India plans to reduce power output from 81 coal plants, replace with green energy

India's federal power ministry plans to reduce power generation from 81 thermal coal-fired plants over the next four years, as part of its efforts to switch to clean energy sources and cut carbon emissions, according to a letter seen by S&P Global Commodity Insights May 30.

The letter, dated May 26 and sent to energy departments of state and central government, noted that according to current regulations, thermal power plants need to operate at a minimum of 55% but reduction of generation from such plants is possible to a minimum of 40%.

The ministry has selected those power plants that charge higher tariffs to reduce the price of power delivered to the consumer.

With this, there would be a reduction in power generation by 58 billion kWh from the 81 utilities, the letter said, adding it will save 34.7 million mt of coal and cut carbon emissions by 60.2 million mt. Moreover, an equivalent of around 30,000 MW of renewable energy will be required for this transition.

This would help India inch closer to its goal of achieving 500 GW of non-fossil fuel-based power by 2030. Analysts have, however, called this target ambitious and believe that India will have to take much bolder steps to meet its clean energy goals.

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India has 173 thermal coal-based power plants with a total capacity of 203.35 GW. The letter comes at a time when the country is battling a coal shortage, which pushed it to a power crisis in April, a few months after coming out of a similar crisis in October 2021.

High global seaborne coal prices due to the Russia-Ukraine war have weighed on India's import demand, leading to a heavier reliance on domestically produced coal. This has led to a fall in stockpiles at power plants, sufficient for over eight days of coal burn, as of May 26.

The Kalimantan 4,200 kcal/kg GAR price has averaged $88.15/mt FOB so far in 2022, as against $45.94/mt in the same period in 2021, up nearly 92% on the year, according to data from S&P Global Commodity Insights. The Newcastle 5,500 kcal/kg NAR coal with 23% ash averaged $182.54/mt so far in 2022, a 228% rise from the average of $55.52/mt in the same period in 2021.

S&P Global on May 30 reported that for the first time since 2015, India's state-owned Coal India will procure coal on behalf of power stations operated by the federal and state governments.

India imported 17.4 million mt thermal coal in January and February, according to data by S&P Global data. The country imported 161.4 million mt in 2021, lower than 172.8 million mt in 2020.