The New India Needs No Coal

The Indian power industry has seen a massive paradigm change over the last few years with renewable energy particularly solar energy dominating the discourse around new generation. While King Coal still accounts for 60% of the country’s power generation capacity, solar energy is making rapid strides. It is expected to grow by more than 130% this year and reach a 5 GW size market. Some analysts are predicting a 10 GW annual solar market from 2017 onward, which would make it the No.1 source for newly installed capacity. With India’s commitment towards climate change and target of 100 GW by 2022, I don’t think that the solar energy is going to look back though it may not meet the lofty targets set by the government.

The Central Electricity Authority (CEA) which is one of the regulators of the electricity industry in India has come out with an annual review of the industry. It shows that India is on the path to put up more than 100 GW of renewable energy between 2017 and 2022. This would mean that India would not need any new coal based generation capacity and that the existing thermal power capacity would be enough to power all the homes. However, 50 GW of thermal power plants (a similar situation is existing in China) are already under construction by various state governments as well as a number of central utilities. These power plants cannot be wished away and it will lead to a situation of continuous overcapacity as well as pressure on lower amount of renewable energy capacity to be installed. The overall power demand is expected to grow from a 1000 billion units now to around 1600 billion units by 2022.

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India has recently faced slower demand growth in the range of 6% due to a slower recovery in industrial demand. There has also been numerous initiatives launched to decrease the amount of energy consumption through energy efficiency measures such as the DELP plan, where LED lights are being given for a subsidized price to consumers across the country. Even by 2027, coal power demand will not come up much as the existing capacity that will be created by 2022 will be sufficient. Private power producers have given up on installing new coal based power plants. It is time of the state governments and central utilities to also give up their coal fixation.