The world's second-largest coal consumer saw its energy demand plummet by nearly 30 per cent during the lockdown that began on 25 March, with coal-fired generators carrying the brunt.
In 2018, the International Energy Agency predicts that Indian coal demand will more than double by 2040 – a major challenge to international efforts to prevent climate breakdown.
With the right policy structure in place, coal generation in India could peak much earlier, the analysts told Climate Home News.
“I think we will see the peak in coal use for power generation this decade,” said Tim Buckley, director of energy finance studies for the Australia and South Asia region at the Institute for Energy Economics and Financial Analysis (IEEFA).
“There is potential for India to really surprise the global community and contribute to the decarbonisation story while doing it in a very cost-effective way.”
Prior to the Covid-19 crisis, there was political support for renewable energy, reinforced by rapidly declining costs.
At the United Nations Climate Change Summit in New York last year, Prime Minister Narendra Modi pledged to double India's renewable target of 450GW by 2030 , up from about 87GW of installed capacity today. The bulk of it will come from solar panels.
The cost of adding solar electricity is around 2.5 rupes per unit generated, compared to around 4.5 rupes for new coal capacity, according to analysts. Even coupled with more expensive electricity storage batteries after dark, solar energy was auctioned at a cheaper price than new coal earlier this year.
Meanwhile, the coal sector has been confronted with cash flow issues over the last few years, with most plants running well under capacity.
The IEEFA report found that more than two-thirds of India's new generation capacity additions were made to renewables in the 2019-20 fiscal year.
Before the outbreak, Sunil Dahiya, analyst at the Centre for Research on Energy and Clean Air, said there was “a clear signal that coal will not fuel future electricity growth,” which will mostly be provided by renewables.
“Now the pandemic makes that trend much clearer,” Dahiya said. “Coal capacity could peak before 2025,” he said, noting a peak in coal generation will take longer.
The competitive cost of renewable energy is not the only reason for the resilience of the sector during a time of low demand.
In India, the sector benefits from a 'must-run' status that obliges power distribution companies to use solar or wind energy whenever it is generated.
Driven by the sun and wind, renewable generators are not subject to the same supply chain disturbances as fossil fuel plants.
“The resilience of the renewable model was established during the lockdown,” Abhishek Dangra, senior director at S&P Global Ratings, told Climate Home News.
“The pandemic tipped the scale in favour of renewables for cleaner and cheaper power,” he said, adding that coal’s share in power generation will continue to decline in the medium to long term.
In the case of Dangra, 2027 could mark a peak in capability when India "is unlikely to require any new coal plants."
In recent years , private investors have also been largely reluctant to invest in Indian coal infrastructure with most new funding coming from state-sponsored banks and companies. On the contrary, global investors are prepared to invest "aggressively" in new renewable projects, Buckley said.
“You can’t build a power plant if it’s not funded and if it’s not going to provide a return. And from a financial perspective, you can’t justify a new coal-fired power plant,” he added.
“The pandemic has accelerated the debate about what choices India will have to make” for its energy sector, Swati Dsouza, a New Delhi-based consultant at the Brookings Institute told CHN.
Despite the favourable conditions for boosting renewables, Dsouza did not rule out an uptick in coal generation and new capacity once the lockdown lifts, saying coal will continue to meet base load demand.
“Renewables have not been a substitute for coal,” she said. None of the new coal plants in the pipeline for construction have so far been cancelled.
Buckley said he was confident that the Indian government would be able to meet its 450GW renewable energy target by the end of the decade, despite the huge effort needed to scale up the sector.
The pace of renewable deployment and the growth of the Indian economy will remain key factors in shaping the transition. It will also depend on the grid being ready to match variable solar and wind generation to consumer demand.
As Prime Minister Modi called on the nation to turn off their lights for nine minutes at 9:00 p.m. on 5 April in a call for solidarity against coronavirus, there were concerns that the grid might collapse.
“This was a huge test of resilience for the grid,” Buckley told CHN. “But it passed with flying colours.”
With a looming global recession and an Indian government trapped in cash while fighting a pandemic, there can be no trillion-dollar recovery package expected to accelerate India's clean energy transition.
For Buckley, this will require Modi to think "laterally" about ways to boost the renewable deployment of all private capital.
