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Coal India report finds renewables will ‘substantially decrease’ coal demand

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Climate Home News

Jharia coal mine, Jharkhand state, India. (Photo: TripodStories-AB)

Coal India, the state-owned monolith that produces almost all of the country’s coal, sees a slowdown coming, according to an internal prognosis.

That’s despite government efforts this week to open up India’s coal mining sector to competition.

Entitled Coal Vision 2030, the report – which has been circulated to stakeholders for consultation – warns that cheap solar power, climate commitments and economic factors are likely to have a “significant impact” on the coal sector.

“Even in the case of coal industry in India, trends portent [sic] that in the long run the demand is likely to decrease substantially,” it states.

“With the increasing threat of climate change impacting humanity (irrespective of the US position) and the global funding focus on renewables, it is a matter of time when alternate clean energy would displace coal.”

Yet the raw numbers in Coal India’s analysis tell a different story, predicting coal use roughly doubling to 1,300-1,900 million tonnes in 2030.

“The messages are extremely contradictory,” Swati D’Souza, energy policy expert at the Delhi-based Energy and Resources Institute (Teri), told Climate Home News.

“The [coal demand] numbers are very high given current trends on solar and wind penetration in the power sector… The document does not really give clarity on how they arrived at these numbers.”

Demand projections in Coal India’s Vision 2030 report. The upper end of the spectrum corresponds to a GDP growth rate of 8%. The lower end corresponds to an energy efficient scenario.

Ted Nace, director of Coal Swarm, which tracks the development of coal power plants globally, described 1,900Mt as “an absurd figure for coal demand in 2030”. Coal India did not respond to emailed questions about the basis of its projections.

In January 2018, India had 215GW of coal power generation capacity installed, by Coal Swarm’s count. There was 44GW under active construction and 17GW of planned plants where building was frozen. Net annual growth has fallen to around 5GW.

“Finance has completely dried up for privately sponsored coal plants; the only ones moving forward at this point are government-owned,” Nace said. “Without significant growth in coal power capacity there will not be the doubling or tripling of coal demand that this report talks about.”

The Central Electricity Authority is assuming no new coal plants will be connected in the next decade beyond those already in the pipeline. By 2026, Teri forecasts renewable sources and energy storage will be cheaper than coal generation.

India’s energy trajectory is critical to global efforts to avert dangerous climate change. Prime minister Narendra Modi has set ambitious renewable energy targets and launched an international push to accelerate solar power deployment.

All the same, coal remains India’s main fuel, generating three quarters of electricity. Efforts to expand grid access to millions of households and boost manufacturing are only increasing demand for power.

On Tuesday, the government’s economic committee approved a plan to boost efficiency and production by liberalising the coal mining market and breaking Coal India’s monopoly.

Private sector players broadly welcomed the move. “This is bold reform,” Anil Agarwal, chairman of multinational mining company Vedanta told Economic Times. “Some of the most evident benefits of this measure would be enhanced energy sufficiency for India and availability of power at lower costs for the end consumer.”

But others had doubts. The same article quoted a senior mining executive who suspected the only blocks available for auction would be those rejected by Coal India as too difficult to mine.

Falling solar power and battery costs will make off-grid systems increasingly competitive with coal generation (Source: US DoE, KPMG analysis)

The incumbent’s strategy document sends a discouraging message to would-be market entrants, forecasting no need for new mines beyond those already in planning.

“In view of the likely demand (base case scenario), there is limited requirement of starting new coal mines except the ones already auctioned/ allocated,” says the Vision 2030 report.

“Adverse geology” and higher land acquisition costs may make future coal production less competitive, it adds: “Compared to alternative sources, particularly solar, coal could be increasingly disadvantaged.”

While its core demand projections remain high, Coal India notes a mass shift to off-grid electricity systems could lower coal use below that range.

Clean technology developments make such systems increasingly viable. The report cites forecasts that solar panels will compete with coal generation on price by 2025 and battery costs will drop from 250 rupees ($3.86) a kilowatt hour to 50 rupees ($0.77) by 2030.

“It is futile to project beyond this period in such a dynamic environment,” the report says, recommending a review of the technology every three years.

Source: Climate Home News. Reproduced with permission.  

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  • Mike Dill

    Coal in China has already peaked. India is only a few years away from a similar situation. Renewables are already cheaper than new gas and coal. We are just waiting for the price disparity to get large enough that running the gas and coal plants no longer make sense.

    • Megs

      I understand that a large scale renewable power supply tender in USA has just come in at under continuing coal …. ie not just new but continuing. Probably in a recent renew economy report …. You are on the money Mike. Stone age didnt end due to protests about rocks.

  • Tim Buckley

    This new analysis from Coal India Ltd is really important. There are some obvious contradictions in the report, but the key thing is Coal India Ltd is asking questions, being open minded about rising risks and doing scenario analysis to respond to rapidly changing technology parameters.
    Meanwhile, the NSW and Australian governments are head down deep in the hole, listening to the echo chamber of the rear-window gazing MCA and QRC. Only last week QRC’s chief lobbyist Ian Macfarlane told the ABC that according to the IEA India’s coal fired power generation was going to treble. WRONG.
    The IEA’s NPS says India’s coal fired power generation could almost double from 1,123TWh in 2016 to 2,196TWh by 2040. But a 1 minute reading of the IEA would also tell us that the IEA says if the world sticks with the Paris Climate targets then under the Sustainable Development Scenario (SDS) Indian coal-fired power generation by 2040 drops 65% to just 399TWh! With renewable costs down 50% to Rs2.43-3.00/kWh in the last 2 years, RE is already the low cost solution in India. And India’s coal minister knows that, hence why he said at Davos last month India should target 50% renewables by 2030! Game over for imported thermal coal.

  • Radbug

    And Iranian gas is coming … very soon.

  • john

    Well of course this makes a good case for developing the Thermal Seam for Carmichael why well it is about 20 to 30 ash content and well it is coal.
    It fact it is rubbish and everyone knows it.
    No wonder not one bank will finance it.
    But in the political situation evidently this is some how some kind of wonderful idea.
    Look at the underlying financial situation; not one financial identity will risk the finance of this propitiation.
    Are you perhaps now getting the message this idea is ludicrous.

    • MaxG

      Well, it’s public money — who cares?

    • Joe

      The COALition may yet still ride to the rescue. Plenty of taxpayer’s hard earned available to be used as…. ‘lender of last resort’. And a big cheer squad, The MCA, Gina Inc, Rupert and his faithful disciples are all baying for more of that “little black wonder rock” to lift the 300 million Indian residents out of energy poverty. Can’t we all not see that the Adani / Carmichael Mega Coalmine is really a….humanitarian project.

      • john

        The fact is those 300 million Indian Residents are getting out of energy poverty by using R E .
        As everyone now knows wind and solar is both cheaper and of more value to underprivileged people than any other source of energy.
        As to sending low energy rich coal to India from the poor resource is not going to find a market.
        Why is this an issue I ask?
        It is like trying to sell a donkey as a race horse.

        • Joe

          ….donkeys need jockeys…enter The COALition.

        • Edgar

          Those 300 million Indian Residents will certainly not get out of energy poverty by building extra coal-fired power stations. The reason they are energy poor is that there is no grid. To build one to supply the rural areas of India would require VAST quantities of copper (at a horrendous cost). It would actually be far cheaper to install small village-based solar.

          The Indian government is well aware of this, but it wouldn’t suit Mohdi’s billionaire cronies.

  • Coal is OK, because it is cheap, but it has to be burned with mandatory CCS2, per government regulations
    Coal burning is as clean as politicians demand
    http://www.duurzamebrabanders.nl/blog/2017/02/regulations-are-essential-for-successful-energy-policies-wind-power/ https://uploads.disquscdn.com/images/5954da8a252d6b89c34711776dfac8125d4e20206d9db7865fddc7f16314d129.jpg