Managing a fair transition away from Coal

Suresh Kumar

Driven largely by economics and climate considerations, we are seeing a shift towards renewable energy supported by Government policies both operationally and financially. S. Suresh Kumar, IAS, Additional Chief Secretary, Department of Power, Government of West Bengal, in conversation with Puja Banerjee of Elets News Network (ENN). Edited excerpts:

How has the transition been from coal to renewable energy in the recent past?

Coal has been the mainstay of energy in general and electricity in particular. Its use has led to problems of environmental pollution, adverse health impacts, climate change etc. Driven largely by economics and climate considerations, we are seeing a shift towards renewable energy supported by Government policies both operationally and financially. Other than the installed 100 MW of solar renewable energy, overwhelmingly the power produced in our State is through coal fired power plants. This is because of the natural advantage of having good quality coal mines at close proximity to our power plants which has reduced the rail haulage costs. In the Glasgow Conference of 2022, India has committed to a carbonneutral economy by 2070 and by the year 2030 to the following targets: to a fossil fuel free generation of 500 GW by 2030, reduce its ‘emissions intensity’, or emissions per unit of GDP, by 45 per cent from 2005 levels, ensure that at least 50 per cent of its installed capacity of electricity generation would come through non fossil-fuel based energy sources and ensure that it reduces 1 billion tonnes of emissions from its projected emissions between now and 2030.

How will coal affect the transition in the existing political and economic patterns in India’s energy system?

Coal is no longer the cheapest source of energy for electricity generation while variable renewable energy sources are already cost competitive and probably emerging technologies and solutions are likely to mitigate its challenges of variability and make it more dependable and dispatchable in the coming years. Moreover, the modularity of clean energy will accelerate the migration from centralised supply to a decentralised/local supply. Hence in the near future, even if coal remains a significant source of energy in India for a long time due to the lock-ins that have been created which would take time to remove but its importance will diminish over time. This transition will disrupt the existing political and economic patterns in India’s energy system.

Please explain how coal as a source of energy is an important driver of economic growth?

The phase-out of coal in the electricity sector would be the fastest unfortunately due to the cheaper alternatives available, the environmental regulations and the economics adopted by the electricity regulator and consumers. Future investments in coal-fired electricity generation, if any, run the risk of becoming stranded assets and need to be evaluated carefully. Coal as a source of energy is an important driver of economic growth. Out of the 931 MT of coal consumed in India in 2020, 705 MT (75.7%) went to electricity generation and 170 MT for non-power applications. In 2021, coal-based power generation was 74% due to the economic rebound post-covid that saw severe coal shortages from Coal India Ltd which kept everyone on the tenterhooks. The International Energy Agency (IEA) expects that with the continued expansion of the Indian economy through 2024, it expected that the demand would rise to 1185 MT by 2024 at a growth rate of 3.9%.

What is the future of the energy transition in our country? Your views?

The actual pace of the phase-out will be driven by prevailing political economy, economic considerations, environmental regulation and international commitments. Coal has been an important source of public finance for several States and the Centre. Mention may be made that 40% of the revenues of Indian Rail accrue from transportation of coal and the phase-out of coal has implications on railway fares all around. Similarly, a reduction in coal share has direct implications for public finance and therefore on infrastructure and welfare spending by the governments at various levels while clean energy may not compensate for this loss in public finance or in jobs.

We are at the cusp of an interesting phase in energy transition and managing the transition is very critical for the economic well-being of the vast populations dependent on coal as well as that of the country.