Why coal continues to play big role in India’s energy mix


India pushed for a change in the wording of the Glasgow Pact agreed at the COP26 meet to require a “phase down” and not total “phase out” of coal as an energy source. Although experts have said that “unabated coal” would have to stop by 2040 to keep global temperature rise by the end of this century to much below 2 degrees Celsius over the pre-industrial period, poorer countries argue that any bar on coal would make it more difficult for them to meet their development goals. But India did commit to reach ‘net zero’ emissions by 2070, for which the biggest reductions would need to come from coal. The use of the mineral is as widespread as it is cheap, which means that it remains a go-to resource around the world. Here’s what you need to know.

What’s Coal’s Share In India’s Energy Mix?

Coal makes up more than 50 per cent of India’s installed electricity generation capacity and the country also possesses the fourth-largest global reserves of the mineral. Cheap and abundant power is a key driver of economic growth and increasing the electricity coverage of the population has been a central goal of the government.

While India has committed to stepping up on renewables, setting up the infrastructure to maximise on clean energy requires vast investments, for which advanced nations are expected to help out developing countries, although they have been not so forthcoming in this regard, something that was highlighted again at the Glasgow COP26 meet.

In such circumstances, India and, indeed, the developing world, including China, have argued that it is unfair to push them to abandon coal when they still have to address the issue of pulling millions of people out of poverty. To that extent, experts note, India is looking to use its abundant coal stocks to ensure energy security. India’s dependence of coal means the country also imports sizeable chunks of it to meet its power needs.

Domestic electricity demand is predicted to double by 2040. India’s installed capacity at present is a little shy of 400GW, of which coal, or thermal power, makes up more than 200GW. PM Modi said in Glasgow that India aims to have an installed renewable energy capacity of 500GW by 2030 — an enhancement of its initial pledge — and ensure that half of its energy supply comes from non-fossil fuel sources by the end of this decade. Renewable sources, including hydel power, make up for about 150GW of domestic capacity at present.

The Draft National Electricity Policy, 2021, put out by the Union Ministry of Power, says that “while India is committed to add more capacity through non-fossil sources… coal-based generation capacity may still be required to be added in the country, as it continues to be the cheapest source of power generation”.

Also, close to 40 lakh people across the country earn their upkeep directly or indirectly from the coal industry and any abrupt move to end the dependence on coal would also jeopardise their livelihood.

But Aren’t Companies Shying Away From Coal?

The Centre has been struggling to find takers for its auction of coal mines, a clear indication that existing players are wary about the investing in coal production at a time when there is pressure on the climate front to get off fossil fuel-based energy sources.

Included in the third tranche of 88 commercial coal mines put up for auctions in October 2021, were 48 mines that had not drawn any bids in the previous two rounds of auctions. When the second tranche had been placed on the block, the Centre received no bids for 48 of the 67 mines.

A report by financial think tank Carbon Tracker earlier this year said that most new coal-fired plants may become economically unviable forward, resulting in losses to the tune of billions of dollars.

“These last bastions of coal power are swimming against the tide, when renewables offer a cheaper solution that supports global climate targets. Investors should steer clear of new coal projects, many of which are likely to generate negative returns from the outset,” Carbon Tracker’s Head of Power and Utilities, Catharina Hillenbrand Von Der Neyen had said.

Reports say that under increasing pressure from renewables and with the tightening of environmental regulations, coal plants are likely to see a sustained drop in usage. But even if there is an overall reduction in terms of proportion in coal’s contribution to the energy mix, experts say that the use of the mineral will still see an increase in absolute terms.

An indication of India’s heavy dependence on coal came in the third quarter of 2021 as economic activity opened up following the Covid freeze as power plants reported that they were left with supplies to last no more than a few days amid a decline in domestic production and the failure to contract for timely imports.

Noting the need to maintain adequate stocks, the draft electricity policy says that India has the fourth-largest reserves of coal in the world, “but still we are importing coal and, thus, losing huge amount of foreign exchange”. It goes on to state that “there is need to minimise use of imported coal in power stations”.

What Has India Been Doing To Address Coal Needs?

While coal is expected to continue as an energy staple, a report by the International Energy Agency (IEA) says that its “hold over India”s power sector is loosening”. It sees industry, under the current policy scenario, industry accounting for most of the increase in coal demand to 2040.

But while the share of renewables in India’s energy mix is on the rise, the country is also investing in new coal-fired plants. The Climate Tracker report said that India is among the five Asian countries that account for 80 per cent of the new coal plants planned around the world.

But IEA says that “once the coal-fired power plants currently under construction are completed over the next few years, there is no net growth at all in India’s coal fleet” and that “the share of coal in the overall energy mix steadily declines… from 44 per cent in 2019 to 34 per cent in 2040″.

Noting that compliance with stricter environmental norms remains a challenge, “particularly for the older stations”, the draft electricity policy says that the “endeavour should be to adopt the most efficient technology for coal-based power stations available at any point of time” and that all future plants “should only be of super critical/ultra critical technology or other more efficient technology”.

A report by think tank CEEW said that to achieve its 2070 net zero target, India would need total investments of more than USD 10 trillion. The bulk of the spend — the projection amounts to more than three times the size of the country’s current GDP — would be needed to wean the power sector away from its dependence on coal, it pointed out, adding that India would need investment support of USD 1.4 trillion by way of concessional finance from the developed countries.

What’s The Status Of Coal Usage Worldwide?

A report by carbonbrief.org says that since 2000, the world has doubled its coal-fired power capacity to around 2,045GW even though coal power has plateaued since 2014. Experts say that globally “unabated coal use must fall by around 80 per cent this decade if warming is to be limited to less than 1.5C above pre-industrial temperatures”.

But even as coal now generates about 40 per cent of the global power supply, 19 of the world’s 80 coal-powered countries — in 2000, 66 countries used coal power and new entrants in the club include Egypt and UAE — are reported to plan a complete phaseout of the fuel, including the UK and Germany.

Mainland China leads the world on the number of coal-fired plants and has more than 1,000 operational plants, nearly four-times higher than India, the country with the second-highest number of coal plants. The US is third on the list, which is rounded off by Japan and Russia, in that order. Thus, not only developing countries, even advanced…


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