India has rightly stuck to its use of coal which commands over 70% in power generation and makes up for over half of total primary energy supply mix
Guest Column Anil Kumar Jain Secretary, Ministry of Coal
With the industrial-manufacturing giant Germany looking at a recession, the culprit is not far to see. The supply of long-term contracted gas from Russia has become a victim of geopolitics. Availability of energy has become tight, forcing prices to vault and consequently sucking out competitiveness from manufacturing.
This fragility is a result of the country’s two-decade-long policy push for ‘green’ energy; reducing dependence on coal, lignite and nuclear while ramping up subsidy for wind and solar, along with an abundant supply of cheap Russian gas. The lack of diversification into alternate supplies like LNG has added to the problem.
This template, in varying degrees, holds for several European nations. The US, on the other hand, has been largely saved by the shale revolution, because of which coal now generates a little less than a quarter of its electricity, compared to a decade and a half back, when it was closer to half.
How does the Indian energy sector stack up against this global energy churn? While it doesn’t have a magic rabbit like shale to pull out of its hat, the country’s energy policy framework has served its citizens well. The green thrust has been incentivised but not at the cost of expediency for the traditional time tested formula – robust grids that haul power from inexpensive sources like hydel turbines and pit-headbased thermal plants. The nuclear electricity program is on track too.
Akey aspect of this approach has been the conscious acceleration of coal sector reform measures in recent years. Had the 204 coal mines cancelled by the Supreme Court been in uninterrupted operation, India would have achieved energy (largely electricity) security earlier. However, a slew of reforms adopted by the coal sector after the cancellations have kept lights on in India and are not only supporting the government’s 100% electrification agenda but also providing momentum to achieve a surplus coal scenario for the power sector by FY24.
Some of the measures that have enabled this include the grant of permission to captive mines to sell surplus coal, the launch of commercial mining, enabling ease of entry for small businesses in coal block auction rounds and investor-friendly bidding terms.
These measures have received a ‘thumbs-up’ from the business community. For example, five rounds of auctions since 2020 have witnessed the private sector picking up 8-10 blocks each time. High global coal prices have provided the necessary impetus to hasten production. As a result, from 90 mt coal in FY22, thecaptive block owners are likely to produce 130 mt in the current year.
CIL has also shown efficiency in embracing reforms and in engaging with the private sector and aided by simplified outsourcing approach and mine developer and operator contracts, production is likely to rise from 622 mt last year to 700 mt his year.
All told, the substantial increase in local coal availability has helped the nation register a near 12. 8% growth in thermal power supply in first half of this year while avoiding expensive coal imports. With global coal prices recording a three-fold rise in last two years, India has averted a huge energy challenge that would have otherwise createdmacroeconomic disturbances.
This policy thrust also needs to be seen in the larger context of the country’s ambition of becoming a manufacturing powerhouse. The 70s and 80s saw public sector giants set up factories, while the reforms in the 90s have resulted in the private sector emerging as a major industrial player. The renewed push for manufacturing requires competitively priced, reliable electricity which domestic coal can provide.
The domestic consumer will also be able to afford the intermittent renewables, which will get attractive when cheap storage batteries hit the electricity highways.
That said, the challenges are aplenty. For one, dealing with the ‘hard-to-abate’ emission-intensive steel making and aluminium smelting. Secondly, solar modules aren’t cheap any more thanks to the Chinese near monopoly on supply of polysilicon, the critical ingredient.
In short, we are now witnessing a measured energy transition.
Part of it lies in also appreciating that coal markets are not just about spewing more carbon into the atmosphere at any cost. The carbon credit market kick-off will help slash inefficiency in energy use in large industries, just as the renewable purchase credits have taken off, leading to a finer policy calibration of providing incentives to renewables on the one hand, and demand-driven investments in coal-fired power plants on the other. Further, the carbon sequestration, carbon liquefaction tech can come up on financial markets supported by the global clean energy initiatives.
Energy transition is inevitable. But the doctrine espoused thus far by most countries to achieve goals of carbon neutrality has been one of one-shoe-size-fits-all. And, it has failed – for example, purely banking on subsidising renewables on the one hand and jettisoning fossil fuels and nuclear on the other.
India has rightly stuck to its use of coal which commands a share of more than 70% in power generation and makes up for over half of the total primary energy supply mix.
The recent geopolitical stresses have highlighted that the accepted policy aims of energy security – availability, affordability, and sustainability – have a pecking order, and as of now availability comes first. And there appears to be unanimity on this between the developed and developing world.