The Indian Energy Ministry has this week announced plans to cancel four proposed coal-fired power plants with a combined capacity of 16 gigawatts (GW).
The plans previously called for four ultra mega power plants (UMPP) across Chhattisgarh, Karnataka, Maharashtra and Odisha, but these are now to be cancelled due to lack of interest from the host states.
This is yet another major policy shift underscoring how seriously India is working to transform, modernize and diversify its electricity sector away from coal.
For eight years, these four proposed plants remained in the planning, preparation and land acquisition stage. However, community resistance to compulsory land acquisition and forced resettlement combined with electricity power surpluses to push the government to issue a cancellation order.
Moreover, two of the UMPPs (8GW) were planned for coastal locations, aimed to run on imported coal. As such, the announcement is in line with Indian Energy Minister Piyush Goyal target of eliminating thermal coal imports into India.
His motivation in eliminating thermal imports is to drive delivered cost of electricity down, reduce the current account burden, improve energy security and the straight out lack of need in light of increased domestic production.
April 2016 coal imports fell 15% year on year.
To operate, these four UMPPs would have required upwards of a total of 46 million tonnes per annum of coal (approx. 12Mtpa per plant), half of which was to have been imported.
For 2016/17, the Ministry of New and Renewable Energy (MNRE) has set the highest ever capacity addition target for the clean power sector, that being up to 16,660 megawatts (MW). Of this, the solar installs target is set at 12GW, wind at 4GW, biomass power at 400MW, small scale hydro-electricity at 250MW and waste-to-power at 10MW.
India is increasingly looking to source its incremental electricity needs from the combined expansions of renewable energy, as well dampening demand growth by accelerating energy and grid efficiency programs. With the utilization rates of the average coal fired power plant at six year lows of 58% in 2015/16 (down from 75% in 2010), another government goal is to better utilize the existing thermal capacity.
At this stage Indian Energy Minister Piyush Goyal is still persevering with plans for three new UMPP that, if awarded, would add a combined 12GW of new coal fired power generation capacity across Cheyyur in Tamil Nadu, Behabahal in Odisha & Banka in Bihar by 2020.
While the awarding of these projects has already also been repeatedly delayed, these three UMPPs would facilitate the proposed closure of old coal-fired power plants that are now beyond their use by date.
In May 2016, S.D. Dubey, chairman of the Central Electricity Authority, announced the plans to close up to 37GW of antiquated, heavily polluting subcritical coal plants, stating: “Our first concern is emissions … We also want plants to be more efficient in use of resources.” This 37GW is equal to 20% of India’s current coal fired power fleet, or 12% of the total system capacity of 303GW.
In April 2016 the Power Ministry announced it had scaled back its projected thermal power capacity growth forecast by 50GW, reducing the target from 289GW to 239GW by 2022.India currently has a thermal power capacity of 211GW.As a result, the Power Ministry said in June 2016 it would not need any new thermal capacity for the next three years beyond what was already under construction.
This week, S&P Global Platts forecast that India’s reliance on coal fired power generation would drop from an estimated 69% share in 2020 to just 60% by 2030,relative to a peak of 75% in 2015. IEEFA expects this to be achieved as early as 2025.
The government message is clear, consistent and compelling. In his address to the U.S. Congress this week, Prime Minister Shri Narendra Modi clearly articulated that in the focus on driving Indian economic growth at 7.6% pa, this must “be achieved with a light carbon foot print, with greater emphasis on renewables.”In his meeting with President Obama, Prime Minister Modi also confirmed India will ratify the Paris Climate Agreement this year.
Tim Buckley is Director of Energy Finance Studies at the Institute for Energy Economics and Financial Analysis (IEEFA).