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.
