World Bank assess the implication of a three-case scenario
E-car: In its quest to foster clean transport, the government’s ambition to introduce 1,000 electric vehicles (EV) a year would tantamount to replacing 6,000 fuel cars with EVs by 2020.
However, this is possible if the uptake rate among the consumers jags up. The World Bank’s “super high uptake scenario” of EVs in the country assumes 6,132 EVs by 2020, replacing five percent of government and private fleets and 100 percent taxi fleet with EVs.
World Bank’s study on EV initiative in the country is a technical assistance rendered to the Gross National Happiness Commission (GNHC), which was directed by the government to take up the study.
Similarly, in the high uptake scenario, the target is to introduce 245 EVs a year and 1,472 in 2020. Low uptake rate scenario considers 79 EVs a year and 476 in 2020.
The study has highlighted implications and benefits pertaining to the three scenarios.
In the low uptake scenario, about 10 fast chargers and 648 normal chargers at home, work and public places are deemed necessary, costing the government about Nu 40.8M.
Should the super high uptake scenario occur, the government will have to invest Nu 660M for 7,000 normal and 240 fast chargers by 2020. This scenario would also demand five percent of peak demand of grid electricity.
Fiscal cost of incentives such as revenue foregone through tax exemptions between 2015 and 2020, would range from Nu 593M (low uptake) to Nu 7.1B (super high uptake). The higher scale of fiscal cost accounts for 5.5 percent of annual tax revenue.
But the assumption in the case of low uptake scenario is that the consumer group will buy EVs because of product features, even though the total cost of ownership is higher than fuel driven vehicles. In other words, consumers are less likely to be financially motivated.
To reach more consumers, EV buyers will have to be financially motivated, the report states. When the total costs of ownership appears at par or lower than other vehicles, high uptake scenario is expected to commence.
For this to materialize, there ought to be 10 percent reduction in upfront cost in form of subsidy.
Again to make the selling price of EV lower than the other vehicles, the rough estimates of the World Bank suggests a price reduction in EV by 35 percent.
Since Bhutan relies heavily on external grants and loans to finance government expenditures, the report stated that the government might have limitations to implement new initiative or capital investment backed by tax revenue. “External grant resources will likely be a major funding resource for the EV programme,” the report stated.
The report also reveals that EV will benefit richer households. Because of the high cost of EV, only high-income households could afford it. This means that government subsidies would land in pockets of the rich.
The fact that EVs such as Nissan Leaf comes at a starting price of Nu 1.2M (USD 20,000) is because the manufacturer is providing a price concession for a period of three years. Otherwise the car cost about USD 36,000 in any part of the world.
The chief programme coordinator of Sustainable Development Secretariat with GNHC, Lhaba Tshering said the scheme to pursue cost reduction of the EV is a tripartite one-price concession from the manufacturers, fiscal measures from the government and donor agencies.
The ultimate aim, he said is to bring down the cost of EV, for instance Nissan leaf to USD 13,000 or Nu 800,000 approximately. “But this should be a collaborative effort.”
He said a proposal has been made to Global Environment Facility (GEF) for USD 3M and that the government is in constant touch with potential manufacturers. But, he clarified that the government is not giving any preferences to any manufacturers and dealers. “It is open to all those supporting zero emission.”
However, EV behemoths like Tesla and BMW, officials from the GNHC said was not interested to supply their products to Bhutan because of the small market size albeit their appreciation towards the country’s initiative.
As of now, Nissan, Mahindra and Mitsubishi remain potential EV birthplace for Bhutan.
In the next phase, he said a dialogue would possibly transpire with financial institutions pertaining to the transport loan for public transport, including the taxis.
“Poor and vulnerable groups should also have the right to clean transport,” Lhaba Tshering said. In what could be a pilot project, he said the government also contacted Optra, an EV bus manufacturer in UK. But it seems that unless a donor fund the EV buses, purchasing it would remain a question of affordability.
The World Bank’s report states that for taxis, switching to EV is more financially viable, but technically challenging.
The question of total ownership cost arises here.
World Bank’s analysis of the ownership cost reveals those fuel driven vehicles are more favourable than EVs even with current tax incentives. However, it all depends on annual mileage one drives with fuel car, fuel price and the upfront cost of EVs.
Lhaba Tshering said the most suitable comparison is between a Nissan Leaf and Hyundai i20, even though Leaf is more luxurious than i20. If calculated over a period of five years, i20 is still favourable but if stretched over a period of more than eight years, Leaf is more favorable. “That is excluding the intangible benefits EVs bring to the society,” he said.
At a time when the country pledged to remain carbon neutral, 40 percent of the green house gas emission pertains to transport sector.
It is in this light, Lhaba Tshering said, the country needs to do something about the highest emitter of green house gas.
The report estimates a total green house gas reduction of at least 4.5 percent and at the most 33 percent, should the country pursue the EV dreams. In monetary terms, total accumulated social value of avoided carbon emission during 2015-2027 is estimated to range between Nu 31M to Nu 750M.
He said people are more worried about the dumping of lithium-ion batteries, which has longer life and can be recycled when thousands of lead acetate batteries that runs the fuel car are dumped near the streams. Lead acetate batteries prove more hazardous that lithium-ion.
But putting infrastructure is yet again a daunting task. Lhaba Tshering said the government of Japan would be funding the pilot project to set up four charging stations. But a proposal was made to come up with 50 charging stations across the country, with three charging units in each station. The chief program coordinator said it would depend on the success of the pilot project.
Meanwhile, Bhutan Power Corporation has been approached for operation and maintenance of the charging stations. But sources revealed that it was beyond the BPC’s mandate and thus the power utility company is not keen on this.
The Bhutan Postal Corporation was also asked to explore the possibility to take up the operation and maintenance job since the state enterprise runs bus service. But without experience, Lhaba Tshering said they were also not keen.
“After exhausting all the options, Thimphu Homecare, a private company was given the task through competitive bidding,” he said.
Nevertheless, the global initiatives to reduce the battery cost and thus reduce the EV upfront cost is likely to happen soon.
The International Energy Agency has projected that by 2020 annual global EV sales will reach almost 6M, accounting for five percent of passenger car sales.