India Reduces Coal Electricity for First Time in 10 Years

Last year saw a decline in the electricity India produces from coal for the first time in a decade, the product of a slower economy plus increased reliance on renewable energy.

In a post republished by the Institute for Energy Economics and Financial Analysis (IEEFA), Reuters cites India as the world’s second-biggest coal consumer, importer, and producer, after China, consuming nearly a billion tonnes in 2018/19. But last year, analysis by India’s Central Electricity Authority showed coal-fired generation down 2.5%.

“While greater adoption of renewable energy contributed to lower output from coal-fired utilities, weak economic growth added to a slowdown in overall demand for electricity,” the news agency says. “Analysts and power sector executives say the fall in annual coal-fired generation was a blip and largely due to a broader economic slowdown.”

But Tim Buckley, the IEEFA’s director of energy finance studies, said coal is in an “unfair fight” in which the rise of renewables will be increasingly influential. “It is very much an aberration now, but it’s a portent to what is inevitably going to happen in 5-10 years,” he said.

“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,” Reuters writes, with renewable energy contracts coming in around 3.0 rupees/4.2¢ per kilowatt-hour, against 5.0 to 6.0 rupees for new coal plants.

“Once built, renewables also tend to force coal from the generation mix, as they have lower operating costs,” the news agency adds. “As a result, India’s current coal fleet has a utilization rate of around 52 to 55%, well below a level that would be considered economic in other countries.”

As for new capacity, “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.”