India continues to endorse new coal-fired generation projects, beating a global trend of shrinking thermal projects as concerns mount on rising emissions and tightening of credit.
A report released jointly by Global Energy Monitor, Greenpeace India and the Sierra Club (US) shows the number of coal-fired plants under development have seen a sharp fall in 2018 for the third year on a trot.
The findings of the report titled ‘Boom and Bust 2019: Tracking the Global Coal Plant Pipeline’ are disturbing for the coal sector. Its findings include a 20 per cent drop in newly completed coal plants (53 per cent in the past three years), a 39 per cent drop in new construction starts (84 per cent in the past three years), and a 24 per cent drop in plants in pre-construction activity (69 per cent over the past three years) year-on-year.
In India, around 40 GW of the country’s coal plants are either financially stressed or at risk of bankruptcy. Less than three GW of new capacity was commissioned in 2018, compared to 39 GW in 2010. Low plant load factors largely due to over capacity and competition from cheaper renewables have made it harder for coal plants to recover their investments.
“Despite these unfavourable market conditions for coal power, the government continues to invest in new plants”, said Pujarini Sen of Greenpeace India. “In February 2019, the Cabinet Committee on Economic Affairs (CCEA) approved investments worth of Rs 11,089 crore and Rs 10,439 crore into two power plants, Khurja, Uttar Pradesh, and Buxar, Bihar respectively. When the entire coal power sector is under financial stress, building more coal plants will put even more public money at risk”, she added.
In China and India, which have accounted for 85 per cent of new coal power capacity since 2005, the number of permits for new coal plants dropped to record lows, but new plants are still in the pipeline. In the United States (US), coal plant retirements continued at a record pace, making 2018 the third highest year for retirements globally and the second highest for the US despite efforts by the Donald Trump administration to keep more coal plants online.
Ravi Shekhar of The Climate Agenda, an Uttar Pradesh based environmental organization said, “It is very unfortunate that the government is continuing the approval of coal power plants in UP despite the health emergency faced by the state due to air pollution crisis. Electricity from the Khurja super thermal power plant or any other new coal based plant in India would cost close to double compared to that from renewable energy sources, and will also increase the risk to public health. Rather, the Government should invest public money in solutions like aggressive energy transition to renewable energy, and stringent implementation of National Clean Air Programme to achieve breathable air across the country".
Coal powered growth is fraught with escalating fund challenges. Over 100 financial institutions have clamped restrictions on lending to the coal sector while 31 countries are drawing coal phase put plans. However, in a contrarian trend, the state owned financial agencies in China, Japan, and South Korea have emerged as the largest sources of funding for coal plants outside their borders.
Jan Erik Saugestad, chief executive officer of Storebrand Asset Management (with over $80bn of assets under management) said, “The appetite for building new coal plants is waning around the world, including across the US which is undergoing a coal crash. But these trends must be accelerated and huge climate risks remain, so wherever they can, fund managers should commit to a full phase out of coal and be clear that coal has no future if we want to limit global warming. This must include limiting investments in companies involved in current and new coal fired power plants."
Storebrand has decided to exit coal completely by 2026 and already has strict exclusion policies in place.