A spike in demand just lately noticed thermal energy crops working out of coal, which continues to be the predominant supply of power in India. What structural points led to the disaster? Given the worldwide push for renewables, what’s the way forward for coal in India? PARTHA SARATHI BHATTACHARYYA, former chairman and managing director of Coal India, defined some vital points across the current and the way forward for the sector.
On the latest scarcity of coal for thermal energy crops:
The drawback of coal scarcity throughout the monsoon months shouldn’t be unusual. That has occurred up to now. Two elements have made it totally different this time. One is the very sudden improve in thermal energy consumption. From the 5-6 per cent progress that we now have been managing over the past a few years, we immediately discover a 9-10 per cent form of progress — 17-18 p.c over the identical interval of 2019 — so that could be a little little bit of a spike. Two, which is probably an even bigger drawback, is that about 20-25 per cent of the coal used is imported, and costs have immediately shot by means of the roof. That was primarily due to imports by China, and if China sneezes the world may have fever. Prices went upwards and there was a halt in imports that have been supposed to come back [to India]… That added to the home coal demand, and the demand-supply hole.
Also, the roots of the disaster lie three-four years up to now. A kind of complacency had set in, thermal energy crops have been witnessing PLFs (plant load elements: ratio of power produced to producing capability) as little as 52, 53, 54 per cent. They have been discovering it troublesome even to service their money owed. But they’d no alternative, as a result of renewable [energy] was given a precedence in offtake… Power stations have been benefit order dispatch [in which] a fully wonderful, top-class energy station at a distance might not discover its place simply due to the transport price. And the Indian transport price, significantly the railway tariff, is totally out of the system and the best on this planet… The thermal energy circuit has continued to work at a low PLF…as a result of coal is being pushed on them [and] they don’t appear to be very eager on paying for coal in time. The inventory that they have been supposed to keep up, they left it on Coal India…
On the Coal India aspect, with a 1 per cent degrowth for 2 successive years, shares went to document highs, rising by 25 million tonnes… In that form of state of affairs, Coal India is neither ready to implement cash-and-carry nor to convey sense into the entire system… When a jerk comes, a complacent system takes time to react. That broadly is the explanation for what occurred. But thankfully, the unhealthy interval is behind us, the monsoon is over. We are within the good months. And the approaching 4-5 months are going to be good.
On stopping different, related crises sooner or later:
CEA (Central Electricity Authority) is prescribing the variety of days inventory; CEA can have a regulatory mechanism to see that the actual inventory is maintained.
(Thermal) gencos ought to pay for coal in time; it’s principally a cash-and-carry system. Just as a result of coal is well accessible it’s being thrust on you [even though] you don’t want that coal, shouldn’t be a really beneficial factor. The discoms (distribution corporations) ought to have the ability to realise the market value for no matter energy they promote — and whoever must be subsidised must be subsidised by the state funds. As lengthy as you don’t move into this sort of a mannequin, the issue in some type or the opposite will carry on coming.
On the stagnation in output confronted by Coal India:
The demand of coal for the facility stations could be very critically decided by one issue, and that’s PLF. The common PLF of the nation is languishing at 52-53 per cent for the final three years and no wise effort has been made to enhance it, although achieve this would have a number of constructive penalties.
Number one, it results in monetary stability in an effort to do debt servicing and preserve some margins, and many others. Second, the incremental price you’re incurring is just the variable price of coal; that’s the least expensive supply of energy, and by not permitting the PLF to extend, we aren’t tapping into the most affordable supply. And this really ought to have the ability to handle the affordability difficulty, which is essential, as a result of we’re a low per-capita-income nation.
We have seen PLFs of 79-80 per cent in 2007 and 2008. Now it has dropped; we now have created capacities that we aren’t utilising. As a end result, we are literally denying ourselves low-cost energy. We ought to take the PLFs of current energy crops as excessive as attainable.
Coal corporations should have sufficient additional capability constructed into the system [so] they will move sure issues… For instance, when the demand was low, really they did, and that’s the explanation they’ve been ready to manage this [situation]… They did advance transport, extra of overburden, saved a specific amount of coal uncovered, didn’t produce, however they might fall again upon that coal throughout this disaster… As a end result, they’ve been ready to achieve an off-take progress of about 19 per cent over final yr, drawn from inventory in addition to from manufacturing. 15-16 million tonnes of additional manufacturing has occurred throughout this era as in comparison with final yr…
On diversifying into areas like photo voltaic power and fertilisers:
If the demand from the facility sector shouldn’t be going to come back up — this yr is totally different, however the final three years that was the state of affairs — and the corporate has to develop, then the place does that coal go?
For that coal for use successfully, a method could possibly be coal gasification, different use of coal. We have all the time used coal as a gas for energy, we now have by no means thought of the feedstock character of coal, that coal will also be a feedstock for producing chemical substances, fertilisers, ammonia… We are very strongly married to the facility sector [but] now the wedding is breaking, energy has different companions, renewables are coming in. So due to this fact, coal has a possibility, other forms of avenues. I believe that’s the proper factor to do for coal India. But on the similar time…coal to chemical substances, coal to ammonia, and ammonia to fertiliser is regular… China does it, South Africa does it, and it’s an excellent factor to do as a result of all these things are import-dependent…
Also, I’d say photo voltaic is for everyone. Anybody can get into photo voltaic, and photo voltaic is certainly a complement to power. Coal will ultimately get phased out, [but] the corporate should proceed…, so [it] should take a technique of diversifying into numerous areas, which aren’t unrelated but it surely is sensible the place you may have returns, the place you possibly can construct core competence…
On the impression of excessive dividend payouts to the federal government:
If there is no such thing as a demand, then creation of capability turns into sunk price at the least until demand recovers. Coal India is a fairly debt-free firm and has immense debt-contracting capability if it actually desires to do one thing quick, however throughout that interval, what do you do with the sources that you just generate? The largest shareholder is the federal government; [when] the federal government takes a name that it desires to make use of this cash for one thing, you possibly can’t all the time say no, however when you’ve got clear plans of investing cash in your initiatives, positively you must put it to the federal government…
I don’t suppose CIL has actually suffered very closely due to cash being taken out. But on the similar time, the dividend payout must be throughout the norms of the corporate legislation. It can’t be greater than the distributable income for the yr, the payout ratio must be cheap. If you’re giving a goal of the corporate going to 1 billion [tonnes of coal production] you permit some cash, even when the corporate doesn’t have clear plans for that…
On carbon seize to make coal use extra palatable:
The smartest thing that Coal India can do is to assist or help low-emission energy technology. For that what it must be doing is washing its coal, and immediately we don’t have the washeries of yesteryear the place an enormous quantity of water was consumed. Today we now have western-class washeries the place water consumption is simply incremental. The preliminary water you place in and then you definately require just some incremental top-ups… They are power-efficient, water-efficient, yield-efficient, so we must always attempt to promote these applied sciences… We don’t have an excessive amount of good coal [and] with open-cast mining, that coal turns into additional unhealthy, so washing is the one answer.
On the way forward for coal in India because the world pushes for renewables:
If India has to develop it has to have extra energy, it has to generate that energy, and that’s not attainable with out relying on coal. Coal must be there, significantly for the bottom load. Now tomorrow, allow us to say storage prices come down (loads). And photo voltaic plus storage is the most affordable. Even in that state of affairs, how a lot share of the full requirement can photo voltaic meet, even when the share will increase, the facility demand additionally will increase sooner? If you ask these questions I’m fairly certain you’ll come to the conclusion that a lot of this should be borne by coal, and that’s the explanation coal-based energy should proceed for fairly a while on this nation.
Yes, you will need to see that the carbon footprint is minimized… Washing could possibly be one approach, you utilize lesser amount of coal, you do some technological innovation on the consumer’s finish and see that requirement is decreased… You use coal in a extra sustainable method, produce coal in a extra sustainable method, move coal in a extra sustainable method. These are the issues you could positively do, however you possibly can’t shed away coal within the subsequent 25, 30, 40 years.
Transcribed by Mehr Gill