Page 9 - AsiaElec Week 48 2021
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AsiaElec COAL AsiaElec
Coal too expensive and
unreliable for India
INDIA INDIA’S coal supply crisis is highlighting the The price of imported coal has never been
need for the country to accelerate its transition higher. Imported Indonesian coal rose from
to renewables, according to analysis from the US$60 per tonne in March 2021 to US$200 per
Institute for Energy Economics and Financial tonne in September/October for 5,000 Kcal/kg
Analysis (IEEFA). GAR (Gross As Received) coal.
Vibhuti Garg, energy economist and India The crisis has shown that coal is an expen-
lead at the IEEFA, said that India faced unusually sive source of electricity generation and, further,
high coal shortages from mid-August to October it is inflationary. It has also revealed that coal
2021. is an unreliable source of generation because it
Annual monsoons impact state-owned Coal depends heavily on a long supply chain.
India Limited’s (CIL) production every year, Renewable energy prices have gone down
but this year was different as India witnessed an over the years and wind and solar are highly
extended monsoon season, which exacerbated deflationary. With zero indexation contracts
the coal shortage crisis. extending for 25-year terms, year one solar
Analysis of the coal stock position reveals that energy tariffs consistently below INR2.5 ($0.03)
there was enough coal at CIL’s end, Garg said. per kWh are now the low-cost source of electric-
However the company has been regulating ity supply in India.
the despatch of supplies to coal power produc- The economics of low-cost renewables are
ers with outstanding dues on account of discom threatening the viability of proposed new coal-
payment delays. fired power plants.
This meant that the supply curtailment was More importantly, there is little or no capital
worse in states where coal power producers have available to finance such plants. It is necessary
large outstanding dues. now to direct R&D and finance to emerging
The situation deteriorated as more plants technologies such as battery storage and green
reported their supplies were reaching critical lev- hydrogen, to better integrate renewable energy
els. The government sprang into action, ramp- into the system.
ing up domestic coal production and offtake to At COP26, India pledged to increase the
reduce the energy shortages and avert blackouts. share of electricity generation from renewable
The coal shortage led to a surge in prices at sources to 50% by 2030 and to reach net-zero
the power exchange, which hit a ceiling of INR20 emissions by 2070.
($0.27) per kWh during most of the time inter- In order to achieve these ambitious goals,
vals on high coal shortage days. India must ensure a policy environment that is
The average market clearing price increased conducive to accelerating the offtake of renew-
from INR3 ($0.04) per kWh in June-July to able energy. With cost economics favouring
INR5 ($0.07) per kWh in August-September, renewable energy, it’s clear that sustainable
then INR8 ($0.11) per kWh in October. Prices energy choices can and should lead on the path
have now started to stabilise, hovering around to economic growth.
INR3-3.5 ($0.04-0.05) per kWh.
Week 48 01•December•2021 www. NEWSBASE .com P9
