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India should leverage its coal assets while it is economical to do so and then ramp up its renewable energy capacity, Chief Economic Adviser Arvind Subramanian said on Thursday, adding that the low tariffs seen in the renewable sector do not include several implicit costs that are so far being subsidised.

 

Mr Subramanian also said that India should not be influenced by ‘coal imperialism’, where developed countries try to influence developing countries to reduce their fossil fuel consumption at a rate not in keeping with historical factors and equity.

 

“Renewable energy must be properly costed,” Mr Subramanian said while delivering the 16th Darbari Seth Memorial Lecture organised by TERI. “There are several social costs of moving away from coal. We must be abundantly cautious about claims on behalf of renewables. Properly costed, renewables will achieve true parity in social terms with coal only in the future.”

 

“We should maximise the use of natural assets while economics permits it, and then ramp up the free assets such as renewable sources when needed,” he added. “There is a window, perhaps narrow, until renewables become truly viable, for accelerating expansion of coal, and driving up capacity utilisation sharply in thermal power generation.”

 

Among the costs of adopting renewable energy that are not factored into the tariff currently, Mr Subramanian included the cost of intermittent supply of power from solar and wind sources, the land acquisition costs, the upgradation of the grid to support energy from renewable sources, and the cost of stranded coal assets.

 

“The proper estimates of the full costs of renewable energy are elusive,” Mr Subramanian said. “Recent bids are not indicative because of the implicit subsidies and the factor of strategic bidding that has entered the renewable energy space as it did with coal and spectrum auctions.”

 

He also added that the costs of moving away from coal are also significant, since it will impact employment, and the regional economies where coal mines are located. He also said that increasingly using renewable sources would further reduce the plant load factors of coal power plants, which, in turn, could further deteriorate their finances and the non-performing assets problem.

 

“If India achieves its target in renewable energy (of 175 GW by 2022), the plant load factor will decline by 13 percentage points, which is significant since the PLF is already so low,” Mr Subramanian said.

 

“The burden of combating climate change should be consistent historically and equitably,” he added. “We must progressively increase our share of the burden, compared with other countries who should shoulder a higher burden from the outset. The social costs of coal should include its domestic externalities, but at least for some time, not the international externalities.”

 

Finally, Mr Subramanian said, subsidising renewables at a time when the social costs are higher than those of coal “seems a double whammy for the government which then also has to pick up the tab for the resulting stranded assets”.

 

Source: The Hindu