Coal Remains King Piece in India’s Energy Mix

At the international climate conference COP 26 held at Glasgow in 2021, many countries had objected to the initial text of “phasing out of coal and fossil fuel subsidies” after which a consensus was reached among the parties and a new text was arrived at, which contained the term “phase down” instead of “phase out”.

For India, “phasing out of coal” is not feasible in foreseeable future. Even the “phasing down” of coal usage, in absolute numbers may be a hard task, though coal as a percent in energy mix may gradually decline.

The demand for coal in the country is expected to be in the range of 1.3 to 1.5 billion tonnes by 2030, according to the Economic Survey 2021-2022, despite the push for renewable energy. This is an increase of 63 per cent from the 2019-2020 demand of 955.26 million tonnes. India imports fairly large quantities of coal every year, to make up for the demand-production gap. India has imported 215.25 million tonnes in 2020-21, 248.54 million tonnes in 2019-20 and 235.35 million tonnes of coal in 2018-19.

The total coal production in India during 2021-22 has touched over 777 million tonnes compared to 716 million tonnes during 2020-21. Out of the total production, central PSU Coal India accounted for 80%, Telangana state PSU Singareni Collieries accounted for about 8% and the balance 12% was produced by private sector for captive consumption.

In the year 2013-14, the total production of raw coal in India was 565.76 million tonnes. Hence, during the last 8 years of Modi Government, total coal production has gone up by 27% — an average yearly growth rate of slightly above 3%. The International Energy Agency (IEA), in its annual coal report of 2021 said, stronger economic growth and increasing electrification will drive coal demand growth of 4 per cent per year in India.

Due to the hyped-up CAG Report, coal production has suffered during the last several years. In September 2014, the Supreme Court of India cancelled all but four of the 218 coal block allocations.

A total of 42 coal mines could only be successfully auctioned, in four rounds of auctions conducted by the Modi Govt, under the commercial coal mining auction procedure, with a total cumulative peak rate capacity (PRC) of 86.4 million tonnes per annum. To boost coal production, the government is actively inviting the private sector to make private production reach 400 million tonnes per annum by 2030 by including key features in the auction process, including offering ease in participation with no restriction for prior coal mining experience, optimized payment structures, full flexibility in coal utilisation, efficiency promotion through incentives for early production etc.

70 percent of India’s total power production is thermal power or coal-based power generation. Coal is also used in many other industrial uses. Achieving India’s target to deploy 450 gigawatts of renewable energy by 2030 is critical if the country has to succeed in displacing coal generation on the power grid, as overall energy consumption grows.

India has crossed 100 gigawatts (GW) of installed solar and wind capacity, with another 63GW under construction. The plan is to have 175GW renewable energy capacity by 2022 and 450GW by 2030. Huge injection of renewable electricity in the grid from sources such as solar and wind requires a storage mechanism that can help balance the national electricity grid. According to CEA, there will be a need for 27GW of grid-scale battery energy storage systems by 2030 with four hours of storage. India would need 38 GW of four-hour battery storage to efficiently integrate 450 GW of renewables by 2030, a joint study by Finnish power conglomerate Wartsila and consulting firm KPMG has noted.

India currently has just 20 MW of installed battery storage capacity, with 1.7 GW of battery capacity in the pipeline, according to Mercom India Research. To enhance domestic manufacturing of advanced chemical cell battery storage, Government of India has issued a notification for the performance-linked incentive (PLI) program. The program aims to achieve 50 GWh of advanced chemistry cell, and 5 GWh of niche advanced chemistry cell manufacturing capacity.

“Energy storage is actually the true bridge to a clean-energy future,” says Bernadette Del Chiaro, executive director of the California Solar and Storage Association. How quickly that future arrives depends in large part on how quickly the battery storage costs fall.

“The coal crisis is being witnessed in 12 states once again after October 2021,” All India Power Engineers Federation chairman Shailendra Dubey said recently. The depleting coal inventory of domestic thermal power plants has prompted public sector power engineers to warn of an impending energy crisis in 12 states. Coal inventories held by thermal power plants remain tight at around nine days of stock.

To avoid an energy crisis, coal production and hauling needs to be boosted. Instead of taking out most of the funds from Coal India in the form of dividends and buybacks, the PSU should be allowed to plough back its profits in capital expenditure in order to increase the mine capacities and to develop new mines. Allocation of more coal mines to private sector, of course in a transparent manner, needs to be fast-tracked. There are issues with the Railways regarding the hauling of coal. The job of resolving the issues with Railways needs to be taken up by the Coal Ministry. The Centre will have to engage with the state governments for faster acquisition of land and processing of environment & forest clearance applications etc. India must also enhance investments in the deployment of clean coal technologies throughout the coal value chain.

The views and opinions expressed in this article are those of the author.

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