'Greening' of coal: A peek into India's evolving stance towards emission

The war in Ukraine has forced India to review its plans to scale back the fuel in the overall energy mix

Hardly three days after the 2022 United Nations Climate Change Conference started in Egypt, aimed at curbing emissions and limiting the rise of temperatures to 1.5 degrees centigrade by 2030, Indian policy makers extolled the virtues and necessity of burning coal at events last week, reflecting India’s evolving stance towards emissions. The war in Ukraine has much to do with an about-turn.

Sample this: On November 3, India’s Finance Minister Nirmala Sitharaman, at the launch of the sixth round of coal mine auction, said that a fast-growing economy like India, the world’s third biggest polluter after China and the US, needs greater investment in coal production and gasification projects. The offer of 141 mines — the biggest auction ever undertaken after 64 mines were auctioned in the first five tranches — would benefit 12 states. Sitharaman has extended Rs 6,000 crore as an incentive for coal gasification, and Rs 250 crore for exploration. The government expects coal production at 900 million tonnes this fiscal, 16 per cent higher from 2021-22.

Coal Minister Pralhad Joshi reaffirmed that the demand for coal will stay, at least for the next 30 years, and that India’s per capita power consumption, a tenth of developed economies, will double by 2040, for which coal is needed. Coal accounts for more than 51 per cent of the country’s primary energy requirement and around 73 per cent of power generation.

Coal demand in the country is yet to peak and will continue to play an important role in the energy mix till 2040 and beyond, and thus, no transition away from coal is happening in the foreseeable future in India, Joshi added. McKinsey has forecast coal consumption to grow at around 4 per cent a year, while Arthur D Little estimates India’s electricity consumption to grow at an annual rate of 5.4 per cent over the next decade.

The focus of Prime Minister Narendra Modi’s government to become a net zero carbon emitter is not to divest from coal but adopt better technologies to mine and fire it. In fact, the government has added incentives for the latest auction round including reduction in the payment of the upfront amount and bid security amount, permission to relinquish part of the coal mine in the case of partially explored coal mines, and the introduction of a National Coal Index and National Lignite Index and full flexibility in coal utilisation among others. Speaking at an event in Madhya Pradesh, Joshi made it clear that the transition from a carbon-intensive energy source to low-carbon energy source should not be harsh on the people dependent on that source, and such people should be adequately compensated.

“It makes good sense to step up coal production and meet the needs of generators because domestic coal is much cheaper,” said Ajay Shankar, distinguished fellow, TERI, and a former senior bureaucrat in the power ministry. He said that imported coal prices have surged to $350-400 a tonne, unaffordable for Indian consumers — Coal India sells similar fuel grades at around $40 a tonne. Mining as such does not lead to a surge in emissions compared to fumes emitted by coal-fired generators, he added. “That said, it does not make commercial sense to build new coal-fired power plants other than completing the ones in the pipeline,” Shankar said. India has a little over 34 Gw of projects in the pipeline, accounting for around 16 per cent of existing capacity.

“We still have a long time to get to net zero, 20 years beyond Europe and 10 years behind China,” said EV maker Saera Electric Auto’s planning and strategy head Sudip Banerjee, brushing aside concerns over higher use of coal-fired generation affecting emission targets. But the 2030 renewable targets remain a challenge, he added. “We only capture solar and wind power when it's available, and so there is an urgent need to upgrade grid infrastructure, with an option for storage,” said Ankit Mittal, CEO of energy storage start-up Sheru.

Renewables are suffering from lack of adequate funding amid rising demand. India needs strategic investments of over $300 billion to achieve its clean energy capacity target of 500 Gw by 2030 from around 165 Gw now, according to a new Arthur D Little study. The consulting firm, however, expects overall generation to just reach only 2,024 billion kilowatt hours by 2030, short of 2,300 billion units in consumption, highlighting the need for reforms in capacity addition.

India’s renewed thrust on coal, after flirting with aggressive renewable targets and announcing the demise of coal-fired power in the last few years, is a consequence of a Black Swan event — Russia’s invasion of Ukraine, which sent natural gas prices soaring. Spot LNG prices of over $50 per million British thermal units (Btu) caught the Modi government on the back foot as the government had facilitated investments of over Rs 2 trillion to build a gas economy. Gas prices are at an equivalent of $250 a barrel of oil, Shankar said (crude trades at less than $100 a barrel). The share of gas, designated as India’s transition fuel towards net zero, was expected to more than double to 15 per cent by 2030, sending the share of coal lower. But spot LNG is unaffordable, surging from less than $2 per million Btu in 2020 to around $25 per million Btu, Petronet LNG CEO AK Singh said at an event last week.

India produces less than half the gas it needs, and that percentage will trend lower with rising demand in the absence of new discoveries. Moreover, India’s renewables capacity additions have also fallen short of targets, and generation from renewable sources, an intermittent affair without storage capacity, is further behind, contributing to around 10 per cent of overall generation.

In mid-2020. India toyed with the idea of reducing generation from a little less than half the country’s 180 coal-fired utilities by 2023-24. As recently as December, Niti Aayog suggested retiring around 54 GW of coal generators. Instead, the government, after setting a 2017 deadline for thermal power plants to install flue gas desulphurisation units to cut sulphur emissions, extended it to 2022, then to 2025, and, in September, stretched it further to 2027.

All this perhaps explains why Indian climate negotiators at COP27 in Egypt are pushing for a clause to be included in the cover text stating phasing down “all fossil fuels” without singling out the biggest polluter — coal. The COP26 event in Glasgow last year initially included a pledge by countries to “phase out” use of unabated coal, before China, India and the US pared it to “phase down”. This year India wants to bunch all fossil fuels together, perhaps to strike out coal completely from the text.