Despite its proactive stance on climate action, India continues to invest in increasing electricity capacity fired by coal, much of which may never be used, says a new report, but some experts disagree.
India is building new coal power plants and expanding existing ones, creating excess capacity in this sector, according to a recent study by Greenpeace India. The activist group says:
Over INR 3,00,000 crore (close to USD 50 billion) is being wasted on building an additional 62 gigawatt (GW) of coal power plants, which will remain idle due to huge overcapacity in the power sector.
Today, India has a capacity of around 186 GW in operational plants and another 65 GW under construction. Some 41 percent of this capacity is in the private sector. The next biggest source of electricity, hydropower, comes a poor second with 43 GW.
Coalswarm, an independent global coal power station tracker, using data from India’s Ministry of Environment, Forests and Climate Change, estimates that there are about 178 GW of proposed power plants at varying stages of approval. The government has indicated that 37 GW of old power plants will be retired to reduce emissions and increase efficiency.
Increasing Capacity
India has been increasing its coal power capacity from 5.6 GW per year in 2007-08 to 19.5 GW in 2014-15 with a compounded annual growth rate of 11 percent, according to Greenpeace. Since the electrification of the country is seen as a major national priority, there is “a large future capacity that is in various stages of development”.
Based on India’s Intended Nationally Determined Contributions (INDC) declared before last year’s climate change negotiations in Paris, the total demand for electricity from all sources will increase from 776 terawatt hours (TWh) in 2012 to about 1,486 TWh by 2022. This is in consonance with a GDP growth of 8.3 percent annually.
India is making a bid to increase its energy efficiency. The National Mission for Enhanced Energy Efficiency (NMEEE), one of the eight missions under the National Action Plan on Climate Change, is being led by Energy Efficiency Services Limited (EESL) along with Bureau of Energy Efficiency (BEE), an arm of the power ministry. EESL is promoting energy-efficient appliances with electricity distribution companies. The appliances include LED bulbs and tube lights, LED street lights, high efficiency agricultural pumps, solar agricultural pumps, energy efficient fans and efficient air conditioners. Greenpeace calculates that these will save about 191 TWh.
Idling Power
It is estimated that in 2022 there will be a capacity from all electricity sources of about 1,835 TWh, while the Greenpeace analysis puts the demand at around 1,489 TWh, after accounting for 15 percent aggregate technical and commercial (AT&C) losses.
Since excess power cannot be generated it would mean that 346 TWh of power generation will need to be backed down in 2022. In terms of coal power alone, this would mean that 61.7 GW of coal capacity would be lying idle if the average plant load factor (PLF) of the coal power sector remains at 64 percent.
To put it another way, 94 percent of the coal power capacity that is currently under construction will be lying idle in 2022 due to unplanned overcapacity. If we take the prevailing costs of INR 5,250 crore per GW, the capital cost of this 61.7 GW of idle coal capacity would be around INR 3,23,925 crore.Greenpeace
The threat of excess coal power comes even as the sector has already seen capacity utilisation drop to 62 percent in 2015-16, and as low as 54 percent in July 2016, leading to financial stress. At least 31 GW of potential coal power is currently idle due to lack of supply or purchasing agreements with state distribution companies.
Suboptimal Utilisation
The 64 percent plant load factor (PLF) assumed in this Greenpeace analysis is suboptimal. The Central Electricity Authority specifies a normative PLF of 85 percent. A 21 percent reduction in PLFs from normative levels translates into annual foregone earnings of over INR 4.6 trillion, or nearly USD 70 billion. At a 64 percent PLF, India’s coal power industry will continue to underperform financially.
“Unfortunately, in today’s context, the proportion of thermal power is so large that the PLF of the plants has naturally come down sharply,” EA Sarma, a former bureaucrat who is an energy expert, told indiaclimatedialogue.net. “It is a generation mix that has emerged out of an irrational approach and the cost burden of it will impact either the electricity consumer or the taxpayer.”
Sarma further added:
The demand pattern varies from region to region and there are regional diversities in the occurrence of the peak demand. It is therefore possible, to a limited extent, for a thermal power plant in one region trading power to another region, when the demand is low in its own region. The power purchase agreements can provide for freedom for the generators to sell power across the regions. All this is feasible only when the supply mix is not heavily skewed.
Climate Change Argument
Replying to a query on whether Greenpeace was subscribing to the rhetoric of industrial nations which have achieved energy security and are now taking developing nations to task for trying to achieve theirs, Sarma said:
The climate change argument is a more recent one. Even without invoking it, one will realise that any supply mix that fails to match the demand pattern is going to prove expensive. When it is expensive, the burden will be borne by the consumer.
The country seems to have surplus generation capacity even as power outages across the country are common. In January 2016, 45 percent of power offered for sale on India’s electricity exchange remained unsold, another indication that India’s power market is unable to afford the cost of such power. The crisis in power plants comes at a time when solar power is often proving cheaper than coal. While average costs for plants coming on line in 2020 are INR 4.40 per kWh or unit for pithead coal-fired power plants and INR 5.15 a unit for imported coal, solar power projects in the near future are quoting INR 4.34 a unit.
However, Ashok Srinivas from the Pune-based energy research group Prayas sounded a note of caution.
“While there is a good reason to critically revisit how much new coal-based generation capacity is needed, it may not be practical to say that no new coal-based capacity should be added,” he told indiaclimatedialogue.net. “This is for various technical and economic reasons such as grid integration of renewables, inherently intermittent nature of renewables, efficiency of distribution utilities and their ability to buy power, and the need to provide affordable and reliable electricity to all Indians. Of course, any new coal-based (or any fuel for that matter) capacity addition should adequately address local socio-environmental concerns.”
Differing Voice
“Per capita primary commercial energy consumption remains the single-most definitive indicator of a country’s economic and human development with an almost perfect correlation,” Surya P Sethi, former Principal Advisor to the central government on power and energy, noted in an article in the Economic & Political Weekly in June 2016.
Addressing multiple deprivations would be impossible without raising access to greater amounts of commercial energy. India’s per capita primary commercial energy consumption is only 27.2 percent of the global average, about 22.6 percent of China and 6.7 percent of the United States.Surya P Sethi
Sethi had more to say about India’s power sector.
India’s power sector issues are far more complex and exactly the opposite of what Greenpeace is suggesting. Let me simply say that if India fails to deliver 800 GW of generation capacity with an effective PLF of about 60 percent by 2030, India will remain home to the most number of poor, malnourished, hungry, sick, unskilled, disempowered and ill-educated humans in the world with socio-economic indicators at or below the median of sub Saharan Africa, as is the case today.Surya P Sethi
(This article was originally published on India Climate Dialogue.)
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