What is the issue?
- In the backdrop of stressed thermal power sector there is an increased push for the renewables.
- However, a larger picture reveals the challenges in a rapid shift to the renewable energy sector at present.
What is the status of the thermal sector in India?
- Growth optimism of the mid-2000s encouraged an over-expansion in the thermal capacity in the last decade.
- However, the period also combined with the financial stress in the distribution companies.
- This ultimately resulted in falling capacity utilisation in the thermal sector.
- As a result, the status of India's thermal power and coal assets is that of a stressed one at present.
Can renewables be the solution?
- Renewables are indeed an alternative but the time and pace of the shift has many factors for consideration.
- Social Cost - Coal is located predominantly in the poor, eastern hinterland of India.
- But the proposed alternatives, the renewables potential, is mostly in richer, peninsular India.
- A random shift to the renewables leaves scope for a high social cost and a stress on the existent thermal sector.
- This is because, coal provides livelihoods for millions and fiscal revenues for many states.
- Financial implication - The poor health of the banking sector and the distribution companies reveal that time is not ripe for any large scale investment in the renewable energy sector.
- Also, the extensive subsidies given for the renewables do not reveal the true information on their costs.
- Subsidising renewables at a time when its social costs are above those of coal is a double stress for the government.
- As the government has to tackle with the resultant stranded assets in thermal sector in the event of a shift.
What is the challenge and the way out?
- In the Indian context, the social costs of renewables are likely to exceed those of thermal.
- However, in the international context, the social costs of thermal power is high given the fact that it contributes to global warming.
- India must beware this “carbon imperialism” of advanced countries, which risks biasing our judgements about energy.
- Thus, coal and renewables must be the joint focus of policy directions by the government.
- Long-run decisions on renewables must consider the investments already incurred in the energy forms they will displace i.e. thermal power and coal.
- It is optimal for India to accelerate thermal generation when coal remains socially less costly than renewables.
- A gradual phasing down thereafter and parallel policy initiatives on the renewable energy sector is the way ahead.
- India needs coal in the short-medium term and it cannot allow the narrative of “carbon imperialism” to impede rational, realistic planning for the future.
Source: Business Standard