Despite its proactive stance on climate action, India continues to invest in increasing electricity capacity fired by coal, much of which may never be used, says a new report, but some experts disagree.
India is building new coal power plants and expanding existing ones, creating excess capacity in this sector, according to a recent study by Greenpeace India. The activist group said: “Over Rs 3,00,000 crore (close to $50 billion) is being wasted on building an additional 62 gigawatt of coal power plants, which will remain idle due to huge overcapacity in the power sector.”
Today, India has a capacity of around 186 GW in operational plants and another 65 GW under construction. Some 41% of this capacity is in the private sector. The next biggest source of electricity, hydropower, comes a poor second with 43 GW.
Coalswarm, an independent global coal power station tracker, using data from India’s Ministry of Environment, Forests and Climate Change, estimates that there are about 178 GW of proposed power plants at varying stages of approval. The government has indicated that 37 GW of old power plants will be retired to reduce emissions and increase efficiency.
India has been increasing its coal power capacity from 5.6 GW per year in 2007-08 to 19.5 GW in 2014-15 with a compounded annual growth rate of 11%, according to Greenpeace. Since the electrification of the country is seen as a major national priority, there is “a large future capacity that is in various stages of development”.
Based on India’s Intended Nationally Determined Contributions declared before last year’s climate change negotiations in Paris, the total demand for electricity from all sources will increase from 776 terawatt hours in 2012 to about 1,486 terawatt hours by 2022. This is in consonance with a GDP growth of 8.3% annually.
India is making a bid to increase its energy efficiency. The National Mission for Enhanced Energy Efficiency, one of the eight missions under the National Action Plan on Climate Change, is being led by Energy Efficiency Services Limited, along with Bureau of Energy Efficiency, an arm of the power ministry. EESL is promoting energy-efficient appliances with electricity distribution companies. The appliances include LED bulbs and tube lights, LED street lights, high efficiency agricultural pumps, solar agricultural pumps, energy efficient fans and efficient air conditioners. Greenpeace calculates that these will save about 191 terawatt hours.
It is estimated that in 2022, there will be a capacity from all electricity sources of about 1,835 terawatt hours, while the Greenpeace analysis puts the demand at around 1,489 terawatt hours, after accounting for 15% aggregate technical and commercial losses. “Since excess power cannot be generated, it would mean that 346 terawatt hours of power generation will need to be backed down in 2022," the analysis said. "In terms of coal power alone, this would mean that 61.7 GW of coal capacity would be lying idle if the average plant load factor of the coal power sector remains at 64%.”
“To put it another way, 94% of the coal power capacity that is currently under construction will be lying idle in 2022 due to unplanned overcapacity,” Greenpeace said. “If we take the prevailing costs of Rs 5,250 crore per GW, the capital cost of this 61.7 GW of idle coal capacity would be around Rs 3,23,925 crore.”
The threat of excess coal power comes even as the sector has already seen capacity utilisation drop to 62% in 2015-16, and as low as 54% in July 2016, leading to financial stress. At least 31 GW of potential coal power is currently idle due to lack of supply or purchasing agreements with state distribution companies.
The 64% plant load factor assumed in this Greenpeace analysis is suboptimal. The Central Electricity Authority specifies a normative plant load factor of 85%. A 21% reduction in plant load factor from normative levels translates into annual foregone earnings of over Rs 4.6 trillion, or nearly $ 70 billion. At a 64% plant load factor, India’s coal power industry will continue to underperform financially.
“Unfortunately, in today’s context, the proportion of thermal power is so large that the plant load factor of the plants has naturally come down sharply,” EA Sarma, a former bureaucrat who is an energy expert, told indiaclimatedialogue.net. “It is a generation mix that has emerged out of an irrational approach and the cost burden of it will impact either the electricity consumer or the taxpayer.”
Sarma added: “The demand pattern varies from region to region and there are regional diversities in the occurrence of the peak demand. It is therefore possible, to a limited extent, for a thermal power plant in one region trading power to another region, when the demand is low in its own region. The power purchase agreements can provide for freedom for the generators to sell power across the regions. All this is feasible only when the supply mix is not heavily skewed.”
Climate change argument
Replying to a query on whether Greenpeace was subscribing to the rhetoric of industrial nations which have achieved energy security and are now taking developing nations to task for trying to achieve theirs, Sarma said, “The climate change argument is a more recent one. Even without invoking it, one will realise that any supply mix that fails to match the demand pattern is going to prove expensive. When it is expensive, the burden will be borne by the consumer.”
The country seems to have surplus generation capacity even as power outages across the country are common. In January, 45% of power offered for sale on India’s electricity exchange remained unsold, another indication that India’s power market is unable to afford the cost of such power. The crisis in power plants comes at a time when solar power is often proving cheaper than coal. While average costs for plants coming on line in 2020 are Rs 4.40 per kWh or unit for pithead coal-fired power plants and Rs 5.15 a unit for imported coal, solar power projects in the near future are quoting Rs 4.34 a unit.
However, Ashok Srinivas from energy research group Prayas sounded a note of caution. “While there is a good reason to critically revisit how much new coal-based generation capacity is needed, it may not be practical to say that no new coal-based capacity should be added,” he told indiaclimatedialogue.net. “This is for various technical and economic reasons such as grid integration of renewables, inherently intermittent nature of renewables, efficiency of distribution utilities and their ability to buy power, and the need to provide affordable and reliable electricity to all Indians. Of course, any new coal-based (or any fuel for that matter) capacity addition should adequately address local socio-environmental concerns.”
“Per-capita primary commercial energy consumption remains the single-most definitive indicator of a country’s economic and human development with an almost perfect correlation,” Surya P Sethi, former Principal Advisor to the central government on power and energy, noted in an article in the Economic & Political Weekly in June “Addressing multiple deprivations would be impossible without raising access to greater amounts of commercial energy. India’s per capita primary commercial energy consumption is only 27.2% of the global average, about 22.6% of China and 6.7% of the United States.”
“India’s power sector issues are far more complex and exactly the opposite of what Greenpeace is suggesting,” Sethi told indiaclimatedialogue.net. “Let me simply say that if India fails to deliver 800 GW of generation capacity with an effective plant load factor of about 60% by 2030, India will remain home to the most number of poor, malnourished, hungry, sick, unskilled, disempowered and ill-educated humans in the world with socio-economic indicators at or below the median of sub Saharan Africa, as is the case today.”
This article first appeared on India Climate Dialogue.