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More and Better: Inefficiencies in India’s Coal Use

Rohit Chandra
November 30, 2015

Developing country coal use has been coming under increasing scrutiny at the UNFCCC Conference of Parties (COP). Given the history of amplified rhetoric and underwhelming outcomes at COPs over the last few years, it is not clear what outcomes can be realistically expected. Regardless, India’s energy mix will be determined primarily by domestic considerations. But these annual multilateral conferences do offer an opportunity to introspect. What is India actually doing to clean up its coal industry given the proven negative long-term consequences (both local and global) of coal combustion? What ideas and initiatives can India project as good faith commitments to improving its coal sector and limiting coal use related emissions?

There are a few misconceptions circulating which need to be addressed. First, India is not part of some small minority of countries which have experienced consistent coal consumption growth. Most large, developing countries, and even some developed countries have seen resurgences in coal usage from the early 2000s onwards. Second, carbon capture and sequestration (CCS) technologies are far from proven and decades away from financial viability. India currently does not have any CCS pilot projects underway, but absent massive technology transfer or financing alternatives, it is unlikely that CCS will take off at scale in India any time soon, even if it is a sensible strategic investment. Finally, India’s energy mix is not capable of dynamically reorienting towards non-coal alternatives in a 15-20 year timescale. In the long run, India must transition to renewables and non-fossil fuels as the majority of its energy system, but the golden age of renewables is still some decades away. Looking at aggregate trends in India’s primary energy mix, perhaps the most salient feature is the increased consumption of natural gas over the last 10-15 years. But even now, natural gas is less than 10 percent of India’s total primary energy consumption. Thus, given the stock of coal investments in power and other industries, coal will remain the dominant source of energy in India in the medium term, even as it makes investments to transition to other sources.

If this is the case, then much more research needs to be done on understanding India’s coal sector, its supply chains, and improving efficiencies in downstream uses of coal. Fortunately, there are some attractive options on this front.

The first is coal washing. Coal washing, beneficiation, or preparation is the process of reducing the ash content of coal through physical separation. Indian coals on average contain 40 percent ash, which is much higher than the 25-30 percent ideally needed for the efficient burning of coal in thermal power stations. Burning ash leads to incomplete combustion, which releases many more airborne effluents than necessary. In addition, since most of India’s coal is not washed, India is needlessly transporting massive amounts of ash (almost 30-40 percent extra weight), which could be avoided if coal was washed close to the pithead before transportation.

While coal washing is necessary for the steel industry, it has not really taken off as an intermediate activity for India’s power plants, where most of India’s coal is used. This is because of a mix of legal and pricing obstacles which make coal washing an unattractive business. Since coal washing was not a notified end use in the Coal Mines Nationalisation Act, prior to 1993 only Coal India Limited (CIL) was allowed to wash coal. The pricing differential between different grades of coal was less than the economic cost of washing, so the profit-maximizing part of CIL never willingly wanted to enter the coal washing business. However, despite this reluctance, CIL has been washing 10-15 percent of the coal it produces due to the poor quality of Indian coal, and because more recently, Ministry of Environment and Forests (MoEF) guidelines have mandated that coal transported more than 1000 km must be washed to below 34 percent ash content. More recently, CIL has been bidding out washeries to private contractors, which has enabled some modest private entry into the washing industry. Unfortunately, private coal washing has, so far, not had the best reputation. End users of coal are well aware that many private coal washing companies simply manage connections to get the best coal from mines (hence, not actually engaging in coal washing), and some companies also have a reputation of diverting coal for their own purposes. Consequently, coal washing is stuck in a low-level equilibrium. Despite considerable benefits on power plant efficiency, emissions, and reduction of transport costs, coal washing still faces multiple hurdles. It deserves significant promotion.

The second idea deserving a closer look is domestic supercritical boiler design. Under the National Clean Coal Mission, collaborations were planned between Indian and foreign firms to create capacity for manufacturing boilers which could function at supercritical conditions. Supercritical boilers are superior to conventional boilers because they function at higher temperatures and pressures, which results in more efficient combustion and less waste heat. Supercritical boilers also result in fewer emissions and lower operating costs over the lifetime of a plant, which make them an attractive proposition. However, buying them internationally is not cheap. India’s first commissioned supercritical plant was built by the Adani’s in Mundhra, who bought their supercritical boilers from Chinese suppliers. While Bharat Heavy Electricals Limited (BHEL) has recently constructed supercritical boilers for NTPC Limited’s upcoming plant in Bihar, many currently planned power plants still do not incorporate supercritical technologies. Part of the problem is that it is difficult to maintain the high heat rates required for supercritical operation with lower quality Indian coals. Coal washing could help with this problem, but there is also a need to adapt boiler designs to be more compatible with Indian coal. BHEL and other manufacturers need to be more involved in making this a reality.

Finally, the perennial problem of coal transportation and power plant siting still looms large. The initial logic of siting power plants close to coal deposits to minimize transportation costs did not succeed for a variety of reasons: coal-bearing states did not provide great investment environments, had relatively ineffective State Electricity Boards (which were unable to build up state level generation assets), and did lose from the implementation of freight equalization policies. Most of the surviving public sector plants in Bihar, Jharkhand and West Bengal are run by Central public sector undertakings, which consequently result in lesser allocations of power to the home states by the Gadgil formula.

The resulting geography of power plants at the national level has led to extremely ineffective methods of coal transportation. Over 20 percent of India’s coal still moves by road to power plants, which is much less efficient than railways-based movement. The idealized vision of a stream of unimpeded coal wagons circulating between coalfield and power plant with bottom-opening technologies — so that they do not have to stop moving when dumping coal — has not been realized anywhere because of the parallel congestion of passenger and freight traffic on Indian Railways. In a few places, exclusive merry-go-rounds run between the pithead and the power plant, but even these are rare now. For a truly effective power infrastructure, India needs to move less coal and more power. Even twenty years ago, this would have been difficult given how poorly regional electricity markets were connected. However, the development of interregional transmission networks and the rise of power markets have lifted this constraint. Wheeling power between states is now both physically and financially feasible, making high level coordination much easier. But this requires a degree of coordination between Railways and power infrastructure planning which has historically been weak. With the recent dedicated freight corridor projects and investments in rail infrastructure by Coal India, this may be changing.

The one unavoidable reality in considering these three ideas is that while they may be more energy efficient and reduce emissions, they will be more expensive than the status quo. This means that coal will be more expensive and power prices will have to increase, although the extent is still uncertain. Without the downstream price signals to incentivize such investments, demand for coal washing, supercritical boilers, or more efficient plant siting and coal transportation will never materialize. The current financial state of the distribution companies makes many of these ideas seem much closer to fiction than truth. By tipping the balance in the other direction, the benefits in both domestic and international spheres are considerable.

Rohit Chandra is a doctoral candidate studying energy policy at the Kennedy School of Government, Harvard University. He can be reached at rchandra@fas.harvard.edu.


India in Transition (IiT) is published by the Center for the Advanced Study of India (CASI) of the University of Pennsylvania. All viewpoints, positions, and conclusions expressed in IiT are solely those of the author(s) and not specifically those of CASI. IiT articles are re-published in the op-ed pages of The Hindu: Business Line. This article can be read here.

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