Economy

In post-Covid-19 times, renewable energy to face stiff competition from fossil fuels

Pratim Ranjan Bose Kolkata | Updated on April 28, 2020 Published on April 28, 2020

Conventional energy-rich economies are even relaxing environmental restrictions

The lessons learnt by countries using significant amounts of renewable energy (RE) are important for India, which is set to announce a bailout package for the power sector shortly.

Faced with the herculean task of restarting and reviving their economies, many major countries are going backwards on their promises to promote RE. Some energy-rich economies are even relaxing environmental restrictions.

Coal mining and coal-power are getting renewed support in countries where it is a prominent source of energy or export revenue.

Most of the bailout packages do not have much reference to electricity or fossil fuel sector, expect South Korea where coal-power is the single largest contributor (45 per cent) in the generation mix.

Before Covid-19, Korea had announced a plan to reduce coal-mix in generation to 36 per cent by 2030. The share of renewables was proposed to move up from 6 per cent to 20 per cent. Some coal plants which were in the pipeline were converted to gas-based plants.

Following the onset of Covid-19, Korean banks extended an emergency loan of $825 million to Doosan Heavy Industries & Construction Co. Environmental groups say the company earns 80 per cent of its revenue from the coal-power segment. The company was in bad shape before the pandemic.

Other countries have gone for cash support, but took indirect measures to support fossil fuel sectors in which they are strong.

No tax relief for RE

According to The Guardian, “The fossil fuel industry, which already benefits from a $5-trillion-a-year subsidy, according to the IMF, has had the biggest wins during the coronavirus pandemic in the US and Canada.”

Three US States ― South Dakota, Kentucky and West Virginia ― passed laws criminalising “fossil fuel protests”. “Solar and wind power businesses did not get the access to tax credits they had sought under the package,” said Climate Home News.

Renewables, including large hydro, contribute 17.5 per cent to the utility-scale generation in the US. Natural gas (38.4 per cent) is now the leading sector. Coal (23.5 per cent) is pushed to a distant second.

In Canada, the Trudeau administration has an environmental slant. But that did not stop Alberta from offering tax relief to its tar-sand extraction industry. The economic needs blew away all resistance by environmental groups against the XL pipeline project to transport tar-sand from Canada to the US.

Some countries have taken a clear anti-renewables stance. Brazil indefinitely postponed the RE auctions. South Africa’s State-owned power distribution monopoly Escom said it would cut down on its wind power purchase plan. Coal is the dominant fuel in South Africa.

Support for coal

The support for coal is most pronounced in countries like China and Australia, among others. According to Global Energy Monitor, from March 1 to March 18, 2020, China approved 7,960-megawatt (MW) of new capacity. This was more than the 6,310 MW of new capacity approved in the full year 2019.

“The increase may signal a move by government officials to use new coal plants as a means to boost the country's domestic economy after the slowdown from Covid-19,” said the wiki page.

Meanwhile, Australia is pushing for expansion of coal mines to prevent job loss.

Australian Resources Minister Keith Pitt said the expansion of the Acland thermal coal mine in Queensland, was “even more” important now the coronavirus pandemic is hammering the economy, says Climate Home News.

Europe for RE?

The ground is not open for fossil fuel as some European nations led by Germany may bat for the renewables sector.

Europe saw a sharp rise in the share of renewables in the generation mix due to stronger wind, better sunshine and reduced industrial and commercial demand in the January-March quarter,

For the first time, renewables met more than half (52 per cent) of the country’s electricity demand in the March quarter, against 44 per cent in the same period last year. The sector enjoys feed-in preference in Germany.

It is not known though if the sector benefitted out of bumper generation at the wrong time. According to one report in ‘Energy Live News’, on April 5 (Sunday), British homes were paid to use electricity, as wind and solar generation peaked during day time.

Indian scene

In India, the renewable sector, including large hydro, accounted for 15.6 per cent of the generation in January, which is a lean season for hydro. Solar, wind, small hydro, biomass ― officially referred as RE in India ― contributed 9.11 per cent, up from 8.55 per cent in the same period last year.

Currently, the renewable purchase obligation (RPO) varies from state to state for distribution utilities. The Electricity (Amendment) Bill, 2020, proposes to harmonise the standard and put up a steeper target.

The proposal came at a time when many or most state governments, starting with Punjab, are demanding relaxation in the RPO obligation. Though RE comes cheaper on a per unit basis, it creates a techno-economic problem for the base coal-based power.

A recent experiment by NTPC suggests that new plants in central and private sectors can run at 40-45 per cent load factor (availability); old plants, mostly under state governments, contributing one-third of capacity, will find it difficult to run below 55 per cent PLF. Also, lower the PLF, higher the generation cost and tariff.

At a time when demand is down and industry PLF is below 55 per cent, RPO can lead to idling of plants, which has a huge economic cost.

Published on April 28, 2020
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