Much of India’s 33 gigawatts (GW) of coal-fired power capacity currently under construction and another 29 GW in the pre-construction stage will end up stranded due to competition from renewables, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
“Coal-fired power simply cannot compete with the ongoing cost reductions of renewables. Solar tariffs in India are now below even the fuel costs of running most existing coal-fired power plants,” said Kashish Shah, research analyst at IEEFA and author of the report.
He said that in the past 12 months no new coal-fired power plants have been announced, and there has been no movement in the 29 GW of pre-construction capacity.
“This reflects the lack of financing available for new coal-fired power projects, and also the flattening of electricity demand growth, which has impacted coal the most,” Shah added.
Despite these headwinds, the Central Electricity Authority had projected that India would reach 267 GW of coal-fired capacity by 2030 which would require adding 58 GW of net new capacity additions – about 6.4 GW annually.
However, the report said that it is ‘highly improbable’.
“It is highly improbable that the CEA’s projections will materialise given the ongoing financial and operational stress in the thermal power sector, and puts the case that India’s coal capacity requirements should be urgently revised,” said the report.
It added that any projections for India’s future generation mix should take into account that new coal-fired power plants are likely to become stranded assets.
IEEFA expects coal-fired capacity in India to peak at 220-230 GW by 2025 and with additions of 2-3 GW of net new coal-fired capacity annually in this five-year window – and only then if financing can be found amid the accelerating global retreat from coal.
Ahead of this month’s summit, G7 country leaders have agreed to stop unabated coal finance before the end of 2021.
According to the report, there is little appetite from investors – except for state-owned Power Finance Corporation and Rural Electrification Corporation – to risk new capital in a sector that continues to carry $40-60 billion of non-performing or stranded assets.
