States and companies that cumulatively operate 50% of existing installed power generation capacity in India are committed to not building new coal power plants, says new research
Since 2019, many of India’s biggest power producers have been working to decrease their dependency on coal power generation and rely more on renewable energy, a new analysis by Delhi-based climate communication outfit Climate Trends found.
The analysis took into account the cumulative impact of a few states and companies that have shifted towards renewable energy to cater to new demand growth.
It started with Gujarat in 2019, followed by Chhattisgarh, which is home to the country’s third-largest coal reserves. In 2020, Maharashtra and Karnataka followed suit, observing that the “thermal power sector [is] a dying market”.
Additionally, India’s largest power producers – the National Thermal Power Corporation Limited (NTPC), Tata Power and Jindal South West (JSW) – have announced an end to greenfield coal power generation projects.
The analysis noted that together, these states and companies account for 50% of India’s existing generation capacity.
“Several Indian states and power producers have moved away from coal as it’s no longer profitable. (The) cost of solar energy in India is now cheaper than coal. In a few years, renewables along with battery storage will be more viable than thermal generation,” said Aarti Khosla, director at Climate Trends.
Phasing out coal power is a ‘no regrets’ policy
According to the analysis, apart from climate benefits, the economic benefits of coal exit will lead to a 2% net increase in India’s annual Gross Domestic Product (GDP) Purchasing Power Parity (PPP) until 2050.
A Lancet study also pointed out the effect of air pollution on India’s economy. According to the study, air pollution in India led to 1.67 million premature deaths in 2019, with the country incurring a loss of $36.8 billion as a result.
If India wants to capture investor’s interest, it will need to illustrate a decisive coal-phase out plan, the analysis emphasised. Some of India’s biggest investors – Amazon, Facebook and Google – have committed to net-zero targets or carbon neutrality.
According to the analysis, the commitment to source green energy applies to each company’s global operations, creating a race between countries to provide corporations with the easiest environment for sourcing renewable energy.
The analysis found that based on economic considerations, smart project developers and distribution companies have announced ‘no new coal’ or ‘exit coal’ policies.
“This trend is likely to be followed by other developers and DISCOMS in India, with low or no appetite for any new coal,’’ says Vibhuti Garg, energy economist at IEEFA.
However, the inputs from industry suggest that the timeframe for a transition away from coal will not only depend on the variable cost of solar power production, but also on several other factors, the analysis added. These include technologies for energy storage, grid flexibility, availability of investments at the scale required, and energy market reforms both at the federal and state level.
Renewable energy is deflationary
Between 2010 and 2020, the cost of setting up solar photovoltaic projects has dropped by more than 80%, the analysis stated. Moreover, the price of renewable energy has dropped 30-40% lower than the domestic coal-based capacity and approximately 50% lower than the imported coal-based capacity, the analysis found.
In addition, India’s renewable energy cost is the lowest in the Asia Pacific region. With the recent solar auction, the per unit cost of solar energy stands at ₹2/KWh ($27/MWh).
The analysis revealed that if Tamil Nadu and Rajasthan (two of the top five renewable energy states) announce their coal exit strategy in the future, the tally of no new coal power plants will increase to 65% of all Indian capacity.
“Power utilities of states such as Rajasthan and Tamil Nadu, which are plagued with financial liabilities, are uniquely placed to commit to no new coal. They have abundant renewable energy and could benefit with reduced cost of electricity production” Khosla said.
Slowdown in global coal capacity
Being home to the world’s third-largest coal fleet, India also has the second-biggest pipeline of coal power projects in the world. The analysis revealed that India’s growing commitment to no new coal will lead to a dramatic slowdown in global coal capacity growth and a reduction in CO2 emissions worldwide.
For India, its state-led coal phase-out can help close the emissions gap between the Paris Agreement and its current Nationally Determined Contributions (NDC) emissions reduction pledge, the analysis noted.
“India has taken significant steps to decarbonise its power sector. With an ambitious target of 450GW of renewables by 2030, the country is committed to transform its energy mix,” says RR Rashmi, Distinguished Fellow at The Energy and Resources Institute (TERI).
According to him, the share of coal in India’s electricity production has already stopped growing since 2016 with the falling cost of solar energy making it uneconomical to invest further in coal. It will naturally decline further if good energy storage systems develop and market reforms are speeded up, he added.