Coal-fired power in India is being increasingly priced out of the market by cheaper renewables such as solar, with the dirtier fuel abandoned by private capital, and only projects with government support being viable.
If there was one major theme at this week’s annual industry gathering, Coaltrans India, held in the resort state of Goa, it was that the domestic coal sector is under siege, and probably faces a future of limited growth and eventual disbandment.
Rather than politics, the reason is largely economic, with power purchase agreements (PPAs) for renewables now coming in at levels at which even existing coal-fired plants cannot compete.
Coal is in an “unfair fight” and is increasingly losing, said Tim Buckley, director of energy finance studies at think tank the Institute of Energy Economics and Financial Analysis (IEEFA).
While IEEFA is unashamedly pro-renewables, the numbers definitely support the view that coal power generation is struggling in India, and that several newly-built plants run the risk of becoming stranded assets.
Renewables can be offered in PPAs at around 3 rupees (4.2 cents) per kilowatt hour (kw/h), while existing coal generation comes in at around 4 rupees per kw/h and new-build coal between 5 and 6 rupees per kw/h.
Once built, renewables also tend to force coal from the generation mix, as they have lower operating costs. As a result, India’s current coal fleet has a utilisation rate of around 52%-55%, well below a level that would be considered economic in other countries.
After a massive build-out of coal-fired generation from about 2010 to 2016, construction has slowed to a near trickle, while investment in renewables has soared.
India added 106 gigawatts (GW) of new coal-fired capacity in the seven years of 2010 to 2016, an average of 15.2 GW a year, according to data collated by the Global Energy Monitor.
Since then, the pace has slowed, with 8.9 GW added in 2017, 8.4 GW in 2018 and 8.2 GW in 2019.