Newsletter - January 22, 2020
Blackrock, the world’s largest asset manager, last week announced that it would cut exposure to companies that generate more than 25% of their revenue from thermal coal. With about $7.4 trillion worth assets under their management, the announcement is likely to cause ripples in the world of energy financing. The move, expected to be implemented by mid-2020, comes after disinvestments worth $11 trillion were reported in the “Financing the Future” summit held in Cape Town in September last year. For many, Blackrock’s announcement is the clearest sign yet that private investors are steadily steering away from fossil fuels, and particularly coal, for future investments.
The drift of private finance away from coal is ostensibly linked to trends in western Europe and the US, where both thermal power and coal production have peaked. But while coal might have stagnated in the West, the situation is starkly different in Asia where relatively dirty thermal power is likely to be an important source of energy for up to six more decades. Provided, of course, the market doesn’t kill the sector first.
India, where thermal power is expected to be the dominant source at least until 2050, is in the midst of reforming its massive coal sector. This fortnight, the country made its biggest leap yet in this endeavour by approving, for the first time ever, 100% FDI in coal mining and the termination of end-use restrictions that limited coal production to just few captive mines held by steel manufacturers and power companies, apart from state-owned entities. The decision effectively ends the monopoly of Coal India Ltd (CIL) in coal production, and opens up the sector to investments from companies seeking to gain access to cheaper fuel or to sell coal on the market.
The move to liberalise the sector comes after a spell of sluggish coal production where shortfalls had to be met with imported coal. India imported a record 235 MT of coal worth almost Rs3 lakh crore in the last year, out of which 135 MT, mostly thermal coal, worth about Rs1.71 lakh crore could have been met with domestic reserves, which are the fourth largest in the world. This fiscal year, worker strikes and monsoon flooding saw CIL produce just 390 MT of its 660 MT target for the year in the first nine months. The shortfall was once again met with 163.86 MT of coal imports until October. While imports have come down in the three months since, the reasons are more to do with India’s ongoing economic slowdown, which has seen demand shrink rather than any serious uptick in domestic production.
The Centre had initially set a target of producing 1.5 billion tonnes of coal domestically by 2020, of which 1 BT was to be produced by Coal India and the remainder by non-CIL sources. With CIL struggling to meet its targets, the timeline has now been revised to 2023-24. While Coal India itself has been flagged for serious concerns, particularly regarding the flouting of environmental norms, the Indian government, over the past year, has moved aggressively to open up the sector and attract global investments. In the first such coal mine auctions in four years since the SC ordered the cancellation of all licenses granted during the last round, five mines were allotted to Birla Corp, Vedanta, Prakash Industries and Powerplus Traders, with the option of selling up to a quarter of the output on the open market. India’s plans for the immediate future involve the auctioning of 200 coal blocks in the next five years, while further regulatory reforms are also on the cards. A proposal from the PMO has also reportedly recommended doing away with the coal cess of Rs400 per tonne of coal mined in a bid to completely end reliance on coal imports for thermal power.
The decision to liberalise coal in a bid to attract investments, while arguably beneficial in the face of India’s coal shortages, is hardly in line with global trends of private investments. The Blackrock announcement, although criticised for not going far enough, is still a clear signal of private investors moving away from fossil fuels and towards low-carbon technologies and sources of power. It is also a sign that globally, investors are becoming increasingly wary of the quickly diminishing costing advantages that coal holds over renewable sources such as solar and wind. Earlier this week, the annual risk report released at the World Economic Forum in Davos, Switzerland revealed that climate impacts dominated the concerns held by the world’s biggest financial players.
Although India has now opened up coal production to 100% FDI, Blackrock and other large private asset managers distancing themselves from coal could imply that India will have to look domestically to finance its big coal push, even as the commodity loses its economic sheen globally. From a forward-looking perspective, this deafness to global cues could have devastating impacts on the future. For one, India’s continued reliance on coal will be a drag on global climate efforts as developed nations accelerate their pull-back from thermal power. But perhaps more worrying is the fact that while improvements in efficiency of renewables and further decline in prices of renewable energy is on the cards, thermal power is only due to get more expensive over the coming decades. With India attempting to once again walk the tightrope between coal and renewables and hedging its bets on both, a poorly planned drive to increase coal production in the country could end up in financial devastation with several stranded assets in just a decade’s time, added to the already exhaustive list of non-performing entities.
The India Meteorological Department (IMD) will release the ‘new normal’ reference dates for the monsoon season in the country. While the arrival of the southwest monsoon in Kerala is likely to remain the same, June 1, the withdrawal of rain from north-west India is likely to be delayed by at least 10 days – from September 1 to September 10.
India has been adhering to the previous dates for the past 79 years. The new dates are based on the analysis of historic data on changing rainfall patterns across India. IMD hopes the change will help farmers, disaster management authorities and other civic agencies to plan better for the season.
Methane emissions in Arctic Ocean highly overestimated: Study
Methane emissions, especially in regions like the Arctic Ocean, are highly overestimated, a new study states. It opines that because the Arctic Ocean region is a harsh working environment, scientific expeditions are only conducted during the warmer months because of predictable weather and water currents. Therefore, most of the data on methane discharge from the ocean floors in this region is collected in summer and early autumn.
The study, however, states that methane discharge system hibernates in the winter months. Case in point: “We have found that seasonal differences in bottom water temperatures in the Arctic Ocean vary from 1.7°C in May to 3.5°C in August. The methane seeps in colder conditions decrease emissions by 43% in May compared to August.” says oceanographer Benedicte Ferré, researcher at CAGE Centre for Arctic Gas Hydrate, Environment and Climate at UiT The Arctic University of Norway. This means that climate gas calculations are disregarding seasonal temperature variations, according to the study. It does not, however, look into the future when ocean temperatures are set to rise to anywhere between 3°C to 13°C because of climate change. It only looks are correcting the current methane emissions budget.
Study links climate change with an increase in violent crimes in the US
Climate change could lead to a significant increase in violent crimes in the United States every year, according to a new study. The study, which was published in Environment Research Letters, states that depending on the rate at which temperature rises, the country could see at least 2 to 3 million more violent crimes between now and the end of the century.
The projections were made by combining empirical models from previous studies with 42 state-of-the-art global climate models and the study also accounted for regionality and seasonality.
Ocean temperatures hit record highs last year as global warming rate accelerates
Heat in oceans across the world reached record levels in 2019. This is a clear sign of the acceleration of global warming because oceans absorb 90% of the heat trapped by greenhouse gases that are released into the atmosphere because of human activities such as fossil fuel burning. According to the new analysis, the past five years are the top five warmest years recorded in the ocean and it is the result is the same with the past 10 years. This is significant because hotter oceans would lead to faster thawing of ice and rising seas, which have already reached record levels.
According to another report, warming oceans are also forcing leatherback turtles to travel twice as far for food because rising temperatures is causing their prey to move further north. The exhaustion of travelling so far for food is leading to the turtles laying fewer eggs on beaches, causing a decline in the population of the largest turtle species.
Chile’s 2017 mega fires doubled country’s greenhouse gas emissions
Mega fires in Chile in 2017 emitted an equivalent of 90% of the country’s greenhouse gas emissions that year. According to a report by Universidad de Chile’s Center for Climate and Resilience, the mega fires burnt more than 570,000 hectares of land and cost %350 million to put out. The fires released 100 million tonnes of carbon dioxide, almost as much as the 111.6 million tonnes emitted by the entire country the year before.
In Australia, brief rain spells and thunderstorms brought some hope the wildfires would be put out. But this was short-lived as the fires continue to rage in the country’s south-east. Some scientists fear the wildfires may permanently alter the country’s landscape, despite the country’s efforts to reseed the damaged areas. This is because the high temperatures, drought and the threat of more wildfires will make the recovery process much longer, scientists believe.
Oil and gas boom in US could mean new significant rise in greenhouse gas emissions: Study
The oil and gas boom in the Gulf and southwest regions of the US could generate more than half a billion tonnes of additional greenhouse gases per year by 2030, according to a study published in Environmental Research Letters this month. This is equivalent to 8% of the country’s current total annual emissions rate.
Texas and Louisiana will record the bulk of these emissions, according to the study. This would make reducing the country’s emissions even more difficult if immediate steps aren’t taken to curb the rise.
Deforestation in Amazon rose 85% between 2018 and 2019: Brazilian government data
Deforestation in the Amazon rose by 85% last year compared to 2018. Brazil’s National Institute for Space Research (INPE) found the area with deforestation warnings last year totalled 9,166 sq km, compared to 4,946 sqkm in 2018.
The World Economic Forum’s (WEF) annual risks report has revealed that it is the climate crisis that the world’s elite are most concerned about. For the first time in the 15 years since the report was first published, issues related to the climate emergency filled up the top five slots in the list of concerns that are likely to have a major impact in the next 10 years. The report was released just ahead of the WEF’s annual meeting at Davos, which it claims will be a carbon-neutral event.
Allow private plantations as compensation, says forest board; activists unhappy
Activists have voiced their concern over the Forest Advisory Committee’s (FAC) recommendation to allow private players to raise plantations to be used at a later date for compensatory afforestation (CA). The FAC’s recommendation comes after complaints from private players about the CA process, like delay in setting up plantation because of flow of funds, land identified for CA being isolated and therefore difficult to maintain. The FAC, therefore, reasoned that setting up plantations beforehand would eliminate most of the issues.
Activists, however, expressed concern over the mechanism, where ‘the CA money can be exchanged between the private agency and the project proponent, can lead to a situation where money keeps circulating within a private company’. They also raised red flags over the ambiguity about how the mechanism will be realised on ground.
India begins talks with World Bank for PM Modi’s global power grid plan
India has opened dialogue with the World Bank (WB) for the implementation of Prime Minister Narendra Modi’s ambitious global electricity grid. The project envisions leveraging solar power generated in one part of the world to meet the electricity needs of other nations. A senior government official said WB may prepare a feasibility report for the project soon.
After delaying the emission deadline from 2017 to 2022, India’s power industry, led by state-run NTPC, now wants to raise limits for deadly NOx emissions from 100 mg/Nm3 to 450 mg/Nm3, saying international technology to cut Nitrogen Oxide (NOx) doesn’t work in India. According to an Indiaspend report, the government has already filed an affidavit in the top court to dilute the norms, for power plants that came up between 2003 and 2016 from 300 mg/Nm3 to 450 mg/Nm3.
The NTPC is now suggesting that norms for new plants commissioned after 2017 also be diluted from 100 mg/Nm3 to 450 mg/Nm3, the Indiaspend probe found. Experts said if the plants had followed the 2017 NOx deadline, 28,000 deaths every year could have been avoided. NOx causes respiratory infections after it takes the form of PM 2.5 – one of the major factors behind lethal air in Indian cities. Even the lowest Indian NOx norm of 100 mg/Nm3 is twice the world’s strictest norms of 50 mg/Nm3 set by China for its coal power plants. Experts say the European Union, the US and China are using the same technology rejected by NTPC.
Installing NOx-cutting technologies will cost Indian thermal plants between $1.8 billion and $2.3 billion), far less money than the health benefits of cutting this pollutant, says a joint study by IISD and the Council on Energy, Environment and Water (CEEW). The study said non-compliance would result in nearly 300,000-320,000 premature deaths by 2030.
Adani, NTPC pushed government to extend deadline to install clean tech
Investigations by Reuters have revealed that top coal power generators Adani Power and NTPC pressured the government to extend the deadline to install emission reduction technology by two to three years, delaying emissions targets for a second time. India’s power ministry pushed for coal-fired power plants around New Delhi to be given more time to install equipment. Experts point out that If the government keeps diluting the norms every time polluters wish, India will fail to meet the National Clean Air Programme target of reducing PM 2.5 pollution by 20-30% by 2024.
150 industrial units near Delhi using polluting coal, rice husk, wood as fuel
Environment Pollution (Prevention and Control) Authority (EPCA) chairman Bhure Lal has warned polluting industry units in Kaushambi in National Capital Region of Ghaziabad, to shift to less polluting fuel or face closure. According to UP industries Federation, around 50 units in the township were using coal and rice husk as fuel. The EPCA chief warned them to shift to PNG, which the industry lobby says would result in 25% increase in fuel expenses. There are around 150 industries in Ghaziabad that are running on highly polluting coal and agricultural waste. The central government has given a year’s time to all industries in NCR to stop using coal, wood, rice husk and other traditional energy sources.
Green court gives four months to finish study on automated tyre recycling units
Can the highly polluting process of recycling old tyres to produce industrial oil and other products be curbed by automated plants? That’s the study National Green Tribunal, India’s green court, wants the Central Pollution Control Board (CPCB) to conduct within four months. The CPCB said there are nearly 520 functional pyrolysis units in the country, and around half of them are not complying with the norms. The central pollution watchdog said because of action by state pollution control boards, number of complying units have increased. Pyrolysis, which involves recycling old tyres through a thermochemical treatment under high temperature, causes high levels of pollution and harms the health of workers. The green court has directed the CPCB to regulate import of waste tyres so that India does not become a dump yard for highly polluting hazardous waste material from other countries.
Festive season over, discounts on polluting BS-IV cars continue to be offered
Carmakers may have reduced discounts on polluting BS IV vehicles as their inventory of obsolete BS-IV fuel standard cars come down to manageable levels thanks to sales in festive season, but discounts are not going anywhere just yet. The car companies were offering discounts of as high as Rs 1 lakh on polluting models ahead of transition to BS VI models from April 2020. Maruti Suzuki sold BS-IV stocks as its sales increased by 5-7% during the festive period. Nikunj Sanghi, president of the Automative Skill Development Council said most manufacturers are continuing to produce BS-IV cars as there was no clarity on the availability of new BS-VI fuel across India, therefore discounts would continue to be offered.
Latest state data has shown that India’s renewable energy generation witnessed the slowest growth in the past four years: Renewable power generation moved at a snail’s pace of 5.22% in the past eight months of the current financial year (April-November 2019). The power ministry figures showed the combined generation from solar, wind, small hydro- and biomass- and bagasse-based power plants was at 93.69 billion units (BUs) in the April-November period, as opposed to 89.04 BUs in the same period last fiscal. In November 2019, combined renewable energy generation grew 0.23% to 7.92 BU compared to 7.90 BU generated in November 2018. Industry experts said tariff renegotiations, delay in auction and issue of renewable energy tenders, under-utilization of wind energy potential and an extended monsoon were among the various reasons for the slowdown.
December 2019 saw a significant rise in the solar tender activity compared to November 2019. In December 2019, tenders were announced for 2.3 GW of solar.
Companies lost Rs1,400 cr to Andhra Pradesh’s renewable power curtailment policy?
Of over 7,000 MW of installed renewable energy, Andhra Pradesh curtailed up to 25% of solar and 50-60% of wind power since August 2018, industry executives alleged, claiming that curtailments have caused renewable energy developers a loss of revenue of Rs1,400 crore. Last September, the high court had ordered Andra Pradesh’s discoms not to curtail renewable power, which industry executives say is a violation of court orders, as well as flouting of must-run guidelines laid by the Centre. Without revealing their names to the press, renewable energy forms’ executives said they have filed contempt plea against AP discoms. The court has adjourned the matter of curtailment issue to January 23. The state discoms began curtailing renewable power around July 2019, soon after YSR Congress-led new state government started to renegotiate PPAs signed by the previous administration, claiming the rates were much higher than the prevailing tariffs.
Meanwhile, Suzlon Energy said it has defaulted on loans worth over Rs7,200 crore. The loans were given by a consortium of 18 banks, led by the State Bank of India, along with the Indian Renewable Energy Development Agency (IREDA).
India needs land size of Chhattisgarh to achieve RE targets: Study
A recent study claims India needs a whopping 55,000 sq km to 1,25,000 sq km of land to meet its 175 GW of renewable energy targets by 2022. India has classified a huge 27% area as wasteland. But experts say the words “compensation” or “livelihoods” do not figure in the solar power policy. Many agricultural and pastoral communities in India are livid over state declaring common lands as wasteland and claiming ownership of it, saying the land belongs to everyone. The displaced communities experts say have been reduced to doing daily-wage labour or working as cleaners in the solar parks.
Earlier, IndiaSpend study revealed that large tracts of arid and semi-arid land are being covered by solar panels. Experts point out that the economic cost of land acquisition is being calculated for compensations to land-owning farmers, but loss of livelihood is not addressed.
House panel says govt’s 40 GW rooftop solar target “unrealistic”, needs a relook
India’s rooftop solar programme is in dismal state of decline when it comes to meeting its 40GW by 2022 target, the programme needs a serious relook, latest report by a Parliamentary panel said. Government has achieved merely 11% of its annual rooftop solar target, according to state data. Parliamentary panel said at this rate it was highly unlikely that the target would be met, as there should have been installed rooftop solar capacity of 16,000 MW by 2018-19, but as of October 15, 2019, only 1,826 MW capacity has reportedly been installed.
The Cabinet Committee on Economic Affairs has therefore revised the annual rooftop solar targets, according to which 3,000 MW capacity has to be commissioned during 2019-20. The Committee warned that the slow pace could derail the entire National Solar Mission and recommended that Centre should implement a simpler and quicker method of subsidy disbursement and provide incentives for rooftop solar installations.
Rajasthan-NTPC, set to sign first deal under new 30GW RE by 2025 policy
Under its new solar policy of achieving 30,000 MW by 2025, Rajasthan is set to sign deal with NTPC to set up un ultra-mega 925MW solar park in Jaisalmer, which the state expects will generate Rs 4,000 crore investment. The state is currently in discussion with three other Central public sector enterprises (CPSUs) such as Power Finance Corporation, Solar Energy Corporation of India, and National Hydroelectric Power Corporation for developing joint venture solar parks. Renewable developers are allowed 100% exemption from stamp duty and conversion charges under the new state policy.
India may soon set up 600kW flash chargers for electric buses, which reportedly could recharge their depleted li-ion batteries in as little as 15 seconds. The project will be a joint effort between the Hinduja Group and ABB Power and is called the TOSA flash charging technology. Electric buses are an important target for improved urban mobility and apparently the Centre is aiming to have 30% of India’s buses go electric by 2030.
The NITI Aayog, meanwhile, has estimated that India needs around 50GWh of battery storage capacity in the next 2.5 years to complement the growth of its renewable energy capacity, as well as to meet its e-mobility targets. It has recommended that since EVs are “10 times cheaper than each IC engines” and each 10GWh of battery capacity needs $1 billion in capital expenses, the Centre should extend a direct subsidy on every kWh capacity to lower storage costs as soon as possible.
Amazon India to induct 10,000 EVs by 2025
Online retail giant Amazon has decided to induct 10,000 EVs into its India delivery fleet by 2025. The vehicles will be a mixture of three- and four-wheelers and will operate in 20 cities, including the four metros and tier II cities such as Pune, Ahmedabad and Coimbatore. The EVs will be designed by Indian OEMs (Original Equipment Manufacturers).
Gen-2 EV maker Arrival to get $100 million from Hyundai
Hyundai Motor Corp. will be investing $100 million into UK-based EV startup Arrival, which has developed “second generation” all-electric delivery trucks that have been welcomed by UPS and the Royal Mail. The ultra-lightweight 3.5, 6 and 7 tonne trucks have an all-composite body and reportedly offer 50% reduction in running costs over traditional delivery vans. They also offer a range of up to 150 miles (240km) and with Hyundai’s interest, could even be powered by fuel cells.
The Indian government has done away with captive end-use restrictions on coal mining to open up the sector to even more players and dig out more of the fuel. This will allow all new entrants (except for the steel and power sectors) to sell coal commercially. The new ruling will also support Coal India’s bid to boost its annual output to a billion tonnes by 2023-24.
The Centre will also extend Rs5,559 crore (~$794 million), or 60% of the project cost, to the North East Gas Grid. The finance will be extended as VGF (Viability Gap Funding) — which implies that the government will shoulder a part of the cost, the rest of which will come from the PSUs involved, and the grid will connect the eight north-eastern states to the rest of the country.
Bangladesh asks Australia to fuel 29 new coal plants
Bangladesh has asked the Australian government to consider supplying it with 80 million tonnes of coal over the next five years to fuel its 29 new coal plants. The plants are still in the proposal stage but could also source coal from South Africa and Indonesia. Yet, Bangladesh is one of the most vulnerable to climate impacts and could lose up to 11% of its land area to rising sea levels — which could also displace nearly 15 million of its residents.
Siemens to support Carmichael mine despite protests
Germany’s Siemens has decided to continue supporting the Adani Group’s Carmichael coal mine in Australia despite climate campaigners staging a “die-in” protests at its headquarters in Germany. The firm will provide rail infrastructure to the mine under an $18 million contract, but has been chastised over the climate impact of coal — especially following Australia’s hellish wildfires last month.
However, Siemens will now constitute a Sustainability Board to “better manage environmental care” in the future.