King Coal in #India is about to crash! #StopAdani #auspol #qldpol It doesn’t stack up.

By Silvio Marcacci

Silvio is Communications Director at Energy Innovation, where he leads all public relations and communications efforts.

India Coal Power Is About To Crash: 65% Of Existing Coal Costs More Than New Wind And Solar

King Coal’s reign in India is about to come crashing down .

Coal supplied 80% of India’s total power mix in 2016-2017, but economics have flipped the country’s energy equation – new renewable energy is now cheaper to build than running most existing coal-fired power plants.

Renewable energy costs have fallen 50% in two years, and are forecast to continue dropping apace.

New wind and solar is now 20% cheaper than existing coal-fired generation’s average wholesale power price, and 65% of India’s coal power generation is being sold at higher rates than new renewable energy bids in competitive power auctions.

The tipping point may have been 2016-2017, when renewable energy installations surpassed coal for the first time, adding twice the capacity.

Coal plants nationwide already only run around half of the time, nearly every Indian coal plant violates the country’s new air pollution standard, and India’s Central Electricity Authority (CEA) has proposed closing nearly 50 GW of coal capacity by 2027.

Retrofitting the plants that remains open will each cost millions to achieve compliance, so running already uneconomic plants will get more expensive as plants run less often and generate less profit.

But while India’s power demand will double over the next decade, its draft National Electricity Plan (NEP) calls for rising demand to be met with 275 gigawatts (GW) total renewable energy capacity by 2027, without requiring new coal plants beyond those already under construction.

As ever-cheaper renewable energy comes online, increasingly expensive coal generation will fall further from profitability. So how can India’s power sector handle this looming coal crash?

New Wind And Solar Are 20% Cheaper Than India’s Existing Coal Power

Similar to the United States, it’s increasingly difficult for Indian coal generation to compete economically with fast-falling renewable energy costs, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

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IEEFA finds India’s wind and solar energy costs have fallen 50% to as low as $38 per megawatt hour (MWh) over the past two years, with renewable energy bids in new auctions costing 20% less than the cost of wholesale electricity from existing Indian coal generation, and 30-50% less than the required cost to justify new imported coal or liquefied natural gas capacity.

India coal power prices compared to solar auction prices 2012-2017

In 2016-2017, India added 15.7 GW renewable energy capacity (2.5 times the 6.5 GW added in 2015-2016), compared to 7.7 GW net coal installations (65% less than average installs over the previous four years). IEEFA forecasts India will add 14 GW new renewable energy capacity in 2017-2018, more than doubling the 5.8 GW expected net coal additions.


India power generation capacity additions by technology 2012-2018

India’s 2027 renewable energy target requires 57% of installed capacity to come from non-thermal energy, necessitating 21-22 GW annual renewable installations. CEA expects 317 GW peak national power demand in 2026-2027, 20.7% lower than its previous estimate, thus requiring no new coal capacity beyond the 50 GW of coal currently under construction. IEEFA estimates less than 5 GW annual net coal power installations over the next decade, with more than 2.5 GW in annual retirements of the oldest and dirtiest generation.

Because power demand has risen slower than expected and renewable energy has come online faster than expected, national coal-fired power plant capacity factors (how often a plant runs) fell from 77.5% in 2010 to 56.7% in 2016-2017. The 50 GW of planned coal could push national coal capacity factors as low as 50%, just as gigawatts of cheap renewables come online, meaning unless new plants replace retiring capacity they could come online as stranded assets.

Expensive (And Dirty) Coal’s $8 Billion Annual Bill

Stranded assets are already a problem for Indian’s coal fleet – the India-run Numerical service estimates 17 coal-fired plants totaling 18.4 GW capacity worth roughly $30 billion are currently stranded assets – and the problem isn’t going to improve anytime soon.

Two-thirds of existing Indian coal generation is now more expensive than solar or wind generation , and keeping these power plants running costs India billions every year, according to Greenpeace research comparing CEA 2015-2016 coal power generation data to new renewable energy project bids. At least 65% of India’s current coal power generation (94 GW of installed capacity) is being sold to distribution utilities at rates higher than the cost of new solar and wind. Roughly 30 GW of this total is more than 20 years old, and ran at a 53% average capacity factor in 2016.

Potential annual savings by replacing coal with renewable energy

Greenpeace reports replacing the 94 GW of uneconomic coal generation with solar or wind energy would save Indian industrial and residential consumers $8 billion per year, but even replacing the 30 GW of older uneconomic coal would reduce annual power costs by $3 billion.

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