the dots. It has rightly set its eye on stipulating the minimum technical and operational requirements for the battery swapping system that otherwise have been a major governance void since the current charging infrastructure guidelines issued by the Ministry of Power do not address this issue adequately. Also, the draft Policy paves the way to extend possible direct and indirect financial support to Battery Providers and EV users. Currently, FAME-II scheme does not offer demand incentives to battery-swappable EVs and very few state EV policies provide direct support to battery-swapping. Such stepmotherly attitude of existing policies and schemes towards battery-swapping has been a major grievance of the energy operators.
• Coming to the core of the Policy, the draft suggests a practical and effective framework for technical and operational requirements that approaches the interoperability issue from both “discharging” and “charging” sides enabling the much-needed end-to-end compatibility. The draft Policy while signalling the need/goals for technical and performance standards i.e., compatibility, safety, asset security and cost-effectiveness, it draws boundary for standards to avoid any possible conflict with future innovation especially considering the heterogeneity of battery technology. Now, it is to be seen how the upcoming technical standards follow the policy guidance and whether the market responds positively to both the Policy and the standards.

On the other hand, the proposed general requirements are also in the right direction. Focus on Advanced Chemistry Cell, mandating BMS-enabled batteries for improved performance and safety (which is the need of the hour considering the repeated incidents of electric two-wheelers catching fire as if they have been put on tandoor), and advocating IoT-based system to ensure asset security (otherwise, a major apprehension of financiers) are welcome steps.      

• Considering safety, transparency and scalability are critical for the sector to mature, the draft Policy rightly stresses on the requirement for testing and certification and adherence to existing and new standards and guidelines at both component and system levels. On the other hand, adoption of open standard communication protocol like OCPP would allow backend interoperability (enabling switching of networks), and stipulating information sharing with EV users is expected to bring transparency and trust in transactions and offer quality user experience. However, the potential game-changing policy intervention on the matter of transparency is the proposal to assign Unique Identification Numbers (UINs) to batteries and swapping stations. This would help in ensuring probity in transactions including channeling and tracking financial support from the government (which otherwise has been an outstanding issue). Hopefully, all these mandates would help introduce industry best-practices in battery swapping system implementation and operation.
• Among all the important provisions given in the draft Policy, its USP is the open “ecosystem” approach that has the advantage of balancing the public interest of the sector at large and the commercial interest of the companies. This potentially offers several benefits –

o  Allows “multiple distinct interoperable solutions to arise” so long they comply with the technical and operational stipulations which means that enough room would be given for innovation without compromising with safety and transparency

o  Counters possible formation of monopolies or duopolies (dominating closed groups) by keeping the ecosystems open to participation of other market players

o  Encourages companies to bring and leverage proprietary battery swapping solutions without the fear of losing their USP (best-in-the-class feature)

o  Levels the playing field to all market players and their solutions (in the form of technology, financing, business model, partnership, etc.)

o  Fosters collaboration among stakeholders across the industry value-chain

o  Ultimately, paves the path for scaling up implementation

• A key pillar of a customer-centric policy has to be its grievance redressal mechanism. This draft Policy does not disappoint on this front as well. Taking cognizance of the possible involvement of multiple players in a battery swapping ecosystem that might give a leeway to companies to pass on the buck in case of handling complaints from customers, the draft Policy rightly designates the Battery Provider as the sole Point of Contact with customers. This makes lot of sense considering the Battery Providers would receive on behalf of the ecosystem any possible direct financial support from the government. This way, the proposed mechanism becomes customer-friendly without putting too much onus on one stakeholder (since the Battery Provider would only be responsible for coordination and channeling compensation, if required, and not necessarily to bear the financial cost).

Having all these and more positives, what are the key takeaways for the major stakeholders from the draft Battery Swapping Policy?

EV users – The interests of the EV users are central to framing this draft Policy. The latter has left no loose nuts and bolts to this end. Right from safety to transparency in transactions to grievance redressal and compensation, the draft Policy has made sincere attempt to build confidence of EV users which is shaken a bit currently due to a spate of fire incidents involving primarily electric two-wheelers.

Industry players (battery providers and EV OEMs) – Industry has been quite tentative about the possibility of a central policy on battery swapping; a key reason has been whether the policy along with the upcoming standards might potentially derail the current business plans. That scepticism should now be put to rest assuming the new standards would follow the essence of this draft Policy. The latter has taken care of the interests of the industry players by giving enough space to bring innovation and proprietary solutions, be in technology or business model. However, the biggest takeaway for the market is the possibility of getting direct financial support from the government (a long contentious issue). The draft Policy has cleared the air regarding possible framework for providing financial support to the industry in a transparent and goal-oriented manner.

Nodal and implementing agencies – The draft Policy goes an extra mile to ease the tasks of nodal and implementing agencies at national and sub-national levels in implementing battery swapping infrastructure. The draft Policy sheds light on a range of governance and implementation related issues including de-risking, financial incentives, phased rollout, and institutional framework.     

While recognizing all the benefits of the proposed Policy, it is, however, critical to underline here that the true outcomes would heavily depend on meaningful follow-up actions of the different ministries, departments and public agencies. These mainly include developing required standards (in line with the Policy), system for issuing and tracking UINs, necessary infrastructure for testing and certification, introducing checks and balances for data sharing and other compliance requirements, scheme(s) for fiscal support to battery swapping, revisiting GST rates, issuing regulations for the minimum battery performance and durability requirements, Battery Management Rules, creating single window system, and last but not the least, working together towards a common goal of effective on-ground implementation. With this caveat, one should commend NITI Aayog for drafting the Policy, which is probably the first such attempt worldwide to develop a governance framework for battery swapping.