India’s Overemphasis on renewable energy would affect thermal power projects: CEA

“Rapid changes in technology are promising to help realize the promise of renewables. This is an eminently desirable development and one that India is attempting both to benefit from and accelerate. At the same time, these changes need to be seen in the context of India’s current economic situation and its enormous endowments of coal which is still a very cheap way of providing energy to hundreds of millions who are still energy-deprived.”

Indian thrust on renewable energy would result in reducing viability of coal-fired thermal power plants in India, adding to the massive non-performing assets (NPAs) of state-run lenders, Chief Economic Adviser (CEA) Arvind Subramanian said on Thursday.

Subramianan at the 16th Darbari Seth Memorial Lecture organised by TERI said, “Rapid changes in technology are promising to help realize the promise of renewables. This is an eminently desirable development and one that India is attempting both to benefit from and accelerate. At the same time, these changes need to be seen in the context of India’s current economic situation and its enormous endowments of coal which is still a very cheap way of providing energy to hundreds of millions who are still energy-deprived.”

Noting that both coal and renewable sources should be the focus of power generation, Subramanian said that “for India today, the social cost of renewables is higher than that of thermal power, and it is highly unlikely for the converse to be true, at least for some time”.

“Over-expansion, fuelled by the growth optimism of the mid-2000s, combined with stresses in the discoms and slowdown in the economy has led to a plummeting plant load factors, declining profitability, the spectre of large amounts of stranded power assets, and consequentially stranded coal assets as well.

“All this can have a detrimental effect on the health of the banking sector, especially the public sector banks, in the country, which in turn can adversely impact the health of the Indian economy, already afflicted by the ‘twin balance sheet’ challenge,” the CEA said.

The declining viability of thermal power plants and the rising NPAs of state-run banks, which have lent to power companies “seems a double whammy for the government,” he said.

For India, which is struggling to provide basic electricity to about 25 per cent of its population, coal will provide about 60 per cent of the country’s power needs until 2030, he added

India’s total renewable generation capacity has crossed 57 gigawatts (GW), with an increase of 24.5 per cent being registered in the last fiscal year. The capacity addition in solar energy last year stood at 81 per cent.