A new report says India has an estimated 29% of the installed fossil fuel capacity in excess of what is required to meet its 2021 peak electricity demand. This is equivalent to 67.6 GW of overcapacity — all coming from coal-based power plants.
The report, released by Centre for Research on Energy and Clean Air (CREA) and TransitionZero, highlights this excess fossil fuel capacity can be retired immediately without compromising reliable supply of electricity in the country.
The report also looks at electricity demand and supply in other South Asian countries including Pakistan, Bangladesh, and Sri Lanka. It uses a modeling exercise based on actual peak demand and source-wise generation data around the peak demand.
According to the report, South Asia has over 75 GW of excess fossil fuel capacity. This excess capacity can be phased out resulting in improved utilization of other power assets as well as annual savings of over US$ 2.3 billion.
The report found that approximately 75 GW — or 27% of the total excess fossil fuel capacity (coal, Oil, and Gas) in the modeled countries in 2021— can be considered overcapacity in South Asia. The high amount of overcapacity found in the study is a result of excessive investment in coal development, as construction has far outpaced actual demand growth within countries. Together, India, Bangladesh, and Pakistan commissioned over 30 GW of coal, oil, and gas capacity between March 2018 and 2021.
“Our analysis finds that India has the largest overcapacity of fossil fuel in South Asia. Over 67 GW of coal-fired capacity in India is found to be in excess. This is costing Indian ratepayers over US$ 2.1 billion (INR 15,780 crore) annually. Retiring 67 GW of excess coal-fired capacity will not only save billions of dollars but also help India improve its air quality,” said Sunil Dahiya, Analyst at CREA.
In regulated electricity markets like those in South Asia, investments are made through power purchase agreements (PPAs). Conventional fossil fuel generators are often shielded from market forces and receive fixed capacity charges/payments regardless of whether plants are utilized. Such payment policies make overcapacity a cost borne by consumers and can raise the overall cost of electricity.
An estimated $2.3 billion in fixed operating & maintenance costs is spent despite no longer being necessary to meet peak demand. Given the enormous potential savings in maintenance costs and benefits to human and planetary health, phasing out excess fossil fuel capacity and ensuring that future demand is met by renewable energy by halting additional fossil fuel projects is a crucial first step in the energy transition.
Sunil Dahiya, one of the authors, said, “Future electricity can reliably be met from cleaner alternatives such as wind and solar with battery storage. Investing in retrofitting already excess coal capacity is a poor investment decision since it will take away necessary capital needed for investments in renewable energy technology, but also extend the life of an inefficient and polluting coal power plant for many years.”
“In India, various estimates pin the cost of retrofitting existing coal power plants to the tune of US$ 10 – 12 billion. In Pakistan and Bangladesh, most of the coal-fired capacity have very poor emission control standards resulting in poor air quality. Retrofitting these coal plants with best available emission control technology would mean additional investments to protect public health.” Dahiya added.
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