Produce coal, not coal stations – The Hindu BusinessLine

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Cost of power from new thermal plants will exceed renewables, while pump storage is promising

India has the fifth largest reserves of coal in the world. The country’s thermal power plants used domestic coal and by the 1980s BHEL was making efficient and reliable power generating equipment which could use coal with high ash content. The result was cheap electricity, with NTPC leading the way and creating new benchmarks. Coal production grew along with thermal power generation, and we were self-sufficient. But soon demand for electricity began to grow faster and power shortages became chronic.

However, in the early 2000s, the pace of thermal power development picked up significantly. The economy began growing faster, more and more villages and households got electrified and the country started becoming free of power cuts. As domestic coal production could not keep pace with thermal power development and growing industrial demand., importing thermal coal became a necessity. Imports rose to over 196 million tonnes in 2019-20.

International coal prices which had been low and stable for a long time began to rise. They also began to mirror other commodity price cycles, especially oil and gas. Prices rose from $58 per tonne in 2020-21 to $111 in 2021-22. The energy price spikes triggered by the sanctions on Russia saw coal prices hit a peak of $425/tonne in June and is now around $260/tonne.

Coal demand rising

With the economy again on a growth trajectory, electricity and resultant thermal coal demand is rising. Though domestic coal production has been increasing significantly, import of thermal coal still rose to 103 million tonnes by end-September of this financial year. There is, therefore, an urgent need to give domestic coal production a boost.

Ramping up production to the extent technically feasible from operating mines, fast forwarding production from mines under development and developing new mines, to meet total demand of thermal power plants and industry should be a priority.

Speedier environment and forest clearance is a must to achieve this goal without any compromise on substance. The Coal Ministry has announced the ambitious goal of ending all coal imports by 2024-25.

In addition to the thermal plants already being built, do new plants need to be built? On purely commercial considerations, the answer would be no, till supply of domestic coal is assured through the grant of a firm coal linkage by Coal India. This is unlikely in the next few years.

Investors and banks have burnt their fingers badly by financing thermal plants without assured domestic coal supply. There is also 25GW of gas power plant capacity lying idle as domestic gas is not available, and using imported gas to generate electricity from these plants has made it so expensive that there are no buyers.

There is also the need for flexibility in generation to meet varying demand, especially at night, and maintain grid stability. Does this necessity creation of new thermal capacity? Before answering this, the question to ask is: Are there alternatives? There are. There is the option of storing solar energy to get electricity at night.

Electricity from renewables can be stored in a hydro pump storage plant, a mature technology of the last century, and in batteries, where technology is under rapid development and costs are declining.

Solar power can be directly stored in a concentrated solar thermal plant (CSP) using a set of mirrors to reflect the sun’s rays to a container of molten salt. This retains high heat which can then be used at night to generate electricity through a normal steam turbine.

Thrust on renewables

What then is the cheaper option? The cost of electricity from a new thermal plant using domestic coal is ₹4.50-6 a unit; and the cost using imported coal is simply unaffordable at present. Last year, SECI (Solar Electricity Corporation of India) signed two contracts for renewables along with storage for 1200 MW. The rates for renewables were ₹2.88/ unit and ₹6.12-6.88 for stored electricity. This is cheaper than new thermal power from domestic coal.

There is, however, the concern that the storage option provides electricity for only a few hours. The solution would be to have more renewable energy being used for multiple storage plants to be able to get electricity through the night. This would still be cheaper. Then there is the concern for grid stability which needs sources of supply with the ability to quickly step up as well lower generation to meet varying demand, something which renewables cannot do.

But pump storage as well as CSP can raise and lower output as well as thermal power plants. The optimal way forward therefore is to rapidly create large grid storage capacities rather than think of building new coal-based plants.

Work on 5000 MW of pump storage must begin as early as possible; the identified potential is 93,000 MW. The storage capacity must be increased rapidly. This is essential for optimal utilisation of the 500 GW of non-fossil fuel capacity to be created by 2030, as announced by the Prime Minister at COP26 last year in Glasgow.

Coal plants require lumpy capital investments and have a useful life of 40-50 years. Investment decisions on these should be carefully considered. There is little point in ‘standing up to international pressure,’ asserting our ‘right to use coal’ and build new coal-based plants when these are now the more expensive option for meeting our needs for electricity.

Technology, with downward movement in costs, has resulted in a fortunate convergence between the least cost pathway for meeting our growing electricity needs and decarbonising our electricity system. Decarbonising electricity would be a major milestone in our journey to net zero by 2070 as declared by the Prime Minister.

The writer is Distinguished Fellow Teri, and former Secretary DIPP

Coal plants require lumpy capital investments and have a useful life of 40-50 years. Investment decisions on these should be carefully considered.

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