So says Tim Buckley of the Institute for Energy for Energy Economics and Financial Analysis:
In 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.
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