No thanks to the govt, but coal may be on its way out in India anyway

The Centre’s recent directive to state-owned power generation firms to stop coal imports and instead buy domestic coal, saw skeptical voices warning against seeing it as a sign of new commitment to reduce coal consumption. However, there’s good reason to the hope that India may be moving away from coal, irrespective of the government’s intent.

Shankar Sharma

The Centre’s recent directive to state-owned power generation firms to stop imports of the fuel and instead buy coal from the public sector Coal India Ltd, has provoked mixed reactions. While some experts have lauded it as a welcome move, seeing it as a first step towards reducing dependence on coal, others, especially environmentalists, have been skeptical, warning against seeing it as a sign of new commitment to reduce coal consumption and cut CO2 emissions.

This latter reaction is not surprising, given that it has simultaneously been granting fresh licenses for coal mining and sanctioning literally hundreds of new coal thermal power plants. However, there are many factors which justifiably give rise to the hope that India’s power sector may finally be moving away from coal, and irrespective of the Indian government’s intent. Here are some of the major reasons:

a. The power deficits and many of the chronic problems experienced in the power sector of the country have been there for decades, and the coal power is being increasingly acknowledged as part of the problem, and not the solution. There have been massive local opposition movements to coal power capacity additions. Each and every fresh proposal for coal power plants is being opposed by the project affected people, and is, almost without exception, being challenged in the court of law. Land acquisition (for mines, power plants and power lines) has been a major problem for the project developers in a hugely populous country which is already facing many resource constraints. This hurdle is getting acute, as is being acknowledged by the govt. and the industry.

b. For similar reasons, the infrastructure hurdles associated with needed to handle the additional coal mined locally/imported (in the form of storage and rail transportation), including ports and/or railway lines also appear insurmountable. There were reports of a glut of coal at mines during the last 12-15 months but the same could not be transported. Power plants claim that they have no place to store this additionally mined coal (not the imported coal).

c. Since the cost of new coal power plants can only be higher than the previous ones (due to coal cess, new environmental compliance needs, increased infrastructure costs etc.) the distribution companies are unable to pay for this cost, as they themselves are in poor financial status. Many coal power plants have been operating at much lower PLF  (Plant Load Factor), a measure of capacity utilisation, for more than a year because the distribution companies are disinclined to purchase this power. They are rather resorting to power cuts. This scenario may sound unusual in a general sense, but for various reasons, remains a fact. There are also power transmission bottlenecks to be reckoned with.

d. Massive finance needed to set up the additional coal power plants (which are seen as economical in large sizes only) is hard to come by, because the banks are hesitant to extend the loans, while they are not doing very well with very many bad loans impacting their bottom line. The recent RBI-initiated crackdown on major debtors, which include some of the top energy producers – has added to their woes.

e. The unacceptable levels of pollution of land, air and water due to frenetic economic activity in the country has already been a major source of concern, and coal power’s visible contribution to this pollution level is leading to growing protests against it. The projected consequences of Climate Change have begun to catch the attention of influential sections of society, leading to sustained demand for mitigation measures.

f. Even for a tropical country with about 35% of the land area prone to drought almost every year, India has just gone through one of the worst droughts in recent memory. Many operating coal power plants were forced to shut down due to non-availability of water in the rivers. This situation will only get worse. The competing demands for a scarce resource is already a very serious political issue. The affected people have taken serious objection to coal power plants consuming fresh water from the rivers, when water is not available for domestic and agricultural usage.

g. Renewable Energy sources are being increasingly seen as affordable and inevitable in the medium and long term. Solar power is becoming popular, may be not at the same pace as could have been expected for a sun drenched terrain, but there can be no doubt about its shining future. Solar power prices are continuously dropping and people are deploying solar power in many ways. Solar usage for domestic and agricultural pumping has enormous potential which is waiting to be fully tapped. Once this picks up, coal power is likely to face massive problems.

h. Growing pressure from the international community to reduce the total greenhouse gas emissions of the country (already the the fastest growing major GHG emitter?) cannot be continued to be ignored for long.

i. The inefficiency prevailing in the power sector since decades is so huge and has such a massive potential to reduce the overall demand on the integrated grid, that additional demand for coal power can be seen as negligible for many years. Civil society too has increasingly begun to oppose investment in additional coal power plants.

These are some of the major factors, but there are many more, which may not be immediately visible. A tranformation in attitudes towards economic growth, social change, environmental degradation, the infrastructure boom, etc, along with a shift in inter-generational perspectives, are all clearly piling up against coal power and other conventional power generation technologies (including nuclear and dam-based hydro). Public opinion against their favour, and is becoming too forceful to be ignored any longer.

Putting all these factors together, it is highly unlikely that the present ‘business as usual’ scenario will continue for long. The coal dependent power sector is expected to undergo drastic changes, and sooner than later. I will be surprised if such changes are not clearly visible to all before the year 2020.