Coal, the ‘black gold’, is here to stay despite adverse impact on environment from emissions

China’s critical electricity shortage is the result of draconian regulation of coal mining, exacerbated by Beijing's punitive ban on Australian coal imports. Heavy rains have forced the closures of 60 coal mines in Shanxi province, the largest coal mining hub in China.

An energy crisis is looming in some states of India also, including Delhi, Punjab, Rajasthan, Tamil Nadu and Andhra Pradesh due to a combination of factors such as excess rainfall hitting coal movement and imported coal-based power plants generating less than half of their capacity due to record high rates.

While several thermal power stations across India have shut and the state governments are warning citizens of possible power cuts due to a shortage of coal, the Central government has claimed that there is no need to worry.

Absent from mainstream news headlines was the steady rise in coal prices. Coal futures rose slightly on Monday to trade around $240 per metric ton and getting closer to a record of $269.5 hit on October 5th. This is almost five to six times the price last September.

Coal has two main uses - electricity generation and steel manufacturing, with the former responsible for about two-thirds of what is consumed. The Intergovernmental Panel on Climate Change (IPCC) signalled the dire consequences of human-induced climate change. The stark warning behind the report was the urgent need to substantially reduce coal in the energy mix.

Even as the warnings get louder, the progress in reduction of coal in the energy mix is at a snail's pace. Since 2010, the percentage share of natural gas in total global electricity generation has stayed the same level at 23%, even though the world’s power consumption has risen by about a quarter. The percentage share of renewables, excluding hydroelectricity, has tripled.

Meanwhile, coal has lost share, down to 35% from 40%, but it remains way ahead of natural gas, its closest competitor, and the quantity of coal that we burn for electricity generation has gone up overall in absolute numbers.

In 2020, coal generated 63% of electricity in China and 72% in India. Elsewhere, coal is on the back foot. In the US, the second-largest electricity generator after China, coal has retreated in favour of natural gas. Coal fired 20% of US electricity in 2020 compared to 43% in 2010, while natural gas has risen over the same period from 24% to 40%.

The reality is that coal makes good commercial sense. Coal-fired power plants have long been big enough to make the building costs economically viable, with the largest plants boasting a capacity of 5GW.

As the third-largest producer of carbon dioxide emissions in the world today with an economy that's poised to see massive growth in the future, what happens to India’s energy mix will have a significant impact on the entire planet and its inhabitants.

The growing adoption of solar, wind and other clean energy technologies doesn’t tell the full story of India’s energy shift. It is impossible to ignore the role of coal. The advanced technologies needed to balance the use of intermittent renewables on the grid are still emerging. Until clean energy is flexible enough to provide power whenever it's needed, experts say there will be a role for coal in India.

“Today, solar electricity is the cheapest electricity that is produced in India, but only when the sun is shining. At night, coal is the cheapest electricity. So we are living in these times where both coal and solar are growing,” said Ajay Mathur, director general of The Energy & Resources Institute (TERI), in an interview in Delhi early last year. “This will continue until we get batteries that are inexpensive enough that…the cost of solar-plus-storage is less than the cost of coal electricity,” he added.

Last year, the Modi government sought to boost the domestic coal mining sector with a series of commercial auctions. The government has also repeatedly delayed the implementation of pollution regulations for coal plants, effectively throwing the polluting coal plants a lifeline. The situation today remains murky as policymakers seek to mitigate poor air quality while keeping coal plants open.

(V Venkateswara Rao is an alumnus of IIM, Ahmedabad and a retired corporate professional. Views are personal)