EVCA: How it will affect the demand for EVs in Singapore

Singapore has taken a significant step in its national agenda to transition to clean energy, with the commencement of the Electric Vehicles Charging Act 2022 (EVCA) on Dec 8. This law forms the missing puzzle piece, which has remained a key limiting factor in local conversion to electric mobility. 

Above it all, the EVCA symbolises a clear mandate for the nation's EV goals and strategy. For the longest time since initial efforts focused on incentivising the acceptance of EVs, it seems demand — going forward — will be driven by systemic readiness. 

Quite undeniably, the EVCA will help to build up local EV charging infrastructure by regulating and enabling a network of safe and reliable charging services. Put together with the extension of the EV Early Adoption Incentive (EEAI) scheme till 2025, EV uptake in Singapore appears poised for success.

As we approach an inflection point, here's a question to ponder: Is the EVCA the first necessary step for Singapore to achieve its EV goals? 

Sustaining demand for EVs

Since 2021, the EEAI has helped to gather EV traction by entitling those who choose to switch to an EV to rebates off the Additional Registration Fee (ARF). According to LTA, EVs made up almost 12 per cent of newly registered vehicles locally in 2022. This number tripled from that in 2021. 

But the EEAI, being an incentive scheme, cannot be continued forever simply because it has cost implications for the government's budget. Already we are seeing signs of us being weaned off: Starting 2024, the maximum amount of rebate one can get from the EEAI will be reduced from $20,000 to $15,000.

Based on a survey conducted by S&P Global Mobility in May 2023, affordability is the main reason for why consumers are holding back on electrification. This is despite the fact that EVs are slowly but surely closing the gap on price parity with their internal combustion engine counterparts. 

How will we sustain EV adoption rates on local grounds with scaled down financial support?

Let's first consider where Singapore stands in the global journey to vehicle electrification. China and Norway are no doubt at the forefront, having invested in infrastructure and technology early on. Both countries were also quick to push out government incentives, and tax credits or rebates to encourage EV adoption. Others like Canada, Japan, and the United Kingdom have policies mandating 100 per cent EV sales.

These stories tell us that we are on the right track, albeit slow to effecting the necessary enablers. 

The EVCA is the first enduring enabler in Singapore's experience with EV adoption. From hereon, the Act will function as a pillar in maintaining and boosting local demand for EVs. 

Paving the way for EV charging infrastructure

With the EVCA, we will see an increase in the availability of shared or public EV charging points, islandwide. 

The Act requires all new buildings and existing ones that undergo works from Dec 8, 2023, involving an "increase in the existing gross floor area (GFA) by at least 50 per cent" to provide charging points for electric cars and motorcycles. This provision also applies to developments that request increases in their electrical load to over 280 kilo-volt ampere (kVA), after the EVCA has come into force.

These will bolster LTA's plan to make every HDB township EV-ready by 2025. On completion, almost 2,000 housing board car parks will be equipped with EV charging lots.

What this means for Singaporeans is more accessible chargers that will normalise EV charging on-the-go. This will ease much of the present inconvenience and frustration that comes with owning and driving an EV.

Now that one of the biggest challenges impeding the local uptake of EVs is being addressed, vehicle owners should feel more inclined to make the switch. 

Or so it seems. There are still the dollars and cents that can fuel or cool sentiments to convert. 

Unavoidable tradeoffs

The arrival of the EVCA brings with it a slew of regulatory costs for EV charger suppliers, owners, and operators. These include licensing and registration fees, which could vary depending on the charger profile (i.e. high or low power rating), size of the charger fleet, and charger lifespan. 

It's natural to think that costs can be kept low by limiting the number of chargers registered, for instance. Interestingly, that isn't the case. According to LTA's calculations based on a charger lifespan of seven years, a large-sized public EV charging operator 10 times that of its competitor with the same profile of chargers, actually incurs $43 less in projected regulatory costs per charger each year.

This is possible because of economies of scale. In this context, having more chargers helps to bring down the fixed costs since each charger can charge up multiple EVs in a day. Think of it as consumers paying for the regulatory fees whenever they pay for their EV charging sessions. The more the number of consumers who use an EV charger, the lesser the charger will cost in regulatory fees. 

And here, we have two not-so-obvious implications that come hand in hand: An EV charger market dominated by the big players and cost transfer to the end user.

As we have seen, the economies of scale brought about by the regulatory costs naturally prices smaller-sized charger operators out of the playing field. Unless they find a way to effectively diffuse costs, sustaining the fixed costs amidst competition from the large operators will be a tough battle to win.

Another anticipatory reaction to these regulatory costs is for operators to pass them on to the end user. This would in turn translate into more expensive EV charging services, which could make EVs feel even more unaffordable than they already do to the masses. 

In spite of these cost-driven implications, the EVCA is imperative to setting up the required charging infrastructure to boost the next phase of EV adoption in Singapore. In a way, these could be viewed as trade-offs for allowing our government greater locus of control over the safety, reliability, and rate of advancement of EV charging technology. 

A pertinent step forward

The implementation of the EVCA is the single most important step, at this point in time, for Singapore to make progress with EVs. Even if it comes with immediate cost implications, it's pertinent because it puts in place the infrastructure that enables charging availability and accessibility. 

Government interventions can influence demand, but there is limited utility to such support external to the workings of the free market. They are also not sustainable. Ultimately, efforts pumped into the demand side of the equation have to be balanced with supply factors, and this is precisely what the EVCA sets out to do. 

The Act may have come later than would have been ideal and much against our will, but it is a good start that will see Singapore through to 2040 and beyond. 

This article was first published in sgCarMart.

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