Build thermal capacity as per CEA estimates and, by 2030, accelerate renewable energy production & storage capacity
By Deepak Gupta
India has committed in the 2015 Paris Agreement to reduce GHG emissions intensity by 33-35% below 2005 levels, and achieve 40% of installed electric power capacity from non-fossil sources by 2030. In this context at the UN General Assembly in 2019 we announced a target of 450 GW of renewable energy (RE) also generally understood to be achieved by 2030. Recent storage tenders and reducing prices of solar and batteries have led to a voice to urgently move towards a low-carbon economy. Simultaneously, however, the target for coal production at 1.5 billion tonnes, which while set in 2015, has been reinforced recently to be achieved by 2024. Privatisation of coal mining and recent auctions have given a meaningful thrust to this. These convey contradictory signals and raise the following questions: Are our commitments feasible? Are the targets achievable, even desirable? Is there a contradiction between the two? Are we moving towards a huge demand-supply mismatch? We need to make a sober assessment of constraints mixing ambition with feasibility and look at a more realistic pathway. We should note the recently finalised optimal electricity mix study of the Central Electricity Authority (CEA), which estimated 430 GW non-hydro renewables (280 GW solar + 140 GW wind + 10 GW bio); thermal capacity at 266 GW thus making percentage of non-fossil fuel (RE + hydro + nuclear) in installed capacity by 2030 at 64%, much higher than India’s Paris commitment. Let us examine the constraints, contradictions and possible steps.
The targeted coal production of 1.5 billion tonnes, even by 2030, would mean thermal generation capacity could double over the current 223 GW. In that case, even with targeted RE capacity, we will not achieve our emissions intensity Paris commitment; this target would require additional production of 150 million tonnes coal each year. This is simply not possible, nor even desirable. Can a global green champion announce doubling its coal production in five years? The 2020 CEA study estimates that in 2030 the coal requirement will be only 892 million tonnes, but which, significantly, will have a PLF of only about 59%. What then should be our coal target by 2030?
There are problems with RE, too. In 2014, the solar target was increased to 100 GW by 2022. But solar deployment has seen policy challenges both from Centre and states—continuous changes in duty structure; renegotiation of PPAs; curtailment of solar power; extremely delayed payments in some states; policy flip-flops on open access and net metering; delays by state agencies and regulators; land possession difficulties; transmission road blocks (even in solar parks). It is an unexplained contradiction where enthusiasm to have bids has been matched by roadblocks on deployment, affecting both foreign and domestic investment. We reached 35.7 GW by 2019. While the government argues the target will be overachieved, it is possible we may reach 60-70 GW by end-2022 which will be a remarkable achievement. To reach 280 GW by 2030, however, requiring addition of average annual capacity of 30 GW seems impossible, as also wind capacity estimate of 140 GW by 2030.
There are other, greater constraints. Our capacity for cell manufacture is 3 GW, though workable capacity is actually around 2. Our cells are more expensive and less efficient. There is little upgrade in a rapidly changing world of technology. Our module capacity is around 10 GW. In spite of this, and a lot of effort to have only domestic modules projects, 90% of cells and 80% modules are imported largely from China or Chinese companies elsewhere. Levying of safeguard/customs duties has not made much difference in import quantities, though projects have been delayed and costs increased. Wafer imports are 100% as we don’t manufacture ingots/wafers. For every GW (average cost in 2019 of Rs 5,000 crore) we deploy, more than half goes to China. Deployment of huge annual quantities, and a somewhat ruthless drive to lower tariff, has mortgaged our solar plan to China, a worry expressed for years. Continuation of this strategy would lead to a huge import bill and put our energy security at risk. With the latest developments with respect to China, this is no longer possible or desirable, and there will be imposition of customs duty and other restrictions. This will lead to increased tariffs and supply bottlenecks, making capacity increases difficult. Incidentally, solar with storage requires even greater solar capacity deployed, because part of it would go for storage.
Let us now look at our storage constraints. Much has been made of the recent solar storage tenders at a tariff cheaper than new thermal. Hydro pump storage is limited in quantity and there will be issue of costs. The other project is solar-wind hybrid with batteries installed after a few years. Neither intends to meet peak power demand or even the base load. These are not the solutions for large quantities in the near future. Policy cannot be made basis wrong assumptions. Forecasts suggest lowering of battery costs by 50% by 2030. It makes sense to wait before we go for large-scale storage.
This brings us to the vexed problem of domestic manufacturing. We have seen the dismal position in solar. We also do not manufacture lithium-ion batteries. Lithium and other raw materials are in short supply, and China has moved to take control of sources. We haven’t got any! How will we build solar with storage? And in huge quantities? We cannot mortgage this also to China? Dynamic ‘atmanirbharta’ requires us to do two things. First, at the least plan to make 5 GW of ingot/wafer manufacturing capacity urgently, even by way of meeting entire capital costs, if necessary, to keep end-prices reasonable. This would only be the cost of 5-6 Rafale jets, and as important and critical for our security. We may require electricity supply at about Rs 3 per unit, and dedicated power plants. The risk of technology obsolescence would need to be factored in. Indigenous manufacturing should be flexible enough to absorb shifts in tech space and maintain competitive edge in global markets. Policy, fiscal and financial support prescriptions should aim at creating globally competitive industry.
Second, develop batteries suitable for extreme Indian weather conditions but globally benchmarked; this demands a mission approach, getting our best people and institutions together, properly funded and tasked to get a battery out in the next three years. Till that is done, or there are other global discoveries that we can get into India, large-scale solar or RE storage seems out of the question. The same will apply for large-scale electric mobility.
We must also simultaneously launch a hydrogen mission—target heavy vehicle mobility through fuel cells. It may become a solution for RE storage, too. But that is another story.
This brings us to the supply-demand mismatch. In the last two decades, we have been overestimating demand and increasing supply. Our demand projections for 2030 are wildly high, more so because of the medium-term impact of Covid-19—PLF in 2018-19 was 60.30, declining to 56.08 in 2019-20 and hovering around 50% with the Covid-19 impact. This is suboptimal. Demand will not grow such that we should more than double our existing surplus generating capacity. Supply must match demand. Even the latest CEA review of ‘optimal’ mix talks of thermal PLF of 59% in 2030! This is inefficient and costly. Thermal PLF must be taken to over 80%.
The suggested pathway
1. Build thermal capacity as per CEA estimates and quickly. None after 2030. Retire inefficient plants. Plan for miner rehabilitation.
2. Accelerate RE after 2030 with storage. Aim for 10 GW solar and 5 GW wind annually.
3. Develop 5-10 GW ingot/wafer manufacturing capacity urgently and diversify import sources even at some extra cost.
4. Develop a battery for Indian conditions in three years; full battery manufacturing in India in five years.
5. Revisit manner of solar generation. Prioritise decentralised and solar agriculture.
6. Plan for hydrogen economy with pilot projects and dedicated highways for long and heavy haul traffic.
7. Put a strong energy demand management system into place with a much stronger energy efficiency and conservation movement.
The latter are separate stories and the starting point of the last is compulsory green buildings, so important, but an area that we hear little about.
The author is former secretary, MNRE