Rise in electricity demand may lead to further growth in India’s coal consumption, said a report released on Wednesday by think tank Carbon Tracker and Council on Energy, Environment and Water. “Indian fossil fuel demand for power generation has plateaued for now. This is not a certainty of a peak since various factors are at play,” the report said. “The sluggish growth in the demand for fossil fuels in the power sector has contributed to the plateauing but it must be recognised that this is an economy where latent demand for electricity is still high.”

India’s electricity market has a structural shortage in supply. Latent electric demand is that which is automatically seen whenever supply grows. Additionally, the expected rise in electric demand during India’s economic recovery after two waves of Covid and previous slowdown may give another lifeline of growth to coal consumption. “When demand surges again as the economy recovers, or when latent demand has to be met, there is likely to be an increase in coal demand as well, at least while cost of renewables plus storage does not become cheaper than the variable cost of generating coal-based power.”

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A new high in India’s coal consumption is more likely to occur in the absence of unexpectedly low battery storage costs, the report said. The Centre has announced policies relying on another fossil fuel, natural gas, to act as a bridge in sectors such as industry and transport, but gas-fired power plants continue to suffer with low usage levels.

“India has already begun auctions for solar-plus-storage and round-the-clock renewables generation. These bids are designed to increase competition while driving down the prices of renewable electricity without intermittency challenges,” the report added.

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