Tumblr Icon RSS Icon

Why India’s Coal Plans Are An Illusion

Posted on  

"Why India’s Coal Plans Are An Illusion"

Share:

google plus icon

by Justin Guay, via the Sierra Club

The biggest untold story in the world is now out in the open.

Despite warnings from the World Bank about the dangers of unchecked climate change, the coal industry has a global pipeline of nearly 1,200 plants planned, two thirds of which are in India and China. India alone has plans to build a coal fleet nearly twice the size of the entire U.S. coal fleet.

But if this pipeline has you thinking that a coal-fired future is inevitable, think again. The truth: The majority of plants in this global pipeline are nothing an illusion.

To understand the reality of the industry’s plans, take a look at India. India’s huge pipeline will require ~2.4 billion tons of coal by 2030. That’s two and a half times what the U.S. currently consumes. More importantly, it’s nearly five times the amount of coal that India produces. To feed this beast India is going to need a herculean effort to increase production.

Let’s take an optimistic scenario where Coal India (CIL) – the state owned mining company responsible for 90 percent of domestic supplies — maintains a robust 7 percent annual growth rate. In this scenario, India would increase production to ~ 1.5 billion tons. Despite this mammoth increase in production, the country would still face a supply shortfall equal to 920 million tons by 2030 – an amount equivalent to annual U.S. coal demand. That’s a jaw-dropping amount of coal and it’s the “optimistic scenario” because it’s based on the fantastical belief that CIL will maintain an annual growth rate it has only achieved twice in the past 10 years.

India Coal Shortfall
But this optimistic scenario looks even more doubtful when you take into account the woeful state of the Indian coal sector. Despite industry spin that “environmental hurdles” are constraining production, the truth is that India has simply not invested in the infrastructure necessary to mine and transport coal to power plants. Worse, the permitted mining expansions it does have are under heavy scrutiny as the coal gate scandal has already resulted in the revocation of dozens of coal leases.

To expand any further the industry will need forest clearances because remaining deposits sit under prime forest land. Getting those permits is already leading to a showdown with activists determined to preserve what’s left of India’s natural heritage. Which is why Prime Minister Singh’s attempts to force CIL to sign fuel supply agreements are so laughable. Without solving fundamental infrastructure problems, or convincing Indian citizens to destroy what’s left of the country’s forests, those agreements aren’t worth the paper they’re printed on.

More importantly, though, even if CIL defies all past experience (and concerted opposition), the 920 million tons they will still need is roughly the size of the entire international coal market today. Unless India thinks it can lock down a monopoly on the global market, that will be extremely difficult to procure.

The more pressing issue is how much it will cost India to secure that supply. Coal prices in the international market have hit a two-year low, causing near hysteria in Australia where billionaires are decrying their inability to compete. However, even these “cheap” prices are still $90/ton — triple what India pays domestically. This is likely a temporary lull. Coal prices have been on a steady upward march for the past decade and there are no signs this trend will reverse course given that easily-accessible reserves are tapped, transportation costs (oil) are rising, and an “Organization of Coal Exporting Countries” (OCEC) is emerging. Geologically speaking, coal may be abundant. But economically speaking, cheap coal is dead.

Coal price graph

In addition, communities across the country are fighting new coal plants. Their movement is rivaling the anti-nuclear movement in its global reach and efficacy at shutting down projects.

Taken all together, we can see that this enormous pipeline is nothing but an illusion. But don’t take it from me. Best to take advice from the Reserve Bank of India who has called for a freeze on lending to this “distressed sector.”

Justin Guay leads the Sierra Club’s international program. This piece was originally published at the Sierra Club’s Compass blog and was reprinted with permission.

Tags:

« »

10 Responses to Why India’s Coal Plans Are An Illusion

  1. Spike says:

    We must do what we can to support communities fighting coal and deforestation – especially when combined, where it would be hard to think of a greater madness.

  2. Jeff says:

    Missing a word in paragraph 3: but.

  3. The projected growth in coal plants may be an illusion, but stopping growth isn’t enough. We need to shut down existing plants at a rapid pace.

    • Mike Roddy says:

      I agree, Jonathan, this is no time to be complacent. Conditions could change in India that would enable coal plant construction- price crashes, corruption, and willing lenders to pay for the lack of infrastructure mentioned in this article.

  4. Gillian King says:

    WRI did themselves a major disservice with the “1,2000 coal plants” report. I’ve seen the number repeated and repeated, but it takes only a moment’s thought to see that the figure is pure nonsense. The report tallies 9 coal generators for Australia, despite the fact that current generators are being mothballed and the output from coal generation is on a steady decline – it fell 10% last year alone.

    In fact, it is almost impossible for Aust to build a single new coal generator – the carbon price makes them too expensive and there is strong community opposition.

    WRI should have dug deeper and released a genuinely useful report of the likely number of new coal generators. I suspect that they could be wrong by a factor of 10 – that’s about how wrong they are about the Australian estimate of 9.

    What if they found that world-wide there are realistically about 120 new coal generators coming online? Coal miners are in deep trouble, and some of them know it. The Australian Financial Review reports that Marcus Randolph, head of BHP ferrous and coal, said BHP was “cautious about investing in growth in its thermal coal division due to the expectation that over the longer term, coal’s market share in the electricity mix would decline due to concerns over climate change.”

    I’ll treat *all* WRI reports with deep suspicion in future.

    The tide has well and truly turned on coal, and it is worldwide. Climate lobbyists need to be nimble to keep up with the rapidly changing landscape. And despite the need for greater urgency, we could do with more celebration of achievements and progress, and less hand-wringing triggered by false data.

  5. Mulga Mumblebrain says:

    India is one or two monsoon failures from disaster. It’s ruling elites are unbelievably corrupt, have made the fatal error of tying themselves to the decaying US Empire and are mired in communal and insurgent violence in many places. The parameters of India’s economic ‘miracle’ are cracking, and poverty and misery, hunger and starvation are rising as the economic gains are all garnered by the elite, in typical neo-liberal fashion. India will be one of the first great casualties of climate derangement, and, within decades, vast areas of the country will literally be too hot for human habitation.

  6. Dr.A.Jagadeesh says:

    Coal is not the Goal for India but Renewables are for future energy needs.
    Dr.A.Jagadeesh Nellore(AP),India
    E-mail: anumakonda.jagadeesh@gmail.com

  7. Motley Green says:

    Great, informative article. Thank goodness for India’s inadequate infrastructure and environmental activists! Without them and other obstacles outlined in this piece, coal could soon be polluting the planet even more than it already is. Let’s hope India and the rest of the world will focus on developing green alternative energy solutions instead.