Battery as a Service: Opportunities and Future Challenges

Transition to cleaner fuels and energy is seen to be the primary focus in global climate change dialogues, where switching to electric vehicles (EVs) is observed to be the mainstay in adoption and implementation globally. One major hurdle in adoption of EVs has been its high ownership cost, primarily due to the cost of the battery. A battery in an EV contributes to 30–40% of the cost of the vehicle, without which purchasing an EV becomes affordable to a broad base of customers (Normura Research India). Battery as a Service or BaaS offers the benefit of keeping the vehicle and the battery as two separate components offering flexibility and affordability. With a model like BaaS, customer doesn’t buy the battery, instead, just buys the vehicle, bringing the ownership cost down by 30–40%, which makes owning an EV almost at par with internal combustion engine (ICE) vehicles.

Types of BaaS models

There are two types of BaaS models:

• Fixed battery BaaS model

In this, the battery is fixed and not swappable. The customer leases the battery from a leasing company with a fixed subscription plan. The leasing company raises a bill to the customer as per the usage and the subscription plan opted by the customer.

• Battery swap BaaS model

In this, the customer subscribes to a battery swapping service with a battery swapping service provider (BSP). The BSPs provide the necessary infrastructure, battery maintenance and swapping services at battery swapping stations. Customer pays for the swapping service at the time of battery swapping.

Opportunities from BaaS

With BaaS, customers can enjoy flexibility with affordability on multiple fronts. First of all, the cost of ownership reduces considerably making it affordable to purchase an EV. Secondly, with BaaS customers can avail battery swapping services which relieves range anxiety issues and dependence on charging infrastructure. Battery swapping is known to reduce the downtime of an EV from 30 minutes to 5–10 minutes. Thirdly, with BaaS, customers don’t have to worry about battery replacement cost since it is owned and maintained by BSPs.

BaaS ecosystem fosters strategic partnerships, aiding competitive BaaS offerings, which may lead to better branding and profitability for institutions. BSPs can form alliances with battery manufacturers or original equipment manufacturers (OEMs) to service their customers. For space requirements and better coverage, possibilities can be explored for tie-ups with existing fuel stations to utilize the already existing infrastructure.

BaaS ensures safe recycling and disposal for end-of-life batteries as the battery is managed and maintained by the OEMs or BSPs, promoting circularity in battery. Such sustainable consumption adds to the brand value and instils customer loyalty contributing to the brand’s success.

Future challenges

Battery technology and efficiency have become the main differentiator between OEMs in the EV space. This leads to lack of interoperability due to no battery standardization measures, which seems to be a major challenge in future with BaaS.

With improvements in battery charging technology, fast charging is expected to improve considerably in the future due to which the difference in downtime is expected to reduce.

Maintaining a robust BaaS ecosystem requires managing the demand and supply of battery inventory, which requires surplus battery production to cater to high demands during peak loads. This will lead to high demand of critical minerals which will drive up a significant demand for them, leading to a demand-supply gap.

About T S Veeramani: T.S. Veeramani is a Consultant in the Transport and Urban Governance Division at The Energy and Resources Institute (TERI). A Wharton certified conservation consultant having over a decade of experience, specializing in building resilient, low carbon cities through ecosystem-based adaptation approaches for formulating inclusive, evidence-based, climate sensitive urban plans.