India’s Ongoing Power Generation Course Correction

It is estimated that nearly 240 million Indians currently do not have access to electricity. In many cases that also means a lack of access to adequate health care or educational opportunities. It is no surprise that, as nations have done throughout history, to solve its energy poverty problem, India turned to fossil fuels. However, as a nation still developing, and as the effects of climate change become ever more apparent, and as air in India fills with pollution, the country has the opportunity to adjust course, avoiding the mistakes of others.

There is currently a massive push in India to transform its still-developing energy system into one built on a foundation of sustainability. Several recent reports find that the nation is doing so with a fair amount of success, specifically in the solar industry. In this way, India's energy system is one of very few things in the country that could potentially be characterized as both new and improved.

Growing Demand

India is home to roughly 18% of the world's population but uses only 6% of the world's primary energy. According to an analysis by the International Energy Agency (IEA), the nation's energy consumption nearly doubled between 2000 and 2015. "India's economy, already the world's third-largest, is growing rapidly and policies are in place to press ahead with the country's [modernization] and an expansion of its manufacturing," a 2015 IEA special report says.

Energy demand in the country is growing rapidly, driven by several factors including urbanization and industrialization, which are linked. India's population is moving from rural areas to urban areas in great numbers, driving up energy demand in cities. Energy-intensive industries, such as steel, cement, plastics, aluminum, and paper, play a large role in India's industrialization. The nation was responsible for nearly 10% of the increase in global energy demand from 2000 to 2015.

It is expected that India's urban population will grow by 315 million by 2040. As more people move to cities, use of modern appliances and vehicles will increase, and with it, electricity demand. "Three-quarters of the projected increase in energy demand in residential buildings comes from urban areas, driving the sector's energy use away from solid biomass (two-thirds of the total today) and towards electricity and oil (45% and 15% of the 2040 total, respectively)," according to the IEA report.

This move to the cities will also increase the need for building supplies like steel and cement, the production of which require a great deal of energy. According to the IEA: "Energy use in industry is the largest among the end-use sectors, its share in final consumption rising above 50% by 2040."

Energy demand in India increases by almost 5% each year. To keep up with the projected growth in energy demand, India's power system needs to almost quadruple by 2040, according to the IEA. "Taking population growth into account as well as the high policy priority to achieve universal electricity access, India adds nearly 600 million new electricity consumers over the period to 2040," the report says.

Growing Supply

To meet its growing energy demand, India turned to coal, which currently accounts for roughly 60% of its energy mix according to the Central Electricity Authority. However, the nation's reliance on fossil fuels has had negative environmental effects. India's cities are regularly blanketed by smog, and it is estimated that poor air quality has resulted in hundreds of thousands of premature deaths.

India is the world's third-largest emitter of greenhouse gases, and as such, its role in global efforts to address the issue of climate change has been significant. As a party to the United Nations Framework Convention on Climate Change's Paris Agreement, India has submitted a public declaration of its plan to mitigate the effects of climate change.

In its Nationally Determined Contributions (NDC) to the Paris Agreement, India vowed to "achieve about 40 percent cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030."

The NDC breaks down the nation's plan to promote clean energy in many different areas, stating that these planned efforts are built on existing momentum. "India is running one of the largest renewable capacity expansion programs in the world. Between 2002 and 2015, the share of renewable grid capacity has increased over 6 times, from 2% (3.9 GW) to around 13% (36 GW)," the NDC says.

Just a few of the efforts mentioned in the NDC that the national government intends to undertake to reach the 40% goal include:

a- Aim to achieve a target of 60 GW of wind power installed capacity by 2022. As of 2015, wind accounted for 23.76 GW of the nation's renewable installed capacity.

a- Promote solar power and continue the nation's solar expansion program. Installed solar power capacity has increased from 3.7 MW in 2005 to about 4,060 MW in 2015, a compound annual growth rate of greater than 100% during the decade. "The ambitious solar expansion programme seeks to enhance the capacity to 100 GW by 2022, which is expected to be scaled up further thereafter," the NDC says.

a- Initiate programs to promote cleaner and more efficient use of biomass energy. Biomass currently constitutes 18% of the total primary energy use in India with 70% of the population dependent on it.

a- Promote small and mini hydro projects for electrification of remote villages.

a- Improve the efficiency of the nation's coal fleet. "India has already taken several initiatives to improve the efficiency of coal-based power plants and to reduce its carbon footprint. All new, large coal-based generating stations have been mandated to use the highly efficient supercritical technology. Renovation and [Modernization] (R&M) and Life Extension (LE) of existing old power stations is being undertaken in a phased manner. About 144 old thermal stations have been assigned mandatory targets for improving energy efficiency," the NDC says.

While India's NDC paints a picture of the future India wants, recent reports have shed light on the future that is probable at this time. The IEA's special report predicts that in 2040 coal-fired power plants-half of which have entered service in the last ten years-will remain the backbone of India's power system. "In our projections, the coal fleet increases by around two-and-a-half-times, reaching almost 440 GW in 2040, by which time India has the second-largest coal fleet in the world (after China), having overtaken the United States in the early-2020s," the IEA report says.

The IEA notes that 85% of the coal plants in India were based on subcritical boiler technology in 2015. The remaining 15% were supercritical plants (Figure 1). By 2040, the IEA expects the share of supercritical plants in the expanded fleet will increase to about half of the total, and that there will be some ultrasupercritical plants and integrated gasification combined cycle units built in the latter half of the projection period.

1. A subcritical fleet. According to the International Energy Agency (IEA), 85% of the coal plants in India operated subcritical boiler technology in 2015, while the remaining 15% were supercritical units. There were no Indian coal plants using ultrasupercritical or integrated gasification combined cycle (IGCC) technology at the time. Courtesy: IEA

Contradicting Predictions

The IEA's prediction for the future of coal in India is called into question in a November 2017 report released by the Institute for Energy Economics and Financial Analysis (IEEFA). The report predicts that India is within a decade of peak coal demand (Figure 2). The report notes many contributing factors to this predicted flatlining of India's coal use, including retirements of inefficient units, a surge in solar installations, and a favorable political climate.

2. Is peak coal in sight? A November 2017 report by the Institute for Energy Economics and Financial Analysis (IEEFA) suggests that due to several factors, including decreasing renewables costs, and a push from the government, peak coal in India could be realized in just 10 years. Courtesy: IEEFA

"The challenges to integrating India's 40% renewable energy target by 2030 are not to be underestimated. However, the momentum over the past three years, gained through clear government policy and growing economic merit, give us confidence India will stay the course," the report says.

The IEEFA report points to current trends to support its assertion that peak coal is within sight. For example, the Indian electricity grid more than doubled its installed capacity over the last decade, the report notes, and from 2012 to 2016, that expansion was mostly from coal- and gas-fired generation (Figure 3). "However, in 2015/16 the Government of India announced an exceptionally ambitious plan to double installed capacity over the coming decade and to do so primarily through an accelerated deployment of renewable energy," the report says, further stating that "2016/17 was the first year in Indian history in which renewable capacity installs (15.7 GW, 2.5 times the 6.5 GW of renewable installs in 2015/16) exceeded net thermal power installs (7.7 GW, down 65% year on year)."

3. Renewable push. New energy generating sources are being constructed all over India, but the type of sources has shifted dramatically. While fossil fuel-powered generation dominated new construction for several years, renewables are now coming online faster. Courtesy: IEEFA

For much of India's current coal fleet, the IEEFA report suggests that the writing is on the wall. "By FY2027, this 40 GW will all be at least 35 years old, and overdue for retirement. Given pollution pressures and technological obsolescence, more ambitious market estimates suggest that up to 55 GW of thermal capacity could face closure in the next decade," the report says.

A growingly stringent regulatory system is threatening to push these older subcritical plants out. "In 2015 India adopted legislation with new emissions limits that is due to take effect at the end of 2017. The legislation is designed to both require minimum performance standards for new coal-fired power plants and to require that existing plants either be retrofitted with emissions controls, or closed. In October 2017, it was reported that 89% of India's entire thermal generation fleet is in breach of the pending emissions limits," the report says.

The IEEFA predicts that half of the 40 GW of coal plants built before 1993 will be closed by 2027. Sixty-eight GW of new coal-fired plants are expected to be commissioned by that time, so the net expansion to 2027 is just 48 GW. "IEEFA is confident that end-of-life coal plant closures will occur, rather than be consistently deferred, in light of very low [utilization] rates and given India's increasing awareness of the growing health impacts of air particulates and water pollution, particularly on the rural poor," the IEEFA report says.

Renewables Buoyed by Lower Costs, Supportive Policies

Over just the last two years, solar has made great strides in India. The first half of 2017 saw rapidly declining solar tariffs. Several projects were auctioned with levelized tariffs of less than 3 rupees/kWh. The levelized tariff for the Rewa solar project was Rs2.97/kWh in February 2017. In May 2017, The Bhadla, Ragasthan, project attracted a tariff bid of Rs2.62/kWh, a record that was broken within a week, when a bid of Rs2.44/kWh came in at an auction in the same Bhadla solar park.

Tim Buckley, lead author of the report and IEEFA's director of energy finance studies, Australasia, noted that the trend of rapidly declining tariffs is being seen in many other nations as well. Buckley specifically mentioned decreasing tenders in Mexico and Chile. "All three have reported multi-billion-dollar renewable energy tenders that have evidenced near 50% declines in renewable energy tariffs since the start of 2016. Both the [United Arab Emirates] and Australia have seen similar cost declines in renewables, so even as each country has individual country-specific factors at work, the deflationary trends are clear and consistent across a number of major economies. This isn't unique to India, but government policy clarity is a key prerequisite," Buckley told POWER.

When it comes to government policy, India is making a lot of the right moves, Buckley said. "One of the key decisions India has made has been to set out a 10-year plan for aggressive, sustained investment in renewable energy and grid infrastructure. The consistency and clarity of long-term policy intent has allowed industry, finance, and investors to see the magnitude of investment ($300-500 billion over the coming decade) with a degree of certainty and central government underwriting," Buckley told POWER. "This derisking in turn has inspired both domestic and international businesses to move rapidly to scale up capacity, with the result that renewable energy tariffs have fallen a massive 50% since the start of 2016."

The IEA, in its World Energy Outlook 2017 (WEO) report, makes special note of coal's competition with solar photovoltaic (PV) in India (Figure 4). The tone of the WEO report is more cautious than the IEEFA report, stating that it is "worth remembering that the PV auctions in 2017 are for delivery a few years later, so do not necessarily reflect prevailing costs (developers may have built in an assumption about future cost reductions into their bid)."

4. Dropping solar costs. The last few years have seen a dramatic decrease in solar photovoltaic (PV) project auction prices in India. With the cost gap between PV and coal closing quickly, the IEA reports that solar could disrupt the future of coal. Courtesy: IEA

However, the WEO report goes on, "the cost gap between PV and coal-fired electricity is closing fast and, while coal-fired generation is a mature technology that is unlikely to become significantly cheaper, the future is likely to see further reductions in PV costs. Solar PV could therefore disrupt the future of coal in a country that has been widely expected to be a major growth engine for global coal use for decades to come."

If the IEEFA predictions prove true, India could, and should, increase the stringency of its NDC, Buckley said. "I think this is a clear opportunity for Prime Minister Modi to elevate India on the global stage, aligning with China to both ratchet up their NDCs and show global leadership in transitioning to an increasingly high-technology driven, low-emissions growth model at a time when American isolationism and climate change denialism is growing," he said.

However, while models make it possible to determine likely outcomes, there is still a lot that could go wrong, derailing India's march toward a cleaner energy future. For example, Buckley told POWER nobody knows for sure what the Indian government is going to look like in a few years. "Prime Minister Modi has been 100% supportive of the energy transformation, but with national elections pending in 2019, the commitment to this plan could be put at risk if India had a change of prime minister," Buckley said. a-

-Abby L. Harveyis a POWER reporter

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