Is sun setting on Indian coal as renewables knock on the door?

Posted on 12 Feb 2018

Coal India (CIL) has come up with a bolt from the blue. The coal major in a recent study has said that no new coal mines need to be allocated or auctioned beyond what is already there in the pipeline.

CIL has reportedly put the onus on this to the “lack of demand” from power sector.

CIL’s recommendation to pull the plug on new coal mines comes at a juncture when Ministry of Coal is holding discussions with various key players to auction coal mines for commercial mining with an expected involvement of the private sector as well.

The study also comes at a time when there are around 175GW of coal-based thermal power projects said to be in various stages of planning across the country.

In its research for which it is seeking feedback from the public, CIL has advocated for some corrective measures such as discontinuation of costly mines and correcting the prices of its grades downwards.

Earlier the Central Electricity Authority (CEA), a power sector coordinator of the central government, had also mooted the idea that no coal-based capacity addition was required immediately. As per CEA, apart from the 50GW of coal-based projects in various stages of construction, additional capacity was not needed.

The requirement for energy, it stated, could be met through other sources such as gas, hydro, nuclear and renewable energy sources. The addition of 175GW of solar and wind will enable India to meet its clean energy capacity.

India had ratified the Paris agreement on climate change which mandates it to cut down its carbon dioxide emissions to keep global average temperatures rising above 1.5°C.

India is responsible for around 7% of the world’s carbon dioxide emissions. To reduce this carbon emission intensity the country needs to switch from coal-based power generation to renewable energy-based power generation.

This means that by 2030 at least 40% of the India’s installed electricity capacity should comprise of non-fossil fuels, and for this the country needs to produce 100GW from solar, 60 GW from wind, 10GW from biomass, and so on.

With such renewable energy capacity addition India perhaps can even surpass the pledges it made in Paris. Thus, India can move towards a golden age and realize the dream, felt noted climate and energy activist and campaigner at Green Peace India Nandikesh Sivalingam. “With India’s renewable energy sector taking off, it is now possible to reduce poverty, improve living standards and provide power for all,” he said in a media interview earlier.

It is interesting to note that in April last year the government was forced to cut down CIL’s production target for the financial year from 660 mt to 600 mt due to a lukewarm demand for the fuel from thermal power plants. It may also be pertinent to note that the increment in production proposed for FY 2019 is merely 5% to 630mt.

“Even such an assumption on the part of the government could be a short-lived one,” a leading energy consultant told Indoen. He believed the decision to shift to renewable energy as an alternative is a welcome move given the increase in prices of imported coal and the quality concerns of coal supplied by CIL.

“It will also reduce environmental pollution besides health risks associated therewith. Solar and wind power are the only options to meet India’s rising energy demand for entities that go without power for a major part of the year.”

With solar tariffs likely to fall below Rs 2 per unit (kWh), demand for coal is not expected to go up in a conventional pattern. The competitiveness of renewable energy will soon pose a strong challenge to coal’s hegemony in the power sector.

The union budget for 2018-19 tabled in the Parliament recently announced a package of Rs 5,020 crore for expansion of various renewable energy technologies. An estimated 15.62GW of new renewable energy capacity is likely to be commissioned in FY 2019. The targeted capacity addition is higher by over 7% as against the capacity addition target of FY 2018.

Whereas the budget has retained the capacity addition in wind sector at 4000 MW, it plans to increase the capacity addition in solar sector from 1,000MW in FY 2018 to 11,000MW in FY 2019. It has allocated Rs 2045 crore for capacity addition in the solar sector. The budget has also allocated Rs 600 crore for development of 3,000 circuit kilometres of transmission lines across eight states which have significant renewable energy deposits. The green energy corridors would be used to supply electricity generated from renewable sources.

India this year achieved a milestone by completing 20GW of installed solar capacity. It took eight years to reach this benchmark figure but acceleration is on the cards with the experience gained from this exercise. It is reliably estimated that the share of non-fossil fuel in India’s energy mix will increase to about 55% by 2027, up from about current 30%.

With the outcry in the world for usage of coal and the government’s commitment towards international treaties, renewable energy sources are likely to emerge as replacements to coal in future. Another important area CIL study throws light on is battery storage cost. The cost has come down significantly from over $1,000 per kWh to $250 per kWh over last couple of years. As technology evolves cost is expected come further down to around $50 per kWh by 2030. CIL believes this could have a major impact on coal-fired plants in future.

If someone thinks renewables are gearing up to take over the place of coal, there is reason in it. CIL’s study is perhaps just a premonition that the black fuel cannot be on the driver’s seat forever.