Over the years India’s dependence on Coal has been the key question dominating the deliberations on energy policy. Our commitments to the international community on fighting climate change was also a trigger.
First the facts:
1. India had in 2015 committed to a target of 40% installed capacity coming from non fossil fuel sources by 2030. This was revised to 50% in 2021 .By March 2022 the 40% target was crossed. By all accounts the 50% target is also going to be crossed well before the promised date. The other target of 33% reduction in the emission intensity of GDP in 2030 over 2005 will also be achieved ahead of schedule
2. The draft National Electricity Plan of 2022 projected addition of 50 GW of new coal based capacity by 2032
3. The CEA study on Optimization of Generation Capacity released in May 23 estimated 40 GW of new coal based capacity addition by 2030.
4. In 2020 auctions for commercial mining started. At present about 87 mines have been awarded which will provide employment to about 3 lakh persons and produce about 220 MTPA once peak levels of production are reached [1].
5. In April 2020 the National Coal index was just about 100. This index has a weightage for international prices also. Due to the Ukraine war this index sharply jumped up in 2022 and reached 233 in April 2022, before dropping off to 169 by April 23. Over this time domestic coal prices were stable. It was domestic coal (which accounts for over 70% of the electricity generated in the country )that gave stability to the Indian Energy sector. But for domestic coal we would have been badly hit.
6. Given the fluctuating electricity production and the lack of storage it is coal that has borne a big load in helping the grid follow the load curve. From 55% capacity generation coal based plants are now expected to run at a minimum of 40% capacity to permit this flexibility in the grid [2]. No doubt this has led to a fall in the PLF.
These 6 facts bring out that while as a country we have been responsibly meeting our commitments to fight climate change at the same time we have been using our domestic resources prudently to ensure availability and affordability of energy. The Government of India has to be complimented on both counts.
One Big Cloud over this entire effort is the difficulty in financing coal production and generation projects. As an example the IFC has decided to stop financing all new coal based projects [3] Owing to the misconception that we can do away with coal quickly the financial community have been shying away from financing coal projects.
In this background the recent statement [4] of the Chief Economic Advisor that such actions of the financial community would put India’s economic growth in jeopardy is indeed welcome. Determined effort by Central and State Governments, Industry, Academia and Civil Society to bring the financial community on board regarding the National priorities is critical.
India has earned the distinction of achieving more than its commitment on the climate front while fighting poverty with judicious use of the carbon space. The financial community has to align the pursuit of these twin objectives.
While the need for coal has to be reiterated again and again there are some other steps that needs to be taken. In the quest to fight climate change the need to clean our coal to fight local pollution seems to have been forgotten. The need to emphasize this is more important as with improvements in transmission the case for pithead plants is getting stronger. While economically this is the correct thing to do but it will bring more pollution into an area that is already polluted by coal mining. The need for making coal production and coal based generation more eco friendly needs emphasis. All possible measures need to be put in place to achieve this end.
Mitigating emission from coal based generation will require introduction of CCUS technology. As part of their commitment to help fight climate change the advanced Nations must develop and provide cost effective CCUS technology to the developing Nations to mitigate emissions. Financial Institutions should progressively advocate use of both these sets of technologies – one for fighting local pollution and one for fighting global pollution. And use the financing lever to promote these technologies . That would be a much more sensible and responsible way of meeting the twin challenges of economic growth and environmental sustainability.
[This piece was written by Rakesh Kacker, former Secretary, Government of India, and Partha Bhattacharyya, former CMD, Coal India Ltd]
References:
1 https://coal.nic.in/nominated-authority/about-na
2 https://cea.nic.in/wp-content/uploads/notification/2023/01/Gazette_Flexible_operation-2.pdf
3 https://www.thehindu.com/business/Industry/ifc-to-stop-funding-new-coal-powered-electricity-
projects/article66704002.ece
4 https://economictimes.indiatimes.com/news/economy/finance/economic-growth-at-risk-if-financial-sector-
avoids-funding-fossil-fuel-based-power-projects-cea-nageswaran/articleshow/100498123.cms?from=mdr
