India’s Zombie Threat

27 GW of unnecessary planned coal power plants threaten India’s RE goals

Published 6th September 2021

 

Analysis by Ember and Climate Risk Horizons (CRH) shows that 27 GW of pre-permit and permitted new coal power plant proposals are now superfluous to requirements and will likely end up as “zombie” plants— assets that will be neither dead nor alive. These surplus plants, if built, will suck in scarce resources and impede India’s renewable energy (RE) ambitions. But they can be cancelled without needing to sacrifice the power system’s ability to meet future demand.

Key findings

New coal not required to meet demand: India does not require additional new coal capacity to meet expected demand growth by FY 2030. India can meet its peak demand in FY 2030 without building the “zombie” coal plants.

Financial benefts to cancelling new coal. India can free up Rs. 247,421 cr in capex by killing the “zombie” coal projects. India can make annual savings of Rs. 43,219 cr by investing in renewables and storage, instead of “zombie” coal projects.

As India recovers from the disruption caused by the COVID-19 pandemic, how the country uses scarce public resources will be absolutely crucial. By avoiding the unnecessary “zombie” coal plants, India can not only save lakhs of crores of rupees, but also lower power costs and reiterate its commitment to the success of its clean energy transition goals”

Aditya Lolla

Senior Electricity Policy Analyst, Ember

“The financial risks associated with new coal plants are manifold—for developers, lenders, discoms and the Indian economy at large. With the current generation overcapacity in the system, adding additional new coal will jeopardise the growth of the RE industry and with it, India’s ambitious 450 GW target.”

Abhishek Raj

Analyst, Climate Risk Horizons

“The 27 GW of new coal being proposed at an investment value of 250,000 cr ($33 billion) represent a significant threat to the Indian economy, not just in terms of misallocation of scarce capital, but also due to the lock in effect of expensive electricity and ancillary impacts on the renewable energy industry. This must be avoided especially as the Indian financial sector is yet to recover from the Non Performing Asset crisis created by excessive coal construction in the last decade.”

Ashish Fernandes

CEO, Climate Risk Horizons

Summary

27 GW of unnecessary planned coal power plants threaten India’s RE goals.

Analysis by Ember and Climate Risk Horizons (CRH) shows that 27 GW of pre-permit and permitted new coal power plant proposals are now superfluous to requirements and will likely end up as “zombie” plants— assets that will be neither dead nor alive.

These surplus plants, if built, will suck in scarce resources and impede India’s renewable energy (RE) ambitions. But they can  be cancelled without needing to sacrifice the power system’s ability to meet future demand.

India’s power sector landscape has changed markedly in the last few years—both in its electricity demand profile and the economics of electricity production.

India’s electricity demand growth rate has slowed in recent years, diverging significantly from previous Central Electricity Authority (CEA) projections.

India’s power generators are starting to respond to the country’s 2030 target of 450 GW renewable energy (RE).

India does not require additional new coal capacity to meet expected demand growth by FY 2030.

Even if India’s power demand grows 5% annually, in line with the most optimistic International Energy Agency (IEA) projection, coal-fired generation in FY 2030 will be lower than in FY 2020 as long as India achieves its non-coal generation targets. In effect, more coal capacity beyond what’s already under construction isn’t needed to meet the aggregate demand growth by FY 2030.

India can meet its peak demand in FY 2030 without building the “zombie” coal plants.

India’s peak demand would reach 301 GW by FY 2030, assuming it grows at an annual growth rate 5% in line with the Central Electricity Authority (CEA) projections. This is about 40 GW less than the OGCM forecast.

If this peak occurs during sunlight hours as recent studies predict, India’s planned solar capacity can cover much of it. Even if it occurs in the evening, substituting the “zombie” coal plants with additional battery storage capacity represents a more flexible, cheaper option.

India can free up Rs. 247,421 cr in capex by killing the “zombie” coal projects.

These surplus plants, if built, will require an estimated Rs. 247,421 cr (US $33 billion) of investment. They will lock consumers into expensive contracts and jeopardise India’s RE goals by adding to the system’s overcapacity.

India can make annual savings of Rs. 43,219 cr by investing in renewables and storage, instead of “zombie” coal projects.

Substituting 27 GW of coal with battery storage will save the Indian power system Rs. 43,219 cr (US $6 billion) a year in terms of reduced power purchase cost.

It will be cheaper to generate electricity from renewables and storage than any of India’s planned “zombie” coal power plants.

Concluding remarks

The economics of India’s electricity generation sector have changed drastically in the last five years. Clearly, many parts of the electricity system have yet to adapt to that change: system inertia on the part of coal power players (both government and private) and regulators has meant that new coal power proposals have continued to move through the system. This raises the risk of creating 27 GW of coal “zombies”:  power plants that if built will waste public finance, lock consumers into expensive contracts and threaten India’s ambitious RE targets.

 

About the report:

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This report estimates electricity requirements by the end of this decade and compares it with the Central Electricity Authority (CEA’s) Optimal Generation Capacity Mix (OGCM) report forecasts. It examines whether India needs more new coal power plants under the current circumstances to meet its power requirements in FY 2030 and estimates savings that can accrue by investing in clean energy technologies better suited to address India’s growing electricity demand instead of unnecessary new coal plants. The analysis in this report was done based on the electricity generation data and broad thermal power status reports from the CEA database, peak demand data from the Ministry of Power (MoP) and the data on future RE+storage costs from Lawrence Berkeley National Laboratory.