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Battery Swapping: A Promising Future For Electric Vehicles – Oil, Gas & Electricity


Rising temperatures, rising sea levels, floods and climate
change in general has become a cause of global concern in the last
decade. To combat climate change, the Government of India
(“GoI“) has been proactively campaigning
about its climate goals. With the aim to achieve net zero emissions
by 20701 and 100% shift from Internal Combustion Engine
(“ICE“) vehicles to electric vehicles
(“EVs“) by 2030, the GoI has taken
various steps to promote mass electrification of transportation and
push for a shared, electric, and connected mobility
future.2 A detailed analysis of the incentives and
policies issued by the GoI and various state governments and the
legal landscape governing manufacturing of EVs has been covered in
our previous articles on this topic, titled ‘Electric Vehicles:
Driving India Towards Sustainability’3 and
‘Legal Landscape Governing Manufacturing of Electric Vehicles
And Batteries’4.

In order to enhance the demand for EVs, manufacturers of EVs and
its components have been trying to make EVs affordable, easy to
charge and economically viable.5 Battery swapping has
emerged as one of the biggest solutions to the shortcomings of
traditional EVs. It has been reported that batteries consist of 40%
to 50% of the EV’s cost, with a switch to EVs without a battery
this cost is eliminated, thereby making EVs more affordable. In
addition to making, it more affordable, primarily, battery swapping
is a noteworthy solution for the lack of fast paced development of
charging infrastructure in India. With leading market players
advocating for this change, battery swapping has the potential of
becoming an alternative that is adequate, affordable, accessible,
and reliable. We have dealt with the distinguishing aspects of
battery swapping infrastructure and battery charging infrastructure
in greater detail in later part of this article.

The objective of this article is to undertake a comparative
analysis of the different approaches adopted in various
jurisdictions towards successful implementation of battery swapping
services and examining the key features of the draft battery
swapping policy (“Policy“) published by
Niti Aayog on April 20, 2022 to implement such a service
model.6.

Further, emphasis is drawn on other measures, incentives and
schemes introduced by both the GoI and the state governments to
promote a complete battery swapping ecosystem in India to attract
potential investment and mass adoption.

Global Trends – Battery Swapping in China, Japan, and U.S.

Despite initial resistance, countries are now actively switching
to battery swapping to accelerate adoption of EVs. Set out below is
a summary of the current position in respect of battery swapping in
China, Japan, and U.S.

  • China: Battery swapping is in its
    nascent stages in China whereas it hasn’t really taken off in
    other parts of the world.7 China’s State Council
    announced the New Energy Vehicle Industry Development Plan
    (2021-2035) on October 20, 2020 (“Plan“)
    with an aim to ensure development of the new energy vehicle
    industry.8 Under the Plan, the Chinese government is
    looking forward to developing a public charging network with focus
    on fast charging. Further, it also provides financial support to
    the businesses’ involved in the construction of charging
    stations. Amongst the companies in the swapping business, companies
    like Nio and Aulton New Energy have built 1,400 battery-swap
    stations nationwide and plan to grow the number to 26,000 by
    2025.9

  • Japan: The Japanese government’s
    goal is to achieve carbon neutrality by 2050. It is aiming to
    transition to 100% EV by 2035.10 Original Equipment
    Manufacturers (“OEMs“) in Japan namely,
    ENEOS Holdings, Honda Motor, Kawasaki Motors, Suzuki Motor and
    Yamaha Motor have collectively established a new company called
    Gachaco Inc. to ensure production of swappable batteries meeting
    the same standards and set up effective replacement systems to swap
    batteries.11 The newly incorporated company will develop
    necessary battery as a Service (“BaaS”)
    platform infrastructure to provide the swapping service to electric
    2W users,12 thereby combating one of the common hurdles
    to the widespread adoption of EVs in the country. The aim is to
    manufacture mutual-use swappable batteries that can be swapped in
    the Two-Wheelers (“2Ws“) produced by all
    the OEMs forming part of the consortium.

  • U.S.: Tesla, one of the biggest EV
    manufacturers in the world had introduced swapping stations in the
    US back in 2013.13 The company had to shut down the
    swapping stations within a few years due to low-cost recovery. This
    led to the innovation of super chargers which would decrease the
    otherwise high downtime for EVs. However, recently battery swapping
    has witnessed immense demand in the U.S..14 Ample, a
    start-up based in California, U.S., engaged in developing battery
    swapping technologies has produced battery modules that can handle
    battery packs of different cars and low-cost swapping stations.
    Batteries that can accommodate a range of vehicle, eliminates the
    requirement of a standard battery pack required to be maintained by
    OEMs while producing 2Ws in order to ensure that the batteries
    being produced fit into the vehicle.

Global trends suggest a move towards battery swapping as a new
solution. As observed, different countries have used different
business models of battery swapping to overcome the prevalent
shortfalls in the EV landscape. With the release of the Policy, the
GoI has also joined other jurisdictions in promoting a switch to
battery swapping. This move should be further backed by state
governments to ensure deeper penetration of electric 2Ws and
three-wheelers (“3Ws“) in India. The
Finance Minister of India, Mrs. Nirmala Sitharaman had during the
2022-23 budget announcement, introduced BaaS as a new business
model to accelerate sustainable mobility solutions.15
This model aims at resolving the space constraint faced in setting
up charging stations in urban areas by providing a recharging
facility akin to the refueling facility available for ICE vehicles.
The key feature of this model is discussed in the next section of
the article.

Key features of the Policy

The GoI had announced the introduction of the Policy in its
union budget for the financial year 2022-23, with the intent to
strengthen the EV industry and catalyze large scale adoption of EV.
The Policy would also enable in recognizing ‘battery’ or
‘energy’ as a service and help in further developing the EV
infrastructure and increasing the use of EVs in public
transportation. It is pertinent to note that the Policy focuses on
2Ws, 3Ws, light electric power train vehicles (“LEV”)
among the lightweight category vehicles and E-Rickshaw/ECart and is
intended to promote swapping of batteries with Advanced Chemistry
Cells (“ACC“), to reduce battery
cost.

The key objectives of this Policy are:

  • Offering flexibility to EV users by developing battery swapping
    as an alternative to time taking charging facilities;

  • Providing technical guidelines, standards and principles
    required to enable interoperability within the battery swapping
    ecosystem;

  • Addressing regulatory and financing challenges faced by
    manufacturer or/and service providers;

  • Encouraging co-operation among various market players like
    battery providers, battery OEMs, EV OEMs, lending institutions,
    etc. thereby forming an ecosystem that can provide integrated
    services to the customers;

  • Providing for a better lifecycle management of batteries,
    including both maximum usage and recycling.

This policy is valid from the date of its public notification
till March 31, 2025, post which Ministry of Power
(“MoP“) is authorized to review, revise,
and extend its validity.

We have set out below, particulars of some of the key features
of the Policy:

























S.No Key Features Brief
Particulars
1. Technical and operational standards for
batteries

  • Technical and performance standards to be approved/adopted by
    concerned agencies to ensure safe operations and flexibility in
    operating with different battery types;

  • Battery Management System (BMS) will be enabled in all ACC
    batteries;

  • Batteries to be equipped with advanced features like IoT-based
    monitoring system, remote monitoring etc.;

  • Additional standard and specifications for batteries to be
    notified later to support a phased manner transition to battery
    swapping;

  • A Unique Identification Number (UIN) to be assigned to
    batteries and battery swapping stations;

  • Batteries to be tested as per Automotive Industry Standards 156
    and 036, testing protocols and relevant regulatory standards;

  • OEMs to seek approval from Automotive Research Association of
    India (ARAI) to accept interoperable swappable batteries.

2. Standards for Battery charging and swapping
infrastructure

  • MoP to develop and approve the standards for battery charging
    and battery swapping stations;

  • Electric Vehicle Supply Equipment (EVSE) used at swapping
    stations should be tested and certified by National Accreditation
    Board for Testing and Calibration Laboratories (NABL) or agency
    appointed by the central nodal agency for battery swapping;

  • Charging infrastructure for electric vehicles – guidelines and
    standards released by MoP in 2022 to be followed;

  • Guideline and protocols issued by Central Electricity Authority
    are to be followed.

3. Data Sharing

  • Emphasis on data sharing agreements among major battery
    providers;

  • A non-restrictive guideline with respect to classification and
    usage of collected date will be developed;

  • Information about the type of batteries available for swapping,
    use of swapping mechanism, performance of batteries etc. will be
    provided by battery providers to the customers in a standard
    format.

4. Battery as a Service (BaaS) Model

  • Users will purchase EVs without battery and shall acquire
    battery on a subscription basis;

  • Battery providers may work with battery OEMs to develop
    batteries and operate swapping stations;

  • Multiple distinct solutions from relevant market players to be
    taken into consideration for maintaining technical and operational
    standards;

  • Ecosystems to be open to other market players to foster
    flexibility and choice for EV users;

  • Users are allowed to detach swappable batteries and charge it
    elsewhere using appropriate measures.

5. Direct financial support

  • Existing incentives for EV purchase to be extended to batteries
    covered under this Policy;

  • MoP to produce a mechanism for disbursement of subsidies,

  • Battery providers to receive subsidies, provided they meet the
    technical and operational requirements under this Policy;

  • Subsidies to be linked with UIN of EVs to avoid
    double-dipping;

  • Scheme to specify minimum duration of contract to be signed by
    EV users and battery providers;

  • State governments to provide additional financial aid in the
    form of subsidies.

6. Indirect financial support

  • Electricity consumed by swapping stations to be charged under
    time-of-day tariff regime to reduce operating expenditure;

  • Public entities and governments (both GoI and state
    governments) to provide land for establishing swapping/charging
    stations on a revenue sharing basis;

  • State governments to ensure power supply to swapping stations
    at concessional rates;

  • Goods and Services Tax (GST) may at a future date reduce tax
    rates.

7. Implementation in a phased manner Swapping stations to be set-up in urban areas in
the following phases:

  • Phase I (1st and 2nd year): All metropolitan cities with
    a population greater than 4 million;

  • Phase II (2nd and 3rd year): All major cities with population
    greater than 0.5 million.

8. Nodal agencies responsible for rollout of swapping
stations

  • Central Nodal Agency – rollout of EV charging
    infrastructure;

  • States and Union territories – implementation and governance of
    the entire ecosystem;

  • Transport departments – easing registration process;

  • Municipal Corporations – land allocation permission;

  • Energy department – supply of power;

  • State electricity regulatory commissions – concessional tariff
    rates for electricity supply.

9. Re-use and Re-cycling of Batteries

  • Regulation on minimum battery performance and durability
    requirements;

  • Standards for re-use of batteries to be developed;

  • Battery providers to be encouraged to develop a power bank
    using swappable batteries after their end-of-life;

  • Improper disposal of batteries in landfills or scrap is
    prohibited;

  • Battery management rules to be notified with respect to
    end-of-life handling of batteries;

  • Collection and re-processing of batteries will be tracked as
    per provisions of Draft Battery Waste Management Rules, 2020.

10. Single window portal

  • A single window portal to be set up by concerned authorities to
    facilitate submission of all required documents, issue trade
    licenses, approve allocation of public land and to grant
    electricity supply connections in relation to battery swapping
    business.

11. Grievance Redressal

  • On behalf of the ecosystem, battery providers will be the
    primary point of contact between the players in the battery
    swapping ecosystem and will be responsible for channeling monetary
    compensation to EV owners in case of grievances. The Policy is
    silent on the types of grievances covered. Any of the relevant
    market player can be liable to pay compensation. Battery providers
    are merely a medium for addressing and facilitating grievances
    raised by customers.

Battery Swapping vs. Battery Charging

Basis the key objectives of the battery swapping ecosystem
mentioned above, further is a pros and cons analysis of swapping
vs. charging, as a service and the relevant difference between both
the infrastructures.

  • Time: One of the main objectives of the
    Policy as mentioned above is increasing consumer flexibility by
    reducing the long recharging time required by traditional EVs.
    Battery swapping provides a quick alternative as it involves
    replacement of discharged batteries with pre-charged batteries.
    Reports suggest that it takes a minimum an hour or two to charge an
    EV.16 It takes minutes for swapping versus an hour for
    charging.

  • Cost: Battery swapping aims at
    eliminating the upfront cost incurred while purchasing an EV by
    providing battery as a service on a subscription basis. This will
    further lead to opening the market for other players like battery
    providers. EVs with batteries are expensive to purchase thereby
    creating a need for the government to announce purchase as well as
    manufacturing incentives on a regular basis.

  • Space: The plug-in chargers used at
    charging stations are slow and capable of charging only one vehicle
    at a time. One the other hand batteries can be stacked up and
    charged together for swapping. Charging batteries and swapping the
    discharged batteries requires lesser space in comparison to
    charging stations charging one vehicle for hours.17 This
    makes swapping stations more effective and less capital-intensive
    in terms of the infrastructure required.

  • Range Anxiety: Range anxiety is
    primarily fear of a vehicle owner that they might run out of charge
    before reaching the destination. This anxiety arises due to lack of
    proper charging infrastructure. Battery swapping helps address this
    issue as swapping stations is easier, faster, and more convenient
    to establish and less time consuming. However, this will prove to
    be beneficial only upon successful implementation of the BaaS model
    in India.18

  • Sustainability: The Policy aims towards
    providing a better life-cycle management of batteries by focusing
    on both maximum usage and recycling. Batteries charged for swapping
    can also be used to power the swapping station in case of any power
    interruptions.19 In case of an EV with battery, once the
    battery is dead it has to be degraded and the vehicle has to be
    refitted with new battery, adding on to the generation of
    e-waste.20

  • Innovation: OEMs claim to be using
    different technologies for efficient battery then their
    competitors. Swapping aims at standardization of battery packs
    thereby eliminating innovation. This will further attract
    resistance from OEMs.

The shortcomings of battery swapping are mentioned in detail in
the next section.

Potential hurdles in establishing a swapping eco-system

Undoubtedly, the Policy is seen as a move in the right direction
by industry experts and stakeholders.

However, it comes with certain challenges. One of the issues in
introducing swappable batteries is adoption of standardized
batteries applicable to all EVs. In order to swap discharged
batteries with a charged one at any swapping station, it is
important for all EVs produced by OEMs to use a standard battery
back and connector to charge the battery. In the absence of
standard batteries or battery modules adapting to all size and
models, swapping stations will be able to cater to vehicles only
with a specific type of battery pack.

This standardization comes with its own set of challenges. Along
with the technical difficulties in standardizing plethora of
battery specifications already existing in the market,
standardization is also highly criticized by OEMs. News reports
suggest that vice president of a leading energy company had linked
standardization of batteries for personal vehicles to decrease in
innovation.21 Battery standardization along with
interoperability is crucial for BaaS model to become effective. In
case of unstandardized swappable batteries, swapping stations will
not be able to offer services to all kinds of EVs. Unlike a petrol
pump, swapping stations will then cater only to a specific brand of
batteries. However, the Policy is silent on the mechanism for
standardization. Standards and protocols in manufacturing swappable
batteries are yet to be provided. This creates a need for extensive
research in this field especially given the rise in incidents of
EVs catching fire. Swapping involves multiple market players like
OEMs (EV manufacturers), battery manufacturers, service providers
and network operators. The success of battery swapping ecosystem in
India is heavily dependent on the smooth co-ordination and
communication between the above-mentioned key players.

Further, the Policy currently does not extend to four wheelers.
However, it is important to note that BaaS ecosystem in India
covers the mass market of 2Ws and 3Ws batteries which captures the
bulk of the EV market share and in comparison, to four wheelers are
easier to swap.

Further, the applicable GST for BaaS is around 18% which in a
developing sector may be substantially higher. At the least, the
Government could consider having parity with battery charging and
reduce it to the applicable GST chargeable on electricity in case
of battery charging.

Having said that, one cannot ignore that the battery swapping
industry is growing rampantly both in India and globally. Various
BaaS models are prevalent in the Indian battery swapping industry.
For instance, Sun Mobility, a leading electric energy
infrastructure and service provider based in India, has been acting
both as a battery manufacturer and network provider as it offers
both smart batteries and swapping services.22 Whereas,
Bounce Infinity, a swapping service provider has recently launched
its own range of electric 2Ws.23 Further, Battery Smart
is an integrated platform that aims at connecting various players
in the EV space.24 It primarily provides swappable
batteries to e-rickshaws on a subscription basis for a replacement
charge per battery at a nominal rate at its own swapping
stations.25 Sheru, a tech start-up also provides
e-rickshaw owners to swap batteries at their retail stores with a
pay- per-use policy.26 It is pertinent to note that
battery swapping industry is still developing and with
technological advancements newer and more efficient models will
emerge.

Conclusion

Battery swapping is globally seen as the ultimate solution to
overcome the shortfalls of the traditional EVs. It allows for
replacement of the discharged batteries for charged ones thereby
providing flexibility to recharge the batteries separately. Unlike
a traditional EV wherein the owner cannot use the vehicle until it
is charged, battery swapping allows for reduction in both downtime
and space required for setting up charging stations. In order to
promote the implementation of the Policy, the Ministry of Road
Transport and Highways had earlier on August 12, 2020, allowed
registration of EVs without pre-fitted batteries. The BaaS model
emphasizes on buying EVs without batteries as it makes the
production of EVs less expensive, resulting in reduced cost of an
EV. This is most likely to act as an incentive for vehicle users as
high cost in comparison to traditional vehicles is one of the
biggest hurdles in mass adoption of EVs. The one-time cost to be
incurred in purchasing a swappable battery is eliminated by
providing batteries on a subscription basis for the during the
lifetime of the Vehicle. Ease in registration requirement fosters
mass production of battery swappable EVs and swappable
batteries.

In addition to production of EVs without batteries and
production of batteries setting up swapping stations, providing
batteries and maintenance services represent a huge economic
opportunity for India. It presents itself as a lucrative area of
investment to both foreign and domestic investors. With policy
support from the GoI and active involvement of private players,
vast network of swapping stations can be set-up. This will lead to
increased adoption of EV as it will address the issue of lack of
charging infrastructure for EVs in India.

The Policy coupled with GoI sponsored incentives, strong
coordination between multiple players, detailed standards on
interoperability has the potential of helping India achieve its
long-term climate goals. Further, increased purchase incentives and
awareness about the benefits of battery swapping will attract more
consumers, leading to large scale switch to EVs.27

Footnotes

1. Press Release available at https://pib.gov.in/PressReleasePage.aspx?PRID=1795071#:~:text=The%20Government%20of%20India%20has,held%20in%20Glasgow%2C%20United%20Kingdom.

2. Minal Pathak and Shaurya Patel, The
speed bumps in India’s electric vehicle that no one’s
talking about, available online at https://economictimes.indiatimes.com/industry/renewables/the-speed-bumps-in-indias-electric-vehicle-ride-that-no-one-is-talking-about/articleshow/88144625.cms?from=mdr
last accessed on July 20, 2022

3. Saurav Kumar, Swathi Sreenath and
Ritvika Thakur, Electric Vehicles: Driving India towards
sustainability, available online at https://www.mondaq.com/india/rail-road-cycling/1146374/electric-vehicles-driving-india-towards-sustainability

4. Saurav Kumar, Swathi Sreenath, Ritvika
Thakur and Shreya Chaturvedi, Legal landscape governing
manufacturing of electric vehicles and batteries, available online
at https://www.mondaq.com/india/waste-management/1169402/legal-landscape-governing-manufacturing-of-electric-vehicles-and-batteries

5. Dr. Irfan Khan, Battery Swapping for
electric vehicles and ways to lead the change, available online at
https://www.livemint.com/auto-news/battery-swapping-for-electric-vehicles-and-ways-to-lead-the-change-11652604393940.html
last accessed on July 20,2022

6. Battery Swapping Policy dated April
20, 2022 issued by Niti Aayog, available online at https://www.niti.gov.in/sites/default/files/2022-04/20220420_Battery_Swapping_Policy_Draft.pdf

7. Anjani Trivedi, The promise and
pitfalls of an EV battery swapping pathway, available online at https://www.livemint.com/opinion/columns/the-promise-and-pitfalls-of-an-ev-battery-swapping-pathway-11658085503475.html
last accessed on July 21, 2022.

8. State Council, Notice on printing and
issuing the development plan for the new energy vehicle industry
(2021-2035), available online at http://www.gov.cn/zhengce/zhengceku/2020-12/31/content_5575906.htm

9. Paul Lienert, Nick Carey and Norihiko
Shirouzu, Inside China’s electric drive for swappable car
batteries, available online at https://www.reuters.com/business/autos-transportation/inside-chinas-electric-drive-swappable-car-batteries-2022-03-24/
last accessed on July 21, 2022.

10. Available at https://www.trade.gov/market-intelligence/japan-transition-electric-vehicles

11. Mohan K Ramanujam, Gachaco Starts EV
battery swapping service in Japan, available at https://paultan.org/2022/03/30/gachaco-starts-ev-battery-swapping-service-in-japan/
last accessed on July 21, 2022.

12. Available at https://www.automotiveworld.com/news-releases/agreement-reached-to-standardize-swappable-batteries-for-electric-motorcycles/

13. Available at https://www.popsci.com/science/electric-car-battery-swap/

14. Jeniece Pettitt, Why battery swapping
may finally become a part of EV charging infrastructure in the
U.S., available online at https://www.cnbc.com/2021/05/29/how-ample-is-bringing-battery-swapping-to-the-us.html
last accessed on July 21, 2022

15. Express Drives Desk, Union budget
2020: EV industry welcomes measures recognizing battery as a
service, available online at https://www.financialexpress.com/auto/electric-vehicles/union-budget-2022-ev-industry-welcomes-measures-recognising-battery-as-a-service/2422609/
, last accessed on July 22, 2022.

16. Venkat Rajaram, To swap or not to
swap: What’s best for electric vehicles, available at https://economictimes.indiatimes.com/industry/renewables/to-swap-or-not-to-swap-whats-best-for-electric-vehicles/articleshow/88543602.cms?from=mdr
, last accessed on August 01, 2022.

17. Gerald Ollivier, Shyam Srinivasan and
Shyamasis Das, A greener future: Thoughts on India’s proposed
battery swapping policy, available online at https://blogs.worldbank.org/endpovertyinsouthasia/greener-future-thoughts-indias-proposed-battery-swapping-policy,
last accessed on August 01, 2022.

18. Available at https://www.business-standard.com/podcast/automobile/what-is-range-anxiety-and-how-does-it-affect-ev-buyers-122051600045_1.html,
last accessed on August 09, 2022.

19. Available at https://www.financialexpress.com/auto/electric-vehicles/rechargeable-battery-vs-battery-swapping-in-electric-vehicles/2467989/,
last accessed on August 01, 2022.

20. Ananth Iyer, EV Battery Tech :
Charging vs Swapping, available online at https://www.team-bhp.com/news/ev-battery-tech-charging-vs-swapping
, last accessed on August 01, 2022.

21. Prathik Desai, Hurdles seen in mass
adoption of EV battery swapping technology, available at https://www.deccanherald.com/business/hurdles-seen-in-mass-adoption-of-ev-battery-swapping-technology-1078152.html
last accessed on July 21, 2022.

22. Available at https://www.sunmobility.co.in/

23. Available at https://bounceinfinity.com/home.html?utm_source=google&utm_medium=search&utm_campaign=INTCBrandSearch&campaignid=15501962536&kw=bounce%20infinity%20electric%20scooter&gclid=EAIaIQobChMI84y-jMWL-QIVxw0rCh3IkgJeEAAYASAAEgJblfD_BwE

24. Available at https://www.batterysmart.in/aboutus

25. Available at https://auto.economictimes.indiatimes.com/news/auto-components/battery-smart-announces-one-million-swaps-powering-30-million-emission-free-km/89617736

26. Available at https://sheru.se/

27. Available at https://www.livemint.com/news/india/india-has-found-a-way-towards-mass-electrification-swap-batteries-11657859978788.html

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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