Peaking Coal?

India’s coal-fired generation fell in 2020. There is now an opportunity to ensure it doesn’t bounce back as the country recovers from the COVID-19 pandemic.

Aditya Lolla

Senior Electricity Policy Analyst, Asia

15 February 2021 | 12 min read

Executive summary

India’s coal power may have already peaked, if it seizes the opportunity

As India recovers from the COVID-19 pandemic shock, the choices it makes for its power sector can make or break its coal-to-clean electricity transition in the next decade.

  • 01


    India's coal power fell for the second year running

    The historical peak of India’s coal-fired generation was seen in 2018. Coal-fired generation fell 5% in 2020 due to significantly reduced annual electricity demand caused by the COVID-19 lockdown and a steady increase in solar generation. This marks the second consecutive annual fall in coal-fired generation, following a 3% decline caused by economic slowdown in 2019. However, coal still remains the dominant source of electricity, generating 71% of India’s electricity in 2020.

  • 02


    Electricity demand growth is likely to be less than forecasted

    Indian government forecasts show coal-fired generation rising in the next decade. But with electricity demand likely to be less than forecast due to COVID-19, this analysis shows that it is possible coal-fired generation will be unchanged from now by 2030, even if electricity demand is increasing at 4-5% per year on an average

  • 03


    Coal power may plateau - or even fall - by 2030

    An analysis of International Energy Agency’s (IEA’s) new India Vision Case (IVC) from the India Energy Outlook 2021 revealed that the coal-fired generation may plateau even if India pursues higher rates of economic growth. This is consistent with the COVID-19 pathway above. IEA Sustainable Development Scenario (SDS) shows that it is even possible for coal-fired generation to fall by 2030.

  • 04


    Delivering RES targets is crucial

    Peaking of coal-fired generation is contingent on India meeting its wind and solar generation targets. India’s combined wind and solar generation in 2020 was 118 TWh. This is some way off the government’s targets of 274 TWh in FY 2021-22 and 793 TWh in FY 2029-30. India is at an immediate high risk of not meeting its 2022 target.

  • 05


    India's coal plants are running less and less

    India’s coal plant load factor (PLF) fell to a record low level of 53% in 2020, while coal-fired generation fell and coal-fired capacity increased. Therefore, the current coal fleet is already running the risk of turning into loss-making stranded assets.

  • 06


    India's coal capacity could peak in the next 5 years

    It is possible that India’s on-grid coal capacity will actually peak within the next 5 years, if India delivers on its commitments to close older coal power plants and does not build new coal power plants beyond those currently under construction.

Recommendations

This report makes the following recommendations to ensure that coal-fired generation has already peaked in India:

  1. Focus on removing barriers to ensure wind and solar targets are met
  2. Moratorium on building new coal power plants
  3. Incentivise closure of old coal power plants
  4. Moratorium on new coal mine auctions

It seems increasingly likely that coal power will plateau in the 2020s in India. But, there is still a risk that India could be knocked off course. As India recovers from the COVID-19 pandemic shock, the choices it makes in the next decade will make or break its coal-to-clean electricity transition. Now the focus must be on building enough new solar and wind capacity to meet increasing electricity demand. That would mean the new wave of coal plants coming online in the next few years can be used to replace India’s oldest and dirtiest coal plants. As the world’s second-largest coal generator, all eyes are on India in this crucial decade of climate action.

Aditya Lolla Senior Electricity Policy Analyst – Asia, Ember
Aditya Lolla

Coal-fired generation falls for second year in a row

The historical peak of India’s coal-fired generation was seen in 2018

Coal-fired generation fell 5% in 2020 due to significantly reduced annual electricity demand caused by the COVID-19 lockdown and a steady increase in solar generation. This marks the second consecutive annual fall in coal-fired generation, following a 3% decline caused by economic slowdown in 2019. However, coal still remains the dominant source of electricity, generating 948TWh (71% of India’s electricity mix) in 2020.

Has coal-fired generation peaked in India?

COVID-19 demand shock means it’s possible coal power has already hit its peak – if India delivers on its wind and solar targets

Indian government forecasts show coal-fired generation rising in the next decade. But with electricity demand likely to be less than forecast due to COVID-19, this analysis shows that it is possible coal-fired generation will be unchanged from now by 2030, even if electricity demand is increasing at 4-5% per year on an average.

An analysis of International Energy Agency’s (IEA’s) new India Vision Case (IVC) from the India Energy Outlook 2021 revealed that the coal-fired generation may plateau even if India pursues higher rates of economic growth. This is consistent with the COVID-19 pathway above. IEA Sustainable Development Scenario (SDS)  shows that it is even possible for coal-fired generation to fall by 2030.

Peaking of coal-fired generation is contingent on India meeting its wind and solar generation targets. India’s combined wind and solar generation in 2020 was 118 TWh. This is some way off the government’s targets of 274 TWh in FY 2021-22 and 793 TWh in FY 2029-30. India is at an immediate high risk of not meeting its 2022 target.

If coal-fired generation can peak, then can coal power capacity also peak?

It's possible India's coal power capacity will peak within the next 5 years

It is possible that India’s on-grid coal capacity will actually peak within the next 5 years, if India delivers on its commitments to close older coal power plants and does not build new coal power plants beyond those currently under construction.

India’s coal plant load factor (PLF) fell to a record low level of 53% in 2020, while coal-fired generation fell and coal-fired capacity increased. Therefore, the current coal fleet is already running the risk of turning into loss-making stranded assets.

Conclusion

Ensuring the peak of coal power in India

As India recovers from the COVID-19 pandemic shock, the choices it makes for its power sector can make or break its coal-to-clean electricity transition in the next decade.

This report makes the following recommendations to ensure that coal-fired generation has already peaked in India:

  1. Focus on removing barriers to ensure wind and solar targets are met
  2. Moratorium on building new coal power plants
  3. Incentivise closure of old coal power plants
  4. Moratorium on new coal mine auctions

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Acknowledgements

Peer Reviewers

Report Design

Wilf Lytton