India requires stringent steps to ensure maximising the efficiency of its existing coal-fired power plants to achieve nationally determined contributions under the landmark 2015 Paris Climate Change Agreement, a report said on Thursday.
The report by the Indian Institute of Management-Ahmedabad, favours retiring old coal plants, scaling up new and alternative fuels, reducing end-use energy demand and developing a coherent strategy for future energy system to manage risk and avoid stranded assets.
A team led by Amit Garg has modelled three transition pathways which address some of key international and national debates on future of coal in a report “Coal transition in India: Assessing India’s energy transition options”.
The analysis brings out key insights on the future of coal in Indian energy systems, and its implications on international coal trade, including the possibility of increased stranded assets both in coal and power sectors as a result of coal transitions.
The report, authored by Saritha S. Vishwanathan and Vineet Tiwari, also co-published as part of an international research project, discusses the impacts of critical natural resource such as water on coal-based power plants.
“Any coal phase down in India has to, therefore, consider the socio-economic-political implications on over 15 million workforce and their families,” said Garg.
According to the report, thermal coal demand decreases by two per cent under two degrees Celsius conventional scenario and by 50 per cent in 2050 under two degrees sustainable scenario, over nationally determined contributions scenario in 2050.
French think tank Institute for Sustainable Development and International Relations (IDDRI) and Britain-based research network Climate Strategies are international partners of this study.
“Investments of up to $5 trillion are required until 2030 for transforming the energy systems. Power sector leads the investment requirements at $2 trillion, followed by industry and transport ($1 trillion each), buildings ($0.7 trillion) and agriculture ($0.3 trillion),” said Garg.
He added: “Stranded assets in the thermal power sector could also create pressure on financial institutions that have provided debt for constructing these plants to the tune of $90 billion during 2006-2014.”
Sustaining one of the fastest GDP growth rates in the world currently at around eight per cent per annum, India is well on track to meeting and even surpass its nationally determined contributions Paris commitments for 33-35 per cent reduction in greenhouse gas intensity of its GDP during 2005-2030 (around 25 per cent reduction achieved during 2005-2014) and 40 per cent share of non-fossil electricity capacity by 2030 (around 30 per cent by 2017).
Coal, however, is projected to remain the mainstay of Indian energy systems at least until 2030.
“With Ministry of New and Renewable Energy (MNRE) recently imposing a cap on solar at Rs 2.50/unit without safeguard duties and Rs 2.68 with safeguard duties which is similar to providing a feed-in tariff to solar, it may have indirectly provided a temporary breather to coal as NTPC power costs have come down below Rs 2 per unit in 2016-17 due to grade readjustments and improvement in coal quality and supply.
“However, coal would continue to be under relative cost pressure with renewables. Financing capital costs for coal will also increase due to increased risks from climate change and many global financial institutions gradually coming out of their coal portfolios,” Garg said in a statement.
Coal consumption in India could, therefore, drop significantly beyond 2030, especially under stringent carbon mitigation, he said.
Globally coal meets 28 per cent of the world’s energy needs to generate 41 per cent of world’s electricity and emit approximately 46 per cent of global carbon dioxide.
In contrast, Indian energy security revolves around coal with about 70 per cent contribution to total power production, resulting in 65 per cent of national CO2 emissions.
India is currently the third largest power producer using coal and third largest coal importer in the world.
However, the Indian population is characterized by low levels of consumption of modern energy (880 kWh/capita/year) by international standards.
Coal transitions especially in a coal dependent economy such as India will be challenging in short to medium-terms, mainly due to its energy security concerns and national developmental targets (aligned with sustainable development goals) for universal electricity access, housing, health, and education by 2022.