<b>Vandana Gombar:</b> Electric vehicles, batteries & renewable energy

Sales of electric vehicles have been rising, even though the absolute numbers are somewhat underwhelming

First the numbers: global sales of electric vehicles - both battery electric vehicles and plug-in hybrid electric vehicles - were at 288,500 units in 2014, about 40 per cent higher than 2013 levels, according to Bloomberg New Energy Finance research. The total sales of hybrid vehicles such as the Toyota Prius (without the plug-in facility) totalled 1.6 million units.

The big markets for electric vehicles are in the US, Europe, China and Japan. About 121,000 electric vehicles were sold in the US last year while the estimated sales in Europe were 100,000 units. Norway stands out in the region: over 13 per cent of passenger vehicle sales in 2014 were of the electric variety, the highest in Europe.

In China, the electric vehicle sector has been identified as a strategic emerging industry, which is to be promoted. Sales of electric vehicles in China exceeded 35,000 units in 2014 - some 247 per cent higher than the year before.

The battery that provides the juice for the electric vehicle is getting more attention as energy storage cost declines and technology progresses to offer interesting alternatives. These batteries have applications in the renewable energy sector too. Last year, Tesla Motors co-founder Elon Musk announced his intention to invest $5 billion to set up the world's largest battery factory in Nevada, which is slated to start production in 2016. The so-called gigafactory is projected to shave 30 per cent off the cost of a lithium-ion battery. Japan's Panasonic is a partner.

The price of storage (lithium-ion) used in fully electric vehicles was about $500 a kWh last year. It was much higher for plug-in hybrid vehicles, at $825 a kWh. Besides technology companies, a number of universities are working on reducing the cost while increasing the efficiency of storage using different materials, such as molten metal and lithium-sulphur. We expect prices to continue to fall.

There are some car makers working on fuel-cell powered vehicles. Toyota started selling the "Mirai" fuel-cell car - it travels 300 miles with a hydrogen tank that can be refilled in less than five minutes - in Japan in December. These vehicles will require supporting hydrogen refuelling infrastructure. Musk has dismissed fuel cells as "fool cells."

Cheaper storage vastly improves the business case for renewables. For an individual residential or commercial unit consumer, it also reduces the reliance on grid power, as stored power can be used when the sun is not shining on the rooftop solar panels, for instance. SolarCity, the rooftop solar installer also backed by Musk, is already offering rooftop systems with Tesla-made batteries.

BYD, the Chinese car maker partially owned by Warren Buffett's Berkshire Hathaway, is one of the companies active in the storage products market. It expects to double deliveries of storage products this year amid rising global demand.

There are some countries that are mandating storage installations or at least incentivising them. The Ministry of Economy, Trade and Industry in Japan, for instance, provides grants for energy storage applications. The South Korean government was considering the option of offering 5.5 times the agreed per-unit tariff for renewable energy, if it is delivered during peak hours. California wants to add 1.3 gigawatts of storage systems by 2020.

There isn't too much activity in the Indian electric car or storage market. The government has earmarked some Rs 75 crore in the current year for FAME - an acronym for faster adoption and manufacturing of electric vehicles. There is also a target of putting five million electric and hybrid vehicles per year on the road by 2020 under a National Electric Mobility Mission Plan.

Tesla is reportedly keen to start selling in India, but the high import duty and lack of customer incentives present significant barriers. Mahindra & Mahindra, which owns the Reva brand of cars, projects electric vehicles to account for 2-5 per cent of the market in the next few years. The question is, how far should an energy deficit country promote electric vehicles?

Vandana Gombar is editor, global policy for Bloomberg New Energy Finance