Indian Coal Today and Tomorrow A Dichotomy in the Offing 6th Roundtable Conference on Coal 20th September 2017 New Delhi D.N. Prasad Former Adviser (P) MoC, GoI

Structure of Presentation Challenges in supply of Energy Energy Demand projections Coal’s Role in Energy Issues in Power Sector Coal versus Renewables Future of Coal Actions for sustainable development of Coal Sector

Challenges in supply of Energy India is facing tough challenges in making available required amounts of energy to all; About 30 per cent of the population still do not have access to electricity; Large sect of population still depend on biomass for cooking purposes; Without targeted global action, the International Energy Agency (IEA) estimates that in 2035, there will still be one billion people without access to electricity and 2.7 billion without access to clean cooking fuels (World Coal Association 2012);

Energy demand projections As per NITI Aayog [India Energy Security Scenarios (IESS)], 2047, the energy demand is likely to go up by 2.7-3.2 times between 2012 and 2040, with the electricity component itself rising 4.5 fold; Other projections are - Population is likely to reach 1.6 billion by 2040; GDP is to grow @about 8%; Primary energy supply to grow @ 3.6% [from 7113 Twh in 2012 to 22479 Twh in 2040];

Energy demand projections (contd.) Electricity generation to grow @ 5.5% [from 1078 Twh to 4753 Twh]; Share of non fossil based capacity to be in the range of 57%-66%; Per capita energy demand to grow from 503 kgoe in 2012 to 1184 kgoe in 2040; Per capita electricity consumption to grow from 887 kwh in 2012 to 2924 kwh in 2040]; Emissions per capita to increase from 1.2 T co2 in 2012 to 2.7-3.5 T co2 in 2040;

Coal’s role in energy Globally, around 30 per cent of primary energy and 41 per cent of electricity generation is coal based (International Energy Agency, 2016); India’s situation is no different. With over 55 per cent share in primary energy supply and over 75 per cent share in electricity generation, coal is playing a critical role in supporting India’s energy plans;

Coal’s role in energy (contd.) Out of about 327 GW of installed generation capacity in India as of March 2017, about 192 GW (59 per cent) was coal based and 57 GW or 17% RE; Similarly, out of a total generation of about 1160 Billion Kilowatt hours (billion units) achieved in 2016-17 (excluding about 82 billion units or about 7% from renewable sources), about 80 per cent was coal based (Central Electricity Authority, 2017).

Coal Resources Further with over 308 billion tonnes of estimated coal resources and 44 billion tonnes of lignite resources, coal provides for energy security of the country compared to other resources (GSI, 2017);

Status of coal sector Public sector coal companies CIL and SCCL contributed about 93% and others about 7%; Contribution from 84 captive blocks allocated to both private (31) and public sector companies (53) is highly critical in enhancing domestic production; It is important to expedite permitting private sector to take up commercial coal mining for which law has been amended in 2015 through Coal Mines (Special Provisions) Act;

Status of coal production Domestic coal production increased from about 431 million tonnes in 2006-07 to about 659 million tonnes in 2016-17, implying a compound average annual growth rate (CAGR) of 4.3%; As against this, domestic coal production is envisaged to grow at over 12 per cent if the demand for coal, particularly for power sector comes through as envisaged; Government wants to replace import of non-coking coals through expansion of domestic production; However, import of coking coal would continue on account of resource constraints;

Issues in Power sector Demand supply mismatch leading to financial stress; Decline in average PLF of coal based thermal power plants from 77% in 2010 to 60% in 2017; Growing financial stress leading to stressed assets with banks; 18 GW capacity struggling for PPAs; Power surplus states are backing down coal plants even at the cost of paying backing down charges;

Issues in Power sector (contd..) Ultimately these costs are passed on to the consumers through tariffs; All this has resulted in delay/decline in signing PPAs for low price renewable energy auctions by some DISCOMS; In view of the envisaged RE capacity of 175 GW by 2022, CEA observed that no coal based capacity addition is required during the period 2017-22; However, coal based capacity of about 50 GW is under various stages of construction and is likely to be commissioned during the period 2017-22;

Issues in Power sector (contd.) Public financial institutions are continuing to fund coal based plants; Due to weak sub-distribution system (last mile link controlled by DISCOMS) it can not be ensured to supply surplus power to the needy; More investment is taking place in generation and intra-state transmission system compared to investment in distribution system; Poor financial health of DISCOMs;

Issues in Power sector (contd.) 22 out of 41 DISCOMS rated lack of operational and financial performance capability to sustain on their own; Recognising the criticality of DISCOM performance, 27 States and UTs have signed UDAY scheme of GoI; In the past two years States/UTs implemented the easier to do financial restructuring component of UDAY; And poor progress in other identified operational improvements viz. upgrading local distribution, metering & bill collection systems, enforcing administrative measures promptly, leading to burden on the states with larger deficits and delay in 24X7 power for all ;

Issues in Power sector (contd.) Compliance of new environmental norms aimed at reducing emissions of particulate matter and NOx, minimising fresh water consumption etc.; Huge financial implication in terms of Capex @ Rs.1.15-2.5 cr per MW and Opex @ Rs.04 to 0.9 per unit of energy generated; It is not economical in case of plants with a balance life of less than ten years; While NTPC has drawn an action plan for compliance, it is understood that States/UTs are yet to draw the same;

Issues in Power sector (contd.) The envisaged RE capacity of 175 GW by 2022 including 60 GW of wind and 100 GW of solar has several implications like grid integration, grid balancing, import dependence for solar panels, coordinated system operation for achieving economy and efficiency in operations;

Coal vs Renewables Chief Economic Adviser (CEA) to GoI in his lecture at TERI on 17.8.2017 mentioned that currently there is inadequate understanding of the issues related to coal and renewables and observed that: Coal and renewables must be the joint focus of policy; they must be jointly decided not separately. The social costs of coal should include its domestic externalities, but at least for some time, not the international externalities.

Coal vs Renewables (contd.) Once capacity is created, the social costs of renewables (variable costs) are almost zero and considerably below the social variable costs of thermal power; For long run decisions on solar one must take account of investments already incurred in thermal power; Renewables, in this situation, must be properly costed considering:

Coal vs Renewables (contd.) Lower availability factor of solar and wind & storage costs; Lower capacity utilization; Land acquisition costs including political & regulatory costs; Costs of building and upgrading grids to equip them for renewables, so that all the hidden subsidies are taken out.; One overlooked point is that while the price of PV panels has been plummeting, they account for only a fraction of the total cost of solar energy.;

Coal vs Renewables (contd.) Proper estimates of the full costs—not just levelized costs of renewables are still elusive; Recent prices bid at solar auctions are not a true reflection of the true cost because of the different subsidies available and strategic under-bidding in the reverse auctions as in coal and telecom; (In fact, there is an important lesson here for renewables, namely, to avoid the experience of thermal power in creating excess capacity.)

Coal vs Renewables (contd.) Be abundantly cautious about claims on behalf of renewables. Properly costed, renewables will achieve true parity (in social terms) with coal only in the future. Beware “carbon imperialism” of advanced countries which risks biasing our judgments about energy. The social costs of coal should include its domestic externalities, but at least for some time, not the international externalities.

Coal vs Renewables (contd.) Because of the Twin Balance Sheet problem and because coal is special, the social cost of renewables should include the costs of stranding thermal and coal assets. Current bids on renewables are not especially revealing or informative about the true costs of renewables because of extensive subsidies (implicit and overt, center and states) and strategic behaviour by renewables producers. There is a window, perhaps narrow, until renewables become truly viable, for accelerating expansion of coal, and driving up capacity utilization sharply in thermal power generation.

Coal vs Renewables (contd.) Subsidizing renewables at a time when its social costs are above those of coal seems a double whammy for government which then also has to pick up the tab for the resulting stranded assets. This strategy will raise two dynamic implementation challenges, one on the political/social side and one on the economic/financial side, which will need to be addressed. Rapid, organic growth in energy demand and technological progress in cleaning coal—for which there must be a collective international effort— will help minimize the tensions between coal and renewables."

Issues for consideration in Coal Considering the need for peaking use of coal in the window available to India as per NDCs, its highly important for us to strengthen our coal sector addressing the following: Productivity, Technology, Quality, Safety, Environment, Land acquisition, Evacuation Infrastructure etc. Simultaneously for coal use, High Efficiency Low Emission (HELE) technologies are highly critical;

Future of Coal Coal is an important driver of affordable, reliable energy to support economic development and competitiveness; Coal will play a major role complementing renewable energy sources; Despite accelerated efforts for enhancing renewable energy, coal will continue to play an important role in meeting country’s energy requirements up to 2030 and beyond since 60% capacity will be fossil fuel based; Coal price needs to be made competitive;

Actions for sustainable development of Coal Sector Enhance exploration for coal; Production enhancement to follow realistic demand estimates & commitment by consumers; Expedite Introduction of commercial coal mining; Adoption of appropriate technologies for improved productivity, safety, quality and environment; Adopt best mining practices for sustainability; Review levies and duties on coal including rail freight to make it competitive;

Actions for sustainable development of Coal Sector Lignite development for power generation; Promotion of Clean Coal Technologies including alternative use of coal other than power; Strengthening Research & Development; Innovative land acquisition models; Simplified procedures for statutory clearances; Strengthening infrastructure for coal evacuation;

Thank You