Has Pakistan kickstarted an EV revolution for the masses?
A 45% tariff cut for EV charging stations has the potential to radically alter the economics for mobility, especially two- and three-wheelers.
It is not every day that the Government of Pakistan announces policy measures that are future-oriented and have the potential to truly improve lives for ordinary citizens. But on January 15, Power Minister Awais Leghari made one of those announcements that at least has this author excited about what could come next in Pakistan.
It is no secret that Pakistanis have been exposed to major inflationary shocks in recent years, especially as they relate to the cost of energy in the country. These inflationary shocks reverberate through the entire economy, especially due to the rapid increase in the cost of mobility.
Electric vehicles offer a way out of this cycle for energy importers like Pakistan, primarily due to the fact that battery powered vehicles can store renewable energy produced by nature (primarily the sun) and convert it into clean, efficient kilometers on the road.
But the economics of EVs are still a bit skewed towards fossil fuel-powered vehicles, despite the fact that significant cost reductions have brought EVs to cost parity with ICE vehicles over the entire lifecycle of the product.
The skewed economics can be fixed through a variety of ways, such as the FAME subsidy program offered by the Government of India for the last few years. But Pakistan is cash-strapped and in an IMF program, so a major subsidy program like FAME is not possible for the foreseeable future.
This is where the government has thought of things in a creative manner by rolling out a new electricity pricing policy for charging stations. Here are the key parts of the announcement per Dawn:
Addressing a press conference, the power minister said that Prime Minister Shehbaz Sharif had decided to make EVs cheaper for the people.
“Charging station tariffs will decrease from Rs71.10 to Rs39.70,” he said, adding that this was an approximate tariff reduction of 45pc.
The power minister also said the permission to install charging stations would be given within 15 days.
“So, today, we made a decision — the prime minister held a meeting and decided that the tariff of Rs71.10 distribution companies used to bill charging stations will be reduced by approximately 45pc to Rs39.70,” he said, adding that by reducing electricity prices, people who own electric motorcycles and small cars would be able to access those charging stations more.
This policy move achieves four key things in one go:
It improves the economics for EVs by reducing the cost per kilometer of battery-powered vehicles.
It incentivizes new charging stations to be setup across the country, thereby creating supply for charging stations.
Given that charging infrastructure and tariffs are primarily a barrier to demand for households that do not have the space or capital to setup their own charging stations at home, this policy incentivizes EV adoption among ordinary households, the majority of whom rely on two-wheelers for their mobility needs.
It creates new demand for electricity from the grid, which is a critical need given the amount of excess capacity available on the grid (and stagnant electricity demand).
For now, this policy is just an announcement and the success of this move a year from now will be visible in places like Jodia Bazaar and Anarkali. If they start seeing EV motorcycles proliferate in these places, then Minister Leghari and his advisors can take a victory lap for kickstarting an EV revolution in Pakistan.