While the Indian coal sector is undergoing a crisis, it is also worth analysing the issues surrounding solar and other renewable energy sources.
This article is part of the series Comprehensive Energy Monitor : India and the World
According to the central electricity authority (CEA), 101 coal-based power plants with total capacity of about 121 GW (giga watts) had less than eight days’ stock of coal with 22 power plants with total capacity of over 27 GW had less than one day’s stock of coal on 24 October 2021. Out of the 101 plants with critically low coal stocks, two pithead plants had coal stock of less than five days (against normative stock of 15 days) and another three had coal stock for less than three days. Amongst non-pit head plants, 37 plants had coal stock for less than seven days and 49 plants had coal stock for less than four days (against normative stock of 20–25 days). Amongst non-pithead plants that were more than 1,500 kilometres (km) away from coal mines, two had stocks for less than nine days and eight had stocks for less than five days (against a normative stock of 30 days). What this indicates is that coal stocks in power plants accounting for over 70 percent of coal-based power generation capacity were in a critical or supercritical state on 24 October 2021.
Amongst the incidental reasons offered by power plants with critical coal stocks are that supply of coal was lower than expected. This could be because late monsoon rains affected both production of coal as well as the transport of coal. Other causes for low coal stocks in power plants include higher demand for domestic coal under the ‘self-reliance’ policy of the government that increased demand for domestic coal. The price arbitrage between domestic and internationally traded coal was significant enough to push demand for domestic coal even from power plants that generally relied on imported coal. Revival of the economy and the consequent increase in demand for power following the end of lockdowns are the other causes that explain the coal stock crisis. In July 2021, peak demand for power touched an all-time high of 200,570 MW exceeding the pre-COVID 19 peak demand (182,533 MW) by over 9 percent. Power demand has shown an increasing trend since the end of the first wave of the pandemic and has picked up again after a brief fall during the second wave of the pandemic.
Out of the 101 plants with critically low coal stocks, two pithead plants had coal stock of less than five days (against normative stock of 15 days) and another three had coal stock for less than three days.
The crisis in the coal sector predates the COVID‐19 pandemic but the epidemic amplified it. Coal‐fired power plants had to bear the brunt of the lock-down induced decline in electricity demand in 2020, with solar PV (photovoltaic) and other renewable energy (RE) sources retaining priority access to the grid, and gas‐fired power generation experiencing an uptick on the back of record low international LNG (liquid natural gas) prices in the spring and summer of 2020. The plant load factor (PLF) of thermal plants fell from a high of 64 percent in April 2019 to about 42 percent in April 2020. Increased cycling of thermal plants to accommodate variable RE generation of power tested technical minimum load factors. This was a real come down for thermal plants that enjoyed PLFs in the range of 75-80 percent in the early 2000s. Annual investment in coal in the power sector fell from a peak of US $28 billion in 2010 down to US $11 billion in 2019 and is projected to fall further in the coming decades. In January 2021, the government announced that public sector and private firms will invest INR 4 trillion in the coal sector in the current decade. According to the government, the coal sector would be the largest contributor to India’s US $5 trillion economy target. The expected investment in the coal sector may or may not materialise but if it does, it will still be much lower than peak investment made in 2010.
Another structural issue that was behind the coal stock crisis is the irrational exuberance over the ability of RE, particularly solar, to meet varying demand for electricity. The share of coal in power generation in India has remained at around 70 percent since the 1990s, notwithstanding the support offered to investments in RE. The tremendous growth in RE has tempered growth in coal capacity, but not prevented it. Between 2012 and 2021, RE capacity additions grew at an average of over 17 percent compared to about 7 percent of coal capacity additions. In the same period, thermal generation increased by over 7 percent and RE generation by about 13 percent. Electricity generation from RE displaced thermal generators but it has done little to defer the need for capacity from those generators due to low correlation between RE production and peak demand in India. According to detailed studies, RE in India avoids far less thermal capacity than RE in other regions in the world.
The expected investment in the coal sector may or may not materialise but if it does, it will still be much lower than peak investment made in 2010.
Under the current strategy of a dominant share for solar, the cost of CO2 (carbon dioxide) mitigation is found to be greater than or equal to estimates of the social cost of carbon (SCC). CO2 mitigation costs are found to be lower if India undergoes rapid urbanisation and its national demand profile becomes increasingly similar to that of Delhi’s and Mumbai’s. This is because Delhi’s and Mumbai’s demand profiles are better correlated with RE generation across all mixes and targets, resulting in more new conventional capacity avoided by RE and less curtailment. But in such a future, peak demand is estimated to be higher requiring an increase in new thermal generation capacity. Ironically, if India experiences a lower growth rate of demand for electricity, total CO2 emissions are lower, but costs of mitigating CO2 emissions are higher because of greater RE curtailment. Even at this lower demand, new coal and gas capacity is required to meet peak demand, because of the low-capacity value of wind and solar. Though there is ideological preference for solar amongst policymakers and the people, it is probably worthwhile to objectively analyse the appropriate composition of conventional and RE capacity for power generation and allocate financial and policy attention proportionally.
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