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IEA's view out of touch, thermal coal demand won't rise beyond 10%: Report

The International Energy Agency (IEA) had said coal use would double in India by 2040

Jayajit Dash  |  Bhubaneswar 

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India's thermal demand is poised to fall, belying hopes of exporters from Australia and US who eyed the country as a long-term growth market.
 
The country is now the second-largest consumer-cum-importer of thermal but imports are sliding. During the April-October period of the current financial year, thermal imports declined 16 per cent to 33.62 million tonnes.

Research by the US-based Institute for (IEEFA) sees within a decade of peak thermal demand. The transition is fuelled by the renewable sector, especially solar power, where tariffs in recent tenders have dropped below the average cost of coal-fired power.

IEEFA forecasts that India's thermal use is likely to peak not more than 10 per cent above current levels, a far lower peak than most other analysts are forecasting.

Tim Buckley, lead author of the report feels India's target to all but cease thermal imports by the end of this decade is nearing its logical outcome.

IEEFA's conclusion stands in stark contrast to the forecast by the (IEA) which sees Indian use doubling by 2040.

But, Buckley contests the view by "IEEFA would challenge IEA's coal-centric view of the world as entirely out of touch with energy developments in under Prime Minister Narendra Modi. While IEEFA acknowledges that our forecasts are non-consensus, we believe strongly in them and note that we were ahead of the pack in predicting a similar transition in China", he said.

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Buckley feels is on track to catalyse $200-300 billion of new investments in infrastructure where global capital inflows will play an increasingly important role.

The report notes India's de-carbonisation policy is in line with global trends. Globally, infrastructure investments is running at two to three times the level of fossil fuel capacity investment since 2011.

Contrary to what other commentators have got to say on the sustainability of the tariff in India, the IEEFA report sees price stabilising at Rs 2.44-3 per unit of electricity in the near term.

"A combination of ambitious government policy combined with ongoing solar and wind cost deflation running at more than 10 per cent annually means that the power and financial sectors face growing stranded asset risk if excessive investment in new thermal power capacity is allowed to continue", it observed.

According to IEEFA, renewable capacity additions in are projected at 14,000 megawatts (Mw) in the current financial year, a slight slowdown from the 2016-17 level but more than double the 5,800-Mw net thermal capacity ramp-up.

Tepid capacity addition in coal-fired power plants is expected to slow usage. Across the country, 24,000 Mw of coal-based plants under construction are facing viability issues due to logistics, even as growth in electricity demand remains below expected levels and there is a simultaneous increase in demand for renewable energy/power.

Between FY17 and FY20, the annual net capacity addition in coal-fired power units is projected at 6,100 Mw. This implies a dramatic two-thirds reduction from what was produced in three financial years between FY13 and FY16. During the three-year period, around 20,000 Mw of net capacity was added on a yearly basis.

First Published: Thu, November 30 2017. 01:40 IST
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