The share of generation capacity from non-fossil-based sources will likely increase to 45 per cent by 2022
New Delhi: India will exceed the compliance of its commitment made to address climate change through green energy installations under the landmark Paris agreement, according to global credit rating agency Moody’s Investors Service.
The share of generation capacity from non-fossil-based fuel sources in the country will likely increase to 45 per cent by 2022 as India plans to increase its renewable energy capacity, excluding hydro, to 175 Gigawatts (Gw) and both wind and solar have already achieved grid parity, according to Moody’s analysis.
“This is higher than India’s commitment under the 2015 United Nations Climate Change Conference (UNFCCC) in Paris (the Paris Agreement) to have 40 per cent of the country’s total generation capacity from non-fossil-based fuel sources by 2030,” the agency said in a report titled “Power Asia – Climate goals, declining costs of renewables signal decreasing reliance on coal power”.
In India, the generation volume from coal power is expected to continue to increase through 2030 in the International Energy Agency’s New Policies Scenario (NPS) and remain the largest contributor to the country’s power supply. But the share of coal in the country’s power mix in the NPS decreases to 57 per cent in 2030 from around 74 per cent in 2017.
The report stated that coal power will remain important, but the possibility that it will become uneconomic is rising. “In our baseline scenario, renewable power will not grow fast enough to meet Asia’s total power needs on its own. But the share of coal power in Asia’s power mix is declining with governments’ climate change and air quality goals. And coal-fired generators could become uneconomic sooner than in our baseline scenario, given governments’ clean energy policies, the declining costs of renewables and ongoing technological advances,” it said.
Also, the declining costs of renewable power will expedite transition toward renewables, according to Moody’s analysis. The declining costs for solar and wind will lead to increased renewable capacity and generation even without policy incentives. Coal power will face increasing challenges from renewables, particularly if costs for battery storage decline significantly and storage efficiency increases. Both the factors would increase the reliability and stability of power supplied from solar and wind. In Asia, renewable power growth will be strongest in China and India given the lower costs of renewable energy there and greater site availability, according to the report.
The rating agency also said that the risk of stranded asset for coal power is growing, and it varies by geography. Companies in most Asian geographies are unlikely to reduce coal plant utilization sharply or retire operational coal plants earlier than planned through 2030.
“However, the potential that coal power plants will become impaired or otherwise non-productive is rising given government policies promoting renewables, ongoing cost reductions for renewables and development of disruptive technology. More aggressive penetration of reliable renewable energy will clearly have a significant detrimental effect on coal power generators in the absence of compensation for declining dispatch volumes,” Moody’s said.
Also, the funding options for coal power are seen declining and this will further limit the growth of coal power in Asia. The tightening environmental regulations and improving economics for renewables will likely weaken investors’ risk appetite for new coal power projects with long tenors given the increasing long-term risk of holding and operating coal power plants. Investors and banks are also under increasing pressure to decarbonize their portfolios and reflect climate risk into those portfolios.