Coal, Renewables Would Complement Each Other For Meeting India’s Increasing Energy Demand
Coal, renewables would complement each other for meeting India’s increasing energy demand midst the mounting thrust on renewable energy, India has witnessed record coal production in the past four years. The statistic assumes importance in the middle of a popular rhetoric to write off coal. But it’s imperative to understand the core tenets of India’s energy needs before jumping the gun. Power generation in India grew at 7 per cent between 2010 and 2017 with a healthy influence on the gross domestic product growth rate. While electricity generation touched 1,200 billion units from an installed capacity of 344 gigawatt (GW), India’s per capita energy consumption continues to be one of the lowest in the world.
Sample this: With 1.33 billion population, India’s per capita electricity consumption until 2017 was 1,122 kilowatt-hour (Kwh). In contrast, China, with 1.39 billion population records per capita electricity consumption of around 4,500 Kwh, nearly four times higher. And, if we look at matured economies such as the US, the per capita electricity consumption is about 14,000 Kwh with the population of about 0.32 billion, which means that consumption volumes are almost 10 folds higher even as the beneficiaries are just about one-fourth our size. Most essentially India’s urban penetration is nearly half the size of China. The purpose of these comparisons is to drive home a simple point. India still has an exponential growth potential for power. According to industry projections, power demand in India is likely to touch 1,600 billion units by 2022 and spiral up to 2,100 billion units over the next decade. In view of this buoyant outlook, the obvious question is how will we meet this demand? Would coal-based generation continue to fuel the Indian economy or would renewables take over? For more than a century, coal-fired thermal plants have been the backbone of the power sector in India. Coal currently comprises of more than half (57 percent or 194 GW) of the total installed capacity. It also contributes to more than three-fourths (77 percent) of the country’s power needs. In comparison, renewable sources today have the second-largest installed base of about 20 percent (69GW) generating about 8 percent of the power.
But India’s ambitious plans to whip by its renewables capacity by more than 2.5 times up to 175 GW by 2022 have some inherent challenges. We all know that expansion would be powered by solar and wind energy, however, fluctuations on seasonal and weather patterns are common to both of them and day-night fluctuations are challenges which at times are difficult to predict. As the share of solar energy in the total energy portfolio increases, greater will be the impact of daily generation of solar energy, which would require seamless grid-load transition between renewables and conventional energy. The inconsistency in energy availability from renewable sources stresses the need for grid stability and conventional sources provide a buffer against the fluctuations, thereby, stabilising the grid. Thus, it is evident that coal-based generation would continue to play a role in the growth story of electricity generation in India along with renewables and thereby enjoy healthy demand.
In this regard, the Central Electricity Authority released a National Electricity Plan for Generation in January 2018 that further validates the above observations. The plan does not provide targets for electricity generation mix but it does provide insights to the new capacity under development in the country. It projects coal-based capacity to be around 38 percent (240 GW) and renewables about 44 percent (275 GW) by 2027. Even though there is increasing thrust on achieving the target of installed capacity of 175 GW of renewables sources by year 2022, many industry experts believe that the aforesaid target would be achieved somewhere around the year 2025 and therefore, adding another 100 GW by the year 2027 would be difficult. Even if India achieves the proposed plan by year 2027, it would continue to depend on the coal-based capacity of 240 GW for almost two-third of its power needs. Whereas renewables would cater to about one-fourth of the power demand, again pointing to the fact that coal-based generation is here to stay.
Having examined the energy mix of India it is worthwhile to look at the likely demand-supply situation of thermal coal and the position of imports. The demand for thermal coal has increased by nearly one-third over the past five years and reached about 850 million tons in the financial year 2017-18 with the power sector as the key consumer contributing nearly 65 percent to 70 percent of the overall demand. The positive outlook for demand is likely to continue and would cross one billion tons by the year 2023 and would continue to grow, albeit, at a lower rate. Coal India in its vision document for the year 2030 has predicted a range of thermal coal demand of 1,150 million tons to 1,750 million tons.
Despite the healthy outlook, some inherent challenges over movement of coal persist. While much of the coal is confined to the eastern part of the country, power gencos are spread all over. Worse, many of these power stations are neither close to coal mines nor have preferential access to imported coal through deep draft ports. Therefore, it is important for the government to keep the new capacity of coal-fired power stations closer to the mines and augment the existing routes. States distant from the mining belt might prefer wheeling power over moving coal to save on logistics costs. To conclude, both coal and renewables would complement each other to meet India’s growing demand of power in the next decade. While it may be difficult to predict the coal scenario after 10 years, one thing is certain, that the coal industry would continue to thrive as long as it remains cost competitive. Thus, it is advisable to monitor the major developments every two to three years and re-assess the energy mix dynamics. It is of utmost importance for coal mining players to be lowest on the cost curve among its competitors. Technology is going to be a key enabler in this regard. Players in this sector need to focus on how they disrupt themselves before somebody else.
Vinay Prakash is responsible for mining, integrated coal management and bunkering business at Adani Enterprises. He is also the chairman of ASSOCHAM’s National Council on coal, member of India – Indonesia CEOs Forum, and chairman of the Standing Committee on Coal & Industry in FIMI.
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