‘Coal to dominate power sector despite growth in renewables’

27 February 2017

India’s power sector will continue to be dominated by coal over the coming decade despite significant growth in cleaner fuels or renewables, says BMI Research.

“India’s power sector will remain dominated by coal over the coming decade despite significant growth in cleaner sources – notably nuclear, non-hydro renewables and natural gas,” BMI Research said in a statement. According to the statement, the country’s efforts to bolster domestic supply of coal and the loosening of the global coal market over the coming years will ensure that coal will remain the power feedstock of choice for the Indian market.

India’s power sector will remain dominated by coal over our 10-year forecast period, with coal making up a share of just less than 70 percent to the total power generation mix by 2026. This is roughly the same level as it is currently, with growth underpinned by the significant and continually growing project pipeline for coal-fired power facilities in the country, it said. Coal will continue to be the feedstock of choice for the Indian power sector given its widespread supply and relatively cheap cost. Domestic coal supply is expected to increase over the course of the decade as Coal India ramps up output, it added.

“We expect India to surpass the US as the world’s second largest producer of coal during 2016-2020, increasing market share from 9.8 percent in 2016 to 12.7 percent by 2020. Imports will remain important for the country, as India’s coal production will not meet the government’s ambitious target of self-sufficiency, due to delays in opening up commercial mining to private players and slow approvals for new state mines,” BMI Research said. “We expect global coal market to loosen and thermal coal prices to weaken from their 2016 highs, with prices to settle in a USD 60-70/tonne range over most of 2017.

This trend will be driven by China’s more cautious approach to coal sector consolidation policies after provoking a policy supply shock in coal sector in 2016 which sent prices rallying,” it added. “Despite the prevalence of coal-fired power generation, we expect significant growth in alternative, cleaner power sources over the next 10 years – albeit from a lower base – notably in the natural gas, nuclear and non-hydropower renewables sectors. This is in line with government efforts to reduce pollution across the country and international pressure to boost environmental policy,” it said.

Source – Moneycontrol