India and US agree: Coal is not the answer

Whatever you might read in the mainstream media about the important bits of US president Barack Obama’s summit with Indian prime minister Narendra Modi, you can be sure it went beyond concerns about fashion.

The agreement struck between Obama and Modi now means that all three of the world’s biggest emitters – India, the US and China – are at least agreed on the importance of striking a strong climate agreement in Paris this year, even if they are not yet on the same page about how this should be done.

But the underlying theme of these agreements, and the position taken by the leaders of the world’s three most influential national economies, is that coal no longer rules. The “all of the above” credo that once dominated their thinking on energy is steadily morphing into “anything but coal.”

The US is cracking down hard on emissions as the primary means of meeting its climate targets, and will likely force the closure of 50GW to 100GW of coal-fired generators in the next few years.

China is talking openly of an emissions cap by 2030, an achievement that could be preceded by at least a decade by a cap on coal use, and a rapid decline in coal imports. It is closing many of its coal-fired generators along its coastal strip and pushing generation inland, away from the markets that could be serviced by imports from countries such as Australia.

Now India is also engaging in the issue about pollution and energy access, and concluding that coal is the major culprit in the former and not the ready answer that the coal lobby wishes it was in the latter.

Sure, a bunch of new coal plants will be built in coming years in India, and attempts made to remove the blockage that means current coal plants are operating at only half their capacity.

But the contents of the India-US energy and climate deal make this much clear – the overwhelming portion of new investment in India’s energy industry will go towards renewables, and smart grid and storage technologies.

India is currently committed to investing in more than 100GW of solar by 2022, and possibly 60GW of wind (that bit is yet to be confirmed).

Indian energy minister, Piyush Goyal, says $250 billion needs to be spent across the power sector. More than $100 billion will go directly on renewables, another $50 billion will go on transmission and distribution, and just $60-$70 billion on stalled and new thermal projects (coal).

The biggest challenge for India’s coal plans is that they either centre around unlocking its domestic reserves, which requires a massive injection into infrastructure, or importing from overseas (such as the contentious Galilee Basin in Queensland), in which case the commodity is simply priced out of the market.

The agreement between Modi and Obama includes a range of commitments – such as working towards a successful and ambitious climate agreement in Paris, and various partnerships on clean energy, finance, climate research, and adaptation.

But the details of the partnership indicate exactly where the two countries are heading on technology.

A $125 million program jointly funded by the US and Indian governments will focus on solar energy, energy efficiency, advanced biofuels, and smart grid and grid storage technology.

America’s Export-Import Bank is looking for projects with the Indian Renewable Energy development agency for up to $1 billion in clean energy financing. This will focus on off-grid and utility-scale projects.

The two countries will look to promote “super efficient” off-grid appliances to help address the lack of grid access for more than 300 million people.

There is also nuclear, and attempts to remove the impediments that have prevented US nuclear giants such as Westinghouse and General Electric operating in that market.

India is one of the few countries in the world that wants nuclear, but wants nuclear equipment suppliers to accept liability if something goes wrong – most other governments underwrite that risk.

India’s position has meant that even companies like GE – with a balance sheet bigger than just about any other corporate and many countries – are not prepared to accept the risk that something will go wrong with the nuclear plants they build.

The India-US agreement says it is addressing the problem, but it doesn’t say how. As the Westinghouse CEO told Bloomberg, he needs to read the fine print before getting to excited about any such investments.