Renewable Energy - Reliance on Coal in India

NIKITA DESAI

Option 2 – Renewable Energy

The process of getting governments and citizens to switch to renewable energy from their use of non-renewable energy sources has been quite slow and uncertain, especially in the developing nations. There have been many reasons contributing to this resistance ranging from over-reliance on fossil fuels (coal), political and regulatory barriers, technical barriers, market-related barriers, social-cultural barriers, financial and economic barriers, and geographical and ecological barriers. The fundamental barrier has been one of a lack of perspective in accounting actual true costs of continuing to burn fossil fuels and the true benefits of using abundant, self-supplying and clean renewable energy.

There is a sort of short sightedness play out in many developing countries due to limiting energy policies, inadequate funds for infrastructure development and lack of technological advances. Additionally, rapid growth in population and subsequent increase in energy demand in the developing countries has led to emerging energy crisis, which in effect, increases people’s dependence on non-renewable energy sources.

In India, the tide is turning and the commitment to renewable sources of energy is optimistic but not without its challenges. A recent report which arose from a Finnish Solar Revolution research project and the Neo-Carbon Energy research project, titled ‘The Demand for Storage Technologies in Energy Transition Pathways Towards 100% Renewable Energy for India’, details how increasing solar, wind and storage capacities would allow India to transition from its fossil fuel-heavy energy mix to a clean and sustainable alternative.

Reliance on Coal in India

According to International Energy Agency (2017), coal contributes one-third of global energy supply, making up about 40% of electricity generation; as well as playing a very significant industrial role. This means that it will be hard to replace coal as a source of energy, especially in our industries. The kind of infrastructural changes that are required in changing from coal to other renewable sources of energy is prohibitive—in terms of cost and time. Also, industries require a lot of energy. Coal has a high net energy yield compared to other sources of energy. This means that for a unit of coal a lot of energy is produced compared to other sources of energy. Therefore, coal is very efficient for producing the high amounts of energy required in the industries, which makes it very hard to replace it with other energy sources.

Additionally, coal is an abundant source of energy in India. Therefore, it can hardly be replaced by other forms of energy, because people usually prefer to use what is readily available to them. In this regard, the technological advancements have made it more efficient to mine and burn coal to produce high amounts of energy. Therefore, it is challenging to convince people to abandon coal power for other sources of energy. There are 34 stressed thermal power projects, with a capacity of 40 GW and a combined debt of Rs 1.7 lakh crore. Thermal power accounts for two-thirds of India’s electricity capacity.  

India’s Renewable Energy Goals

India is committed towards global climate change initiative and has ratified the Paris Agreement on Climate Change. As part of the Nationally Determined Contributions (NDC), India has committed to reduce the emissions intensity of its GDP by 33 – 35% by 2030 from the 2005 level. The major pillar in achieving the NDC commitment is the massive renewable energy capacity addition target of 175 GW by 2022 and 275 GW by 2027.

India recently achieved the milestone of 20 GW in cumulative solar installations and has high hopes for increasing solar power generation further in the coming quarters.^[1] As per statistics released by Mercom India. solar power generation grew by 86 percent from 2016 to 2017, more than any other power generation source. Wind power generation increased by 21 percent year-over-year, followed by hydro at 6 percent and thermal with 3.7 percent. In India thermal still makes up majority of power generation with 79 percent.

In India’s case, the National Tariff Policy 2016, takes into account 100 GW of solar capacity target and mandates the State Electricity Regulatory Commissions (SERCs) to revise the solar renewable purchase obligation (RPO) target to 8%. The Ministry of New and Renewable Energy (MNRE) has already notified SERCs to increase RPO to 17% by FY 2022, of which 8% is solar RPO. It also mandates utilities to procure all renewable energy sources except waste to energy (WTE) through competitive bidding process. It mandates utilities to compulsorily procure 100% power produced from all the waste-to-energy plants in the state at tariff determined by respective SERCs. The potential for renewable energy technologies vary across states, thereby, restricting uniform RPO across states. In order to overcome this bottleneck, the policy waived off the inter-state transmission charges and losses for solar and wind energy procured through competitive bidding.  

Political and regulatory barriers

Although there have been many policies and regulations favouring the development of Solar and wind, they have been extremely skewed to cater to large utility scale players and corporate-houses looking to get tax breaks. Additionally, policies like reverse bidding on utility-scale energy projects with a lack of standards and codes being passed or enforced has aggravated the full-scale adoption of renewable energy.  Availability of land and the lack of a reliable and comprehensive transmission grid are also challenging. This means that, despite the many renewable energy policies developed in most of these countries, it has been difficult to implement them mainly because they are immature. Additionally, private sector participation in renewable energy projects in some countries is hindered by the lack of well-defined policies on private investment and delays in the authorisation of private sector projects.  Therefore, because large-scale renewable energy projects require large amounts of capital to run, many countries’ progress toward renewable energy is held back by policymakers’ failure to implement measures to attract private investors.

In India, evidence^[2] suggests that passing of the Tariff Policy 2006, state-level policies, quantity-based instruments and a greater participation of the private sector have played a key role in promoting the development of installed capacity from renewable energy power in the nine States.

Energy Economics and Infrastructure

The most crucial barrier to overcome is the barrier of perception. There is a lack of awareness among even the most seasoned bureaucrats, about how to properly account for and calculate costs and levelized costs of electricity (LCOE) which is simply the unit cost of over the lifetime of an power producing asset. When solely looking at upfront capital costs, the LCOE for a coal plants does edge renewable sources like Wind and Solar. But when one accounts for O&M costs, environmental damage costs and carbon costs, then solar and wind look like the clear winners. Solar and wind are intermittent sources of energy, this intermittency needs to be controlled in order to keep the supply and demand of the grid balanced. The smart grid infrastructure required to truly enable value generation actions such as net metering, energy arbitrage, frequency regulation, etc. are still absent. This has also hampered the adoption of solar energy on a domestic level due to the economic inefficiencies created due to infrastructure inadequacy and overall inadequate connectivity to the grid.  However, positive directions include, open access regulations whereby, renewable energy generators are allowed to sell power to third party and captive consumers. SERCs provide concessions on open access charges like transmission and wheeling charges and cross subsidy surcharge for sale of renewable energy to third party. Many SERCs also provide energy banking facility to promote third party sale of renewable energy.