Draft Battery Swapping Policy

Draft Battery Swapping Policy

Subject: Science & Tech

Context- The NITI Aayog has released a draft battery-swapping policy targeted at electric two- and three-wheelers as the government think tank aims to expedite large-scale adoption of EVs.

Concept-

• Under this, it has proposed offering incentives to electric vehicles (EVs) with swappable batteries, subsidies to companies manufacturing swappable batteries, a new battery-as-a-service business model, and standards for interoperable batteries, among other measures.

What is Battery Swapping?

• Battery swapping is a mechanism that involves exchanging discharged batteries for charged ones.
• This provides the flexibility to charge these batteries separately by delinking charging and battery usage, and keeps the vehicle in operational mode with negligible downtime.
• Battery swapping is generally used for smaller vehicles such as two-wheelers and three-wheelers with smaller batteries that are easier to swap, compared to four-wheelers and e-buses, although solutions are emerging for these larger segments as well.

What is BaaS?

• Battery-as-a-service (BaaS) is seen as a viable charging alternative.
• Manufacturers can sell EVs in two forms:
  • Vehicles with fixed or removable batteries and
  • vehicles with batteries on lease.
• If you buy an electric scooter with battery leasing, you do not pay for the cost of the battery—that makes the initial acquisition almost 40% cheaper.
• Users can swap drained batteries for a fully charged one at a swap station. The depleted batteries are then charged on or off-site.
• The advantages of swapping include low downtimes for commercial fleets, reduced space requirements, and lower upfront costs.
• It is also a viable solution for those who don’t have parking spots at home.

Draft Battery Swapping Policy: Key Proposals

• Rationalizing taxes on battery: 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.
• Incentivization for swapping enabled vehicles: 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 size of the incentive could be determined based on the kWh (kilowatt hour) rating of the battery and compatible EV.
• Terms of contracts for battery providers: The government will specify a minimum contract duration for a contract to be signed between EV users and battery providers to ensure they continue to provide battery swapping services after receiving the subsidy.
• Public battery charging stations: The policy also requires state governments to ensure public battery charging stations are eligible for EV power connections with concessional tariffs. It also proposes to install battery swapping stations at several locations like retail fuel outlets, public parking areas, malls, kirana shops and general stores etc.
• Tariff rationalization: It also proposes to bring such stations 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.
• Registration ease: Transport Departments and State Transport Authorities will be responsible for easing registration processes for vehicles sold without batteries or for vehicles with battery swapping functionality.
• Unique identification number (UIN): The policy also proposes to assign a UIN to swappable batteries at the manufacturing stage to help track and monitor them. Similarly, a UIN number will be assigned to each battery swapping station.
• Locations: The NITI Aayog has proposed that all metropolitan cities with a population of more than 40 lakh will be prioritized for the development of battery swapping networks under the first phase, which is within 1-2 years of the draft policy getting finalized.
• EV safety: To ensure a high level of protection at the electrical interface, a rigorous testing protocol will be adopted, the draft said, to avoid any unwanted temperature rise at the electrical interface.

Why hasn’t BaaS taken off yet?

• High taxes: There are economic and operational constraints. Energy service providers offering swapping solutions have to charge 18% goods and services tax (GST) for swapping, compared to 5% GST on the purchase of an EV.
• No incentives yet: Additionally, the government’s FAME-II incentives are not offered to vehicles sold with BaaS or swap station operators.
• Lack of interoperability infrastructure: While these are economic disadvantages compared to direct charging solutions, the lack of a dense and interoperable battery swap infrastructure has also hindered the roll-out.