India won’t save coal

So says  of the Institute for Energy for Energy Economics and Financial Analysis:

CaptureIn 2014, the government of India announced a massive electricity-sector transition. A year into this program, the evidence suggests momentum is building on a number of key fronts. In a reference to Hindu mythology and the Chariot of the Sun being drawn by seven white horses, Prime Minister Narendra Modi’s refers to “Seven horses of energy.”

The goal for India is to build energy security by diversifying supply reliance beyond coal, hydro, nuclear and gas, to significantly expand levels of wind, solar and biomass. The Modi government’s goal of adding 175 gigawatts (GW) of renewables by 2022 and accelerating the deployment of distributedenergy microgrids underpins this transformation.

Key enablers of this transformation will be a sustained reduction in the aggregate technical and commercial (AT&C) loss rates of 26%, and a successful reform of the state-based distribution companies (Discoms) to resolve unsustainable net operating losses (US$11bn in 2012-13). IEEFA models a 60%, or 500 terawatt hours (TWh), increase in net electricity demand to 1,318TWh per annum over the seven years to 2021-22. Reducing AT&C losses by 1% per annum could deliver a 114TWh saving, equating to a massive 23% of the required increase in net electricity generation.

If energy efficiency initiatives can deliver a net electricity savings of 1% per annum, this likewise could reduce required electricity generation growth by 75TWh, or 15% of the total required. Solar electricity installs of 75GW by 2021-22 could deliver 110TWh or 22% of the required electricity increase.

Access to international finance is key, and SoftBanks’ June 2015 US$20bn endorsement shows the momentum in this realm. Plans to take wind installs to 60GW could deliver 19% of the uplift. A combined capacity expansion across nuclear, gas, biomass and hydro could deliver another 25%.

The net result is that India could supply net electricity sufficient to underpin 7% annual gross domestic product (GDP) growth in the seven years to 2021-22 (60% overall) with coal-fired electricity delivering only 32% of the overall expanded electricity production required. Even here, a 1.25% per annum improvement in average thermal efficiency of coal-fired power plants could reduce the required increase in coal tonnage by a cumulative 65 million tonnes per annum (Mtpa).

Energy Minister Piyush Goyal’s hope for India to cease thermal coal imports is entirely feasible. In this context, the Government of India’s (GoI) ambition to double Indian domestic coal production to 1,500Mtpa by 2021-22 is actually likely to oversupply India with coal by 400Mtpa. On this basis, we believe it would be prudent for India to go slow on new thermal power plant additions, lest they end up stranded similar to generator fleets in China, the U.S. and Australia.

The obstacles are like everything about India: vast, interrelated, and complex. If India is unable to achieve sustained economic grow of 7-8% per annum, it will not need current imported coal levels, and achieving zero thermal coal imports could occur earlier than forecast. Likewise, lower than projected growth rates could leave US$100bn of stranded thermal power plants running at low utilisation rates and delivering continued net losses for shareholders and banks.

Buckley has already declared the death of the Adani coal monster. Full report.

David Llewellyn-Smith


    • Coal is about to be smashed… no doubt. And Indian demand is years away from making up the shortfall with increasing surplus which is about to hit.

      However, there is one glaring factoid in the above article which makes the whole domestic supply argument nul in void. Primarily, the vast majority of India’s economic coal resources comprise of coal seams from the Permian and Tertiary periods, as well as lignite, formed when India was part of the Gondwana supercontinent. Gondwana coal (hard coal), constitutes the large majority of coal known resources, and is concentrated in Central and Eastern India.

      Hence the key limitations – (a) India cannot increase domestic coal production, most of its significant resources residing under protected forests or land set aside for minorities. (b) Rail infrastructure from the centre, where the majority of the coal is located, runs to the east where most of the coal is shipped, has very limited demand. (c) Economics – the east is also the opposite side of the country where thermal coal demand growth is at its greatest (i.e. demand is primarily West). But more importantly, (d) Indian coal is also typically of such poor quality, high in silica, which makes it unsuited for newer, more efficient coal-fired power stations.

      And thats the key bit I want to emphasise, that even if they dig up their forests, and rail then ship their domestic coal to where its needed – THEY CANNOT BURN IT IN MODERN POWER STATIONS. It would destroy them quick smart.

      Hence the reason why various Indian companies have being buying coal resources everywhere – even trying develop totally uneconomic resources too…

      In any case, India has other opportunities with Iran (i.e. gas). But can I make this last point, Indian coal is typically very poor. They know this, and it would be far better (and cheaper) for India to close 99% their small inefficient coal mines and import 100% thermal coal from Australia. Recognising that there will be substantial competition from gas via pipelines. So nothing is assured.

      That article above is factually wrong on a number of fronts.

  1. FiftiesFibroShack

    Does anyone know if that Hector costume is a one of a kind? It will be the perfect halloween costume at some point in the future.

  2. India’s coal consumption grew at the fastest pace globally in 2014 and on track for similar 2015. Consumption is expected to double by 2030. Piyush Goyal said it may be possible to cease thermal coal imports in 2-3 years if Indian coal mining sector could resolve inefficiencies (understatement) and maximise output in order to substitute imported coal.

    So we have coal still hundreds of millions of tonnes of coal being consumed India. Much of this coal is high ash high sulphur and other particulates – coal is to be burned regardless – if CO2 is your concern, better for India to source low ash low sulphur feed. I know where there is plentiful supply 😉

    • Forecasts for Indian coal consumption assume that India will follow the development pattern of China 20-30 years ago. Unfortunately for Australia’s coal producers, this simply wont happen (and probably cannot happen, even if they wanted it to).
      Coal distribution requires enormous amounts of physical infrastructure to make it work. India is neither wealthy enough nor capable of such vast projects (where China was).

      India will skip coal in power generation, like it has skipped fixed telephony in communications. The fixed costs are insurmountable, in the face of low cost competitors.

      India/Africa/Phillipines etc will skip coal, and head straight to solar. Investors have already discounted the value of coal assets. They will never recover. Good riddance.

      The job of people working in your industry (including certain politicians) is to delay the inevitable death of coal. Although you guys know you’re flogging a dead horse, it’s still worth your while lobbying hard – as extending the life of the assets by even a few years is still worth multi-millions.

      The rest of us call bullsh*t on coal’s dinosaur mentality.

    • if CO2 is your concern, better for India to source low ash low sulphur feed. I know where there is plentiful supply

      CO2 is CO2, from low or high sulphur coal.

      Ironically, high sulphur coal tends to ameliorate AGW by putting up a sulphate shield. 😯

      • Coal has a decent chance of being in the mix post-2020, but it wont be large part of it. Both the backwards looking hubris of the MCA and IEEFA’s call of zero imports by 2021 are rubbish.

        At the very best, coal will deliver critical base-loads for high intensity industry and/or CBDs. They will become niche.

      • Developing countries are bypassing the outdated Western idea of massive power stations as the cost of developing and maintaining a grid network and transmission lines are prohibitive.
        Coal power stations have low initial capital costs compared to renewable energy but the long term costs are the issue as well.
        Coal power stations are there mainly for heavy industry, for the 22% of Indians in poverty, they are not going to see any benefits for them.

      • Energy Minister Piyush Goyal has been so bold as to say the country can cease thermal coal imports entirely soon, an ambition that is utterly feasible. It’s likely, in fact, that India’s ambition to double its domestic coal production to 1,500 million tones per annum by 2021-22 will oversupply India by 400 million tones per year.

        In other words? The end of India’s coal-import market may not be all that far away.