The Reserve Bank of India has warned in a 2013 report that power cuts and coal shortages were a major constraining factor for industrial growth
NEW DELHI—For six years in a row, India’s monopoly coal producer has missed its production targets, leading to chronic electricity shortages and sending power producers scrambling for pricier imports. But what looks like a looming crisis could turn out to be an almost accidental energy overhaul.
Like many developing nations, India has relied for decades on cheap coal to provide electricity for burgeoning industry and fast-expanding cities, putting aside worries about pollution and global warming.
The country has in three years added 2.2 gigawatts of solar to its electricity grid, enough to power 20 million Indian homes. It plans another 2 gigawatts this year, toward a total 15 gigawatts addition by 2017. Individual states plan even more. India has also added about 26 gigawatts in coal-fired capacity since 2011, but already plants are sitting idle for lack of cheap supply.
“I’ve stopped developing coal plants,” said Ratul Puri, chairman of Hindustan Power Projects Ltd. “There’s not enough coal, and I’m not going to rely on imported coal. It’s too risky.”
After building two coal-fired plants due to start generating this year, Hindustan Power plans to invest nearly $3 billion to expand its 350 megawatts of solar generation to 1 gigawatts by 2017.
Decisions like Hindustan Power’s are more pragmatism than idealism as the coal industry trips up on its own dysfunction. Coal India, the monopoly producer, is too large and unwieldy to do any better. Much of the country’s easy-to-access surface coal has been extracted, with the remaining reserves harder to reach: underground, beneath cities or within national parks and tiger reserves.
New projects can take almost a decade to get going thanks to village protests, bureaucratic entanglements and trouble securing fuel. Meanwhile, more than 300 million people still have no electricity, while hundreds of millions more are lucky to have a few hours a day.
Coal-fired thermal power counts for the bulk of India’s energy supply at 59 per cent of the nation’s 234 GW generation capacity. India still has ambitions for another 70 GW in coal capacity by 2017 if it can find the investors.
But there’s an additional crucial factor that is making solar a viable alternative: For the first time, solar electricity prices have fallen to near parity with India’s coal-generated power prices. Subsidies at about a third of cost put solar prices at about 7 rupees (11 U.S. cents) per kilowatt/hour, versus coal’s 5-6 rupees per kilowatt/hour.
Solar projects also need fewer clearances and take just six to 12 months to develop, versus about eight years for a coal plant.
Analysts say India is set to surpass its target of having 15 per cent of its energy produced by the sun and other minimally polluting sources by 2022.
India’s coal bind is in part a product of its bounty. Declaring the world’s fifth-largest coal reserves, India invested heavily in coal-fired power as a low-cost way of boosting energy production.
For a while, the formula worked. Energy capacity doubled over the past 10 years, while economic growth averaged above eight per cent during that time. The coal-power recipe also helped to jump start economic development in China, Indonesia and other developing countries. But it has come with a heavy toll.
India is suffering from water shortages and toxic runoff from a host of polluting industries, including coal. Emissions of sulfur dioxide, which leads to acid rain and lung ailments, increased more than 60 per cent in India between 2005 and 2012, surpassing the United States to become the world’s second highest SO2 emitter after China, according to a study by the Argonne National Laboratory analyzing NASA satellite data.
The Reserve Bank of India has rung economic alarm bells. It warned in a 2013 report that power cuts and coal shortages were “a major constraining factor for industrial growth.” India’s current account deficit hit a record $88 billion last year, made worse by a trade bill bloated by $18 billion in coal imports.
The U.S. closed 138 coal plants in 2011-13 and plans to retire another 150 soon, according to the Union of Concerned Scientists.
In China, where investment in solar infrastructure has helped bring down prices, coal consumption had its lowest growth in 50 years last year at 2.6 per cent, according to the China Energy Agency.
For India, “if we constantly focus on wind and solar, our country will be energy sufficient in the coming future,” said Tarun Kapoor, a senior official in the Renewable Energy Ministry.
Despite that enthusiasm, analysts say it would take several decades for India to replace its thermal power base.