Coal on its way out amid rising costs

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Firstpost, Katowice, Poland

Earlier this month, fishermen in North Chennai breathed a collective sigh of relief after the Madras High Court ruled in their favour — even if temporarily — by stopping the Vallur Thermal Power Plant from building yet another fly ash pond in the Athipattu Pudunagar area of Thiruvallur district.

In an interim injunction, the court also stopped the plant from dumping sludge in the old fly ash pond, observing that continued dumping would lead to environmental hazards and natural disasters.

Adani Power Plant in Mundra and conveyor belt / Credit: Programme for Social Action India via Flickr

While activists have been trying to drive home the point that coal-fired thermal power plants are an environmental and social disaster, these factories are becoming economically unviable as well. Now, nearly a hundred years after the first such plant was installed in India, the outdated mode of generating electricity seems to be on its way out. 

A new report released by CarbonTracker on December 7 revealed that it costs more to run 62 percent of India's coal capacity than to build ways to generate energy from renewable sources such as wind and solar. By 2030, this number will rise to 100 percent, the report said.

"Renewable cost deflation underpins India's ambition to build 275 gigawatts of renewable energy capacity by 2027," according to the report. "Indeed, for the fiscal year 2017, India installed more renewable capacity than coal and gas capacity. These dynamics, plus a failure to pay generators, has placed significant stress on India's coal assets."

India's energy ministry currently considers 30 gigawatts of coal capacity to be "distressed assets," the report said.

As much as 42 percent of the world's coal capacity has already become unprofitable. By 2040, this figure could reach 72 percent as carbon pricing and air pollution regulations drive costs upwards.

In India, energy economists say that apart from falling prices of solar parks, higher dependence on imported coal and a rise in train freight charges are behind coal's downfall. While solar power prices have reached a record low of Rs 2.44 (3.4 US cents) per kilowatt hour, coal energy can cost more than Rs 5 per hour.

"While in 2015, coal formed nearly 70 percent of the new power plants in the country, it was only 20 percent in 2017," said Chandra Bhushan, deputy director general at the Centre for Science and Environment, an environmental research and advocacy organisation.

He believes that by 2025 it will be economically irrational to build new coal-fired power plants. By 2050, India will not have a single coal plant and storage for energy from renewable energy will also be strengthened, he added.

The proposed plant in Khurja, Uttar Pradesh, is a case in point, said researchers from the Institute for Energy Economics and Financial Analysis.

Project developers estimated that electricity from the plant would cost Rs 4.88 per kilowatt hour — far above current solar costs.

The institute's estimate — which accounts for coal freight costs and coal price inflation after an environmental impact assessment — is that the plant's electricity would cost at least Rs 5.67 per kilowatt hour.

Its report on the power project, which includes this estimate, also notes that the plant would be reliant on a taxpayer-sponsored subsidy of Rs 6,946 crore (US$ 966.87 million) over a period of 25 years.

Energy economist Vibhuti Garg said industry uncertainties and more stringent regulations over coal are bound to increase the price of the commodity.

Apart from logistics and taxes, the cost of coal will also rise by several times if environmental and social costs are considered.

"The Kosasthalaiyar River in Tamil Nadu would have had an effective floodplain and been able to drain excess water if it had not been silted with sludge," from a thermal power plant, said Pooja Kumar, a researcher and activist from Coastal Resource Centre, a Chennai-based fisher solidarity organisation. 

Mangroves and other water bodies provide several "eco-services, but sludge destroys those ecosystems," she said. "The damages from the 2015 (Chennai) floods would have been a lot less if these were still intact."