During an interactive session at Bloomberg Global Business Forum [GBF] on September 25, 2019 coinciding with the United Nations General Assembly [UNGA], Prime Minister, N Modi faced a dilemma on the issue of clean energy versus coal based power.
Even as Modi reiterated his commitment to rapidly promote use of renewable energy viz. solar, wind, bio-mass, small hydro [India has more than doubled its original goal of having 175,000 mega watt (MW) of power capacity on renewable to 450,000 MW; it is also the founder of International Solar Alliance (ISA) jointly with France with 121 countries having already joined the ISA], he was confronted by CEO, Bloomberg on what plans he has with regard to use of coal [India has the third largest reserves of coal in the world and currently, about 54% of generation capacity is based on its use].
Fully conscious of the implications of coal use for the environment in terms of emissions and carbon footprint, Modi wriggled out of the dilemma by stressing on the need for changing processes for mining coal as also use of environment-friendly technologies such as ‘coal gasification’ to develop clean energy [global companies are being invited to bring this technology to India; the government has taken necessary policy initiatives and given incentives].
Modi may have succeeded in convincing the global community on the efforts being made by India to mitigate the consequences of continued use of fossil fuel such as coal but the dilemma will continue to haunt us. Until such time Modi took charge in 2014, there was proliferation of power plants mostly based on coal. The resultant capacity was far in excess of the demand for power. At present, only 50% total generation capacity of about 360,000 MW [this includes about 63% based on fossil fuel (of this coal alone is 54%) and nearly 22% being the share of renewable energy] is utilized.
The current capacity based on renewable energy being about 80,000 MW, going by Modi’s revised target, increasing this to 450,000 MW will require an addition of 370,000 MW. This plus about 50,000 MW from coal-based projects already under implementation, the total capacity will go up to 780,000 MW [360,000 +370,000+50,000]. The projected demand by 2030 being about 320,000 MW [based on ambitious growth @6%], this would mean decline in utilization rate to 40%.
The only way the proposed mammoth addition to renewable capacity can be accommodated – without disturbing the demand-supply – is by closing down a substantial chunk of existing capacity based on fossil fuel besides abandoning such projects already under implementation. But, that is an abstract idea.
There can be absolutely no two opinions on the dire need to go for clean energy based power plants in the interest of preserving our environment. One would even go along with Modi when he exhorts that ‘India is the least polluter and yet is committing more than others in terms of reining in emission’. But, this can’t be at the cost of under-utilizing the assets already created.
The important point to note here is that the original target of 175,000 MW based on renewable energy was ambitious. The government had not taken into account the existing capacity with the result that even with 80,000 MW of it already added, we have aggravation of excess supply leading to several plants remaining idle or running at woefully low capacity utilization threatening their viability. Now, to more than double the target [read: 450,000 MW] will lead to the demand-supply imbalances assuming catastrophic dimensions.
Phasing out fossil fuel based plants is not a practical option as there will be surge in non-performing assets [NPAs] en mass. Already, nearly 40,000 MW capacity worth about Rs 250,000 crore has turned NPAs due to a combination of factors such as non-availability of fuel, inability of promoters to sign power purchase agreement [PPAs], delayed payment for supplies by power distribution companies [PDCs] etc. One shudders to think of the fall-out when many more will be closed.
Even so, this option is also out of sync with what Modi indicated when he alluded to changing processes for mining coal as also use of environment-friendly technologies such as ‘coal gasification’ to develop clean energy. Clearly, the government has no intent of closing coal-based; instead, it is focusing on working out better ways of generating power from these sources so as to make such use environment friendly to the maximum extent possible.
Yet, in his enthusiasm to show to the world that India is a front-runner in embracing renewable energy, the Prime Minister has gone ahead setting unrealistic target ignoring the already existing capacity. This must be avoided. There is no justification whatsoever for any increase in renewable capacity beyond 175,000 MW.
With 80,000 MW already added, adding another 95,000 MW will take the total capacity to 505,000 MW by 2030. This should be adequate to meet the projected demand 320,000 MW at a use factor of about 63%. While, maintaining some degree of semblance between supply and demand, this will still be in compliance with the target of 40% share of renewable energy in generation capacity as committed by India under the Paris Agreement on Climate Change.
Meanwhile, the government should adopt policies which offer a competitive environment to generators, distribution companies [discoms] and consumers [if, it wants to give subsidy to certain users such as farmers and poor households, that should be credited directly in their accounts]. The overarching focus of these policies should be to be to ensure optimum utilization of capacity, curb inefficiencies in procurement, transmission and distribution, delivery of power at affordable rates and health of discoms.
The government’s approach to policy formulation should be ‘holistic’ with all its crucial components neatly inter-woven to serve a common objective [the left hand must know what the right hand is doing]. This is an absolute must to prevent too much excess or too much deficit of power – neither of which is desirable.