A Titanic crash: Coal to sink under renewable energy onslaught

Posted on 02 Feb 2018

Coal has ruled the Indian power sector for decades, but its reign is about to end?

With two-thirds of the present coal generation being more expensive than solar or wind generation, there are analysts and industry insiders who think the fossil fuel has run its full course.

Coal has been supplying around 70% of India’s total power needs, but a change is on the cards. Economics is tilting the other side of the coin changing the energy equation with renewable energy finding more favor as it has currently become cost effective compared to the coal-fired power plants.

The last two years witnessed renewable energy prices falling by 50%, making it a more viable option for the country’s power sector. Additionally, the prices are forecasted to fall further making it all the more attractive as against coal. Coal-powered energy on the other hand is showing no such movement.

“The cost of wind and solar is currently around 20% economical as against coal-fired generation’s average wholesale power price. Even in a competitive bidding renewable energy is finding its feet since 65% of the coal power generation is sold at a higher price,” an analyst with a leading energy consultancy told Indoen.

The initial breakthrough possibly came the previous year when renewable installations doubled their capacity and surpassed coal sector for the first time.

Industry sources have identified that operating costs of coal plants currently are more compared to the costs incurred in building and operating renewable projects. They say that if the situation continues on the same lines then there would be significant deployment of alternative energy capacities with several firms joining the fray.

The discussions these days are not just restricted to “is it economical to build new coal or new renewable” but also extends to “is it worth to continue operating existing coal plants or rather switch to building new renewables”.

It would be an understatement to say that India’s coal sector violates the country’s air pollution standards. With the government coming under intense pressure from various quarters due to environmental conditions primarily air pollution and consequent health hazards the Central Electrical Authority had proposed closing of around 50GW coal capacities by 2027.

As per a study done by Institute for Energy Economics and Financial Analysis, India is undergoing the same development as was the case with the United States, perhaps a century ago.

The country’s coal sector will find it increasingly tough to compete with renewable sector due to the price gap in near to medium terms. The report states that India’s wind and solar energy cost has come down to as low as $38 per megawatt over the last two years.

India’s power demand is expected to double in the next 10 years and it is interesting to find that the draft National Electricity Plan states that the rising demand for electricity should be met with 275GW of renewable energy capacity by the year 2027 without constructing any additional coal fired power plant than the projects that are already underway.

There are experts who think that coal-fired plants will soon become a thing of the past and the renewable energy that is becoming cheaper with each passing day will eventually win the game.

So are we seeing a passing of the torch? Will India’s power sector which is today face to face with the looming coal crash bank upon renewable for their business?

It will be interesting to watch how the industry takes a call on this.

(The author is a Delhi-based journalist. He can be reached at prasad.n@indoen.com)