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India’s dependence on coal to continue despite thrust on renewables

According to reports, even as India has made a considerable push towards renewable sources of energy keeping in view its Paris Agreement goal, the country’s dependence on coal as primary source of energy will continue as its ‘social cost’ is quite less as compared to that of solar and wind.

The government has brought in the ‘social cost’ element in its latest Economic Survey which noted the importance of renewables but suggested a cautious approach, saying investments in renewable energy be made at a “calibrated pace” looking into the total cost accrued to the society.

The ‘social cost’ is calculated while factoring in private costs of electricity generation, opportunity cost of land, health costs as well as the costs of stranded assets of the conventional energy generation plants if it become idle due to shift to renewables.

The survey calculated the ‘social cost’ of renewables at Rs 11 per KWh which, it claimed, is three times that of the coal in 2017 and the gap would reduce only when the country progresses towards the year 2030.

The government’s chief economic advisor Arvind Subramanian, while delivering Darbari Seth Memorial lecture on last Thursday, too spoke about this scenario when he noted that the coal continues to be “a very cheap way of providing energy to hundreds of millions who are still energy-deprived”.

He said though renewables were part of the energy answer, it came with “hidden cost” which must not be overlooked in the country’s headlong embrace of renewables.

Subramanian suggested to factor in the ‘social costs’ of both renewables and coal before taking any decision and said, “Current bids on renewables are not especially revealing or informative about the true costs because of extensive subsidies (implicit and overt, awarded by centre and states) and strategic behaviour by producers.”

The Economic Survey too noted that the low tariffs, witnessed recently, have been partly a result of government subsidies\tax holidays and other incentives.

Though the survey constantly referred to India’s commitment to fulfil its pledges made under the Paris Agreement on climate change, it stated that the first goal for India is to provide energy access to its entire population and bridge the “development deficit gap” by tapping all cleaner sources — an indication that the country may also move fast towards using nuclear energy for electricity generation.

India, under Paris Agreement, has committed to produce 40% of its electricity from non-fossil sources of energy by 2030. It, therefore, planned to scale up its targets for renewable energy capacity addition from 30GW by 2016-17 to 175 GW by 2021-22.

In his welcome address on the occasion of the Darbari Seth Memorial Lecture, Ajay Mathur director general of TERI noted that the think-tank’s recent report on energy transitions in India has found its way in the second volume of this year’s Economic Survey which elaborated in detail the dynamics between the renewable energy and fossil fuels in the country’s energy mix in the years ahead.

The Lecture series was initiated by TERI in 2002 in the memory of  the Institute’s founder and noted technocrat-industrialist, Darbari Seth. Many eminent persons including N R Narayana Murthy, Anand Mahindra, Mukesh Ambani and Kiran Mazumdar-Shaw had participated in the lecture series in the past.

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