For a large part of 20th century Coal was a very important part of our lives. Railways, which were the largest medium of long distance inland travel, operated mostly on coal. An overwhelming proportion of electricity was generated using coal. The black gold was also a key ingredient for producing steel, cement, aluminium, copper, and a variety of chemicals. Things began to change slowly in second half of 20th century and change accelerated in the last quarter of the century. Petroleum and Natural Gas started to gain share as major source of transportation fuel, electricity production, industrial feed stock and medium for cooking. From last decade of 20th century, the share of renewable sources in India’s energy mix is also rising consistently. Nonetheless, coal remains the most important source of energy for Indian consumers and industry.
As per the latest data published by USEIA, “primary energy consumption in India has nearly tripled between 1990 and 2018, reaching an estimated 916 million tons of oil equivalent. Coal continued to supply most (45%) of India’s total energy consumption in 2018, followed by petroleum and other liquids (26%), and traditional biomass and waste (20%). Other renewable fuel sources make up a small portion of primary energy consumption, although the capacity potential is significant for several of these resources, such as solar, wind, and hydroelectricity.”
The agency further noted that “India was the third-largest consumer of crude oil and petroleum products after the United States and China in 2019. The gap between India’s oil demand and supply is widening. Demand for crude oil in 2019 reached 4.9 million b/d, compared to less than 1 million b/d of total domestic liquids production.”
Also “Diesel remains the most-consumed oil product in India, accounting for 39% of petroleum product consumption in 2019, and is used primarily for commercial transportation and, to a lesser degree, in the industrial and agricultural sectors.”
It is also important to note that out of the most 30 polluted cities in the world, about two third are in India. About 1.7million deaths (about one fifth of all deaths) are attributed to pollution every year (see here). It is also estimated that India loses about 1.4% of GDP every year due to pollution.
The India’s thrust for use of electricity as primary transportation fuel must be assimilated in this background. In my view, there are two primary objectives for increasing the share of electric mobility:
(a) Achieving energy security, by reducing reliance of imported fossil fuels; and
(b) Reducing carbon emission by vehicles.
As per a study by KPMG India, by 2030 India should expect EV penetration of 65-75% in 3W; 25-35% in 2W and 10-15% in personal 4W and 20-30% in commercial 4W and about 10-12 in overall busses.
In my view, like mobile telephony and digital payment, the pace of acceleration in adoption of EVs would surprise most of the analysts and administrators. The usage of EVs would only be limited by the lacunae in ecosystem rather than the willingness of users.
Innovative solutions for faster development of EV ecosystems are already being devised. Business models such as battery swapping would alleviate the need for millions of charging points, for example.
Three things must be taken care of in developing the EV ecosystem in the country:
(i) Power generation through renewable sources must be accelerated materially. Charging EV batteries with thermal power will not serve the purpose of pollution control.
(ii) India should try to become self-reliant in manufacturing of EVs, including all components. Otherwise, EV related import will replace fossil fuel import defeating the purpose of security.
(iii) A strong framework for end disposal of used batteries and EVs must be established beforehand.
Insofar as investment ideas in listed space are concerned, I believe it will be a mixed bag for most existing OEMs and component manufacturers. Some will gain, some will lose and some might become redundant. The new crop of entrepreneurs which will focus exclusively on EVs will have plenty of gainers. I shall keep a watch for opportunity to invest early in some of these new ventures as and when they list; for I am too small to invest in an unlisted enterprise.
