Context

• International Energy Agency (IEA) in its annual report has predicted that India’s coal production will surpass a billion tonnes by 2025.

Key Highlights of the Report

• India’s coal consumption has doubled since 2007 at an annual growth rate of 6 per cent.
• India and China are the only two countries where investment in the coal sector has gone up.
• Domestic production has been ramped up in both countries to reduce external reliance.
• With the present trend, Coal’s global phaseout is also nowhere in sight.

Impact of steeper gas prices on coal demand

On India and China:

• For both India and China, coal is the backbone of the electricity system and not gas. As a result, the impact of steeper gas prices on coal demand has been limited.
• Increased coal use in these countries had replaced some gas, which has been purchased by other regions willing to pay more for it.

On Europe:

• Europe has a reliance on Russian gas and the Russian invasion of Ukraine has sparked a surge in gas prices.
• The spike in the prices of gas due to the war as well as lower output from hydro and nuclear led to ‘fuel switching’ to coal in the European Union to generate power.
• Despite the surge in gas prices, the production of electricity from coal has not been much in most European countries except for Germany.
  • Germany is the only country in Europe that has ramped up electricity production from coal and is expected to remain at these higher levels for some time.
• EU coal generation and demand will return to a downward trajectory as soon as 2024.

China:

• Coal power generation in China increased by around 15 per cent year-on-year to over 500 terawatt-hours (TWh).
• An increase in renewable power generation in China means that growth in coal consumption is expected to remain relatively stagnant at an average of 0.7 per cent a year to 2025.

In the United States

• IEA has made a forecast that coal use will maintain its downward trajectory in the United States.

What is the government of India’s stand?

• The union coal minister has confirmed that:
  • India is geared up to stop the import of thermal coal by 2024-25 (the next fiscal).
  • India's coal production with touch one billion tonnes in the next fiscal.
  • Our requirement by 2030 will be 1,500 million tonnes.

What is compelling India to continue its dependency on coal-based thermal energy?

• It was for the first time in the 50 years of Coal India's existence that the public sector undertaking was asked to import the dry fuel.
• The geo-political situation triggered by the Russia-Ukraine war has resulted in:
  • Supply chain constraints
  • Increased energy prices
  • Pushed inflation to highest-ever levels

What is the Reason for Increasing Coal Demand?

• Iron and steel production uses coal and there are not many technologies to replace the fuel immediately.
• Continued expansion of India’s economy is expected during 2022-2024, with annual average GDP growth of 7.4%, fuelled partially by coal.
• The central government has opened up coal mining for the private sector, claiming it as one of its most ambitious coal sector reforms.
  • The government anticipates that it will bring efficiency and competition in coal production, attract investments and best-in-class technology, and help create more jobs in the coal sector.
• As part of the Covid-19 recovery plan, the government opened up its coal mining sector for private players and announced many new coal mines for auction.

Impact:

• It hampers its efforts to push for greener options.
  • Coal is increasingly becoming economically unviable.
• India’s promise that renewables will provide 50% of its electricity by 2030, may not get fulfilled.

Concern

• India is developing coal mines despite the Union government’s international pledge to achieve net zero emissions by 2070.
• India, in its nationally determined contributions, announced a target to cut 1 billion tonne carbon emissions by 2030 and reduce the carbon intensity of the economy to less than 45 percent.
• Coals’ domestic and global phaseout is also nowhere in sight, given the demand for it.
• In the absence of low-emissions alternatives, global coal demand is set to remain flat through our forecast period.