Conventional thinking represented by the BP Energy Outlook or the International Energy Association’s forecast suggests that India’s thirst for electricity requires ever more coal.
But coal’s continuous rise has ground to at least a temporary halt.
As of this week, at just after the halfway point of FY’20, India has generated less electricity from coal (and lignite – brown coal) than in the same period a year ago, while overall electricity production grew by 2.9%.
Data from the National Load Despatch Centre run by the Power System Operation Corporation (POSOCO) showed that this crossover took place on October 9th, with 2019-20’s cumulative coal generation dipping to just over 500 GWh less than the equivalent period in 2018/19.
The dataset maintained by the Central Electricity Authority (CEA) on the National Power Portal differs only marginally from POSOCO’s data, and is also expected to show it occurred on or around October 9, when it is published in the next few days.
Coal-fired electricity generation had increased each month up to July, by which time it had produced nearly 17000 GWh more than the previous year – enough to power Delhi for six months. Since then it has fallen sharply compared to last year, taking the cumulative change all the way back past zero, as shown by analysis of CEA’s Coal/Lignite and Multi Fuel reports (monthly and daily), and POSOCO’s equivalent daily thermal generation reports.
Nearly half a century has passed since India last saw coal-fired generation decline in absolute terms for a whole year. Whether the current lull is maintained for the rest of this fiscal year is of course uncertain, but coal-fired generation faces significant headwinds, making a full-year decline a real possibility.
What explains the drop?
One factor eating into coal’s share is the continued rise of renewable energy, especially solar. Though still a modest contributor, and itself suffering from an investment dip and push-back by DISCOMS seeking lower tariffs (notably Andhra Pradesh), renewable energy has maintained generation growth and now provides just over 9% of India’s electricity on an annualised basis. The Indian Electricity Grid Code 2010 requires discoms to purchase renewable energy when available, which has the effect of squeezing out conventional power unless there is sufficient demand.
A second contributor has been a recovery in hydroelectric generation. The year-on-year increase in hydropower was especially evident in April and May, and again in August and September. The late departure of the monsoon, coupled with the above average rainfall of recent weeks, will leave many dams at higher levels and in a position to produce some additional power in coming months.
India’s fleet of nuclear reactors, despite their modest 3% contribution to the nation’s electricity supply, have not seen a repeat of last year’s maintenance-related output drop, and have upped their contribution by some 25% so far this year.
Finally, India’s stalling economic growth appears to have depressed demand for power. While overall generation is still about 3% higher than a year ago, this marks a large drop from the 10% growth in the first quarter, or the compound annual growth rate of over 6% in recent years.
While almost all analysts acknowledge that coal’s relative share of power production will fall over time, many have expected that increasing demand would see it continuously generate more electricity in absolute terms.
Will coal resume its upward march? A return to higher economic growth would be a necessary condition, and some of the temporary factors such as hydro’s recovery may stall or even reverse. In addition, periodic coal supply interruptions, such as that from late September’s Coal India strike or last week’s inundation of Chhattisgarh’s Dipka mine by the Lilagar river, may not recur.
Even so, the coal power sector still faces barriers of excess capacity, decreasing competitiveness and massive new costs when air pollution controls finally take effect. Then there are constraints from uncertain cooling water availability. These factors will hinder coal’s outlook whether or not the renewed global focus on climate change bolsters India’s ambition to curtail carbon emissions with enhanced goals and new policies.
No wonder, then, that the optimistic forecasts from BP and the IEA, which make broad statistical projections at the expense of taking a more fine-grained perspective, have been joined recently by far more measured commentary and analysis about coal’s place in India’s electricity future.
Charles Worringham is the Australia-based editor of India Power Review.