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Australian coal v renewables: how much will it cost to bring electricity to India’s poor?

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The Conversation

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The Australian government continues to claim that coal will play a vital role in bringing cheap energy to developing nations. In particular, it’s claimed India’s poor will benefit from the development of coal reserves in Queensland’s Galilee Basin. But is that really the case?

In our recent research, my colleagues and I tested claims that coal will help India’s poor, relative to the impact of alternative, renewable energy sources. We found that when you add up all the costs and benefits of coal – including positives such as jobs, and adverse impacts such as those on health – renewable energy is cheaper.

The cost of coal

We calculated the cost of delivering coal-powered electricity from Australia’s Galilee Basin to the Indian state of Bihar. It’s a poor, farming-dependent state with annual gross domestic product of about US$565 per person. It has India’s highest proportion of households without access to electricity – roughly 75 million people without power.

In our analysis, we added proportionate costs for: developing the Galilee Basin; expanding the coal terminal at Abbot Point on the Great Barrier Reef; shipping the coal to India; developing infrastructure to transport it to Bihar; building coal-fired power stations; and improving the electricity network.

The infrastructure required to produce a modest amount of electricity for each household for a 20-year period amounted to a staggering US$29 billion. We assumed that every household would initially demand a maximum of 0.3 kilowatts, rising to 0.675 kW in a decade. This means every household would initially at least be able to have a couple of lights and a fan on, charge mobile phones and power a computer or a small television for four to six hours a night.

By comparison, Queensland average residential demand every hour of the year is similar at 0.6 kW, but varies over the year and during the day. For instance, the average maximum demand can rise to 1.9 kW on very hot or very cold days. Demand depends on the energy efficiency and size of appliances, but speaking in averages, if the household is running an air conditioner, a fridge, a television, a computer and a few halogen downlights, this adds up to about 1.9 kW.

A kettle alone can draw 1.8 kW, an iron 1 kW and an oven 2.4 kW, so you can see how quickly household power demand can ramp up.

The investment required for coal-fired electrification in Bihar worked out to a cost of 13.6 cents per kilowatt-hour, about half what we pay in Australia for the electricity we get from (largely) coal-fired generation.

The major reason for this difference is that network costs are high in Australia. Australia’s grid is widely dispersed and network companies have sought to add infrastructure to cope with those few (very hot) hours a year when all air conditioners are turned on at once.

The residents of Bihar would not be using air conditioners, heaters or stoves because, with an average daily income of US$3 per person, they cannot afford expensive appliances or, for that matter, large electricity bills. Using electricity for only four hours a night would cost each household in Bihar US$130 per year, a sizeable proportion of annual household income.

Coal would replace kerosene and animal dung, which are associated with burns, poisonings and respiratory problems.

Nitrogen oxide, sulphur dioxide and particulate matter form when coal is burned at high temperatures and are associated with respiratory problems. China’s health minister from 2007-13, Dr Chen Zhu, a professor of medicine and molecular biologist, estimates that lung cancer is now the leading cause of death in China and that between 350,000 and 500,000 people die prematurely each year as a result of pollution. Much of this can be attributed to burning coal.

Based on Indian and other studies on health costs, we estimated that attempting to control pollution and health costs would increase the total cost of electrification using coal to US$40 billion, adding another 11c per kWh to the cost of electricity. Coal-fired electricity for Bihar would not improve health outcomes, nor provide cheap electricity for the rural poor.

There are, of course, benefits associated with a large electrification program for Bihar. We estimated, based on current project plans, that the building of coal-fired power stations and network infrastructure would provide around 8,500 jobs. While 8,500 jobs is a sizeable employment number, it is modest when considered in the context of a population of 104 million people who live in Bihar.

Renewable alternatives

With the level of investment and the costs associated with coal-fired electricity for the rural poor, it is easy to feel daunted by the staggering scale of the challenge. We found, however, that there are alternatives.

Bihar does have potential for hydro, biomass, solar and combined solar-battery electrification options. We estimate the investment cost of using the local renewable resources to implement village-level micro-grid electrification at US$27 billion. That is less than the cost of the Galilee Basin coal-fired option and translates to a cost of 13.5c per kWh.

Importantly, there are no additional health costs associated with pollution.

In addition to the benefit of electrification, project estimates for solar electrification in Bihar point to significant employment potential for locals. As Germany and Australia have found, the development and installation of rooftop solar have resulted in employment growth.

It is estimated that the solar home system program in Bangladesh has reduced the use of noxious fuels and provided employment for 114,000 people. Based on current project plans in Bihar, we estimate that developing the local resources for electrification in Bihar will provide around 79,000 jobs for locals.

That would be nearly 10 times as many jobs as would eventuate from coal-fired electrification. Job creation on that scale is likely to provide a significant stimulus to economic development in the state.

Lack of industry

The elephant in the room for proponents of coal-fired power for the rural, agrarian poor is that remote rural locations have no or little energy-intensive industry.

Industry is necessary to underwrite the costs of electrification for residential consumers. Coal-fired power stations must run constantly; they cannot just run for a few hours a night when a few lights and mobile phone charging is required for 15.8 million households (as in Bihar). A few hours a night is all that they can afford.

If the needs of the rural poor are to be matched to the supply of affordable and benign electricity, then the best option for rural electrification is local renewable micro-grids, implemented by local workers, to develop their economy from within.

The poor will benefit from coal-fired power generation only if you ignore the costs of pollution and if industries can be attracted to rural areas. Without industry, though, electrification for the world’s rural poor requires a different model to that offered by coal-fired power.

This may be why there is speculation that the Carmichael coal project is now on hold.

Source: The Conversation. Reproduced with permission.The Conversation  

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  • energyAsFreeAsAir

    Hopefully more coal CEO’s will get what Massey’s got. Looks like finally the true human cost of coal will begin to be understood. Coal = Exploitation.

  • Power generation based on coal imported into India is not economically viable – that is clear now! At least this puts paid to mammoth projects like the Adanis and some others. However, pls note that Bihar is right next to India’s largest coal mining State – Jharkhand – so a lot of costs of transportation, port upgrade, shipping etc will not apply in calculating cost of electricity generation from Jharkhand coal. Hence while recognizing coal is bad etc etc India’s administration understands that it will not be dead just yet as it still is economically viable in some regions

  • Ian

    Distributed local solar based generation will distribute costs and benefits relatively evenly –
    This contrasts strongly with the centralized and politically corrupting mega – business and highly polluting model.

  • solarguy

    $29 billion sounds too cheap for coal fired Infrastructure that would need to produce 22.5GW. It is unclear if the demand will be per hour or per day.

    • trackdaze

      29billion is cheap. Due to India’s lower property costs, government charges & labour costs.

      • solarguy

        If the cost of new coal plant is USD $3,500/kw to build, not including HVAC transmission lines, transformers, poles etc. Then yes.

  • trackdaze

    Bloomberg is stating the coal tax is to double from india’s next financial yr.

    When is that you say? April 1st ;).

  • Rex

    Interesting study. I would like to see the health implications to the Chinese towns where Rare Earth Elements are processed, as well as solar panel manufacture, added into the costs for the renewables side of the equation. Also, there are many small brick making facilities throughout Bihar that use coal to fire their kilns. These generate an immense amount of particulate pollution. If these were converted to electric kilns powered from a coal fired station there would be a huge health offset in favour of the coal case. Solar would not be capable of supporting electric kilns. The study also assumes that demand would not increase. Indians can be very entrepreneurial and will no doubt come up with ways to improve their standard of living by consuming more electricity.

    • Steve159

      @Rex

      “If these were converted to electric kilns powered from a coal fired
      station there would be a huge health offset in favour of the coal case.”

      If these were converted to electric kilns powered from solar farms there would be an exceptionally huge health offset in favour of the solar case.

    • John Knox

      “Solar would not be capable of supporting electric kilns.”

      Why not??? Surely you know that electricity is electricity and the means of production doesn’t factor into its use… An electric kiln cares not whether the electron comes from a coal fired power station or a solar panel but the people surely will benefit healthwise if the said electron doesn’t come with both particulate pollution and CO2 attached.

      • Rex

        This study made a direct comparison between coal fired plants and micro solar cells capable of only providing light and charging a phone for four hours a day. I should have clarified in my original post that solar of this scale would not be capable of powering an electric kiln rather than the blanket statement. So for a true comparison to me made, that being with a renewables plant that is capable of supporting such industry, this study would need to be extended and must also address adverse health implications from the solar panel production and supply chain.

    • Rex