India expects renewable energy growth to leave coal in the dust

India’s renewable energy capacity is on track to outpace the expansion of its coal-powered capacity in the current decade.

The Central Electricity Authority (CEA) expects the share of renewable energy in the country’s overall generation capacity to rise to 34 per cent in the next 10 years, or about 435 gigawatts (GW) from the current 23.6 per cent, or about 87GW.

Meanwhile, coal-fired generation capacity is projected to grow from 205GW, or over half of India’s total generation capacity, to 266.9GW by 2030.

While that increase in generation capacity would certainly mean an increase in thermal coal demand, the world’s second most populous country is also working to replace imported thermal coal with local supply.

The Economic Times reported earlier this month that Indian coal imports had dropped 20 per cent in May to 18.93 million tonnes (Mt) from May last year.

Coal India, which produces over 80 per cent of India’s domestic supply, has been mandated by the Indian government to replace at least 100Mt of imported coal with domestic supply in the 2021 financial year.

Even Gautam Adani, chairman of the Adani Group that is trying to build the Carmichael mine in Queensland, has expressed the view that while fossil fuels and renewables would co-exist in the near future, renewables would outpace fossil fuels in the long-term.

India isn’t the only country looking to cut coal imports, South Korea is also reducing thermal coal use as part of the government’s pledge to achieve net zero emissions by 2050.

The US Energy Information Administration has also lowered its coal production forecasts for 2020, predicting a 25 per cent drop in US coal production from 2019 levels.

Renewable resources

Part of this is likely due to continued improvements in the cost of renewable energy.

The International Renewable Energy Agency (IRENA) recently found that on average, new solar photovoltaic (PV) and onshore wind power cost less than keeping many existing coal plants in operation.

Goldman Sachs believes that the transition to renewable power from traditional fuels will create a $US16 trillion investment opportunity through 2030.

Infigen (ASX:IFN) has found itself the target of competing takeover offers from Spanish utility Iberdrola and UAC Energy Holdings that value the company at 86c and 80c-per-share respectively.

Unsurprisingly, the company has recommended that shareholders accept the Iberdrola offer and reject the UAC offer.

Iberdrola is the number one producer of wind power and one of the world’s largest electricity utilities by market capitalisation.

Likewise, Windlab (ASX:WND) is in the process of being acquired by Wind Acquisition 2 after shareholders and the Supreme Court of New South Wales gave their approval to the transaction.

Meanwhile, New Energy Solar (ASX:NEW) recently agreed to sell a 50 per cent stake in its Mount Signal 2 solar power plant in California to NextPowerIII for $US52m.

The price compares well with the December 2019 valuation of $US50.25m for a 50 per cent stake in the project and its original equity investment value for half the project of $US44m.

Chief executive officer John Martin says that despite the difficult circumstances, the sale to a reputable renewable energy investor reinforces the company’s belief that its asset values are real and realisable.

“Also, this transaction demonstrates that the transition to renewable generation is a market transformation that won’t be easily de-railed,” he said.