Electric vehicles charging Infrastructure- an area of concern

The Central government is learnt to have set up a committee chaired by the Member Planning, Central Electricity Authority to recommend the way forward for developing EV charging infrastructure in India.

Electric vehicles (EVs) present an impactful and beneficial cross-cutting opportunity to the Indian Government. Among the various sectoral intersections, a critical, and a net positive, one is the interaction with the Indian power and utilities (P&U) sector.

India is currently estimated to have 0.4 million electric two wheelers, 0.1 million e-rickshaws and a few thousand electric cars — certainly miniscule compared to the automotive fleet in India, which increased by 20.5 million in FY16 alone3. EVs may not yet be considered mainstream in India, but with the segment gaining the attention of both domestic and foreign investors, indications point to a growing momentum and a possible disruption. This accelerated and upcoming EV development is set to disrupt a variety of stakeholders, as depicted below. It presents a complex program with linkages across the energy, manufacturing, consumers, and government sectors.

Work-in-progress

The first and foremost question, as one looks at the legal and regulatory framework in India’s price-sensitive automobile market, is whether EV charging should be treated as a ‘service business’ or as purely the ‘sale of electricity’. The Central Government is learnt to have set up a committee chaired by the Member Planning, Central Electricity Authority (CEA) — the apex policy advisory body in the power sector — to recommend the way forward for developing EV charging infrastructure in India that can push the introduction of EVs on a large scale. The Forum of Regulators — an aggregation of power sector regulatory institutions — has also commissioned a separate study to look into the various aspects.

The CEA panel has largely approached it from the legal aspect, fundamentally four key questions: Whether charging of EVs at a public charging station is distribution of electricity? Whether EVs, which use public charging stations, are consumers of the distribution licensee of the area? Whether the activity of charging of EVs by a public charging station will be “Supply” of electricity in terms of the Electricity Act, 2003? And, more crucially, whether charging of EVs at a public charging station is sale or resale of electricity or is a service business?

The CEA panel seems to be veering around to the view that an AC (alternating current) or a DC (direct current) charging facility, while undoubtedly being a service, involves third party sale of electricity by a consumer of a distribution utility, among other things. So, if EV charging is commercially allowed under the existing provisions on the ground that it does not involve purely the resale of electricity by the private charging station, it could lead to a host of such interpretations on the ground that the service is not merely the sale of electricity, but a composite service.

The panel has, therefore come to the view that public EV charging by private entities should be allowed after explicit exemption is provided in law. Given this conclusion, the panel is learnt to have recommend to the government that a beginning can be made immediately by adopting a franchise model for setting up charging stations. This is being proposed as an interim arrangement, till the time that the Electricity Act 2003 is amended (the amendment is warranted since offering electricity charging service to EV users entails supply of electricity and hence would fall within the ambit of electricity distribution, which is a licensed activity and is in the jurisdiction of the distribution utility). The selection of a franchise is likely to be proposed to be done through competitive bidding on least markup criterion and bids bring invited from franchises over a large area such as a state as a whole, or the area under a discom (distribution company). Once the Electricity Act is amended, in next phase, the panel is likely to propose the introduction of market-based public charging stations to come up in competition with franchisees.

The panel has, therefore come to the view that public EV charging by private entities should be allowed after explicit exemption is provided in law.

While experts concur that EV charging is undoubtedly a service, the panel’s view incorporating a regulatory attitude to keep EV charging under tight control could be detrimental to the development of the crucial infrastructure. Therefore, it might be a better to amend the law right at the onset and let the private sector come into EV charging service from day one.