May 11, 2022

Do India and China have divergent views on the use of coal?

While China has tried to reduce pollution, it has been unable to significantly reduce its dependence on coal. After facing a severe energy crisis last winter, the Chinese have increased coal production, while approving new coal-fired power plants in the country. The energy crisis had left several provinces without enough coal to meet their residential and industrial coal needs.

Given the dependence on energy security, the Chinese decided to increase coal production and double that of fossil fuels. Coal production from Chinese mines is reaching record levels, while the construction of coal-fired power plants is accelerating rapidly.

The National Development and Reform Commission, the country’s economic planner, has asked mining companies to increase production capacity by 300 million tonnes while storing enough for future consumption. Chinese coal production has steadily increased, reaching 380 million tons in December 2021.

By contrast, India appears to have attempted to reduce its dependence on coal, as evidenced by the number of thermal project approvals granted with environmental clearances.

In 2015, five projects obtained authorizations, with an additional capacity of 8,900 MW. In 2017, nine projects with a total capacity of 15,300 MW were approved, but the numbers have since declined.

In 2021, only one non-captive thermal project with a capacity of 2,400 MW was approved according to an analysis by the Legal Initiative for Forests and the Environment (LIFE). The 2400 MW project is the 3×800 MW NLC Talabira Thermal Power Plant Project.

Research by some advocacy groups Ember and Climate Risk Horizon has suggested that even if India continues to shut down older thermal power plants, without building new ones, it could still meet its electricity needs. The research suggests that India could easily meet its peak demand through its renewable energy base.

However, some argue that the slowdown in thermal power, while relying heavily on renewables, could eventually lead to an energy crisis seen in China, Europe and elsewhere.

Countries like the UK have been forced to restart coal-fired power stations as high gas prices have forced these countries to look for other, cheaper sources of fuel. The UK and other European countries had weaned themselves off coal, but renewable energy and gas have proven to be more expensive and unreliable sources of energy in times of crisis.

Electricity must be consumed instantaneously as it is produced, which makes renewable sources currently unreliable. These energy sources depend on meteorological and climatic hazards. However, with further work on energy storage, it is likely that we could see energy storage issues resolved over time. Nevertheless, creating an effective technology, in addition to mass production and adoption, would take some time.

Additionally, low commodity prices in recent years have prompted investors to force energy companies to return the cash generated, rather than reinvesting in the business. As a result, prices for non-renewable fuels have risen – further constrained by supply chain and geopolitical issues.

Consequently, countries like China have suspended their green energy plans, while increasing more reliable energy sources. Once bitten twice shy, the Chinese government sees energy security as a “growing” economic and security risk. In the last two months of the current calendar year, China’s coal production has already increased by 10%, reaching 687 million tons.

Apart from thermal power plants, the number of environmental permits for coal mines in India also appears to be on the decline. According to a report compiled by LIFE, coal mine approvals fell from around 46 in 2015 to 17 in 2018. A large proportion of these approvals were for new mines, while the rest were for extensions at older mines.

However, the old mines had required much greater production capacities, compared to the new mines. Nevertheless, the overall approved capacity increased from 129.05 MTPA in 2015 to 53.08 MTPA in 2018.

Today, it appears that India and China have taken divergent positions on the use of coal. Fossil fuel proponents and critics have made strong arguments on each side. While green energy has its benefits, we clearly cannot immediately replace fossil fuels. Some experts have supported alternative energy sources such as nuclear power, which do not pollute the atmosphere while providing uninterrupted energy. Only time will tell if the slowdown in thermal power generation is a smart move or a potential disaster.

This article was first published on Company Newsletterand has been republished here with permission.

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