Friday 10 March 2017

alysisolum-king-coal-gets-dethroned-inin India

http://www.dnaindia.com/analysis/column-king-coal-gets-dethroned-in-india-2349318

King coal gets dethroned in India

DARRYL D’MONTE | Sat, 11 Mar 2017 DNA

Coal power plants struggle with low demand, water scarcity, shrinking finance, protests, and tightening environmental norms

There is no economic case for building new coal-based power plants in India, let alone environmental reasons for not doing so. The existing fleet is facing economic hardships and willing lenders for new projects are hard to come by. According to Greenpeace experts in India, “Coal is facing a perfect storm: economics have changed, finance is drying up, and public opposition has never been stronger.” Plant load factors (PLFs or capacity) for the nearly 190 gigawatt (GW) of coal already commissioned in the country are hovering around the 60 per cent average, as opposed to the Central Electricity Authority's (CEA) normative 85 per cent goal. The reason for the low PLFs is lack of effective demand — cash-strapped distribution companies or discoms are curtailing purchase rather than trying to service their entire distribution areas.

Over the last five-year plan (2012-2017), before the Planning Commission was disbanded, India built more coal power plants than the plan called for. As a result, there is overcapacity in the sector. That is why the CEA's new Draft National Electricity Plan now says no new coal power plants (other than those under construction) are needed for the next decade at least. The low PLFs are sub-optimal for the financial viability of many projects, and lenders and investors are already facing delayed payments. If banks are forced to restructure their loans, (a big if, for political reasons), we could see sell-offs or debt for equity trades. We are already seeing consolidation in the coal sector as companies (eg Jindal Steel and Power Ltd) try and offload their least productive assets.

So the sector is currently in trouble for hard financial reasons. But there are several factors on the horizon that will make any recovery hard.

Costs are rising: Coal India's cost of production is growing, as is the cost of coal transport. With air pollution finally becoming a political issue, the Ministry of Environment & Forests has notified new emission norms that must be complied with by the end of this year. While that deadline will clearly not be met, complying is inevitable and this means significant expense. Companies will have to absorb this at least partially, while the rest will be passed on in the form of higher tariffs.

Competitiveness: Solar and wind are now at parity with (or cheaper than) new coal: With the recent Rewa bids of Rs 3.30/kWh for solar and Rs 3.46/kWh for wind, grid parity is effectively here. Tariffs from new coal power plants are in the Rs 3-5 range. The variable cost component for coal power is more flexible, with a greater risk of cost increase from the cost of coal, water, additional emission controls, operation and maintenance etc, whereas once the capital cost for solar and wind is incurred, variable costs tend to be negligible.

Finance: Due to a combination of poor financials and eroding social and environmental acceptability, most leading global banks and investors are moving away from new coal investment.

A spirited campaign highlighting coal’s negative environmental and social impacts has also played a role. Global banks such as Goldman Sachs and Deutsche Bank are now reluctant to underwrite any new Coal India share offers. The world’s largest sovereign wealth pension fund, the Norwegian Global Pension Fund, has divested itself of virtually all coal holdings. According to BankTrack, an international NGO monitoring the banking industry, banks that have made commitments to stop or restrict financing for new coal mines, power plants, and coal companies include the World Bank, Deutsche Bank, Goldman Sachs, Standard Chartered, Morgan Stanley, and BNP Paribas.

According to an updated Greenpeace Investor Briefing titled 'Water shortages cost Indian coal power companies over $500 million in revenues last year', “Large parts of the Indian subcontinent faced a severe drought in the summer of 2016… revealing coal’s vulnerability in water stressed areas. With growing variability in rainfall patterns due to climate change, and growing demand for water from a growing population, this vulnerability will increase.” Nearly 11 billion units of coal power, with an estimated potential revenue of $560 million, was lost in the first half of 2016 due to lack of water for cooling. NTPC and Adani Power are among the companies worst hit. NTPC’s Farakka plant in West Bengal has lost the generation of approximately 1.1 billion units, translating into lost revenue of over $58 million (at an estimated tariff of Rs 3.5/kWh or 5c/kWh).

According to Greenpeace India, a 1 GW Indian coal power plant which closes for just 15 days due to water shortage, faces an annual loss in revenue of over $20 million. Analysis of data from NTPC, filings with the Bombay Stock Exchange and India’s CEA for 2016 has shown that shutdowns due to a lack of cooling water supply have cost coal power companies over $560 million in lost revenue in just six months. (ends)

Monday 6 March 2017

http://www.hindustantimes.com/analysis/us-will-have-to-scrap-plans-to-lead-clean-tech-if-it-exits-paris-climate-deal/story-HcXw79GiavLhtpxEVCkcmO.html

US will have to scrap plans to lead clean tech if it exits Paris climate deal

ANALYSIS Updated: Mar 06, 2017

Darryl D’Monte

US President Donald Trump has ordered a review of all treaties the US has signed with more than a single nation and his advisers have to identify which the country ought to quit. This could lead to the US remaining with the United Nations Framework Convention on Climate Change, even as it pulls out of the Paris climate agreement of 2015, which former President Barack Obama helped to forge.

This has a precedent. President George W. Bush extricated the US from the UN’s Kyoto protocol, which came into effect in 2005. It required all industrial countries to compulsorily reduce their greenhouse gas emissions by at least 5% below their 1990 levels and there were penalties for failing to do so, the only obligatory measure in climate negotiations to date.

Since the US was the world’s biggest emitter till 2007 when China replaced it and remains the second biggest, it bears a major responsibility for putting its house in order. A decade ago, the average American emitted 19.4 tonnes of carbon dioxide a year, as against 5.1 tonnes by every Chinese and 1.8 tonnes by an Indian. While American exceptionalism touts the US as the world’s leader in establishing rights to environmental information and some related areas, its overall record, as Kyoto shows, leaves much to be desired. Ironically, Trump has imposed a gag order on the Environmental Protection Agency (EPA) issuing any public information and the agency could also face cuts of up to 70% to its climate change programmes.

If the US pulls out of the Paris agreement, it will send the wrong signals. As it is, the agreement is voluntary, with each country specifying to what extent it will cut emissions and subject itself to international scrutiny. Every year beats the record for the highest temperatures and the world is well on course to cross the 2˚C increase above pre-industrial levels, beyond which there will be cataclysmic climate change.

At the protracted climate negotiations, the US leads the unofficial Umbrella group, which include Australia, Russia, Canada and Japan. At the very least, their will to combat global warming will be compromised; Japan – although the host country for the Kyoto protocol – pulled out of that treaty after the US did so.

As the Washington-based World Resources Institute observed, climate has come the centre of the agenda of both G7 and G20. Last year, US intelligence agencies found that climate change could case grave political and social instability worldwide, which is why G7 has commissioned a study on A New Climate for Peace and is stepping up its efforts to better coordinate strategies to contain climate security risks.

The bedrock of the Paris agreement is the action which countries take at home. In the US, it is Obama’s Clean Power Plan, which is part of the larger Climate Action Plan and comes under the EPA. Trump has appointed former Oklahoma attorney general Scott Pruitt to head the agency though Pruitt sued it 13 times in the past six years, in collusion with the very industries which the regulations were aimed at. Pruitt has admitted that climate change is occurring, adding worryingly that “human ability to measure with precision the extent of that impact is subject to continuing debate and dialogue, as well they should be.”

The Clean Power Plan seeks to curb coal-fired power plants, which might fell run foul of secretary of state Rex Tillerson’s assertion that he “will support US membership in only those international agreements that advance our national interests and do not cause harm to the American people or our economic competitiveness.” This is reminiscent of the senior George Bush’s remarks at the Rio Earth Summit in 1992: “The American way of life is not up for negotiation.” However, even his son’s EPA head, Christine Todd Whitman, has criticised Trump for appointing a person who is a climate change denier.

Trump may well be shooting himself in the foot because he is abandoning America’s plans to lead the world’s clean energy industries, the global market for which is estimated to touch $6 trillion by 2030. China is investing heavily in these and even India may get a toe in the door with its International Solar Alliance. Last month, 630 American top business leaders wrote an open letter to Trump and Congress, exhorting them to continue supporting renewables and not quit the Paris agreement.

Darryl D’Monte is chairman emeritus, Forum of Environmental Journalists in India