A story of contrasts is playing out in India’s energy landscape: the slide of coal and the rise of solar.
On May 30, a day after it announced its quarterly results, shares of state-owned Coal India, the world’s largest coal miner, dropped to a three-year low. The Kolkata-based company had posted a 38% fall in consolidated profit for the fourth quarter of financial year 2017. Its bottom-line was partly hit by a bump in its wage bill.
However, the fact is that it isn’t easy being a coal company in India today. Faced with tepid demand, overcapacity in thermal power generation, and a surge in renewable energy, even behemoths like Coal India are hurting.
Late last year, the Central Electricity Authority (CEA) estimated that India won’t need any new coal-based power plants till 2022, factoring in the capacity already under construction and the likely growth of renewables (including 100 gigawatts of solar). Moreover, the CEA reckons that the already declining capacity utilisation of thermal power plants, known as plant load factor (PLF), could fall further to 48%.
“To accommodate high quantum of RES (renewable energy sources) into the grid, thermal plants are likely to run at low PLF in future,” the CEA’s Draft National Electricity Plan said. “Many plants may get partial/nil schedule of generation,” which means a substantial portion of thermal power generation capacity may sit idle.
Last fiscal, Coal India produced 15 million tonnes of coal more than the preceding year. Yet, around 11 million tonnes of the coal it produced were left dumped near its mines, the Hindu BusinessLine newspaper reported. Earlier this month, perhaps for the first time in the company’s history, the government cut its annual production target from 660 million tonnes to 600 million tonnes.
“Power demand is linked with the state of the economy,” Rupesh Sankhe, senior analyst at brokerage Reliance Securities, told Quartz earlier this May. “If you look at the demand pattern, 40% of the demand comes from industry. And industrial consumption has drastically come down.”
India’s solar power sector is increasingly positioning itself as a competitor to thermal power. In the last three months, solar tariffs have dropped by over 25%, reaching levels lower than that of coal-powered electricity. While there are concerns over the viability of some projects at such low tariffs, there are hardly any doubts over the sector’s growth trajectory. For big coal in India, however, the outlook is rather different.