Black as coal. No expression could better describe the future of the fossil fuel in India, which is cutting 9 per cent of its production: it simply no longer pays.
Coal is no longer cost-effective, so much so that India will close 37 of its mines because they are no longer economically profitable. A new step towards the energy transition: the country has already planned to cut back on its investment projects in large coal-fired power plants in favour of solar.
Coal India Limited, the world's largest coal mining company, controlled by the Indian state, produces around 82 per cent of the country's coal. It recently announced its intention to close 37 extraction plants by March 2018, equivalent to around 9 per cent of its currently operating mines. These are loss-making plants whose closure would allow the company to save 8 billion rupees, almost 124 million euros. The cessation of activities will affect 15,000 workers, who will be reassigned to other roles within the group. The reorganisation of the company is only at its first step: it appears that in total the loss-making mines number 65, many of them underground, with around 40,000 people affected — approximately 13 per cent of Coal India's total workforce.
The crisis in Indian coal is due to the collapse in energy prices. "For the first time, in India, solar is cheaper than coal and the implications this carries for the transformation of global energy markets are profound," said Tim Buckley, director of the Institute for Energy Economics and Financial Analysis (Ieefa), in a statement. The prices of coal extracted from mines — especially underground ones — are high, disproportionate when considered in light of actual output: over 200 underground mines yield only five per cent of the coal extracted. At the same time, the low prices of imported fuel prevent the company from raising the prices of domestic coal and bridging the gap. And so, in the face of a 35 per cent collapse in net profit in the last financial year, Coal India has decided to close those perpetually struggling mines.
"The measures adopted by the Indian government to improve energy efficiency, coupled with ambitious renewable energy targets and the collapse in the cost of solar, have had an impact on existing assets, rendering a growing number of coal-fired power plants financially unviable," Buckley observed. In recent months, solar tariffs in India have been in freefall, so much so that an analysis published last February by the Energy and Resources Institute (Teri), a Delhi-based research group, found that if the cost of renewable energy continues to fall at its current rate, India could gradually and completely phase out coal by 2050.
Although India remains one of the largest producers of coal — from which it derives around 70 per cent of its electricity generation — the country's efforts to move away from it are concrete. From 2022, the Indian government decided to ban the construction of new coal-fired power plants: those already under way will be completed, but there will be no new projects. Resources will be deployed to make way for new wind and solar installations. At the same time, the country has undertaken highly significant interventions in railways — which within a few years will be powered exclusively by solar energy — and in energy infrastructure — building, for example, in the south of the country, the world's largest photovoltaic solar power plant — in order to make local transport and electricity increasingly clean.
