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Regulatory Impacts And Policy Issues Of Electric Vehicles On Indian Power Sector

Kashmira Sahani
10 Oct 2021 8:46 AM GMT
Regulatory Impacts And Policy Issues Of Electric Vehicles On Indian Power Sector
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The power is one of the most important infrastructure of any nation and our country has one of the most diversified power sectors in the world and its sources includes coal, natural gas, nuclear power, oil, wind, solar and domestic waste as well.

Laws Governing The Power Sector In India

In the year 1910, the first central act came on electricity which was replaced by the Electricity act 2003 and introduced a legislation that addressed the needs of the changing times. Following that, the Electricity Amendment Bill, 2014, and the new Electricity (Amendment) Act, 2018 attempted to amend the Electricity Act, 2003. Both past and current laws have been covered in this section.

Past Laws

The Indian Electricity Act, 1910: The Indian Electricity Act of 1910 (1910 Act) was the first law governing the generation, supply, and distribution of electricity in India. The 1910 Act allowed for the issuance of a licence to someone who wanted to supply energy in a specific region, as well as the supply of energy by non-licensees with the government's permission in some circumstances. Provisions were made to make the installation of electric supply lines and the completion of works by such licensees easier.

The Electricity (Supply) Act, 1948: The Electricity (Supply) Act of 1948 (the 1948 Act) mandated the rationalisation of electricity production and distribution, as well as other steps to promote electrical development. The Central Electricity Authority was established as a nodal authority for technical planning and development under the 1948 Act. State Electricity Boards were formed and given the task of arranging for electricity supply within the state. The Central Electricity Authority, State Electricity Boards, and Generating Companies all had legislative powers and functions under the 1948 Act.

The Electricity Regulatory Commissions Act 1998: The Act Establishing Electricity Regulatory Commissions was passed in 1998.The bill established a Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs), with the aim of excluding state governments from tariff determination. It also addressed the rationalisation of electricity tariffs, the transparency of tariff policies, the promotion of effective and environmentally friendly policies, and other related issues.

Present Laws

The Electricity Act 2003

Because of ongoing economic reforms in the country and power sector reforms in different states, the Central Government saw the need to implement the Electricity Act, 2003 (Electricity Act). The GOI was forced to enact a uniform and unified law to address the current needs of the power sector in the areas of generation, transmission, trading, and distribution of electricity due to the poor performance of the State Electricity Boards (SEBs) formed under the IEA, 1910, and the ESA, 1948. The Electricity Act is a single piece of legislation that covers all of the country's main areas of electricity and establishes a roadmap for the sector's overall and uniform growth. Except for Jammu and Kashmir, the Electricity Act covers the entire country.

The aim of the Electricity Act is to:

  1. To consolidate laws relating to electricity generation, transmission, distribution, trade, and use
  2. To take steps to encourage the growth of the electricity sector; promote competition in the sector
  3. To protect consumers' interests; and rationalise electricity tariffs.
  4. To rationalise electricity tariffs
  5. To create Regulatory Commissions and an Appellate Tribunal for Electricity, and ensure that all areas have access to electricity.
  6. To rationalise the tariff and reduce the levels of cross-subsidization;
  7. To delicense generation;
  8. To allow for new ideas in transmission and distribution, such as power trading and open access.

The Electricity(Amendment) Bill, 2014

The Ministry of Power introduced the Electricity (Amendment) Bill, 2014 (2014 Bill) in the Lok Sabha on December 19, 2014, with the aim of amending the Electricity Act. In different areas of the power sector, the 2014 Bill introduced a range of changes to the Electricity Act. Among the many changes that have occurred, The following were the main thrust areas proposed in the 2014 Bill:

  1. Introducing carriage and material separation, i.e. wire and supply segregation business.
  2. Increasing openness, competition, and business opportunities
  3. Boosting the use of renewable energy sources
  4. Regulatory institutions must be held more accountable.

The 2014 Bill introduced a range of steps aimed at promoting renewable energy production in India, such as procuring electricity from such sources under open access without receiving any cross subsidy. Changes like this would have boosted the renewable energy industry significantly. The amendment also sought to introduce a requirement that generating companies building coal and lignite-based thermal power plants construct renewable energy generation capacity equal to at least 10% of the installed thermal power capacity. A penalty provision was proposed in the 2014 Bill, which was a significant improvement. It was suggested that the liability for non-compliance with any clause of the Electricity Act be increased to Rs.1 crore. This fine was originally set at Rs. 1 lakh. However, a reduced penalty of Rs.10 lakhs has been suggested for renewable energy generators. Regarding the changes suggested by the 2014 Bill, the Standing Committee on Energy has made several recommendations. The Standing Committee raised several important points, including that market segregation between multiple supply licensees should be based on consumer status, cross subsidies, and technical and commercial losses; and that the percentage of consumers with multiple supply licensees should be based on consumer status, cross subsidies, and technical and commercial losses.

The Draft Electricity( Amendment) Act 2018

Pursuant to the recommendations of the Standing Committee on Energy, the Ministry of Power introduced a draft Electricity (Amendment) Act, 2018 (2018 Bill) in September, 2018. We have dealt with certain significant aspects of the 2018 Bill below:

1.Separation Of Distribution And Supply

The 2014 Bill had mooted the idea of segregation of the distribution and supply business in order to promote competition and efficiency in the sector. The 2018 Bill proposes major improvements to the 2014 Bill in order to separate the delivery and supply market, or carriage and content as it is commonly known. It is suggested that state governments be given the authority to devise a scheme for separating carriage and material. The proposal's main goal is to provide customers with the option of buying electricity from several supply licensees. The separation of carriage and content could be extremely beneficial to the industry because it would encourage competition among stakeholders. However, it is critical that the criteria that the state governments would use to decide the segregation scheme are established.

    2.Amendments Regarding Renewable Energy

    The current government has put a strong emphasis on promoting renewable energy as a source of energy. A national renewable energy strategy will be drafted, according to the 2018 Bill. Furthermore, those companies that generate and distribute electricity using renewable energy sources will be excluded from the Electricity Act's licensing requirements. Both a renewable purchase obligation (RPO) and a renewable generation obligation (RGO) were introduced in the 2018 Bill (RGO). The RPO is identical to the duty that states currently impose under their individual regulations. A main insertion is a clause that imposes a particular penalty if the RPOs are not followed. The penalty is based on the number of units missed in reaching the RPO. In terms of the RGO, coal or lignite-based thermal generating stations must produce, acquire, and sell a certain amount of renewable energy-generated electricity. The RGO's amount will be announced by the government.

    3.Reduction Of Cross Subsidy Surcharge

    One of the main reasons for establishing a captive generating plant is to avoid paying cross-subsidy charges. It's worth noting that in order to qualify as a captive generating facility, users must meet the requirements set out in the Electricity Act and the regulations that follow. The 2018 Bill, on the other hand, suggested gradually eliminating tariff cross-subsidization. The plan is to gradually reduce the tariff until it is fully abolished within 3 years according to the Appropriate Commission's decision. The Appropriate Commission will be required to ensure that tariff cross-subsidization to customers within the distribution region does not exceed 20%. The 2018 Bill proposes that a minimum wage be established in1 year, the cross subsidy was reduced by 6%.

    4.Smart Grids

    According to the 2018 Bill, the Central Commission and State Commissions must take measures to promote and grow smart grids. The Central Electricity Authority may define a smart grid as an electricity network that uses information and communication technology to gather data and act intelligently in an automated manner to improve the performance, reliability, economics, and sustainability of electricity generation, transmission, and distribution. The aim of a smart grid is to maximise productivity in terms of electricity production, transmission, and distribution. The implementation of a smart grid would significantly reduce losses in the industry. To prevent any violations of data gathered by smart grids, the government will have to ensure that appropriate security measures are in place. All things considered, the purpose of the Amendment seems to be in the positive direction. The government's actions would provide a much-needed reprieve for the power sector, which has been plagued by problems.

    Evolution Of Electric Vehicles

    Electric motors in electric vehicles (EVs) are powered by energy stored in batteries. An electric motor replaces the internal combustion engine in electric vehicles (ICE). Since an EV runs on electricity, it produces no tailpipe emissions and lacks components such as a fuel pump, fuel line, or fuel tank.

    Advantages of Electrified Vehicles (EVs) over Internal Combustion Engines (ICE)

    Economical

    • EVs have less moving parts than ICEs, so they need less care.
    • EVs are more cost-effective than ICE vehicles due to their higher reliability, lower fuel costs, and lower operating costs.

    Air Quality

    • Generally electric vehicles have no tailpipe emission as compared to ICE vehicles and which will help in reducing air pollution.
    • Evs will reduce greenhouse gas emissions which get emitted from running an ICR vehicle.

    Convenience

    • There are no gears and are easier with respect to driving than ICE vehicles.
    • In EVs the lack of combustion and mechanical drive train makes them easier.

    Electric Vehicles: Regulatory Impact

    By 2030, India's total electricity demand from large-scale adoption of electric vehicles (EVs) is expected to reach 69.6 terawatt hours, generating an additional USD 11 billion in revenue for power utilities. EVs in India will play a key role in transforming the country's power sector and reducing emissions by 40-50 percent, according to experts assisting the nation in meeting its carbon reduction targets. This chapter examines the electric vehicle (EV) market, which is critical to giving India's power sector a boost. An overview of the country's EV environment, as well as the future regulatory landscape that will emerge. Electric vehicles (EVs) are becoming more common in India's transportation market assisting with the National Mission Plan for Electric Mobility (NEMMP) in 2013, as well as the Faster Adoption and Development of Electric and Hybrid Vehicles 2015 (FAME) scheme. The aim of NEMMP is to by ensuring national fuel protection promoting electric and hybrid vehicles India's automobiles It has established a precedent 6-7 million dollars in revenue is the target Every year, thousands of hybrid and electric vehicles are sold starting in 2020. FAME helps to assist in the growth of a business and a manufacturing industry hybrid/electric eco-system by concentrating on vehicles development of technology, development of market, pilot projects, as well as facilities for charging. The foregoing factors, when combined, schemes aimed at boosting the EVs as a percentage of total vehicles in India. By 2030, car sales will have increased by 40%.Unfortunately, the pace of growth has been slower than anticipated, owing to concerns about charging given the lack of adequate charging stations at present. Private players are also hesitant to invest in the development of new products and running such stations because they do not expect a lot of revenue due to the current low EV consumption in the situation.

    Policy Issues: Power Sector

    In order to promote a smooth and efficient transition to EVs in the Indian automobile market, several policy issues in the power sector must be addressed:

    • The use and kind of renewable energy, if any, in charging stations is a point of contention. The rationale for this means that the amount of energy generated or produced using renewable resources is substantially lower, Strengthening of a grid infrastructure is very much important for accommodating the EVs on a large scale because at present electricity distribution grid assets are currently unable to handle large scale EV energy requirements.
    • Also the influx of EVs would result in a fresh demand for electricity, keeping in mind the added load that charging of such vehicles would add to the power grid. As such, this would have new implications for the numerous stressed assets in the power sector both in terms of quantity and quality non-renewable equivalents in terms of quantity and consistency.
    • A distribution licence is required to distribute power from respective SERCs, according to the country's electricity sales regulations, which are outlined in The Electricity Act, 2003. A pan-India licence would make sense, given the number of regulators concerned with the influx of EVs in India. However, such a reform would necessitate a lot of legwork, including a thorough examination of current laws and regulations.
    • Increased reliance on renewable energy sources contributes to increased uncertainty, since wind and solar energy production are dependent on natural factors that cannot guarantee output levels. As a consequence, there could be a wide range of production. To prevent expensive upgrades, new power infrastructure must foresee rising load requirements.
    • To manage new supply and demand fluctuations as a result of EVs, policies for grid automation and infrastructure for load shifting and excess power storage are needed. By using idle battery capacities, EVs connected to the grid will serve as buffers and storage units.
    • India produces and consumes less electricity than the majority of developing countries.(In India, per capita electricity consumption is just about 800 units, while in the United States, per capita electricity consumption is about 4,000 units.) As a result of the large population, EV adoption is more difficult in India Per capita, the sum of power that has been added.

    Policy Issues: Charging

    Certain policy issues must be looked into when it comes to the charging aspect with respect to EVs, which is fundamental in their functioning. Such issues are as follows:

    • The primary issue that the authorities must resolve is the creation of charging infrastructure. To counter this, the Central government proposed that the Union Ministry of Power establish a "minimum skeleton network" of charging stations in consultation with the Niti Aayog and state governments across the country's networks This aims to promote the use of electric vehicles by creating enough demand encourage private companies to construct charging stations, thus expanding the demand for electric vehicles in the future.
    • Which type of charger to use: AC (alternating current) or DC (direct current). While an AC charger takes around six hours to completely charge an EV, DC chargers are much quicker, taking about 40 minutes to one hour. In the electric vehicle industry, having many charging protocols is a pain point. To support multiple charging protocols, the world is investing much more money than is required. Large sums of money may be spent on developing a proprietary charging network that can only be used by owners of a specific company's electric vehicles, while charging network providers invest heavily in developing quick charging for other protocols.
    • Electricity prices are critical in promoting EV adoption and retaining current EV customers to charge their cars in a way that is both environmentally and economically beneficial. Standard, on the other hand Electricity prices do nothing to promote the introduction of electric vehicles or the use of optimum charging times. As India's electric vehicle market expands, the resulting increase in electricity demand would cause EV charging to become a large enough load to warrant special tariffs. In addition, time-of-use pricing or flexible hourly pricing may be seen as viable policies.
    • The NITI Aayog has proposed a fee-rebate model, in which productive vehicles receive rebates in exchange for a surcharge on inefficient vehicles. The government might develop a programme that provides car owners with a subsidy as an incentive to switch from gasoline/diesel vehicles to more fuel-efficient vehicles like hybrids. Such initiatives must be well-crafted in order to make the transition to electric vehicles as simple as possible.
    • In order to attain standardisation of charging infrastructure in India, the government has proposed that Energy Efficiency Services Limited (EESL) should be designated as the aggregator for bulk procurement of public chargers, and other entities act as nodal agencies responsible for setting up and maintaining them using a capital grant by the Central government, which is available under FAME-II. Nodal agencies are to submit their EV charging infrastructure deployment plan, inclusive of the location of charging stations for their respective cities/highways, to the Centre. The Central Sanctioning & Monitoring Committee (CSMC) and State-Level Monitoring Committees (SLMC) are also proposed to facilitate the implementation and post-implementation phases of the scheme. Such proposed charging stations would consist of: o One fast DC high-power charging point (50 kW) to comply with the Combined Charging System (CCS), which is an open and universal standard.
    • If a swappable battery is chosen, the issue of whether aligned industries like car rental companies will consider producing such batteries arises.
    • When it comes to charging EVs, not all cars can use the same connectors, causing compatibility problems. To address this concern, the government must regulate the types of plug outlets used in public chargers.

    The electric vehicle environment in India will gradually change over time. In order to keep up with this radically new paradigm, both business and government would need to change their mindsets. Regulation would have to evolve to keep up with changing circumstances. By 2020, India's total electricity demand from electric vehicles (EVs) was estimated to be about 79.9 gigawatt hours (GWh), increasing to 69.6 terawatt hours (TWh) by 2030.

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