Power crisis not one of capacity but delayed coal deliveries to generators

India's climate plans since November reveal slow progress towards meeting renewables target and an exponential expansion of thermal generation in the face of a power crisis

India’s jugalbandhi with coal and clean energy is coming unstuck, neither achieving adequate renewable generation nor ensuring sufficient coal-fired power in the quest to become a $5-trillion economy.

Six months have elapsed since Prime Minister Narendra Modi announced an ambitious climate agenda for India at COP26 at Glasgow. The net zero emissions target by 2070 is a distant one, but there are nearer-term plans to meet 50 per cent of energy demand with renewables by 2030 by increasing capacity to 450 Gw.

A cursory look at the balance sheet of India’s climate progress since November reveals ponderous progress towards meeting the renewables target even as the country is scrambling to expand coal-fired generation in the face of a power crisis.

“The situation is triggered by an unprecedented heatwave where electricity consumption has sharply increased by around 30 per cent,’’ said Barnik Chitran Maitra, managing partner and CEO, Arthur D Little, India. “During this kind of sharp peak in electricity demand, India will have to depend on coal for power generation because renewables cannot help the peak in the base demand.”

India has added 6.8 Gw of renewables capacity since November, well below an annual 35-40 Gw required to meet a decade-end target. Renewables has a 27 per cent share of India’s 400 Gw capacity but produces just 10 per cent of its electricity because of its inherent inefficiencies. Coal, by contrast, has a 50 per cent share of capacity but produces over 70 per cent of generation. Gas and hydro-power account for the rest.

The future for renewables is thwarted further by detrimental tariff and localisation policies that kicked in this April. A 40 per cent tax on modules and 25 per cent on cells, along with a mandate for the use of inefficient domestic panels, has riled investors.

The government has failed to provide a balance between renewables and conventional power in the face of rising power demand. It takes over twice as much renewable capacity to replace an equivalent amount of coal generation because of the inherently intermittent nature of solar and wind generation. Conventional power capacity, the mainstay of the economy, rose by only 1,875 Mw.

The problem is creating storage capacity for renewables. “Solar and wind can be baseload alternatives, but right now they are mixed in the grid with thermal power,’’ Ritu Lal, vice-president, Amplus Solar, a solar developer, said. “The intermittency of solar is taken care of by thermal power, but if the grid is predominantly solar you need certain storage capacities.” Storage is still expensive but, as Lal pointed out, India does not have the luxury of waiting till it becomes cheaper.

The basic truth is, as Hetal Gandhi, director, Crisil Research, said, “Coal capacity additions will continue to remain critical to India’s energy sufficiency plans over the medium term.’’ India needs to add 45 Gw of coal-based capacities over the next decade to support rising peak demand, which is expected to go from 203 to 314 Gw by 2030. That requires quick ramp-up and ramp-down in generation, which is not achievable from renewables, she added.

The government said it plans to reduce the share of coal-fired capacity to 32 per cent by 2030. At Glasgow, it also promised to cut projected carbon emissions by 1 billion tonnes and reduce carbon intensity by 45 per cent by 2030.

Recent developments threaten those objectives. NTPC, India’s biggest generator, is adding 5 Gw of coal-fired units, 10 per cent of its total coal-fired capacity and the first such projects in six years. Imports will rise to 20 million tonnes this fiscal, and output at its mines will double to 26 million tonnes.
 

The government ordered private sector generators including those run by Tata and Adani to run plants at full capacity, promising higher tariffs to compensate for record coal prices. Delhi has also encouraged state governments to build coal-fired facilities, fully aware that a country’s emission goals are nothing but the sum of climate goals of individual states put together. Neither has the Modi administration consulted all states on its 2030 climate mitigation strategy.

Coal Minister Pralhad Joshi met private sector participants last week to revive discontinued coal mines with plans to convert 100 million tonnes of coal into synthesis gas (a fuel gas mixture of hydrogen, carbon monoxide, and carbon dioxide) by 2030, promoting technology that has been abandoned by most as expensive and polluting.

The political rebound in favour of coal is mystifying because India’s power crisis is not one of capacity but delayed coal deliveries to generators. “The management of coal in India seems to have gone wrong,” Maharashtra’s Energy Minister Nitin Raut told reporters. “Even if coal becomes available, rakes for its transportation are not available.’’

“Coal is all about logistics,’’ said Singapore-based coal consultant U L Sridhar, something the government is yet to understand after three power crises since 2014. The Railways, after four years of delays, plans to issue a tender soon for 100,000 freight wagons. New lines are also needed for new rakes to run, rather than cancel passenger trains for freight carriers to ply during crises.

Coal-based generators operated at 59 per cent utilisation last fiscal below historical highs of 80 per cent during the United Progressive Alliance’s administration, according to Crisil. Operating existing coal-based capacities at around 75 per cent may yield additional generation of 200-220 billion units of power.

The government is unsure about coal imports: the policy has ricocheted from former Coal Minister Piyush Goyal’s plans for nil thermal coal purchases to 4 per cent blen­ded imports in December to 10 per cent now.

Overseas coal purchases fell to a nine-year low in 2021 due to a jump in global prices, reflecting the price sensitivity of the Indian power market. Smart planning enables import and storage of coal when global rates are low especially for state utilities that owe generators over a trillion rupees.

Timing is critical to overseas purchases, and the government invariably gets it wrong. Power Minister R K Singh asked states last week to step up coal imports when the fuel trades were at a near record $380 a tonne, expensive for even European consumers let alone weak Indian utilities. The top-grade Australian coal benchmark has swung from $100 a tonne last May to over $420 in March.

On the oil front, the environment ministry gave the go-ahead for drilling in forest areas, an egregious amendment that impacts India’s dwindling forest cover. Finance Minister Nirmala Sitharaman increased allocations for the Ministry of Environment, Forest and Climate Change by a mere 6 per cent while cutting the budget for pollution control.

India presents a key test case for whether the emerging economies, which are expected to drive fossil fuel demand in the coming decades, choose instead to take a more rapid path to a lower-carbon future. As International Energy Agency Executive Director Fatih Birol said, “All roads to successful global clean energy transitions go via India.”