February 1, 2018 Read More →

A Cost Tipping Point in India


King Coal’s reign in India is about to come crashing down. Coal supplied 80% of India’s total power mix in 2016-2017, but economics have flipped the country’s energy equation – new renewable energy is now cheaper to build than running most existing coal-fired power plants.

Renewable energy costs have fallen 50% in two years, and are forecast to continue dropping apace. New wind and solar is now 20% cheaper than existing coal-fired generation’s average wholesale power price, and 65% of India’s coal power generation is being sold at higher rates than new renewable energy bids in competitive power auctions.

The tipping point may have been 2016-2017, when renewable energy installations surpassed coal for the first time, adding twice the capacity. Coal plants nationwide already only run around half of the time, nearly every Indian coal plant violates the country’s new air pollution standard, and India’s Central Electricity Authority (CEA) has proposed closing nearly 50 GW of coal capacity by 2027. Retrofitting the plants that remains open will each cost millions to achieve compliance, so running already uneconomic plants will get more expensive as plants run less often and generate less profit.

But while India’s power demand will double over the next decade, its draft National Electricity Plan (NEP) calls for rising demand to be met with 275 gigawatts (GW) total renewable energy capacity by 2027, without requiring new coal plants beyond those already under construction.

As ever-cheaper renewable energy comes online, increasingly expensive coal generation will fall further from profitability. So how can India’s power sector handle this looming coal crash?

New Wind And Solar Are 20% Cheaper Than India’s Existing Coal Power

Similar to the United States, it’s increasingly difficult for Indian coal generation to compete economically with fast-falling renewable energy costs, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

IEEFA finds India’s wind and solar energy costs have fallen 50% to as low as $38 per megawatt hour (MWh) over the past two years, with renewable energy bids in new auctions costing 20% less than the cost of wholesale electricity from existing Indian coal generation, and 30-50% less than the required cost to justify new imported coal or liquefied natural gas capacity.

More: India Coal Power Is About To Crash: 65% Of Existing Coal Costs More Than New Wind And Solar

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