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Coal Power’s Trilemma

Variable Cost, Efficiency and Financial Solvency

Karthik Ganesan, Danwant Narayanaswamy
July 2021 | Power Sector

 
 
 
 
 

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Agriculture and allied sectors contribute around 16.5 per cent to India’s GDP and employs nearly half of the country’s workforce (PRSIndia 2020). A massive amount of crop residue (~683 million tonnes) is generated during crop production in the net sown area of 140 million hectares across the country. While farmers use crop residue as animal fodder and for roof thatching, a significant portion (178 million tonnes) is left unused ever year (TIFAC and IARI 2018). Further, the unhealthy practice of on-farm burning of agricultural residue to clear land for the next crop, primarily in the north-western states of India, contributes to alarming levels of air pollution in the Indo-Gangetic plains. Farmers in Punjab, where 20 million tonnes of paddy residue is generated every year during the Kharif season (Ministry of Agriculture & Farmers Welfare 2018), face an unenviable task of clearing this residue in a short window of 15–20 days. This reduced timeframe is an offshoot of the Punjab Preservation of Subsoil Act (2009), implemented to save groundwater by mandatorily postponing the transplanting of paddy from April–May to beyond 10 June (Jain 2019). In 2018, 65 per cent of paddy residue (nearly 13 million tonnes) was set on fire in the fields of Punjab, choking the air in the entire Indo-Gangetic plains (Ministry of Agriculture & Farmers Welfare 2018). The System of Air Quality and Weather Forecasting And Research (SAFAR) under the Ministry of Earth Sciences (MoES) estimated that paddy stubble burning in Punjab and Haryana contributed 40–45 per cent to Delhi’s air pollution during peak burning days in 2019 (Press Trust of India 2019). The courts have come down heavily on stubble burning, forcing the state and central governments to initiate measures to clamp down this practice in Punjab, Haryana and Uttar Pradesh. One such effort was through the New and Renewable Sources of Energy (NRSE) policy 2019, wherein the Punjab government encourages setting up of biomass power generation units and production of biofuels (bio-compressed natural gas [CNG], bio-ethanol, and bio-diesel) using biomass (mainly rice straw) as feedstock. As of September 2020, Punjab has 11 operational biomass power plants, with an aggregate capacity of 97.5 MW, in which 0.88 million tonnes of paddy straw are consumed annually (Chaba 2020b). In 2018, the central government reported that 1.10 million tonnes of paddy residue (5.5 per cent of total residue generated) were used in various ex-situ methods such as in paper/cardboard mill and biomass power projects (Ministry of Agriculture & Farmers Welfare 2018).

Execcutive Summary

Agriculture and allied sectors contribute around 16.5 per cent to India’s GDP and employs nearly half of the country’s workforce (PRSIndia 2020). A massive amount of crop residue (~683 million tonnes) is generated during crop production in the net sown area of 140 million hectares across the country. While farmers use crop residue as animal fodder and for roof thatching, a significant portion (178 million tonnes) is left unused ever year (TIFAC and IARI 2018). Further, the unhealthy practice of on-farm burning of agricultural residue to clear land for the next crop, primarily in the north-western states of India, contributes to alarming levels of air pollution in the Indo-Gangetic plains. Farmers in Punjab, where 20 million tonnes of paddy residue is generated every year during the Kharif season (Ministry of Agriculture & Farmers Welfare 2018), face an unenviable task of clearing this residue in a short window of 15–20 days. This reduced timeframe is an offshoot

of the Punjab Preservation of Subsoil Act (2009), implemented to save groundwater by mandatorily postponing the transplanting of paddy from April–May to beyond 10 June (Jain 2019). In 2018, 65 per cent of paddy residue (nearly 13 million tonnes) was set on fire in the fields of Punjab, choking the air in the entire Indo-Gangetic plains (Ministry of Agriculture & Farmers Welfare 2018). The System of Air Quality and Weather Forecasting And Research (SAFAR) under the Ministry of Earth Sciences (MoES) estimated that paddy stubble burning in Punjab and Haryana contributed 40–45 per cent to Delhi’s air pollution during peak burning days in 2019 (Press Trust of India 2019). The courts have come down heavily on stubble burning, forcing the state and central governments to initiate measures to clamp down this practice in Punjab, Haryana and Uttar Pradesh. One such effort was through the New and Renewable Sources of Energy (NRSE) policy 2019, wherein the Punjab government encourages setting up of biomass power generation units and production of biofuels (bio-compressed natural gas [CNG], bio-ethanol, and bio-diesel) using biomass (mainly rice straw) as feedstock. As of September 2020, Punjab has 11 operational biomass power plants, with an aggregate capacity of 97.5 MW, in which 0.88 million tonnes of paddy straw are consumed annually (Chaba 2020b). In 2018, the central government reported that 1.10 million tonnes of paddy residue (5.5 per cent of total residue generated) were used in various ex-situ methods such as in paper/cardboard mill and biomass power projects (Ministry of Agriculture & Farmers Welfare 2018).

 
 

Executive Summary

Climate change mitigation is a critical global challenge. Many large economies have announced their ambition of a net-zero year, that is, the year their economies will achieve net-zero greenhouse gas (GHG) emissions. Although India has demonstrated climate leadership on several occasions, whether it will make an announcement in this regard is being closely observed. This issue brief highlights that for a rapidly developing economy, the choice of a peaking year must be explicit in the selection of a net-zero year. It presents an analytical exposition to better understand key variables, which would impact the choice of peaking and net-zero years for India’s energy sector-related carbon dioxide emissions, accounting for 88 per cent of India’s total GHG emissions, including land-use change emissions.

The brief focuses on insights related to four alternative scenarios: 2030 peak–2050 net-zero, 2030 peak–2060
net-zero, 2040 peak–2070 net-zero, and 2050 peak–2080 net-zero. These scenarios are based on an India-specific analysis as well as comparison of key variables of some major economies. The key indicators for the 2050 world regarding the above-mentioned alternative scenarios are presented, including the required reduction in emission intensity of gross domestic product, share of electric vehicles, and share of renewable energy in electricity generation, among other variables, for each scenario with and without carbon capture and storage (CCS). The analysis shows that rapid economic growth is one of the most important variables that needs to be better understood in the choice of peaking and net-zero years.

Along with insights for alternative peaking year and netzero year scenarios, the analysis shows that if 2050 were chosen as a net-zero year and if CCS technology were commercially unviable by then, this would imply that:

  • the share of fossil energy in India’s primary energy mix would have to reduce to 5 per cent in 2050 from 73 per cent in 2015;.

  • 83 per cent of electricity would have to be generated from non-hydro renewable energy sources by 2050, up from 10.1 per cent in 2019;

  • biofuels would have to account for 98 per cent of India’s oil use in 2050 compared to negligible share currently; and

  • over two-thirds of India’s industrial energy use and new vehicle sales would have to be electrified, compared to 20.3 per cent share of electricity in industrial energy use and negligible share in transport energy use as of now.

Even a significant decline in the cost of renewablespowered hydrogen would be unable to change the character of the net-zero energy systems described above.

The choice of a net-zero year in 2050 would present an opportunity for an economic growth paradigm focused on green infrastructure and sustainable investment — and avoid lock-in into long-term fossil fuel assets. At the same time, India would have to confront critical trade-offs related to increasing cost of electricity for household energy use, increasing passenger travel
charges in rail travel, fiscal challenges for coaldependent states, job losses for over half a million coal mining workers, and the shifting geopolitics around energy trade and the energy transition.

The key considerations in the selection of peaking and net-zero years should be the average per capita income, economic growth rate, a ‘reasonable’ pace of transition determined by the gap between peaking and net-zero years, possibility of lock-ins and stranded assets, the cumulative emissions across the alternative peaking year–net-zero year combinations, and the economic trade-offs as presented here. The selected combination should provide India sufficient time to develop while ensuring that the climate impact is minimised.

Even a significant decline in the cost of renewablespowered hydrogen would be unable to change the character of the net-zero energy systems described above.

The choice of a net-zero year in 2050 would present an opportunity for an economic growth paradigm focused on green infrastructure and sustainable investment — and avoid lock-in into long-term fossil fuel assets. At the same time, India would have to confront critical trade-offs related to increasing cost of electricity for household energy use, increasing passenger travel
charges in rail travel, fiscal challenges for coaldependent states, job losses for over half a million coal mining workers, and the shifting geopolitics around energy trade and the energy transition.

The key considerations in the selection of peaking and net-zero years should be the average per capita income, economic growth rate, a ‘reasonable’ pace of transition determined by the gap between peaking and net-zero years, possibility of lock-ins and stranded assets, the cumulative emissions across the alternative peaking year–net-zero year combinations, and the economic trade-offs as presented here. The selected combination should provide India sufficient time to develop while ensuring that the climate impact is minimised.

 
 
 
 
 

Citation:

Chaturvedi, Vaibhav. 2021. Peaking and Net-Zero for India’s Energy Sector CO2 Emissions: An Analytical Exposition. New Delhi: Council on Energy, Environment and Water.

Vaibhav is an economist who leads The Council's work on Low-Carbon Pathways. His research focuses on energy and climate change mitigation policy issues, especially those impacting India, within the integrated assessment modelling framework of the Global Change Assessment Model (GCAM).

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