India won’t kick its coal habit so easily

Subir Roy | Updated on September 02, 2020 Published on September 02, 2020

Companies are gearing up to embrace renewable energy. But with imports and mine auctions still in swing, the shift will face issues

India has traditionally considered itself lucky to have been endowed with abundant coal reserves, which it has sought to use to meet its energy needs through large coal-fired power plants. Even as this is considered an ongoing story by official agencies, the power plants are making a momentous shift.

The impetus for change has come not from within India but outside. Global financiers and multilateral agencies are under increasing pressure from stakeholders to shun fossil fuels and embrace clean energy, and have been refashioning their investment policies. Since money talks like nothing else does, Indian energy producers are rapidly changing track and falling in line. Tata Power has stated this explicitly. Foreign lenders are refusing to fund thermal capacities even as they make available large funds for renewable energy.

Focus on renewables

The change is reflected by JSW Energy. It had earlier planned to become a 10 GW company in three-five years with a mix of thermal and renewable energy. But the new goal is to achieve this target entirely with renewable energy.

Adani Enterprises was the first private power producer to announce a significant shift to renewable energy. Group chief Gautam Adani said in January that the energy vertical of the group would allocate 70 per cent of its capex budget for clean energy and energy-efficient systems. The new target set for the group is 25 GW capacity — and perhaps more importantly, carbon neutrality — by 2025.

India’s largest power producer, public sector NTPC, has also set for itself similar twin goals. Twelve is an important number for the company — it first ventured into renewable energy in 2012. And in another 12 years from now, by 2032, it wants to more than double its capacity to 130 GW. Most importantly, 30 per cent of this will have non-fossil feedstock.

Public sector NHPC has just awarded a 2 GW solar power tender at a super low rate of ₹2.55 per unit (kWh), fixed flat for 25 years! Those who won the tender have behind them financiers like SoftBank of Japan, Temasek of Singapore and Brookfield of Canada.

The way ground realities are changing has made the Institute for Energy Economics and Financial Analysis (IEEFA) ask dramatically whether there will be anyone around to still fund a new coal power plant in India. This is because renewable energy is both cheaper and cleaner.

While those taking individual investment decisions will be influenced by the former, those tasked with having to make the balance sheet for the country will find the scales tilted by the latter, which will include the health cost of carbon emission and global warming. Reflecting this reality, in 2019-20 renewable energy delivered 9.39 GW of new generating capacity, which was two-third of the total addition.

A remarkable change in energy policy has been signalled. India’s national electricity plan of 2018 envisaged 70 GW of new coal-fired power plants, installed by 2026-27 with $70 billion in investment. On the other hand, Prime Minister Narendra Modi has outlined a new vision — ‘One Sun, one world, one grid’. It foresaw a single globally-connected electricity grid driven by the ever-lower cost of renewable energy.

Renewable energy, mainly wind and solar, cannot be cost-effectively stored in scale. It gets over this problem by connecting to an international grid that helps a country overcome the mismatch between peak demand and peak output. When daylight enables India to produce excess power, it is able to export via the global grid power to countries which have to meet peak evening demand.

Coal still in play

But that is a distant vision. The present scenario is more prosaic and some current actions decidedly questionable. In an attempt to end the monopoly of the public sector in the mining of coal for commercial sale (not own use), the government is auctioning 40 coal mines for which private companies (even foreign ones) can bid. Modi described the change as bringing coal out of “decades of lockdown”.

But the Jharkhand government, where several of the mines to be auctioned are located, has moved the Supreme Court, arguing that it will as a result lose vital forest cover and displace tribal communities. It seems the way the auctions are designed will also mean low revenues for coal-mining States. The Centre’s argument? The policy is aimed at increasing coal availability rather than maximising government revenues.

India continues to import coal, even though its supply of renewable energy is rising rapidly; in 2019-20, coal imports actually rose. How successful the auctions will be is unknown. The deadline for submitting technical bids had to be extended.

Critically, the tender terms do not require bidders to have any prior experience in coal mining, raising fears that it will attract fly-by-night operators. The IEEFA said India, which seeks to improve the efficiency and productivity of its mining sector, hardly needs “rogue operators” who will “inevitably” take “short cuts” which will have “severe consequences”.

Thus, though renewable energy is having a good day in India, it will be difficult for the country to kick the addiction to coal and the journey ahead will be full of ups and downs.

The writer is a senior journalist

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Published on September 02, 2020
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