The spectre of coal over climate change as electricity demand soars

Record summer heat has sent electricity demand soaring. Despite the focus on renewables, thermal power will meet additional demand, sending sustainability targets for a toss

Summers last a decade in the Game of Thrones, against a three-month Indian summer. But the Starks and the Lannisters did not use air-conditioning to cool their mansions. Not so the case here.

Electricity demand will grow at its highest pace in a decade in 2023-24, as Indian homes and offices rely on coolers and air conditioners to secure themselves against blistering heat waves. That will send peak power consumption to new records, and sustainability targets for a toss. The International Energy Agency (IEA) attributes a surge in power demand in India in the longer term in large part to a six-fold increase in peak daily electricity consumption for air conditioning to 2040.

This summer is not a one-off affair. India has been facing hotter summers and milder winters over the past few years. Heat waves have intensified, sending power demand up by over 8 per cent in 2021-22. That compares with average electricity demand growth rate of 5.2 per cent over 20 years.

India’s electricity demand is projected to grow by almost 5 per cent per year to 2040, the IEA says, which indicates that growth rates will be much higher in the next few years before plateauing. The Central Electricity Authority (CEA) expects demand for electricity to grow by 7.2 per cent to 1,874 billion kilowatt hours in the year ending March 2027. Power demand will grow by 10 per cent this fiscal before moderating to 6 per cent next fiscal, predicts Vikram V, vice-president at ratings agency ICRA.

This has implications for India’s climate change targets. With imported liquefied natural gas (LNG) priced at over $15 per million British thermal units, India’s gas-fired generators, accounting for 6 per cent of total capacity, are in no position to supply power profitably to the grid.

Renewables (excluding hydro-power) will account for roughly 11 per cent of power generation this fiscal, marginally rising to 13 per cent next fiscal despite accounting for nearly 30 per cent of the 412-Gw installed capacity, Crisil said. Solar and wind, operating at low efficiencies and high intermittencies, are hardly sufficient to meet 230 Gw of peak demand expected this summer.

That leaves coal to do the heavy lifting. Coal-fired units of 211 Gw in aggregate capacity, as of January, which constitute 51 per cent of the total installed capacity, generate over 70 per cent of the country’s electricity, according to CEA.

“We have upgraded our outlook for the thermal sector to positive from stable because of lower than expected renewable additions and revival of thermal plants,” said Vishal Kotecha, director and head of infrastructure, India Ratings & Research, in a call. “Solar additions are lower than last year for various issues, and the outlook is negative for wind.”

“With storage capacities limited at present, thermal capacities continue to shoulder the burden of meeting any sudden surge in power demand, especially in the summer months when water levels in hydro projects drop,” said Hetal Gandhi, director, research, CRISIL Market Intelligence. “Indeed, the share of hydro had dropped to 8 per cent last summer compared with 11 per cent on average for the full year.”

Because of seasonality, availability from wind and hydro will be limited this summer while solar might provide some respite, though additional generation from it will be limited considering past trends. So the onus falls on thermal plants to service the incremental demand, Gandhi said. Domestic coal plants are running at requisite plant load factor as of February 2023, but it is the gas and imported coal plants that will need to brace for servicing incremental demand, if we are to avoid last summer’s power outages, Gandhi added. Imported coal-fired facilities are operated at around 21 per cent utilisation, and most gas-fired facilities are hardly operational because of the high cost of LNG.

It was either a miscalculation by Narendra Modi’s government over the extent of growth in power demand post-pandemic, or a blind belief in the power of renewables to power an anticipated 8 per cent of GDP growth annually, meet demand from higher use of air conditioning, and cater to an emerging new class of consumers — electric vehicle owners.

India may need 800 Gw of renewables by 2030 to generate half its power from non-fossil fuel sources, according to energy think tank TERI. That involves adding 80-100 Gw a year of renewables, or around 680 Gw until 2030, led by solar and wind. Nuclear facilities take decades to commission while large hydro projects do not qualify as sustainable power sources, experts contend — especially after environmental disasters in the Himalayan holy towns of Joshimath and Karnaprayag.

But India’s pace of adding variable solar and wind trails the country’s requirements. India may add only 165 Gw of capacity over five years, averaging 33 Gw annually, according to a CEA document. New solar plants would make up 93 Gw and wind power another 25 Gw.

CEA’s estimates are based on ground realities. Variable renewable energy tenders issued annually in India have fallen from 40 Gw in 2019 to about 28 Gw in 2022, according to US think tank Institute for Energy Economics and Financial Analysis. The total tenders issued for solar, wind and hybrid from 2010 to 2022 amounted to only 161 Gw, with an allotted capacity of 114 Gw.

India needs six times that number in the next seven years to make renewables a dependable source of power. For instance, power shortages touched 2.7 billion units last April, which could have been avoided with an additional 22 Gw solar plus 11 Gw of storage.

But corrective measures are underway where the government has scrapped plans to retire old generators, a top government official said. In fact, coal will play a key role in India’s new energy security doctrine.

The spectre of coal looms large over India for the next few decades. The power ministry had advised the closure of coal-fired generators older than 25 years by 2030, amounting to around 50-60 Gw or a quarter of the current coal fleet, to meet India’s net zero objectives by 2070. That plan is off the table, an official said. Instead, old generators will operate at lower loads.

Coal-fired capacity of around 25 Gw is under construction and will be operational in a few years. New coal-fired plants are being proposed after the government decided to use thermal power as an option for flexible power storage. India will now give priority to cheaper thermal over high-cost battery storage, the official said.