New report – released today by the Institute for Energy Economics and Financial Analysis (IEEFA) and Indian energy analysis firm, Equatorials. India’s Electricity Sector Transformation – states the Indian Government is on track to achieve its goals of doubling domestic coal production, modernising the electricity grid and installing 175GW of renewable energy, underpinning sustained economic growth in India of 6-8% pa.
“The profound transformation announced in 2014 by the Indian government is gaining momentum,” said Tim Buckley, Director of Energy Finance Studies at IEEFA. “While most financial commentators have questioned India’s capacity to deliver, all sign are pointing towards success.”
The installation of 175GW of renewable energy – equivalent to three times the electricity capacity of Australia – is one of a number of key policy initiatives that will enable the rapid transformation.
“India has opened the gates to a wave of multi-billion dollar investments in its renewable energy sector,” said Buckley. “There have been eight major deals in July alone with the single biggest international endorsement being SoftBanks’ US$20bn, 20GW solar joint venture.”
NTPC also announced a 420MW Invitation for Bids for the Bhadla Phase-II Solar Park in Rajasthan and a second for 500MW at the Gani-Sakunala Solar Park in Andhra Pradesh. NTPC is facilitating 15GW of reverse auction solar tenders by 2019 on behalf of the government, in addition to its own 10GW of solar projects.
Facilitated by a US$50 billion grid upgrade, solar electricity is key, with installs of 75GW by 2021/22 capable of delivering 110TWh,or 22% of the required electricity increase.
“India is replicating Germany’s and China’s systematic electricity sector transformation, with the added advantage that the cost effectiveness of this is accentuated by the fact that the price of solar electricity has dropped by 80% in 5 years,” said Tim Buckley, Director of Energy Finance Studies at IEEFA.
According to IEEFA, taking wind installs to 60GW could deliver 19% of the required uplift, with a combined capacity expansion across nuclear, gas, biomass and hydro providing a further 25%.
In this context, the Government of India’s ambition to more than double Indian domestic coal production to 1,500Mtpa by 2021/22 would oversupply India with coal by 400Mtpa, with dire consequences for the seaborne thermal coal market.
While many commodity forecasters have assumed Indian imports will continue to grow, as a result of the transformation, IEEFA forecasts a peak in Indian thermal coal imports in 2015, with a rapid ~20% pa decline thereafter.
Energy Minister Goyal has made it clear that India’s reliance on thermal coal imports is not sustainable for the economy, rate payers nor commercially viable for the coal-fired power plants involved. Goyal in May 2015 said: “We are confident that in the next year or two, we will be able to stop imports of thermal coal.”