The demand for energy depends on the rate of a country’s industrial growth as well as residential and commercial demands. India is the world’s fourth largest energy consumer. According to market insiders, India’s coal industry is failing to meet its mark under the NDA government. India is fostering new relations with Indonesia and Sri Lanka to supplement its domestic demand for coal. Additionally, India is trying to think beyond traditional energy resources like coal and natural oil, focusing on renewable energy sources to achieve sustainable growth. Around one fifth of India’s energy is presently produced from renewable sources.
Over the past few years, the Indian coal industry fell short of supply as against its increasing domestic demands. The cabinet decision to open up coal mining to commercial miners is an interesting development. In the financial year 2016-17, 34 Coal India projects were delayed due to issues pertaining to forest clearances and land acquisition. This is a recurring issue in this sector in India.
According to India’s draft National Policy on Renewable Energy, which is based on micro-grids, it is expected that the government would establish at least 10,000 renewable-based micro and mini-grid projects across the country. For the first time, the Indian government complemented grid access with decentralised, smaller-scale systems that are aimed to supply electricity directly to consumers. The country planned to ramp up its solar power generating capacity to 100,000 MW by 2022 which is nearly a 25-fold increase from 4000 MW of installed capacity that was there in 2015. This means that every year, India had to install about 14,000 MW of solar power continuously for the next seven years if this ambitious 100 GW target had to be achieved. The records indicate that in the last five years India has succeeded in installing only around 2000 MW of solar power. The fate of other renewable sectors has fared similarly.
Challenges in current coal market
The market value of energy resources respond to changes in the international price. Indonesia’s benchmark price for thermal coal has risen by more than 25% since June this year. The global rise, surprisingly, comes even though the 13.6 million tonnes gain in China’s imports during January-July 2017 has not been enough to offset the 16.3 million tonnes decline in India’s purchase of coal from the overseas market.
India’s coal imports have fallen by about 12% between FY 2014-15 and FY2016-17, partly due to increased domestic production and also because of weak electricity demand. The country’s sluggish industrial growth is a major contributing factor. Coal price drivers like natural gas, export demands, foreign rates, changes in coal mining capacity, changes in electric power production, industrial utilisation, environmental regulations, steel production, and changes in regional electricity generation capacity are some of the pertinent challenges in the sector.
The falling trend continued in the April-June 2017 quarter with coal imports registering 8% decline compared to the same period in the previous year. The coal import during April-June 2016 was 57.38 million tonnes.
China’s demand for imported coal remains buoyant in 2017 due to domestic shortages. China has shut down inefficient coal mines in sharp contrast to India, which is focusing on enhancing production to end dependence on imported dry fuel.
Energy experts said that the international coal prices are currently being determined by China’s coal mining policies which in turn, keep changing depending on international prices. Chinese economy consumes more domestic coal when international coal prices are high. When global prices fall, it restricts domestic production, forcing utilities to go for imports.
Challenges in renewables
The Renewables Global Status Report 2017 states that there are technical reasons behind the weakness of India’s grid system. It lacks ancillary services like systems designed to keep the grid stable. The report states that India still lacks time-of-day pricing for bulk procurement of power. Peaking power plants, also known as peaker plants, operate very fleetingly in India as there is no significant demand for power even during the high seasons.
In 2015, emerging and developing economies accounted for more than half of the global investment in both wind and solar energy but in 2016, they lost the lead in wind power and only narrowly maintained it in solar power. Investment in wind power was down by 27% to reach $51.9 billion in developing countries. Solar power investment declined in developed and developing countries by 33% (to $56.2 billion) and 35% (to $57.5 billion) respectively. Translating hydropower capacity into asset finance is problematic as the average hydropower project takes four years to build. Global research and development (R&D) spending fell 7% in 2016 in the power sector to reach $8 billion due to the overall downturn of the global economy. Corporate R&D decreased by almost 40% in the renewable sector as wind and solar power manufacturers reduced their research expenditure.
India’s renewable sector faces a plethora of challenges. It is a challenge for private parties to acquire the quantity of land that is required for building solar power plants. The same applies for wind power. The wind turbines need large amounts of land and that is a serious impediment in India. Developed countries are experimenting with offshore wind power generation centres but that still remains a far cry in India. Additionally, renewable energy is highly technology intensive and requires constant updation. It is often an issue for Indian companies to import such state-of-the-art technologies from developing countries as India lags behind in developing these technologies. Some of these are end-use technologies like electric vehicles and heat pumps, energy storage and pumped storage home, commercial or grid-scale batteries like thermal storage, demand-side energy management technologies like energy management systems in buildings, and energy supply and delivery management technologies. In the case of hydel power, there are serious policy-level debates on building of new dams. As of now, the Indian government is focusing on small hydel power plants, mostly by harnessing mountain-rivers and its scope remains highly limited.
Renewed focus on alternative energy
The International Solar Alliance (ISA) has formally kicked off with 62 member-countries adopting the ‘Delhi Solar Agenda’ seeking to raise the share of solar power in their energy basket. This is being led by India and is being seen as a major development in mitigating climate change and providing clean, affordable electricity.
Narendra Modi and French President Emmanuel Macron co-chaired the ISA founding conference in the presence of leaders from 23 countries and ministerial representatives from 10 other nations. The conference indicated an acceptance of India’s leadership role in the global fight against climate change. ISA has set a target of 1TW of solar energy by 2030. According to French President Emmanuel Macron, it would entail an investment of around $1 trillion. Prime Minister Modi has gone on record saying that distribution of 28 crore LED bulbs has saved $2 billion and 4GW of electricity in India. India will also provide 500 training slots for ISA member-countries and start a solar tech mission to lead R&D. However, to move towards an alternative energy solution, a holistic yet calibrated approach is necessary.
Global factors affecting India’s Power Sector
lIndia’s thermal coal imports rose by more than 15% in the first 3 months of 2018 to 39.6 mt. According to the Indian government and American Fuels data, this was up from 34.4 mt during the first 3 months of 2017. In 2018, thermal coal imports will rise after 2 straight years which saw decline because of domestic logistic bottlenecks, regulatory changes and surging power demand.
l Increase in the price of coal in international market was happening rapidly in the end of 2016. In 2017 it ran between 72.04 and 93.00. In this year it went up to 109.92 from 89.58 till June.This could’ve decreased the figure of coal import into India, but in reality the number scaled up for the country.
lIndia faces scarcity of uranium in the domestic scenario but socio-political complications regarding its import restricts its build-up.
lAs the production cost is quite high for that energy, it is a capital- intensive power hub. It needs huge foreign investment for the sector.
lStrong socio-political resistance towards nuclear energy generation due to associated environmental hazards.
lGlobal restriction on import of nuclear technology affects the same.
lNegative international opinion regarding hydro power plants due to detrimental ecological impact affects India.
lElectric vehicles and heat pumps, energy storage and pumped storage home, commercial or grid-scale batteries like thermal storage, demand-side energy management technologies like energy management systems in buildings, and energy supply and delivery management technologies are expected to boost the renewable energy firms. There’s a need for capital-intensive foreign developed technologies in the renewable sector because of the absence of significant domestic R&D.