Here is the basic problem of our global energy system: coal is still the main source of energy for electricity generation. If you look at the world’s growth markets countries like in China, India, or Indonesia the growth strategy is heavily reliant on building more coal-fired power plants. Together with Australia, Brookings predicts that these markets will account for 70% of global coal production by 2040. The problem: these plans are on a direct collision course with the local environments and the global climate.
In 2014, according to the IEA’s 2014 World Energy Outlook, Coal made up 29% of the total global energy mix. The IEA projects that although the share of coal will fall to 24% by 2040, the absolute coal consumption will increase by 15% because of the rising global energy demand.
This growth will come entirely from the developing world, particularly from India. (China’s coal demand is expected to peak in 2030.) This is represented by the 90-90-70 rule first propagated by BP: until 2030, 90% of population growth, 90% of energy demand growth and 70% of economic growth will occur in the developing world (refer). Or, think of this statistic: in 2007 87% of US households had air conditioning. In India, the number was 2% (refer).
While India has large amounts of domestic coal, this coal is of poor quality, which makes it particularly polluting for the air and the water (through the process of washing). Coalmines are mostly in the Eastern part of the country, but most power is needed in the industrialized Western states. This puts a great strain on railway network and power grids. Increasing coal fired power consumption is a “daunting task” according to a recent report by the Brookings Institution (refer).
The price of coal has been falling in the past years. This has a number of reasons. He most important is reduced demand due to China’s economic slowdown and fuel switching. Contributing factors are: a strong dollar, a coal-to-gas shift in the US and falling oil prices that reduce the cost of running gen-sets in coal mining. In the long term, however, prices will probably rise again. The main driver is increasing global demand for coal. In addition, the price of coal fired power generation will likely further increase due to rising pressures to price in environmental and climate externalities (“clean coal”) and due to higher risk premiums associated with inflexible power plants in the future energy economy.
From an Indian perspective, these trends make coal increasingly less attractive as compared to, say, solar. As the energy triangle above shows, today, coal is more competitive than solar in cost. The two are roughly equal in terms of supply security (some Indian coal is imported and there are supply bottlenecks; solar is not yet stored). On the environmental scale, of course, solar is much better. In future, the picture will be much more clearly in favour of solar: solar will be cheaper than coal, will continue to be more environmentally friendly and will provide more energy security.
There is another point to consider, and that is the climate. On the triangle, there are three values: affordability, security, and environment. Trading off between these three only works, if there are no irreversible costs associated with any one of them. On the environment, one could argue that much damage to the environment (soil, air, water) can be corrected, if only enough money is spend. This may or may not be true. When it comes to the climate, however, it is far more difficult to compare with affordability and security. Destroying the climate could lead to irreversible damage that sets in motion a self-sustaining process of global warming, putting at risk the survival of large parts of the global population. How to compare that?