A few months ago, the government had projected that India may not need new coalbased power plants till the next decade or so, sending negative signals to the already distressed thermal power industry.
Recently, presenting a contradictory and a more optimistic view of the coal-based segment, India’s chief economic adviser noted that the country should still have coal as a major fuel and avoid getting distracted by the global debate on carbon imperialism.
He stated that coal and renewables must be the joint focus of policy. He also cautioned that there are hidden costs associated with renewables due to their intermittency, low capacity utilisation factor, land acquisition requirement, cost of upgrading the grid, as well as subsidies.
This view has been reiterated in the recently released second volume of the Economic Survey 2016-17. The survey states that the social cost of producing renewable energy is around three times that of producing coal-based electricity at Rs 11 per kWh. It adds that although solar and wind power tariffs have dipped to Rs 2.44 per kWh and Rs 3.30 per kWh respectively, making renewable energy cheaper than coal-based electricity, these low tariffs do not reflect the cost of integration with the grid and other costs such as those of stranded assets and land opportunity costs.
While these views are unlikely to lead to a resurgence of coal-based power, they lend credible support to coal-based power whose dominance in India’s energy mix is waning. Meanwhile, what would help the coal-based power segment are some new
policy developments. The government recently undertook a review of 34 stressed thermal power plants, which have a debt of nearly Rs 1.7 trillion locked in. Reportedly, a number of proposals are being looked at to address the issue. Prime amongst these are notifying new norms for medium-term PPAs for stressed coalbased plants, which are expected to be notified soon, as well as another proposal to modify long-term PPA norms to waive the fixed costs for discoms that enter into PPAs with stressed projects.
The outcomes of these government actions are keenly awaited.