India's green dilemma: Struggle for renewables as China powers up with coal

The world’s biggest climate conference in Dubai has commenced, featuring India and China, two of the world's three largest emitters, expected to play pivotal roles in negotiations on the extent of the climate pendulum’s swing to combat global warming.

However, India faces a dilemma, having focused aggressively on renewable growth before the pandemic, with limited success, sacrificing thermal generation. In contrast, China, during the same period, added record capacities in both coal-fired generators and renewable installations to power its economy.

It was only recently that New Delhi realised clean energy alone couldn’t propel its ambitions of Aatmanirbharta and becoming a global manufacturing hub. This prompted a U-turn this month, with Minister of Power and Renewable Energy R K Singh convening a meeting with top senior power executives pushing for thermal generation.

“We are not compromising on power availability for our growth, even if it means adding coal-based capacity,” Singh said.

This course correction follows India’s struggles to meet a 240 gigawatt (Gw) peak load, expected to rise to 335 Gw by 2035, one-third of China’s 1,290 Gw peak demand in 2022.

India’s major obstacle to doubling its economy by 2030 or maintaining a 7-8 per cent growth rate is the lack of baseload generation capacity to handle sudden spikes in electricity use during peak hours, according to experts.

Currently, coal-fired plants are doing the heavy lifting, operating at 65 per cent, rating agency CRISIL said. Renewables contribute a mere 11-12 per cent of generation.

“India’s continued reliance on coal arises from uncertainties in demand growth and the high costs of battery technology, which do not address our energy security considerations,” said Karthik Ganesan, director of research coordination at the Council on Energy, Environment and Water.

Saurabh Kumar, vice-president, India, for the Global Energy Alliance for People and Planet, echoed this sentiment, stating, “Renewables can never be baseload power. They are available only for a few hours a day, and as a country, we have under-invested in storage.”

Poor planning by Indian policymakers, coupled with unbridled optimism for renewables, caught India unawares, industry officials noted.

The significance of coal to the country’s growth only became apparent to New Delhi this month. As recent as May, the final draft of the National Electricity Policy had proposed a freeze on new coal-fired generators.

The Institute for Energy Economics and Financial Analysis has attributed the slowdown in coal capacity additions to the flattening of electricity demand growth for two consecutive years (0.5 per cent in 2019-20 and minus 0.3 per cent in 2020-21). However, Indian officials failed to anticipate the post-pandemic explosion in energy-intensive growth and neglected signs of abnormal heat events, rising temperatures, and an increased need for air conditioning.

The question now is the cost of this course correction for the country, both in terms of setting up thermal plants at a rapid pace to meet record electricity demand, and internationally at the 28th meeting of the Conference of the Parties (COP28).

India will face challenges explaining a renewed focus on thermal energy, especially when the US and the European Union have plans to deny private funding to coal-fired generators, and the Group of Twenty declaration advocates phasing down coal.

“India’s surging energy demands, coupled with a commitment to climate change mitigation, demand a comprehensive and thoughtful strategy prioritising energy security and emissions reduction,” said Amit Jain, chief executive officer and country manager of ENGIE India.

Industry officials predict that India may add 17 Gw of coal-fired capacity by April 2025, with 14 Gw expected in the next financial year. This is a challenging task considering India has added less than 10 Gw annually since 2017, according to the Global Energy Monitor. Capacity additions averaged 19.7 Gw annually in the 2013-16 period before enthusiasm for renewables doused investor interest in thermal plants. However, renewable additions have also been disappointing, with a 47 per cent decline in solar installations from January to September, dropping to 5.6 Gw from 10.5 Gw a year earlier, according to Mercom India. Uncertainty due to domestic procurement mandates and tightening rules on local manufacturing has left solar developers hesitant about installations, industry officials claim.

Achieving the 500 Gw renewable energy target will require a significant policy acceleration, warns Lauri Myllyvirta, lead analyst for the Finnish think tank Centre for Research on Energy and Clean Air.

China, the world’s largest developer of renewable capacity, continued to add coal-fired capacity, adding six times more than India from 2017 to 2023, and started building 50 Gw of coal power capacity in 2022. New coal-fired installations in China totalled 238GW in the seven years ending July 2023 compared to India’s 39 Gw, according to the Global Energy Monitor.

Solar capacity additions in China this year are expected to reach 200 Gw, twice that of 2022 and seven times more than coal-fired capacity additions, according to CREA. In contrast, India is looking at 10-12 Gw, nearly flat from a year earlier.

“As solutions like energy storage gain size and scale, the share of renewable power will certainly exceed that from fossil resources in the coming years,” predicts Rohit Bajaj, executive director at the Indian Energy Exchange.

However, Kumar highlights that for battery investments to be commercially viable, tariffs must be reduced from the current Rs 10/unit to Rs 2-3. Pratik Agarwal, director of Serentica Renewables, adds that rich countries can take larger steps to bring down battery costs to sub $100 per kilowatt hour, enabling true round-the-clock renewables to penetrate the grid and eliminate the need for more coal and gas.

As the world converges at COP28 to chart the path towards a sustainable future, India’s strategy of balancing thermal power expansion with net-zero objectives will be under scrutiny. The consequences of new coal facilities also complicate India’s efforts to shed the label of hosting some of the world's most polluted cities.