PREAMBLE
Battery-as-a-service (BaaS) enables users to lease batteries independently of the vehicle, eliminating the need for an upfront battery and vehicle purchase. The battery would be leased from a provider of charging infrastructure under the BaaS model, and every time it would need to be recharged, it would be swapped out at a station. Similar to “software as a service,” “banking as a service,” and “infrastructure as a service,” which have been popular in other industries, the
aforementioned leasing is provided as a service.
Customers who use the battery-as-a-service concept can rent batteries separately from automobiles. An electric vehicle can be purchased for less upfront by leasing the battery. With the help of this new service, EVs with shorter ranges may solve their battery-swapping needs. Additionally, compared to a charging station, battery switching takes less time and requires less infrastructure, making this concept almost practical and encouraging further use.
To enhance the charging networks, particularly in metropolitan areas, a new business model called “battery as a service” will be created. The battery-as-a-service strategy gives the consumer power to agree to pay only the rental costs for the batteries and to acquire just the vehicle shell entirely. This also makes it possible for the consumer to swap out the battery with a new one inside the same automobile body.
A battery swapping policy will be introduced and interoperability standards will be created in consideration of the limited space in metropolitan areas for the installation of charging stations at scale. India set aside US$ 1.3 billion in 2019 to encourage EVs by providing direct incentives to purchasers. This amount has been utilized to provide incentives for battery changing and powering up battery initiatives over these few years.
Advantages of BaaS Model
Battery as a Service (BaaS) is a brand-new and cutting-edge method of powering your cars, gadgets, and machinery. It is a battery delivery business that is based on subscriptions. Customers who sign up for this subscription-based business have access to batteries for their cars. Customers have the option of purchasing a one-time package or a monthly subscription. Customers that want to utilize battery-powered gadgets but don’t want the inconvenience of buying and maintaining them would benefit greatly from BaaS.
According to the customer perspective, BaaS is an asset-light, low-cost, and quick-on-its-feet approach that enables the customer to switch the battery quickly, as compared to a stationary charging station where charging batteries takes time and requires an expensive charging infrastructure. Due to the BaaS model, the initial prices of EVs may decrease dramatically; for example, the expenses for two-wheelers may easily decrease by up to 20%. The battery-swapping
approach will make charging simple and nearly quick by allowing riders to trade in a dead battery for one that has been completely charged at predetermined locations.
The electric two-wheeler and electric three-wheeler markets make up the majority of the electric vehicle (EV) market in India. Therefore, it is obvious that the switching strategy would focus on the electric three-wheeler and two-wheeler fleet segments initially. At the moment, detachable batteries are offered by four of the top five electric two-wheeler manufacturers. In contrast to swappable batteries, removable batteries cannot be recharged at home and cannot be quickly changed through a subscription service.
BaaS providers can also grow their networks by working with organizations that have extensive networks of agents and charging infrastructure, similar to how banks use business correspondents to expand their banking services to the unbanked and underbanked. This is because they do not need to set up infrastructure on their own.
BaaS works effectively to improve business efficiency and bottom line with several benefits for businesses that also include:
- Cost Savings: By using BaaS, organizations may save their overall expenditures for batteries. This is because they may benefit from bulk prices and economies of scale. The service provider frequently takes care of all maintenance and replacement expenditures as well, significantly cutting prices.
- Efficiency Boost: BaaS may also assist firms in increasing their efficiency. This is because the ideal service provider would optimize the battery system for unique requirements. As a consequence, the batteries will operate more effectively and last longer.
- Greater Sustainability: Making the move to BaaS will help increase the sustainability of the company. This is due to the large number of green choices that are available, including solar-powered batteries. Some suppliers will even assist with carbon emissions offset.
- Last but not least, BaaS may offer the flexibility and scalability needed to expand a business.
As it is simple to swap from a drained to a fully charged battery during lengthy travels, the BaaS will show to lessen difficulties with range anxiety. In addition to this, it will reduce the upfront expenses of an EV and provide customers with a wider range of alternatives thanks to the subscription-based business models used by various businesses. For residents in urban areas, the BaaS will provide better charging options for those who do not have access to charging stations at their homes. It will also develop a market for battery reuse and recycling, which will lessen e-waste.
BaaS Ecosystem
It is commonly known that the BaaS model tackles the shortage of EV charging infrastructure in the nation as well as aiding in the quicker adoption of EV technology. The following parties make up a typical BaaS ecosystem:\
- Manufacturers of batteries and electric vehicles (EVs): The BaaS ecosystem is strongly reliant on the production of batteries (including research and development for advancements in battery technology). The next link in the chain is EV producers, who depend on battery producers to power their EVs before selling them to consumers.
- Network operators: In the form of BaaS, a network operator enables and offers clients charging solutions (charging stations/battery swapping infrastructure) for their EVs. The network operator is the main participant in the BaaS paradigm. There has been an increase in network operators in India, even on a small scale, who have installed charging and battery swapping stations at locations like gas stations or even standalone stations.
- Providers of operation and maintenance (O&M) services: At times, it might not be possible for the network operator to manage EV charging or battery swapping stations by themselves. In light of this, the network operators may make agreements with O&M service providers who are involved in creating and managing EV charging infrastructure.
Regardless of the BaaS model chosen, agreements with O&Ms are necessary to guarantee the smooth operation and upkeep of charging/swapping stations on behalf of the network operator as well as to offer auxiliary services. - Customers: For the BaaS model to operate well, customers must accept it. These clients might be institutional or retail customers like fleet operators, large logistics firms, or delivery services. Mobile applications that assist in providing information about the closest battery swapping station, the availability of fully charged batteries, and other crucial data points important for the growth and evolution of this industry also help to facilitate the efficient onboarding and role of customers in this ecosystem.
BaaS – A Game Changer for Electric Vehicles
The BaaS concept provides internal combustion cars with virtually the same convenience and efficiency that a petrol pump does. The immediate influence the battery swapping services can have on EV adoption has been recognized by the Indian Government. The main goal of the battery-as-a-service (BaaS) ownership model for electric vehicles (EVs) is to separate the pricey battery from the car. Instead, BaaS offers an EV infrastructure solution that allows subscribers to pay a subscription fee in exchange for the option to replace a dead battery with a fully charged one at a
swap station.
Due to the widespread use of electric cars in nations like Norway, Sweden, and the Netherlands, Europe continues to be the primary market for battery-as-a-service models. With rising investments in the electric car industry, Asia Pacific is anticipated to see a rise in adoption over the next years. China is pushing hard for EV adoption, which is also anticipated to fuel demand for the battery-as-a-service business model throughout the projection period.
The BaaS model is ideally positioned to offer a viable solution when just a few of the major obstacles to EV adoption are taken into account. These crucial problems, as well as BaaS’s remedies, comprise:
- Lowering concerns about range anxiety since it is possible to quickly switch from a discharged to a fully charged battery.
- Lowering the initial cost of an EV and giving consumers more flexibility through the use of subscription batteries.
- Providing a charging option for inner city residences without access to at-home plug-in charge points.
Regardless of the advantages the BaaS model offers, some obstacles must be removed for it to be a sustainable and successful model:
- Overcoming restrictions caused by EV manufacturers’ lack of battery standardization. Battery swap stations cannot be scaled up without a large amount of battery standardization, and each swap station would only support a certain make or model of automobile. It is improbable that a single manufacturer would have the interest or resources necessary to
create, provide, and maintain the necessary infrastructure and technologies.
- A possible lack of significance because of BaaS model’s savings benefit is reduced by the general falling upfront cost of EVs.
- The continued availability of the raw ingredients required to make batteries. Because there may be a lack of significant domestic raw material suppliers, the geopolitical relations with the nations that supply the raw minerals may have led to manufacturing difficulties.
- Consumer choice lock-in for alternative EV charging models, which might make it more difficult for BaaS to enter the market.
- Battery ownership uncertainty, especially when the BaaS EV is sold again, as well as consumer participation and faith in the BaaS business.
The BaaS model offers an alternative to EV charge points, and more research is needed by the federal government and local governments to fully quantify the benefits and challenges of the BaaS model and its role alongside EV charge points, rather than moving forward with the large-scale EV charging infrastructure rollout as the only solution to EV charging.
Challenges for BaaS
The battery-as-a-service (BaaS) framework’s implementation does appear straightforward and tackles several significant EV issues, such as cost, range anxiety, gaps in the charging infrastructure, and charge times. However, many obstacles must be overcome for this aim to be successful before it can be utilized more extensively.
While the BaaS model has several advantages for promoting the use of electric vehicles, it also has certain inherent drawbacks, notably due to the non-standardization of EVs and their battery needs on the market today. An analogy with mobile phone replaceable batteries, which might be changed to increase the life of the cell phone battery, may be made in this context. However, because battery specs differ from brand to brand, a user couldn’t theoretically put a battery from Brand A in a mobile phone from Brand B. Similarly, if a user of an EV registers with a specific network provider
to exchange batteries.
BaaS is more practical for smaller EVs, thus industry players and innovation teams will need to come up with ways to use it for heavier EVs like trucks and other large vehicles. One of the early problems with EVs has been safety worries, especially in light of fire accidents and EVs catching fire due to product problems. Thus, to make BaaS a reliable and secure choice, research and innovation in battery-related technologies are needed. Given the scarcity of fundamental resources and, if they are not scarce, then the cost, readiness, and local availability, the availability of raw
materials and components for battery manufacture presents another problem. There is now a significant reliance on imports.
All of these factors affect the cost of manufacturing and investing, which serves as a barrier to entry for battery manufacturers and serves as the foundation of the BaaS ecosystem.
Future of BaaS model in India
The government’s battery swapping policy, which aims to provide guidance on interoperability standards, is probably going to be improved greatly in terms of both clarity and incentives. According to sources, the new policy will be unveiled in the coming months. It would bring the ideas of battery leasing and BaaS for 2- and 3-wheelers, as well as aid with problems like high upfront prices and worries about battery range.
The policy will encourage several developments, including the standardization of vehicle components to adapt to such interoperability standards and the establishment of a greater network of battery swapping stations across the country with less real estate, even though the mechanics of interoperable standards actually being achieved are still to be seen. When compared to charging, battery changing has three major benefits: it saves time, saves space, and saves money, so long as each swappable battery is being utilized. Additionally, battery switching gives sustainable and creative business models, such “Battery as a Service,” an equal playing field.
The Union Government will introduce a Battery Swapping Policy and interoperability standards to improve efficiency in the EV ecosystem, according to the Hon’ble Finance Minister in her Budget Speech of 2022–23. This is due to the limited space in urban areas for the installation of charging stations at scale.
A thorough pre-draft stakeholder discussion was also undertaken by NITI with a wide range of stakeholders, including battery swapping operators, battery manufacturers, automakers, financial institutions, CSOs, think tanks, and other professionals. The BaaS model is one of the most effective solutions to address the many issues facing the EV industry today. Any new concept in the EV sector requires plans that are not just adaptable but also responsive. The availability of charging stations at various locations is necessary for a more seamless business service since it will reduce traffic and improve interoperability. When evaluating the future EV charging infrastructure, BaaS should not be disregarded since it might be viewed as a disruptive business model in the EV industry.
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