|
C |O |U |N |T |E |R |V |I |E |W
|
Old King Coal is Dead – Long Live The King
C
oal is the dominant source of energy in India because it’s locally available and has historically been quite cheap, more so because there hasn’t been aggressive regulation or taxation upon its externalities yet. However, future coal will look different than older coal because it will have to be more sustainable and also cost-effective. Renewable energy is now virtually all of new investment in electricity capacity in India except a handful of ongoing projects in hydropower and a few plans in nuclear power. There is almost 60 GW of under construction coal capacity but greenfield coal power capacity appears to be distant. Traditional lenses upon fuels focus not just on their price but also other aspects including energy security and impact upon the range of stakeholders in the ecosystem. This last point is critical to understanding coal’s present and future. Rupees per kilowatt hour, often measured as the levelized cost of energy (LCOE), is one metric by which RE beats coal handily. However, there are two limitations to this. First, we have an existing surplus of coal-based generation capacity and so from a state perspective, a cash flow choice they have is whether to pay the total cost of new RE (and RE has no fuel costs), or the marginal cost of coal, assuming they anyways have to pay the fixed costs due to a power purchase agreement. Second, almost all the headline grabbing bids for renewable energy are based on variable RE (VRE, meaning intermittent), which has both seasonality and time of day constraints. While there are now some limited bids for so-termed Round the Clock (RTC) power, if you dig into the details, you would find that there really isn’t so much battery in these deployments as would be required as renewable energy scales towards the ambitious targets that India has set. This is one reality that India, like other countries, will have to grapple with sooner instead of later. As the share of renewable
36
SAUR ENERGY INTERNATIONAL S E P TE M B E R 2 02 0 SAURENERGY .C O M
DR. RAHUL TONGIA
energy grows, assuming one isn’t adding in full storage to become firm power, then for VRE the marginal value declines while the marginal costs of integration increase. This is even more stark when we consider edge-based or rooftop solar where many consumers apply a metric of cost comparisons that pits their solar cost compared to their retail cost of electricity, which would always be higher than any procurement (wholesale) cost of energy (including solar). At an extreme, many people worry this leads to the so-called Utility Death Spiral. (Editors note: This refers to a situation when energy efficiency reaches a point when customers need less energy. They also find other energy sources, including distributed energy resources (DERs), making their utility bills and dependence, lesser over time.) Another important point to consider Renewable energy is is the winners and losers in the coal ecosystem both today and tomorrow as now virtually all of we adjust to the transition. While coal certainly has externalities, it also pays new investment in back to society in a range of ways electricity capacity in including its levies/taxes, dividends and India except a handful auction fees for mining companies or entities, as well as by overpaying for of ongoing projects in coal freight on the Indian Railways who hydropower and a few under charge passengers. This railways “tax” means that a coal power plant in plans in nuclear power Punjab pays about `0.60/kWh for
