A recent report by the IEA on World Energy Investment highlights a significant increase in clean energy spending in recent years, albeit heavily concentrated in a few countries
Recently, the World Meteorological Organisation issued a warning that there is an 80 percent chance of annual average temperatures breaching the Paris Agreement’s goal of limiting the global average temperature to 1.5 degrees Celsius within the next five years. The International Energy Agency (IEA) recommends achieving a 65 percent penetration of electric light vehicles in new sales by 2030 as part of its Net Zero by 2050 scenario. Governments, worldwide, are implementing policies and providing financial support to increase the adoption of electric vehicles (EVs) in new vehicle sales.
Two things are universally accepted when discussing the actions necessary for driving the energy transition. Firstly, it takes a significant amount of time, sometimes a decade or more, to build the ecosystem and reliable supply chains for any new clean technology, as seen with solar PV and LED lighting. Therefore, sustained and unwavering policy support is crucial until commercialisation is achieved. Secondly, new clean technologies are initially expensive and require concessional financing.
India, with its vast potential for clean electricity from solar sources and a projected exponential growth in car ownership on its journey towards a sustainable future, has strategically decided to promote electric mobility. The country has already implemented two phases of the FAME programme, with the expectation of launching FAME 3 soon.
Influence Map, a global think tank analysing business and finance responses to the climate crisis, recently published a report detailing how negative lobbying by automakers worldwide is becoming a significant barrier to climate policies and the widespread adoption of EVs. We are observing the same in India.
The Bureau of Energy Efficiency introduced Corporate Average Fuel Economy (CAFE) norms for passenger cars in 2015. These norms have been tightened progressively, with a proposal for further reduction to 70 gm CO2/ km by 2032-2037. Analysis of EU CAFE data reveals that comparable vehicle models in Europe are at least 16 percent more efficient than their Indian counterparts. Media reports suggest some car manufacturers in India oppose the stricter CAFÉ norms. Moreover, there have been calls from some incumbent car manufacturers to extend tax breaks and subsidies to hybrid vehicles under the FAME programme.
However, the justification for such support is questionable, especially considering that hybrid technology is mature and there’s hardly any justification for the same. Furthermore, Indian hybrids have small batteries (up to 1.0 kWh) and extremely limited EV mode use cases (primarily at low speeds). On highways, ICE engines take over, negating any emissions benefits.
Media reports often compare sales of cars and SUVs with hybrid transmission with those of EVs
claiming the narrowing the gap with EVs in market share. Comparing hybrids with EVs is like equating chalk and cheese.
Achieving the proposed CAFÉ norms is just not possible with incremental improvements in ICE technologies, which hybrids are. Only widespread adoption and faster transition of zero emission technologies such as EVs can make this possible and all efforts and incentives from the government must be singularly directed towards making mobility emission free.
This approach would significantly improve air quality in our cities and enhance energy security as India presently imports more than 80 percent of its oil.
A recent report by the IEA on World Energy Investment highlights a significant increase in clean energy spending in recent years, albeit heavily concentrated in a few countries. Over 90 percent of this is concentrated in advanced economies and China. Developing countries like India face significantly higher capital costs due to lower sovereign credit ratings. Government support, in the form of tax breaks, subsidies and interest subventions, must be allocated selectively to promote zero emission technologies as the fiscal space is very limited. Improvements in already commercialised technologies do not necessarily warrant such support.
Even within the EV sector, public funding should prioritise addressing the most critical barrier - lack of adequate charging infrastructure. EVs demonstrate financial viability in fleet use due to significantly lower operating costs, and this has potential to add critical mass for large scale adoption. FAME subsidies should focus on building a robust public charging network to address ‘range anxiety’ and enable India to achieve its ambitious goal of 30 percent EV market share by 2030.
By focusing on building a robust EV ecosystem and strategically utilising limited resources, India can achieve its clean energy goals and create a sustainable future.
(Alok Kumar, Former Power Secy)