Here's why coal may become an unattarctive source of energy in the long run

Coal-based power projects worth about Rs 10 lakh crore have been sanctioned, but many factors may make coal unattractive in the long run. 

Industry estimates peg the capital costs of a thermal power plant in the range of `4-5 crore per megawatt. The government has reportedly sanctioned at least 200,000 mw of thermal power capacity, which translates to a capital investment of `10 lakh crore over a decade or more. What if, when they are all ready to start producing electricity, the thermal power plants can no longer be operated due to a combination of economic, social and environmental reasons? 

This is probably a hypothetical question, but one that is being asked in energy circles, especially from those pushing hard for renewable energy. As the coal blocks get ready for auction once again, and the power industry prepares for a frenzy of construction, the headwinds against coal are getting stronger. The black gold is still the cheapest among the world's energy sources, and will probably remain so for some time, but thermal power plants will have to fight an increasingly tough battle against winds that are powerful enough to cause serious disruption to even well-executed plans. "You need 'plannability' to execute large power projects," says Tobias Engelmeier, founder and director of the consulting firm Bridge to India. "Now that is gone." 

Here is a list of the forces against coal. Now that China has agreed to a cap on emissions by 2030, pressure will be on India to cap and then reduce its own emissions. Coal mining will continue to be delayed due to agitations from people around the mines, and coal prices will continue to fluctuate around the world. Health concerns are set to rise in India, like in China, as more and more thermal power plants go on stream, thereby bringing in judicial review and regulations. As water shortages increase, thermal power plants will feel the pinch as much as any other business. Here's why coal may become an unattarctive source of energy in the long run All these would increase the price of coal, or at least create big uncertainties over the decade. The strongest headwind against coal is none of these: it is the disruptive effect of solar power. The price of solar power has been falling relentlessly, and this fall is slated to continue over the decade. Ten years ago, solar power modules used to cost $10 a watt. Now it costs 50 cents a watt. In India, solar power prices have fallen by 60% over the past three years, bringing it close to parity with coal. 

Scarce resources 

Falling prices will take solar power to grid parity within a few years, although grid parity is the wrong yardstick to judge solar power. "Renewable energy sources can be a long-term solution for Indian electricity needs," says Rahul Shah, CEO of Tata PowerBSE -0.92 % Renewable Energy, "as unlike non-renewable sources like coal where costs escalate on a yearly basis a renewable power plant has fixed costs for the next 25 years of operation."

It is not difficult to put two and two here. As coal prices increase or remain stable at best, solar energy prices continue to fall. Solar will become as cheap as within three years and substantially cheaper than coal in about a decade. Coal plants need continual supply of coal and water while solar plants need none. The game would have been over then, except for two crucial reasons. Solar power is intermittent. And India's peak demand comes when the sun begins to go down. The country would thuS need another source, and coal still seems to be the best option. "A simple number for the cost of power isn't always sufficient," says Rahul Tongia, non-resident fellow of Brookings India. "Much of renewable energy doesn't provide power during peak demand in India, requiring additional capacity for meeting the peak." 

Source:ET