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False burden on renewable energy

The Economic Survey estimated high social cost of renewable energy, but an analysis shows many discrepancies in calculations,Writes Aruna Kumarankandath.

False burden on renewable energy

The second volume of the Economic Survey released by the Ministry of Finance earlier this month raised issues with investing in renewable energy attributing a social cost of Rs 11 per unit on electricity, three times more than that of coal. This gives a wrong signal to the investors, more or less questioning why renewable energy is being pushed so hard.

The estimated social cost of Rs 11 per unit has created confusion and there have been critiques on how this number has been derived. There are several components of this estimate—the private costs of generation, the opportunity cost of land, social cost of carbon, health costs as well as the costs of stranded assets.
In simpler terms, it says, more investment in wind and solar would reduce the operation of coal power plants, which in turn will lead to job losses and coal plant loans turning bad in the books of banks. This is similar to the argument US President Donald Trump makes for increasing investment in coal mining jobs.
Missing costs of coal plants
The survey alleges that shift in renewables would leave conventional power plants underutilised; lower than their maximum technically feasible level. The investments made in these plants would be deemed "sunk" and that would, in turn, result in a loss of revenue.
These stranded assets will impact the banking sector. It is estimated that the total advances to coal sector were Rs 5,732 crore with the ratio of non-performing assets at 19.8 per cent. Why this was included in social cost estimate is still unclear.
The survey says that the social costs would include the opportunity cost of land required for solar. However, no specific cost is mentioned, which some may argue, is the same as the cost that private developers pay for it, which is already reflected in the cost of generation, even if it is as low as Rs 2.44. In addition, the opportunity cost of land is not put on the social cost of coal power plants.
Wrong estimates
The estimate assumes that land required for establishing a coal power plant is around 2,023 square meters or 0.5 acres per megawatt (MW), while for solar, in comparison, it is 10 times more. This is considered a barrier to solar development. According to the Centre for Science and Environment, on an average, a coal power plant requires 1.7 acres of land per MW but this does not include the area of coal mines, which increases the requirement to 5.95 or 6 acres per MW. According to the Ministry of New and Renewable Energy, the land requirement for ground mounted solar is around 5-6 acres per MW.
Apart from the underestimated land requirement for coal, the survey also does not consider installations on rooftops and already developed areas, which will reduce the space needed. According to an analysis by Bridge to India, a renewable consultancy, half the desert area in Barmer, Rajasthan can install 1,000 gigawatts (GW) of solar. Solar plants largely use the barren and unproductive lands. Thus, 1000 GW can be installed in the 3.5 per cent of the waste land in the country.
The survey also specified that there are 115,000 premature deaths every year, especially of coal miners and it estimated that the total monetary cost is around US$ 4.6 billion. Another recent study published in Lancet Respiratory Medicine journal claimed that 800,000 deaths in India occur due to 'chronic obstructive pulmonary disease', and 100,000 more due to asthma. It is a safe assumption that a percentage of these deaths are caused due to pollution caused by these thermal power plants.
Renewable sector enjoys some incentives like a priority access to the grid. These benefits or subsidies are being phased out gradually as stated in the draft National Energy Policy. Subsidy for solar has been reduced from Rs 450 crore in 2015-16 to Rs 15 crore in 2017-18. The remaining Rs 405 crore has been attributed to wind for 'generation-based incentives', the scheme has been scrapped. From April 1 this year, tariffs from wind would be discovered through reverse bidding.
The survey cautions investment in renewable energy and suggests a "calibrated" approach due to the total cost accrued to the society. In essence, it suggests slowing down the pace of renewable energy development. The survey mentions that renewable energy would form 43 per cent of the installed capacity in the country by 2027; the share in electricity supply would be only around 25 per cent. Thus, it is evident that coal power would be playing a significant role in the future as well.
Given the intermittent nature of solar and wind energy, India would be compelled to depend on coal or storage for a regular supply of electricity. It is difficult to understand why these misleading estimates of social costs have been added to the renewable energy burden when it is clear that coal is always going to dominate India's energy mix. India is one of the countries most vulnerable to the impacts of climate change and we should be doing everything in our power to move away from coal stepping towards renewable energy. This move seems counter-productive to the ambitious stance taken by the government.
(The author is an Environmentalist. The views expressed are strictly personal.)

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