India’s Zombie Threat

New coal not required to meet demand. India does not require additional new coal capacity to meet expected demand growth by FY 2030. India can meet its peak demand in FY 2030 without building the “zombie” coal plants.

Financial benefits to cancelling new coal. India can free up Rs. 247,421 cr in capex by killing the “zombie” coal projects. India can make annual savings of Rs. 43,219 cr by investing in renewables and storage, instead of “zombie” coal projects.

The Zombie Coal Threat

Unnecessary planned coal could undermined India’s RES goals

27 GW of unnecessary planned coal power plants threaten India’s RE goals

Analysis by Ember and Climate Risk Horizons (CRH) shows that 27 GW of pre-permit and permitted new coal power plant proposals are now superfluous to requirements and will likely end up as “zombie” plants— assets that will be neither dead nor alive.

These surplus plants, if built, will suck in scarce resources and impede India’s renewable energy (RE) ambitions. But they can  be cancelled without needing to sacrifice the power system’s ability to meet future demand.

India’s power sector landscape has changed markedly in the last few years—both in its electricity demand profile and the economics of electricity production

India’s electricity demand growth rate has slowed in recent years, diverging significantly from previous Central Electricity Authority (CEA) projections.

India’s power generators are starting to respond to the country’s 2030 target of 450 GW renewable energy (RE).

India does not require additional new coal capacity to meet expected demand growth by FY 2030

Even if India’s power demand grows 5% annually, in line with the most optimistic International Energy Agency (IEA) projection, coal-fired generation in FY 2030 will be lower than in FY 2020 as long as India achieves its non-coal generation targets. In effect, more coal capacity beyond what’s already under construction isn’t needed to meet the aggregate demand growth by FY 2030.

India can meet its peak demand in FY 2030 without building the “zombie” coal plants

If this peak occurs during sunlight hours as recent studies predict, India’s planned solar capacity can cover much of it. Even if it occurs in the evening, substituting the “zombie” coal plants with additional battery storage capacity represents a more flexible, cheaper option.

India can free up Rs. 247,421 cr in capex by killing the “zombie” coal projects.

These surplus plants, if built, will require an estimated Rs. 247,421 cr (US $33 billion) of investment. They will lock consumers into expensive contracts and jeopardise India’s RE goals by adding to the system’s overcapacity.

India can make annual savings of Rs. 43,219 cr by investing in renewables and storage, instead of “zombie” coal projects.

Substituting 27 GW of coal with battery storage will save the Indian power system Rs. 43,219 cr (US $6 billion) a year in terms of reduced power purchase cost.

Conclusion

The risk of zombie coal

The economics of India’s electricity generation sector have changed drastically in the last five years. Clearly, many parts of the electricity system have yet to adapt to that change: system inertia on the part of coal power players (both government and private) and regulators has meant that new coal power proposals have continued to move through the system. This raises the risk of creating 27 GW of coal “zombies”:  power plants that if built will waste public finance, lock consumers into expensive contracts and threaten India’s ambitious RE targets.