India, second only to China in terms of installed coal-fired capacity in the Asia-Pacific, was estimated to have a share of 7.6% of global coal-fired installed capacity in 2012. This capacity is expected to increase from 144 GW in 2013 to 199 GW by 2020. With coal reserves accounting for 7% of global coal reserves, electricity generation in India will remain highly dependent on coal, with planned capacity additions of 66.6 GW over the 12th Five Year Plan, which spans the period 2012 – 2017. A further 49.2 GW of coal-fired capacity is expected to be added in the country during the 13th Five Year Plan (2018 – 2022). More than 94% of the coal-fired capacity in the country is subcritical in nature; however, the drive towards efficiency triggered by coal shortages and strict environmental norms are driving a shift towards advanced technologies, such as SC and USC.
Until December 2012, the country had installed 7.4 GW of SC coal-fired power generation capacity. Under the current 12th Five Year Plan, India is expected to install an additional 62 GW of coal-fired capacity. SC capacity is expected to constitute around 50% of this amount, accounting for around 37 GW of new installed coal-fired capacity. There is no USC-based coal-fired capacity in the country. Despite this, India’s first 800 MW coal-fired advanced USC power plant is expected to be operational by 2017. Almost all coal-fired power plants in the 13th Five Year Plan are to be SC.
The Indian Government has emphasised the need to overcome the existing annual power deficit of between 9% and 13% between supply and demand, through the installation of increased coal-fired power generation capacity, based on SC and USC technology. The adoption of SC and USC technology will also increase the efficiency of coal-fired power plants in India, which is currently low. Currently around 5 GW of the coal-fired capacity in the country has a capacity utilisation of less than 5%.
Challenges facing private players
The government is also taking an increasing interest in attracting private players to the power sector. Private domestic players, such as Tata Power, Adani Power, Reliance Energy and others, commissioned significant coal-fired capacity based on SC and USC technology in 2011 and 2012.
One of the serious challenges affecting the participation of private players in the Indian power market is the plethora of regulations and clearances that must be passed through in order to set up a project in the country.
The government, in a bid to reduce the power deficit and increase the participation of private players in the power generation sector, announced several ultra mega power projects (UMPP) in India. Each of these projects is set to have a capacity of 4000 MW and all are coal-based projects. Of the 16 projects proposed, the government has so far only been able to clear four. One of the projects was awarded to Tata Power, while the other three were awarded to Reliance Power.
Tata Power’s Mundra UMPP has been commissioned, while other UMPPs are in various other stages of commissioning. However, these UMPPs have been facing problems related to the supply of imported coal, the price of which has risen in comparison to the prices at the time when utilities signed power purchase agreements (PPAs) with the state governments. This has created financial problems for these projects, as state governments are not yet willing to negotiate prices with the utilities. The five countries with sufficient reserves to meet India’s coal demand are the US, Russia, Indonesia, Australia and South Africa.
Recently, Indonesia’s industry ministry has proposed a tax of 25% on coal exports in order to avoid the over exploitation of its coal mines. The economic costs that India will need to bear, due to these kind of developments occurring in the coal exporting nations, still need to be seen.
Domestic production of coal is low, because most of India’s deposits are located in forest belts. Forests are a sensitive issue in India and clearance for mining projects in virgin territory is not easy to secure from the Ministry of Environment and Forests. Furthermore, in terms of India’s existing mines, the public sector company Coal India Ltd. (CIL) currently has a market monopoly and it does not possess the modern technology required to produce sufficient coal for these projects. CIL, which supplies around 80% of the coal in India, took 12 years to increase its capacity from 200 – 300 million t and another five years to exceed 400 million t. In fact, India currently loses around 10% of its power generation capacity due to an inadequate coal supply. This figure is expected to increase.
India is constrained by a limited transportation capacity that struggles to import the substantial quantities of coal needed from other countries. Moreover, major coal captive blocks are located in the Naxal-affected states, which may constrain the supply of coal to the country’s power plants. Market participants will be restricted from investing in coal-fired power plants, unless long-term guarantees on coal linkages are provided by CIL.
Emissions from coal-fired power plants account for the highest share of overall emissions in the country, at over 60%. The country has been working to reduce its carbon emission intensity per unit of GDP by 20 – 25% between 2005 and 2020. The Indian Government plans to invest Rs 74,000 billion (US$ 16.5 billion) over the next five years on reducing emissions from the power sector. This will involve measures aimed at reducing the energy intensity of the domestic economy, increasing the efficiency of power plants and introducing clean coal technologies, such as SC coal-fired generation. This will contribute to the reduction of carbon emissions by 98.5 million t over the period 2012 – 2016.
With strict new ambient air emission standards in 2009 for the first time in 15 years, emission regulations in India are set to become increasingly stringent and are expected to parallel those in developed countries in the future.
Coal capacity additions in the Asia-Pacific region are also expected to be vulnerable to water scarcity: According to the US Department of Energy, coal-fired power plants use three times as much water as natural gas power plants for the same amount of electricity produced. Around 74 GW of existing and planned coal-fired capacity in India and Southeast Asia leads to a threat of water shortages. In the case of China, grasslands in the Inner Mongolia region are drying up due to heavy water usage by coal mines and power plants. The situation has resulted in confrontation between local communities and industries. Given this scenario, China and India need to carefully consider the location of their coal-fired power plants. Both countries plan to commission substantial coal-fired power generation capacity equivalent to 400 GW during the period 2013 – 2020.
Elsewhere around the region
Other than China and India, significant coal-fired capacity is expected to be added in Asia-Pacific countries, such as Vietnam, Indonesia and South Korea. Vietnam and Indonesia plan to add more than 32 GW and 23 GW of coal capacity respectively by 2020, with the majority of capacity additions to be based on subcritical technology. South Korea is expected to add around 16 GW of coal capacity by 2020, with around 14 GW to be based on SC, USC and IGCC technologies.
In conclusion, the Asia-Pacific region, with China and India dominating, is expected to contribute substantially to global coal-fired capacity additions in the future, despite constraints related to strict emission standards and local issues related to fuel supply. Significant coal-fired capacity additions will be based on SC and USC technologies, with steps being taken to make electricity prices a reflection of market-determined coal prices in order to enable the sound financial working of the utilities and the sector in this region. However, due consideration should be given to the environmental effects of coal generation, such as environmental pollution and water scarcity, in order to ensure a sustainable ecosystem.
To read Part 1 of the article, click here.
Written by Shivanshu Agnihotri, GlobalData. This article was first published in the July 2013 issue of World Coal.
Read the article online at: https://www.worldcoal.com/coal/11092013/powering_the_asia_pacific_part_1_b/