India's Energy Transition: Stranded coal power assets, workers and energy subsidies
What is driving stressed coal power assets in India, and how do we ensure workers, not assets, are the focus of government interventions in the future?
- India's 2018 crisis of stressed coal power assets may rear its head in future years as various drivers suggest increased coal power costs in the future. Government interventions should not only focus on the short term, they also need to support a managed transition fair for all involved, including workers.
- Current drivers of stressed assets include coal shortages and the financial distress of energy distribution companies (DISCOMs), while future drivers are likely to include water scarcity, air pollution regulations and cost-competitiveness of renewables.
- Policy support mechanisms for coal artificially dampen market signals that affect coal power costs. These take the form of subsidies, public finance through loan preferential rates, or the delay or lack of enforcement of policies (such as air pollution regulations) that would otherwise increase costs to producers.
- As part of an ongoing dialogue about labour in the coal sector, policy-makers should consider the complementary policies that can ensure that the burden of asset stranding does not fall on workers and communities. This might include general employment schemes, targeted social protection measures and financing mechanisms.
In the India Energy Transition 2018 update, the Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD) and the Council on Energy, Environment and Water (CEEW) published updated estimates of the scale of energy subsidies in India for FY 2017, including partial data on the scale of subsidies for FY 2018.
One of the review's striking findings was government support measures for coal have remained largely unchanged since 2014, despite an ongoing crisis in the coal sector, where around 18 per cent of installed capacity is "stressed" and at risk of entering bankruptcy proceedings.
This issue brief takes a detailed look at why such a large share of coal power is struggling today and the drivers—including subsidies—that may cause similar crises to rear their heads in future. In light of this, it sets out some broad proposals from international literature on the topic of “just transition,” which encourages governments to recognize stranded workers and communities as much as stranded private or public assets. It builds on an analysis of the relationship between subsidies and coal power assets published by the GSI and the Overseas Development Institute in mid-2018, India’s Stranded Assets: How Government Interventions Are Propping Up Coal Power.
You might also be interested in
Power by All: Alternatives to a privately owned future for renewable energy in South Africa
This report explores new models for renewable energy development that create a greater role for public and community ownership in South Africa.
India’s stimulus for renewables is a ‘mixed bag’ for energy transition
A new report shows the government’s stimulus is a 'mixed bag' for the country’s energy transition.
Are Countries Walking the Talk on Cutting Carbon?
In the race against climate change, increasing ambition over time is key. But revised commitments from parties to the Paris Agreement lack two critical components of ambitious climate action.
Electricity overcharging: Cross-subsidies cost businesses Rs 75k crore in FY19
Since the National Tariff Policy 2016 prescribed the tolerable extents of cross-subsidy among various segments of electricity consumers, the market-distorting system hasn’t seen a smidgen of correction.