India is leading the race in renewable energy but is still expected to become the largest coking coal importer by 2022. Will the country be able to meet its ambitious targets in clean energy while a big chunk of funds go towards coal-based plants?

The COP24 began in Katowice, Poland on Monday and declared that it would achieve its targets of carbon emissions well ahead of time. India is also expected to be at the forefront of negotiations as a leading developing country to push for climate action. The Intergovernmental Panel on Climate Change (IPCC) report in October titled ‘Global Warming of 1.5 Degrees’ warned that India will be one of the worst affected by climate change.

With the growing population in India, the country is expanding its clean energy infrastructure.  Developing nations are gradually shifting towards renewable energy and India is leading the race. According to a recently released report by Bloomberg NEF India’s ambitious clean energy policies and extremely competitive renewable energy market pushed the country to second position.  Renewable energy installations in India exceeded those by coal power plants for the first time in 2017. “India’s well-established domestic supply chain facilitated the development of clean energy projects further, despite competitive auctions putting downward pressure on profit margins across the value chain,” Bloomberg NEF said.

The report also added that, “India’s renewable auctions market is the largest in the world. Over 11 gigawatt (GW) of projects were awarded through auctions in 2017 resulting in the best year for solar capacity as installations jumped by 90 pc over the year.”

Rapid urbanisation along with the growing middle-class disposable income is expected to take India’s share in global energy consumption to 11 pc in 2040 from 5 pc in 2016. At the same time, India is committed to reduce the emission intensity of its GDP by 33-35 pc by 2030 from the 2005 level as part of its nationally determined contribution in Paris COP21.

India has one of the world’s most ambitious renewable energy targets. It aims to reach 175GW of clean energy capacity by March 2022, with 100GW coming from solar, 60GW from wind, and 15GW from other sources. Clean energy investment totalled USD 7.4 billion in the first half of 2018, with solar power projects accounting for the majority. India’s solar market almost doubled in size in 2017, making it a record year with annual PV installations touching 8GW.

Also there are foreign companies investing in Indian renewable sector like Softbank, Foxconn, Chinese solar component manufacturer Longi Solar or Goldman Sachs backed ReNew power, the Indian unit of Singapore-listed Sembcorp Industries. This is due to the country’s focus on renewable energy ambitions and subsequent policy creation.

Excessive dependence on coal

However, despite India moving forward in adapting to renewable energy, the country is still expected to become the largest coking coal importer by 2022. According to a Tata Steel official, India is expected to become the largest coking coal importer through sea route by 2022 as the country pushes for more steel production.

India currently imports about 85 pc of its coking coal demand through imports and, by 2022, the demand for coking coal is projected to grow to 67 million tonnes from about 56 million tonnes now. “India may become be the largest coking coal importer by 2022 through sea route,” Tata Steel raw material strategy group chief Somesh Biswas said in his address at the recently held 12th India coal market conference. According to Crisil, growth in steel production is expected to push up demand for coking coal to 65 million tonnes in 2022-23 from 51 million tonnes in 2017-18.

According to a study of 72 renewable and thermal power projects conducted by the Centre for Financial Accountability (CFA), a New Delhi-based non-profit, around 73 pc of all funding in 2017 went towards coal-based plants. Around USD 9.35 billion out of a total USD 12.8 billion funding was given to 12 coal-based power plants with a total capacity of 17 gigawatts (GW, or 1,000 megawatts), the analysis showed.

In a recent report, Wood Mackenzie said that India faces a myriad of challenges in the renewable industry. “The recent cancellation of auctions risks jeopardising investor confidence. Various duties on equipment and the associated uncertainty has led to a short-term uptick in solar prices. This leads to the knock-on effect on already cash-strapped state distribution companies who are showing an unwillingness to green light high priced solar projects,” Wood Mackenzie’s solar analyst Rishab Shrestha said.

Another challenge that the renewable energy sector is facing is the pricing factor as the government has set a tariff capped at USD 0.035 per unit for hybrid projects that includes both solar and wind power. According to a report published earlier this month by Bridge to India, a renewable energy consulting firm, there was a drastic decline in new solar power instalments, and predicted that the trend could continue. In a Quartz report, Bridge to India added that of the remaining near 100 GW of India’s promise to reach 175 GW in renewables by 2022, the current rates of progress would make the country achieve only 67 GW, that is quite short of its target.

Not just coal but according to reports over the next three years India’s three state-owned oil marketing companies (OMCs) plan to nearly double the number of fuel pumps they operate collectively. On November 24, The New York Times reported that India is also building 50 gigawatts of additional coal capacity. On November 25, Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) sought bids from private dealers to expand their retail network. These three companies currently operate 90 pc of all fuel-filling stations in India. Fossil fuel accounts for 60 pc of India’s power capacity.

India is strongly working towards the objective of Paris Agreement to strengthen the global response to the threat of climate change. According to US-based Institute for Energy Economics and Financial Analysis (IEEFA), India is likely to achieve its two Paris Agreement goals 10 years before the 2030 deadline. IEEFA made this estimate ahead of India’s 2nd Biennial update report, which was released on December 3, by the Indian government at COP24 Katowice, Poland.

“For the first goal, IEEFA predicts that installed non-fossil fuel capacity in India will exceed 40 pc by end of 2019. And at the current rate of 2 pc reduction per year in emission intensity of its gross domestic product (GDP), India will likely achieve 33-35 pc of emission intensity reduction targets a decade ahead of target,” it said in a report.

The article, first published on the Media India Group, can be accessed here.

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