In the Mint News report dated November 17th, it was reported that the Coal India’s arm NCL is planning to relocate the residents of Morwa township in Singrauli [ Madya Pradesh], that has about 600 million tonnes [MT] of coal beneath. As per the report, the existing coal mine [ Jayant Block] is moving closer towards the township and within two years it is expected to reach 500 meters of the residential area. This is reason for relocating the residents there. Further, the company is planning to increase the mining capacity from 30 MTpa to 35 MTpa by 2026-27, as per the report.
This news report shows that, India still requires coal to meet the power demand of the country. To understand the need for expanding coal mine we should first know the picture of India’s power and energy sector. It is difficult to understand each and every aspects of power sector, but we can understand the diversification, demand, and supply [capacity] of it, which are fact based.
Industry Outlook:
Power sector is considered as a backbone of any industry in India [also across the world]. It is universally accepted that India is a growing economy. So the increasing industrial and other economic activities would surely result in an increase in power demand. This makes it necessary to increase the installed energy capacity in India, to meet the growing power demand. The ‘ National Electricity Plan 2022-32’ states that, the electricity demand is expected to grow at 7.18% CAGR for the next five years.
Moreover it is generally accepted that increase in climatic temperature would result in increased power consumption especially by households. The heatwaves in the recent years have increased the power consumption. The logic here is simple, increase in temperature will make people to use electronic items like AC and fans, more than usual levels, which will lead to increased power consumption. So it is essential that, we need to solve the energy deficiency in a more sustainable manner.
India’s renewable-energy capacity:
As the power sector plays a major role in addressing environmental concerns the Government has taken initiatives for developing renewable sources of power that facilitates a shift from traditional conventional sources of energy.
According to IBEF data, India’s installed power capacity as on 30th June, 2024 was 446.18 GW which makes the country the third largest producer and consumer of power world wide. Out of the total installed power capacity, 45.5% represent the installed renewable energy capacity. The data further mentions the various government policies and initiatives to promote renewable source of energy like PM Surya Ghar Muft Bijli Yojana, Green Energy Corridor projects, Union Budget allocation to promote green energy, and so on.
Other than this, the Government has also allowed 100% FDI through ‘Automatic Route’.
Due various such Government measures, we could see increase in solar energy adoption. As on 30th November, 2024, India’s installed solar capacity stood at 20.62% of the total installed power capacity in India. The solar energy adoption has significantly grown in the past 9 to 10 years.
How the Government plans to tackle energy deficiency?- [From a long term perspective]:
Despite taking these initiatives, the Government is trying to set an additional coal based thermal energy capacity of minimum 80 GW by 2031-32. This is stated in a press release by the Ministry of Power published on 05 August, 2024. According to this [press release], a study was conducted by the Central Electricity Authority [CEA] for the purpose of planning the power generation based on the estimated demand in 2031-32. The study revealed that, in order to meet the ‘ base load capacity’ of the country in the year 2032, the required coal and lignite based capacity would be 283 GW as against the current capacity of 217.5 GW.
On 31st May, 2023, the Central Electricity Authority [CEA] published the National Electricity Plan 2022-32 [pdf file]. This contains detailed report on the current demand, demand expectations and the plans for power generation. It states that, though the renewable energy adoption is faster, coal based plant would still play a major role in power generation. But due to environmental concerns, it necessitates the adoption of clean coal technologies like super critical and ultra super critical technologies.
India’s plan to develop the coal logistics:
In a news report by Economic Times, published on 18th September, 2023, it was reported about a study conducted by the Railway Board that necessitated the need for ‘coal corridors‘. As per the study, the coal consumption would increase to 1,853 MT by 2030. So, the Railways insist to develop tracks exclusively for coal movement by rail.
Further in order to strengthen the coal transportation and addressing the increasing energy demand, the Standing Committee on Coal, Mines, and Steel has recommended a dedicated ‘coal corridors’, and adoption of real-time tracking system for coal logistics [Mint News report]. It states that the main reasons for such recommendations by Committee was, the record high production in coal in, expectation of increased coal output in FY25, and to ensure a smooth delivery of coal to remote costal areas.
The main challenges faced in faster adoption of clean energy:
- The first main challenge is the inefficient storage system. I came across a news article that was published in Business Standard on 19th June, 2024. This article talks about the problem of inefficient energy storage system. It is a greater problem for faster adoption of clean energy. It further adds that, battery storage is not affordable in India’s competitive power market. The alternative storage system is pumped hydro projects, but they are still at nascent stage it seems. Even the development of nuclear plants are slow. The nuclear plants are considered to be more eco friendly than solar.
- The second main issue is, inadequate grid infrastructure. India’s current grid infrastructure is designed to support mainly the conventional power. So, to integrate the renewable energy source, the existing grid needs upgradation. This, I believe, is not possible in a short span of 3 to 4 years.
- India does not have adequate solar R&D and manufacturing facilities presently. This makes it unavoidable to rely on imports. This subsequently rises the project cost. [ Article to read].
- The another important issue with the renewable sources like solar and wind energy is, lack of stability. It is said that, variations in weather conditions can impact the output. However, we can overcome this issue with a proper backup or storage system.
So, in order to meet the increasing power demand, it is impossible to make it without coal for a foreseeable future.
Is Coal India a good buy?
Concluding with my view:
News article to read: EVs nuclear and forever chemicals: Climate predictions 2025: Economic Times report
Disclaimer:
All the stocks discussed above are only for informational purposes only. I humbly request the readers to consult a SEBI registered advisor before investing in any stocks. I’m not SEBI registered.