India’s pledge to become carbon-neutral by 2070 and its national energy plan seem to fall further apart. The latest National Electricity Plan (NEP) envisages the installed capacity of coal-based thermal power to rise by 23% from the current level by 2022-23. However, it is becoming increasingly clear that an even higher reliance on the “dirty fuel” than NEP may be required to avert a serious energy crisis in the country.
The peaking and subsequent phasing out of coal-fired power may get delayed. This because of a sharper-than-expected rise in domestic demand for power, and the realisation that renewable capacity addition could lag the tall targets. There are also concerns about the huge intermittency and variability of renewable-based generation. Efficient integration of the RE capacities to the grid to meet the peak power demand is also a challenge.
The country has been jolted by the two major power crises in the last two years – October 2021 and April-May 2023 – as it struggled to meet peak power demand in many parts of the country and outages occurred. The government has already aired its concerns about the unravelling energy situation, and indicated that coal-based capacity addition may have to be scaled up.
Union Power Minister R K Singh has recently said the country might add 25-30 giga watt (GW) coal-based thermal electricity, in addition to 50 GW under works to keep pace with the recent sharp rise in the county’s power demand, and the projections for the future. The minister added that the government hasn’t formulated any plan to phase out old coal-based thermal power plants, and cited the Central Electricity Authority’s (CEA) statement in January that, “no retirement or re-purposing of coal-based power stations will be done before 2030.”
In fact, this is not a situation unique to India. “Capital investment in the energy sector continues to flow into fossil fuels, which are responsible for 75%of global greenhouse gas emissions,” the International Monetary Fund said in its report.
As such, India’s capacity addition in the renewable energy sector is lagging the tall targets set. Raising RE capacity to 500 giga watt (GW) by 2030 from the current level of 172 GW requires annual addition of 45 GW. The current RE capacity pace is much slower – just 13-GW of new RE capacity was set up in FY23.
“India was targeting that 50% of energy will come from non-fossil fuels (by now). But that may not happen soon,” said Pramod Agarwal,ex-Chairman and Managing Director of Coal India.
To phase out coal-fired plants will require substantial private investments, notes the IMF in its latest financial stability report. It also highlighted that investments made in the renewable energy in the emerging and developing economies lags behind those done in the area of fossil fuels. “Estimates suggest that a target ratio of about 4:1 for renewable over fossil fuel investment is required globally throughout this decade,” the report said.
“Today we are consuming about 1 billion tonne of coal. Projections are that by 2030, this will rise to 1.3-1.4 billion tonne,” said Partha S Bhattacharya, also a former Chairman of Coal India. “Renewable will grow faster but coal-based power will also have to grow because India will have to catch up in per capita consumption,” he said (see chart).
India’s per capita power consumption is just about 1,300 units which is one-third of the world average, one-fifth of China, and up to one-tenth to one-twentieth of advance countries.
“India is a country where RE is not a substitution but it is complimentary to coal,” Bhattacharya said. “(Coal) will continue till 2040 or so. RE will reach some 1,000 GW and will then taper off.”
The NEP-2022-2032 envisages the average plant load factor (PLF) of installed coal capacity of 235.1 GW at 58.4% in 2026-27, and that of 259.6 GW such capacity to be about 58.7% in 2031-32.
Plant load factor is a measure of knowing the average capacity utilization of a thermal power unit. It is the measure of the total generation by a power plant compared to the maximum output it could produce.
“Though the share of coal-based generation may continue to be high, operation of coal-based plants in a more flexible mode, unlike as base load stations earlier, needs to be emphasised in the wake of huge intermittency and variability of renewable-based generation,” the plan noted.
The NEP also targets at increasing the share of non-fossil based capacity to 57.4% by 2026-27 and further to 68.4% by the end of 2031-32 from around 42.5% at present. However, experts believe that this is a stiff target.
Further, challenges remain in the renewable energy sectors. With the COP28 lined up to take place next month, targets will remain focused at reducing carbon emissions. However, the need is to focus on challenges more than that on setting targets, analysts feel.
IMF sees prices of renewable energy rising as the advance economies accelerate their energy transition. “The supply of critical metals and minerals is projected to fall short of demand, putting upward pressure on their prices and further raising the costs of renewable energy,” it said.
The report also highlighted that since 2000, the emerging and developing nations have had a share of three-fourth of the world’s 9,000 coal-fired power plants and about 90% of the global capital tied in coal-fired power plants.
Out of this 90%, however, only 20% of the current coal-fired generation is covered by agreements among countries. IMF has categorized India as an “established coal-user economy.”
Among other challenges for RE are the installation cost, storage system, and transmission. “Installation of 500-GW capacity for non-fossil is a stiff target to achieve till 2030 as that means 50-GW addition every year. And last year the addition was only of 13 GW,” Agarwal said.
Ashok Khurana, Director General of Association of Power Producers, sees a challenge developing for distribution companies and their finances.“If the RE capacity that is coming up operates at PLF below 45%, it would jack up the cost of power.” He fears that discoms may not be able to afford (pass on the cost of) such RE power, given the cost-reflective tariffs to consumers.
Analysts believe that private investments can help in building a stronger foundation for RE sources and combat the above-mentioned challenges. However, this would require a lot of project re-structuring.
“In the initial set of deployments, there should be financing support (for RE investors) and more PPP (public-private partnership) structures are required,” said Vikas Gaba, National Head- Power at KPMG.