Coal Keeps Powering India as Booming Economy Crushes Green Hopes

(Bloomberg) -- Built along a stretch of salt flats in southern India, the Tuticorin power plant epitomizes a quagmire for the world’s fastest-growing major economy: how to provide reliable energy to 1.4 billion people.

For starters, the 1,050-megawatt coal plant, one of the region’s largest, was supposed to shut down. Opened four decades ago, the facility is too cramped to install retrofits to meet the government’s pollution norms, prompting India’s power ministry to plan its closure by 2022. Yet the facility continues to run at full blast, clocking 90% utilization in February. Aging boilers guzzle coal from mines nearly 2,000 kilometers away — a transport distance that only adds to the nation’s emissions footprint. 

Electricity consumption in India is growing at the fastest rate of any major economy, driven by rising temperatures and incomes, which have pushed up sales of power-intensive appliances like air conditioners. That explosive equation has exposed the country’s teetering grid. Though Prime Minister Narendra Modi has promised to rapidly build out solar and wind generation to replace polluting fossil fuels, his administration hasn’t been able to keep up with demand, giving a second life to old, inefficient coal plants like the one in Tuticorin.

In recent months, Modi has green-lit a fresh wave of power station development and extended the lifespan of many existing coal assets. It’s a decision that puts India at odds with global allies who’re shunning the fuel on climate grounds, threatening Modi’s ambitions to curb air pollution and reduce the world’s third-largest share of greenhouse gas emissions.

Those dynamics will also hand the nation a crucial role in dictating the speed of the world’s retreat from coal. Demand in China, currently the top consumer, probably peaked last year and the rate of future growth will increasingly be driven by India and Southeast Asia’s rising economies, according to the International Energy Agency.

“The message is clear to both the international and domestic audiences: We’re all in for climate actions, but India’s domestic interests will take priority,” said Ashwini K. Swain, a fellow at Sustainable Futures Collaborative, a climate think tank in New Delhi.

India’s power ministry and Tamil Nadu Generation and Distribution Corp., which runs the Tuticorin coal plant, didn’t respond to requests for comment.

India has a long way to go to ensure reliable and affordable electricity. In Oct. 2021, the country was hit by a massive coal and power crisis, just as the economy began to emerge from the Covid-19 pandemic. Years of weak demand had led to sluggish growth in mining, transportation and power generation capacities.

Soon after the situation improved, officials realized the crisis wasn’t a blip. Energy demand rose to a new high the following summer, causing the worst supply shortages in eight years. In 2023, even though that squeeze eased at the national level, Maharashtra, one of India’s most industrialized states and home to its financial capital Mumbai, faced an alarming 10% peak deficit in August.

While shortages raised expectations that the country would accelerate the shift to green energy, India’s response was exactly the opposite. Officials pushed for more mining, abandoned plans to retire old power plants, raised targets to add coal-fired electricity and successfully lobbied international forums to adopt resolutions that wouldn’t hinder fossil fuel use.

“As a country, we should play to our strength, and coal is our strength,” said Prakash Tiwari, a former operations director at state-run NTPC Ltd., the nation’s largest power producer.

Alternative energy solutions haven’t yet caught on for financial, political and safety reasons.

More than 35 miles from Tuticorin, a dusty road leads to two solar power plants surrounded by sprawling wind parks. Ayana Renewable Power, which runs one of the facilities, sees a future in renewable power with energy storage to serve industrial users. That trend is rising in India, although far from becoming a source of mass power supplies. Solar accounted for 6% of generation in 2023, according to Bloomberg calculations based on power ministry data.

State-run power producer NLC India Ltd., which runs the other plant, is committing more than twice as much money to expanding mining, coal and lignite-fired power capacity than to building renewables, according to Chairman M. Prasanna Kumar.

Natural gas, pushed by producers as a less-polluting alternative to coal, has also struggled to compete. Nearly 25 gigawatts of gas-fired power capacity has been idling for years, priced out by other power sources, including coal. India doesn’t have enough domestically produced subsidized fuel to run the plants and operating these assets on imported liquefied natural gas is often too costly in India’s price-competitive electricity market.

Building hydropower dams is also fraught. Most of India’s potential there is locked in the fragile Himalayan region, where frequent extreme weather events, such as flash floods, jeopardize projects. The risks have galvanized local opposition against large dams, delaying plans by years and adding to costs that have rendered many of them unpalatable.

Nuclear power has seen a revival in many parts of the world for its low-emissions energy. But there, too, the industry in India has moved too slowly to make a mark and questions about safety persist. The nation’s nuclear liability law holds vendors and suppliers responsible for accidents. Many are still haunted by the Bhopal gas tragedy of 1984, which killed thousands of people exposed to toxic chemicals.

Consider Kudankulam, about 90 miles south of Tuticorin. The site hosts two reactors of 1 gigawatt each and four more are being added. In the nearby village of Idinthakarai, 52-year-old Mildred, who goes by one name, has been at the forefront of protesting the plant’s construction. She’s traveled across the country to discuss the risks of nuclear energy. 

“Why can’t these be our main source of energy?” the activist asked on a recent day, pointing to a few rotating wind turbines near her home.

In 2008, India struck an agreement with the US to share nuclear technology and fuel, clearing the runway for new projects. India has also signed deals with foreign reactor suppliers, including General Electric-Hitachi, Westinghouse Electric Corp. and Areva SA, which later transfered the project to state-run peer Electricite de France SA. GE-Hitachi has since backed out, citing the liability law. 

In the western state of Maharashtra, India had planned to build the world’s largest nuclear power plant, a mammoth 9.6 gigawatts facility near sprawling Alphonso mango orchards. 

But locals resisted selling their land when Kiran Dixit, then an executive director of the state monopoly Nuclear Power Corp. of India Ltd., visited the area.

They thought prices were too low and worried that the plan would harm the livelihood of fishermen and the mango trees. The company tried to put those fears to rest and the land was eventually acquired, Dixit said. Still, the Jaitapur project has yet to significantly break ground as the two sides continue to discuss terms of the deal.

©2024 Bloomberg L.P.