Recent bidding has seen prices of both solar and wind power coming down. How can this be taken forward?
The price of electricity from renewables is becoming competitive vis-a-vis that from gas and coal. However, wind and solar power provide electricity when the wind is blowing and the sun is shining. That is why storage becomes important. Whether you pump hydro or peaking gas, ultimately, it will need batteries. So, the price of renewables and storage together has to become competitive. That price is $70 per Mw hour or seven cents per kilowatt hour. The ETC feels this would be achieved well before 2030. It would be currently about 12 cents per kilowatt hour. It is both technically possible and economically viable to move to decarbonise electricity.
The next stage will be to use electricity wherever possible. Most of the transport sector, for example, uses petroleum. If you use electricity there, as and when power becomes totally decarbonised, the transport sector too becomes decarbonised too; otherwise, you can make engines as efficient as possible but emissions will never come down to zero.
But, till electricity becomes decarbonised, by promoting its use how do you move to low carbon?
Changing to electric vehicles is clearly not an on and off switch. We need to create demand and infrastructure. As scale increases, prices drop and more people start buying. If we want large-scale pick-up, it will not happen till 2030. So, the longer we postpone, the longer it will take. In the short term, we will be using high-coal electricity but in the long term, we will have the opportunity of decarbonising the electricity sector and decarbonising the road transport sector.
The greatest challenge is that even after moving things to electricity, there will still be places where fossil fuel will be used, like aviation, truck transport and some industry where we do not know of options. There, we can go for bio-fuels and hydrogen, carbon capture and utilisation. This is an area where not much technological development has occurred. While we have seen a lot of development in energy efficiency, renewables and electric vehicles, we have not seen similar technological development in biofuels, hydrogen and carbon capture. A global focus in creating a market here is important.
Is there enough coal capacity?
In the electricity sector, for a vast number of reasons — principally because we did not anticipate energy efficiency so fast — we have a generating capacity which is far more than the demand. Our generating capacity is 315 Gw but the maximum electricity that has ever been sold is 106 Gw. For a very long period of time, we will not need to build coal-based power stations.
Is the excess capacity due to suppressed demand, leading to inefficient use of gensets?
Even when you add till about 2026, the current coal power plants and those that are coming up will work at 80 per cent plant load factor. Coal use will double to over 800 million tonnes. As plants retire, coal consumption will start declining. For 10 years, banks will not touch coal-based generation, not because of green concerns but because of excess capacity. The challenge is whether solar power plus batteries will cost less than coal. Somewhere between 2026 and 2030, it will be economically more viable to invest in solar power plus batteries than in coal. We expect the price of firm electricity — renewables and storage — will be less than new coal capacity, which will produce at ~5 per kilowatt hour, whereas the hope is that solar power plus batteries will be less than that. Banks will say why fund coal? Beyond that, demand will be met by renewables.
Has enough been done to promote storage?
It is not happening. We still use lead-acid batteries. No large-scale investment is happening in lithium-ion batteries. Prices of batteries need to come down fast. We have seen the price of renewable energy coming down. On the battery side, we need bulk procurement, as in renewables. As we enhance the use of electric vehicles, we will need to create infrastructure for charging.
As prices of both solar and wind power decline, people will put up both in hybrid plants. Till the time both were expensive, it was difficult but reliability will now increase. It is true that there has never been a market for reliability in India. Power companies would rather drop a load, since there is no premium on reliability. With solar and wind power becoming less expensive, they become mainstream options and by hybridising these we are using the space much better.