The weekend read: The small but mighty electric bike that can boost India’s green recovery
In conversation with Abhinav Soman, researcher at the Council on Energy, Environment and Water
Welcome to this weekend’s edition of Lights On, a newsletter that brings you the key stories and exclusive intel on energy and climate change in South Asia.
In case you missed this week’s story, on how India may be ready - with a pinch of creativity - to deploy the biggest immunisation push in its history against Covid, you can read it here.
A reminder that for each story I report I have much more data and information than what ends up in the final story, and while this is essential to keep the piece readable, I always love to chat more. Just hit the reply button and ask away, I will answer in a dedicated post once I have enough questions.
Putting India on a green recovery path means promoting well established technologies and industries, such as solar PV, but also tapping into sectors that are still at a very early stage with big potential for growth. Electric mobility is one such field, and the government has made it clear it plans to aggressively invest in its development. Currently, EV [electric vehicle] penetration in India hovers around 1 percent, but according to the Council on Energy, Environment and Water it could reach 30 percent by 2030. In a new study, researcher Abhinav Soman and team found that reaching this target would not only lead to significant air pollution reduction, but it could save India the equivalent of $14 billion in oil imports every year.
Here, Soman speaks candidly about the potential contribution of electric mobility to India’s green recovery, but also about the trade offs and challenges that come with the EV transition.
Lights On: When thinking about the post-pandemic economic recovery, electric mobility may not be the first industry that comes to mind - it’s still a relatively niche sector all over the world, and in India in particular it’s still seen as a luxury segment. However your research reveals a different side to the story. How did you investigate the problem?
Abhinav Soman: As we realise the EV transition, we've heard both sides of the story - on the one hand, [the EV] industry talks about the various gains and economic opportunities that are going to come about. But at the same time, we've also come across some pushback about the reduction in jobs and the reduction in value for other industries such as ICE [internal combustion engine] manufacturing. So we wanted to hold these data points side by side and understand what is the net gain from the transition.
Tell me more about these trade-offs, how do they play into the idea that electric mobility is not the best bet right after a pandemic wrecked India’s economy and livelihoods?
The intention is not to see them as impediments. But to be able to take pre-emptive action measures to deal with those trade-offs and to reduce their impact early on, before it becomes a problem. We've quantified that in terms of gains, there will be a huge EV market that's going to develop, there's going to be job creation in the ecosystem, and India is going to save a lot on oil imports bill. But on the other side, we also quantified the value loss from the oil sector and the existing ICE auto manufacturing, and a corresponding reduction of approximately 19 percent fewer jobs. In addition, since in India, the state and central government draw a good amount of revenue from fuel tax, which is the sales of diesel and petrol, there will also be a reduction in that particular revenue by 2030.
In your study you suggest a 30 percent EV penetration by 2030. This sounds like a great perspective, but there are so many factors that could hold the sector back. KPMG estimates that by the same year electric cars and buses will only make up between 10 and 15 percent of the entire fleet.
One of the reasons why we are looking at this target is that the government has mentioned it a few times, albeit not embedding it into a particular policy. For now it’s more an aspiration, but it can be achieved quite easily if, for instance, we count all types of vehicles, including two and three wheelers. So if you were to electrify a significant share of India’s two wheelers, let's say 30 or 40 percent, then you've already achieved a 30 percent target, because we have such a large number of bikes in India.
So what would be the ideal game plan to achieve this goal while mitigating potential trade-offs?
Ideally you’d want to prepare in advance and diversify your revenue sources of indirect tax, so that by 2030, when you have a significant share of EV in the market, you are not constrained in any way. And you also don't want states to backtrack on their electric mobility targets, just because they see that they're no longer getting the same revenues they used to. You don’t want it to become an either-or situation, where either you push for EV sales or you maintain your revenue. And the same thing goes for jobs from the ICE manufacturing sector. Can we start creating a pool of workforce for the EV industry and electronics manufacturing, so that we are shifting jobs to a new ecosystem including activities like battery recycling which don't exist today.
When we do a direct comparison of manufacturing jobs, it looks like the EV transition creates fewer jobs. But the ecosystem is going to be very different from the standard production chain for ICE vehicles, it has many more activities: there’s battery recycling but also the installation and operation of charging infrastructure, construction of gigafactories, telematics services and IoT.
Whether the electric mobility revolution eventually happens at all, and what it will look like, will ultimately depend on the consumers. How are things likely to evolve on that front?
By 2030 the economic conditions of the country and the average income may be different from what we expect now, and this will in turn change the way people move. For example, people currently choose public transport because they cannot afford to buy a car or a bike. But what if in ten years time, despite a growth in income, people still choose the bus because the right policies made it the most convenient and not just the cheapest option? That would be ideal. But then, the other possibility is that we don't take these measures and we see a surge in private cars and bikes.
Now we wanted to understand what 30 percent EV penetration happening in each of these scenarios can mean in terms of energy consumption. In our business-as-usual scenario, this level of electrification would lead to a 12 percent energy saving. But if you were to combine it with increased public transport, you can go down to as much as 27 percent. The flip side of this argument is that if you have more people depending on private mobility, then even with 30 percent of EV penetration, your energy consumption actually increases.
So an EV revolution in India won’t be just about making more electric cars and bikes at a cheaper price.
Exactly, you have to look at the environmental aspects, you have to try and limit private ownership, and also promote electric mobility. This caveat is very pertinent for India, because vehicle ownership is still very low, so there's a lot of room for this sector to boom, especially in smaller cities. We know that two wheeler ownership is already very high in big and medium cities because of the lack of public transport, there is a risk that by 2030 you’ll end up with way too many cars and bikes in all of these cities. And that would just counteract all of your efforts on electric mobility, because the goal is to reduce consumption.
That’s all for today! If you’ve been sent this newsletter, consider signing up here - I have a premium and a free version!