Coal vs Solar
The per MW capital cost of thermal power plants in the range of Rs 4-5 crore. They are still the cheapest among the energy sources, and will probably remain so for quite some time. Although Indian coal is of inferior quality but the country has enough coal for a century.
Although the government has reportedly sanctioned at least 200,000 mw of thermal power capacity (translating into a capital investment of about Rs 10 lakh crore over a decade or more) the headwinds against coal is likely to get stronger in the future. Already the environmental argument is getting stronger against it. There is a possibility that in couple of years the thermal power plants become unviable due to a combination of social, economic and environmental reasons.
Here is a list of the factors working against use of coal for energy generation:
- China has agreed to a cap its emissions by 2030, it means pressure will build on India to cap and then reduce its own emissions too.
- Coal mining will continue to be adversely affected due to agitations from people around the mines, and the employees’ unions’ of Coal India. It means coal production will remain under pressure, necessitating import of costly coal. Thus, coal prices are unlikely to fall.
- Like in China, the health concerns are set to rise in India as more and more thermal power plants go on stream; thus, inviting judicial verdicts and tighter regulations.
- Water shortage is expected to increase in the coming years; thermal power plants will also feel the pinch as much as any other business. The International Water Management Institute estimates that by 2030 India can supply only half its water needs. How much will thermal plants get?
Coal plants need continuous supply of fresh water, which might be difficult to maintain in a warming and drying world. Water shortage has already shut down thermal power plants. In 2014, the Parli power plant in Maharashtra was shut down due to water shortage. The International Energy Agency estimated that a 35% increase in energy consumption by 2035 will increase water consumption by 85%.
- Solar power becoming cheaper than the thermal power.
This last mentioned force has emerged lately. It will join hands with the other factors working against thermal power. The price of solar power has been falling relentlessly, and the decline is expected to continue over the decade. Ten years ago, solar power modules used to cost $10 a watt. Now it costs 50 cents a watt. In India, solar power prices have fallen by 60% over the past three years; solar power is expected to reach grid parity by 2017, although grid parity is the wrong yardstick to judge solar power. Solar is already competitive with imported coal.
Another argument is that unlike thermal power plants, where cost escalates on a yearly basis, the cost of a solar power plant is fixed for the next 25 years of operation.
It is not difficult to imagine the likely future scenario. As coal prices increase or remain stable at best, solar panel prices continue to fall though the decline is slower now. Research with much cheaper pervoskite based solar panels points to potential for still further reduction in panel prices. Thus, solar power is likely to become as cheap as coal power within three-four years and substantially cheaper in about a decade. So the game would have been over for thermal power within a decade.
However, a crucial shortcoming of solar power provides lifeline to thermal energy. Solar power is produced only during the day time but India’s peak demand comes when the sun begins to go down. Thus, the country would need another source to provide power during peak demand. For this, coal is still the best option.
Solar Power is a Clear Winner!
Compared to thermal power plants which take much longer to build and start solar plants can be set up and commissioned in about six months. It means that with right policies India can create capacities of 5-10 GW easily in a year. Therefore, government’s ambitious plan of creating 100 GW solar capacity by 2022 looks quite achievable provided the policies are streamlined and financial and land availability hurdles are removed. India has already been creating roughly 1 GW annually in the past three years.
Government is planning to shift the peak demand to the day from dusk through ‘time-of-use rates’ when utilities charge more during peak period, thereby forcing consumers to use less energy during that period. Already, country’s peak demand is shifting towards the day as more buildings with air conditioning are coming up.
Karnataka, Tamil Nadu and Andhra Pradesh have taken lead in introducing net metering recently. Other states will soon follow them. It will give a powerful boost to solar power. Likewise, battery technology is expected to improve in the coming years which will also push solar forward.
A booming solar industry would make it difficult to further expand coal capacities in future. Looking at this future scenario some European countries are gearing to switch to renewable energy. But there is a difference between Europe and India: Demand is not growing in Europe while it is exploding in India.
Yet, a 100 GW solar capacity would form just 10% of India’s total capacity, therefore solar will not exactly replace coal in the next decade or two.
Industry experts project the following energy scenario for the coming decades:
Coal prices will continue to fluctuate and likely increase. In any case, they cannot fall beyond the point where extraction from mines becomes uneconomical. Meanwhile, as climate change scenario worsens, the coal production could invite high and higher tax and other forms of disincentives to push the coal prices up. On the other hand, solar prices are expected to continue the downward journey for many years.
Finally, coal and nuclear projects have a history of delays in India. It points to an important fact. India’s strength is not large projects so it may not be able to execute huge power projects the way China has done. Its strength is entrepreneurship. Here solar power fits ideally.