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After adopting its final National Electricity Plan (NEP) earlier in 2018, India remains on track to overachieving its “2˚C compatible” rated Paris Agreement NDC climate action targets. Estimates show India could achieve part of its NDC goals—a 40% non-fossil-based power capacity by 2030—more than a decade earlier than targeted. But a question still remains over the future of coal.
If it were to abandon plans to build new coal-fired power plants, India could become a global climate leader with a “1.5˚C compatible” rating. This is more than feasible: the Draft National Electricity Plan contained no expansion of coal power after 2022. This scenario is supported by recent developments such as a 50% decrease in the cost of solar power in just two years and several utilities shelving plans for building coal plants. In 2017, renewable energy investment topped that of fossil fuel-related power investments. If the price of solar PV continues to fall, it stands to become the preferred choice for distribution companies. However, the final NEP took a backwards step of including more than 90 GW of planned coal-fired capacity—and these risk becoming stranded assets.
The government’s policy signals around electric vehicles are mixed, resulting in a disparate uptake of EV technology across states. It could improve this by mandating action plans at a national level and working towards its earlier aim of all new vehicles being electric by 2030.
The Indian government is optimistic that through the Perform, Achieve and Trade (PAT) scheme, the industry sector will continue to make a substantial contribution to the country’s climate targets. The Ministry of Power and the Bureau of Energy Efficiency state that the first cycle of the PAT scheme resulted in savings of 5.6 GW and 31 MtCO2e between 2012 and 2015 (BEE, 2018). In addition to the PAT mechanism, India seeks to launch a pilot carbon market mechanism for micro, small, and medium enterprises (MSMEs) and the waste sector in March 2019.
The ramp-up of renewables in India can provide access to affordable power at scale, and quickly. A 2018 report by the national coal mining company, Coal India, confirms declining future costs of solar and renewable electricity storage (Coal India, 2018), which is likely to foster low-carbon investments. Investment in renewable power in India topped fossil fuels for the first time in 2017, according to the International Energy Agency (IEA). The government recently increased its previous 2022 capacity target for renewables from 175 GW to 227.6 GW.
Nonetheless, there is still substantial uncertainty in India about coal power capacity and whether all renewables projects in the pipeline will be completed on time and integrated into the grid. In 2017, coal consumption increased by 4.8% or 27 million tonnes and the new NEP still forecasts coal capacity additions (The Economist, 2018). Due to additional retirements, India’s coal power capacity will reach 238 GW in 2027, 11 GW lower than in the Draft NEP. However, unlike the Draft NEP, which projected that no new coal capacity was needed after 2022, the final NEP foresees capacity additions in this period. There is a risk of at least some of this capacity becoming a stranded asset and utilities are already shelving plans to build new coal plants.
Our analysis shows that India can achieve its NDC target with currently implemented policies. We project the share of non-fossil power generation capacity will reach 60–65% in 2030, corresponding to a 40–44% share of electricity generation. India’s emissions intensity in 2030 will be ~50% below 2005 levels. Thus, under current policies, India is likely to achieve both its 40% non-fossil target and its emissions intensity target.