Wednesday, October 30, 2019

How Can Congestion Pricing Solve Traffic Woes?

Image source: LiveMint
By Devika P V,

The term ‘congestion pricing’ is used to describe a distance, area or cordon-based road user charging policy around congested areas to reduce the use of private vehicles and increase the use of public transportation. Congestion pricing is also known as electronic road pricing. Drivers usually ignore the social costs of using the road and only calculate their benefits which result in traffic congestion and air pollution. Singapore was the first country to implement Congestion pricing in 1975, followed by London in 2003 and Stockholm in 2007. The need for congestion pricing is increasing every year due to many reasons, the main being population growth which affects the number of vehicles on the roads and causes delays, air pollution and increased fuel consumption. While the number of vehicles is increasing, the size of the roads remains the same. As of now, Delhi is considered to be the highly congested state followed by Mumbai, Bangalore and Kolkata. If India tries to adopt congestion pricing, it would help reduce the traffic congestion and pollution level which will in turn improve the quality of the environment. Also, the overuse of the roads will be minimised as drivers will divert to less-travelled routes or change the times they drive to avoid the cost.

The purpose of implementing congestion pricing is to divert the profits generated into building a robust public transportation system. However, pricing of the charge should be reasonable as people might react negatively to a high price. At the same time, low price might also lead to congestion charge to fail as the number of cars may not decrease. Therefore, a good pricing scheme is needed before implementing congestion pricing.

In London, cordons tolls are placed in areas where congestion increases during peak hours. The drivers pay the price through TAGS system or automatic vehicle deduction system. Introduction of such a system will have many advantages — it will improve the mobility in urban areas, save time, encourage people to use public transport, lower air pollution, give wider economic benefits and raise revenue, which can be diverted for maintaining public transportation. However, the move is not bereft of challenges. There are also disadvantages like lack of advanced technology, especially in developing countries. Additionally, if there is no sufficient public transport it will cause over- crowding and may become tough to administer, which might result in increased instances of evasions.

The key to successful implementation of congestion charges is to get public acceptance for the policy. This can be created by making people aware of the benefits of reduced congestion. Rule- based systems for changing prices appear to be more popular than those requiring political discretion. Ancillary benefits, including reduced environmental impacts, can in some cases help in creating acceptance and take decision on how much to charge. Another matter of concern is the cost of implementing congestion pricing. Congestion charges potentially raise substantial amounts of revenue, but at the same time it is costly to run the system. Some studies have suggested revenue neutrality with respect to congestion charges, but emphasising revenue neutrality may reduce policy flexibility. Hence, getting public and political support becomes the key issue in the implementation of congestion charges.

Devika P V is a Research Intern at CPPR. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.

Friday, October 11, 2019

Powering Kerala’s Electric Vehicles

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By Jacob Thamarappally,

India is set to move further towards an automobile industry that is primarily electricity powered. The government has introduced certain initiatives in an effort to reduce the carbon footprint in India’s mobility scenario by 2030 and electric vehicles (EVs) are seen to be pivotal to these plans. With schemes like the National Electric Mobility Mission Plan (NEMMP) and the Faster Adoption and Manufacturing of Electric Vehicles (FAME), the government has set lofty targets that if realised would result in a significant increase in the number of EVs on roads in India. Currently, India is aiming for 30 per cent of all vehicles on the road to be electric by 2030. As reported by Autocar India, in the FY2019, the number of EV sales reached a total of 7,59,600 units. However, this is a small fraction of the more than 252 million registered vehicles on Indian roads as on 2017. And with an annual growth rate of 9.48 per cent (for 2016−17), this number is expected to be significantly larger in 2030, which would require a significant increase in the number of EVs from where it is now in the country. This increase would call for substantial development in both the country’s charging infrastructure and the nation's system for producing and delivering electricity. However, India is still heavily dependent on coal as its primary source of energy. According to the BP Energy Outlook 2019, despite some efforts from the government to promote renewable resources — a plan by the Ministry of New and Renewable Energy to install 175 GW of renewable energy by 2022 — India still would depend on coal for almost 50 per cent of its energy requirements. This blog will analyse the feasibility of EVs in India, in particular, the state of Kerala with a focus on the sourcing of the electricity required to power these vehicles.

The state of Kerala is at the forefront of the nation’s vision of an electric future. It is one of the seven states to be granted the first-mover advantage from the Centre’s push for EV regime in the Budget of 2019. The state government has also announced an ambitious target in its Electric Vehicle Policy — 1 million EVs on the road by 2022. A pilot fleet of 3000 buses, 100 ferries, two lakh two-wheelers, 50,000 three-wheelers and 1000 goods carriers are planned as a part of this. The state generates power from four sources — hydel (2107.96 MW), thermal (718.46 MW), wind (59.27 MW) and solar power (75.42 MW). Hydel and thermal are a considerable majority. Furthermore, the state is heavily dependent on its monsoons to sustain the hydropower base in the state, and a shortage in rainfall usually creates a power crisis. The electricity demand of the state is provided through power generation from Kerala State Electricity Board Ltd (KSEB), Central Generation Station (CGS), Independent Power Producers and Traders. However, according to an economic review conducted by the State Planning Board, domestically produced electricity accounts for only 51.18 per cent of the total electricity consumed in the state. The development of the power grid at the regional and national level has allowed states like Kerala to purchase large amounts of power from sources and producers outside the state. At present, KSEB imports around 57 million units of power in order to meet the daily demand. Out of this, the state gets 29 million units from the centre, and the rest is brought through long, medium and short- term power purchases. As a result of these purchases, the state has suffered a total loss of almost `9000 crore.

The growth rate of energy consumption in the state has also been steadily increasing every year. The growth rate from 2015−16 to 2016−17 was 5.84 per cent, with the average power consumption in the state reaching almost 64 million units. As per the 19 th Electric Power Survey by the Central Electric Authority, over the next 10 years, there will be an increase of 74 per cent in the commercial consumption and a 60 per cent increase in the domestic consumption of energy in the state. However, if the state were even to come closer to its ambitious target of 1 million EVs by 2022, the extra demand for power would be considerable. These numbers do not take into account the rise in demand that the widespread adoption of EVs would cause.

An average electric car consumes approximately 0.20 kWh/Km. Most of the Indian drivers drive their vehicles for about 10,000−15,000 kilometres per year. This means that just a single EV would require around 3000 kWh of electricity per year. When we consider the scale of Kerala’s proposed electric policy, the total energy required would seem to be an astronomical number. However, this number might be a little deceptive. On average in 2017, the state of Kerala consumed 64 million kWh of electricity daily. This means that in a year, they would consume 23,360 million kWh of electricity. In the best-case scenario, if the state realises its dream of 1 million electric vehicles, all these vehicles would require 3000 million kWh. This would mean that EVs may take up only 12.84 per cent of the state’s total energy requirements. This number, while not insignificant, is by no means a death blow to the industry, as some people make it out to be. For instance, the extra energy required for EVs would only be half of the energy currently consumed for industrial use (around 20 per cent). This is also not taking into account the fact that the total consumption of electricity will definitely increase by 2022 and similarly, technological advancements in future shall result in more efficient electric vehicles. This will also reduce the amount of power consumed by EVs in relation to the total power consumed. Furthermore, under the Renewable Purchase Obligations (RPO), as part of the Tariff Policy issued by the Ministry of Power, it is mandatory for the states to purchase a certain portion of their electricity needs from solar power plants. This share will keep on increasing on a yearly basis, and will help to provide the excess power required by the EVs.

Examples of this phenomenon materialising can already be seen in more developed countries where EVs are more widespread. For instance, according to a report by Mckinsey, in Germany, EV growth is not likely to cause large increases in power demand through 2030. As per the report, even with a 25 per cent EV penetration rate, it will only cause a 5 per cent increase in the total amount of electricity consumed, and almost all this new-build capacity will involve renewables including wind and solar power. The bulk of electricity demand will still be from industries and homes. For example, for a typical residential feeder circuit of 150 homes at a 25 per cent EV penetration rate, analysis has indicated that the load would increase only by around 30 per cent. This means at the peak charging times (usually around midnight) the increase in the load would be 30 per cent. While this may seem significant, when we consider the aggregate increase in demand over both residential and non-residential areas (where there are fewer EVs), the effects are not as consequential. Similarly, time of use tariffs can give incentive to EV owners to charge their vehicles after midnight rather than during the peak hours.

Finally, we must also consider the fact that EVs in the future are going to be more advanced than the ones currently in the market. Battery costs are already on the decline and the range of newer models is getting larger and larger. Similarly, initiatives are being taken on both the state and national level to promote the use of renewable sources of energy. With 40 ongoing projects, generating more than 20 MW of energy, KSEB is taking initial steps to promote the use of solar power in the state. Much needed power reforms are also set to be implemented on a national level with the ‘One nation, one grid’ initiative announced by the finance minister during the 2019 Budget. This scheme, if implemented, would bring electricity to a wider ambit of the population and help increase the popularity of EVs in the more rural areas of the country.

Once Kerala is able to build ubiquitous charging infrastructure equipped with fast charging facilities and increase the share of renewable energy sources, the EV industry will really take off. And despite global fuel prices expected to decline in the future, the price of electricity is still much lower than the equivalent amount of fuel. Not to mention it is much better for the environment, especially with a greater share of electricity coming from renewable resources.

Jacob Thamarappally is a Research Intern at CPPR. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.


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