Coal Emerges as Epic Loser as India’s Energy Future Shifts to Renewables
Coal is shaping up as an epic loser in India’s energy future, even with the country on track to double its electricity demand over the next two decades.
“The main reason coal may battle to fuel India’s future energy needs is that it’s simply becoming too expensive relative to renewable energy alternatives such as wind and solar,” Reuters reports. “In recent months, power supply auctions have shown that renewables can be offered at less than three rupees (4¢ U.S.) per kilowatt-hour, a tariff that coal-fired generators have difficulty matching.” And there is “zero chance that new coal generators can produce electricity at rates competitive to renewables, given higher capital and operating costs.”
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The only way coal-fired generation makes financial sense is if a company like private generator Tata Power buys a plant that is already under construction, but hasn’t been able to negotiate a high enough power purchase price to operate at a profit. Those plants “are effectively distressed assets” that Tata can acquire “at a discount steep enough to make them viable at the electricity prices currently being offered,” the news agency notes.
But Rajit Desai, Tata’s head of engineering, procurement and construction, told a conference earlier this month the company isn’t planning to develop any new coal plants.
Reuters cites data from Global Coal Plant Tracker to illustrate the larger trend. In January, India had 220 gigawatts of coal capacity in operation and another 36.12 GW under construction, but had seen 491 GW cancelled in the last eight years. “The government’s National Electricity Plan assumes that 94 GW of new coal-fired capacity will be added between the 2017/18 and the 2026/27 fiscal years,” notes commodities columnist Clyde Russell. “But with only 22 GW currently permitted, the pipeline of new plants would appear to be considerably lower than what the government is forecasting.”
This at a time when banks and insurers are becoming increasingly nervous about new coal ventures. “This is largely because the risk that new coal plants are unviable is rising, with 40.1 GW of Indian coal plants currently assessed as stranded assets,” Russell writes, citing research by the Institute for Energy Economics and Financial Analysis.
The resulting challenge for India will be to integrate renewables into the grid, with enough battery or pumped hydro storage to keep power supplies stable. “But coal’s share of generation is likely to slip, and power companies will have to do more to prepare for the increasingly likelihood that renewable energies are going to provide most of the new capacity in coming years.”