Does India need more coal power?

Can we really give up on fresh coal-based plants? And still meet the goal of 24x7 electricity for all? A number of connected issues have to be examined before coming to a conclusion

Of late, a view is being expressed that we no longer need any fresh addition to coal-based capacity other than those which are already in the pipeline. Several reasons are being cited in support of this argument.

First, unless we stop new coal-based stations, we will not be able to do our bit in meeting the Paris agreement target of limiting temperature rise to only 1.5 degrees centigrade by 2100 when compared to pre-industrial levels. Second, our coal-fired plants are operating at very low plant load factor (PLF) and we can generate additional power at a relatively low marginal cost. Third, we have a massive programme of having 450 GW of renewable capacity by 2030 and over the past few years, we have grown at the rate of about 25 per cent annually. Fourth, with the cost of batteries declining progressively, storage is already a viable option, which will help in attaining grid stability. Fifth, it is not only batteries but also green hydrogen, which may become a viable option by 2030 and will be able to provide long-term storage solutions. Sixth, coal-based developers will find it increasingly difficult to find lenders for their projects due to increasing abhorrence for coal.

While all these reasons sound compelling, can we really give up on fresh coal-based plants, over and above what is already under construction? And still meet the goal of 24x7 electricity for all? This question cannot be answered in isolation and a number of connected issues have to be examined before coming to a conclusion. Only some of the relevant issues are being mentioned. First, what is the demand for electricity that we are talking about in 2030? Various estimates are available and it ranges from 2,200 billion units (BUs) to 2,800 BUs depending upon the assumptions made. 

Second, what is going to be the shape of our load curve in 2030? Will it be the same as it is today where the peak demand will be at around 8pm or will it shift to sometime during the daylight hours (meaning at a time when solar generation is still available) as suggested in one of the reports of The Energy and Resources Institute. Third, can we really set up renewable capacity of 450 GW by 2030? Though our track record of adding to renewable capacity has been impressive over the last seven to eight years, there has been a slump during the last two years or so for various reasons. Fourth, though battery costs may have come down by 80 per cent approximately in the last decade or so, there is apprehension that further decrease in costs may no longer be so dramatic. Even at today’s battery prices, it is economically viable to have storage of approximately four hours only. Fifth, low PLF does not necessarily mean that we do not need any further fresh capacity. PLF is only the average use of the capacity of the generating station over the year. There could be certain hours of the 24-hour dispatch period where the plant may have to operate at more than 80 per cent of the load, albeit for a short period of time.

One will need to look into all these issues in detail before coming to a conclusion if we can do away with further addition to our coal-based capacity. Ideally, we can attach probabilities to each of these factors and then see if we are able to meet our demand, both in terms of energy and peak. In fact, one can have different combination of probabilities just to make sure that all possible outcomes are covered.

To add some flesh and blood to the arguments mentioned, one can see the generation mix report of the Central Electricity Authority, published in early 2020. This is a cost optimisation model that calculates the least cost option available to us based on the demand determined by the 19th Electric Power Survey (EPS). The 19th EPS estimates a demand of about 2,400 BUs with a peak demand of 340 GW in 2030. The report says that to meet our demand in 2030 in the least cost fashion, we need a total installed capacity of 817 GW, out of which 266 GW will be coal-based. We have about 200 GW of coal-based capacity today (March 2021), which means that another 66 GW needs to be added. In a separate report, the CEA also mentions that about 32 GW of coal- based plants (private sector share being only about 1.5 per cent) are under construction, leaving a gap of about 34 GW. Though the average PLF of the coal-based plants will be only 58 per cent (during monsoons it will be the lowest at 45 per cent), there will be certain times when we will need the full capacity of 266 GW. Incidentally, the requirement of 266 GW of coal-based capacity is the minimum assuming a battery cost of $75/kwh by 2030. In case battery costs are $100/kwh, we would need a larger coal-based capacity of 270 GW. If the cost of battery rises further to $125/kwh, the requirement will go up further to 280 GW.

In conclusion, it would be fantastic if we can do away with more coal-based plants other than the ones under construction. However, this can only happen after a thorough study clearly establishes that we can meet the demand for electricity without new coal-based plants. Prima facie, if we are to go by the CEA study, it might be somewhat premature to relegate additional coal-based plants to the background.

Kacker is former secretary, Govt of India, and Dasgupta, senior visiting fellow, ICRIER and former member, CEA. 

Views are personal