Dr. Rahul Tongia
Author, “Future of Coal in India"

With a population of 1.4 billion people and one of the fastest growing economies in the world, India is crucial to the future of global energy markets and climate change - and coal is fueling much of that economic growth in India. Coal is the most carbon-intensive fossil fuel and is responsible for more than 40 percent of energy-related global carbon emissions. Over the next five years, India’s coal demand is expected to grow more than that of any other country in the world. In short, there’s no pathway to global decarbonization that does not include meaningfully changing the trajectory of India’s current and projected coal use. 

In this edition of Columbia Energy Exchange, host Jason Bordoff is joined by Dr. Rahul Tongia, author of the new book “Future of Coal in India: Smooth Transition or Bumpy Road Ahead?” to help shed light on that very subject. 

Dr. Rahul Tongia is a Senior Fellow with the Centre for Social and Economic Progress in New Delhi, where he leads its Energy, Natural Resources, and Sustainability group. He is also a non-resident Senior Fellow at the Brookings Institution, and Adjunct Professor at Carnegie Mellon University. He was the founding Technical Advisor for the Government of India’s Smart Grid Task Force. He holds a PhD in Engineering and Public Policy from Carnegie Mellon University and a Bachelor's in Electrical Engineering from Brown University.

Read Dr. Tongia's blog post about his book here.

 

TRANSCRIPT

[00:00:00]
Jason Bordoff:  Hello and welcome to the Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University.  I’m Jason Bordoff.  With a population of 1.4 billion people and one of the fastest growing economies in the world, India is crucial to the future of global energy markets and climate change - and coal is fueling much of that economic growth in India. Coal, of course, is the most carbon-intensive fossil fuel and is responsible for more than 40 percent of energy-related global carbon emissions. Over the next five years, India’s coal demand is expected to grow more than that of any other country in the world. In short, there’s no pathway to global decarbonization that does not include meaningfully changing the current trajectory of India’s current and projected coal use. To help shed light on the future of coal in India, I called Dr. Rahul Tongia, whose new book bears that very title, “The Future of Coal in India,” so he's the man to call. Dr. Tongia is a Senior Fellow with the Centre for Social and Economic Progress in New Delhi, where he leads its Energy, Natural Resources, and Sustainability group. He is also a Non-Resident Senior Fellow at the Brookings Institution, and an Adjunct Professor at Carnegie Mellon University. He holds a PhD in Engineering and Public Policy from Carnegie Mellon and a Bachelor's in Electrical Engineering from my alma mater, Brown University. Rahul, thank you so much for joining us on Columbia Energy Exchange.

[0:01:32]
Dr. Rahul Tongia:  Thank you, Jason. Delighted to be here.

[0:01:35]
Jason Bordoff:  Well, I'm looking forward to talking about it. There's so much rich material in it. And this is an incredibly important topic, but help people understand why you think it is.  You know, there's a lot of fuels, there's a lot of countries why a whole book about coal in India.

[0:01:51]
Dr. Rahul Tongia:  Actually, this started for pretty much that same reason, because a lot of people were saying, why bother with coal, it's dying, it's dead, etc. on its way out. And even on the ground in India, a lot of the growth, the funding for new development is on renewable energy, especially in the electricity sector. And then we step back and realized, while there's a lot of excitement, a lot of need and disproportional growth out of many sectors, like renewables, coal is the mainstay of energy in India.  It is about half depending on the math, plus or minus a few percent of India's primary energy. And it is about three quarters, maybe a little less now, of the electricity in India. So, it's very, very important. And then India itself is a developing region, its per capita electricity consumption is closer to 1000 kilowatt hours per capita, the global average is a couple of thousand. And I think last I remember from the U.S., they were at 13,000 or so kilowatt hours per capita. And so, there's a lot of growth that will happen. And coal still has a role to play. But certainly, what we learnt during this book is it won't look the same that it did in the past, necessarily.

[0:03:05]
Jason Bordoff:  So, say more about that. What do you mean, it won't look the same in the future as it did in the past? I mean, as you said, three quarters of electricity, I guess that's electricity generation.

[0:03:12]
Dr. Rahul Tongia:  Correct.

[0:03:13]
Jason Bordoff:  Different from capacity. And you talk a little bit about that in the book, we'll come back to that. What's different going forward?

[0:03:19]
Dr. Rahul Tongia:  So, coal was not only the mainstay, but how we thought about energy, till very recently in India was very different. For decades or at least a very long time, India had scarcity of energy, you had a lot of brownouts, load-shedding, as they call it, the euphemism. And the answer to all problems was more. And so in that vein, centralized large plants that were often state owned or state connected in some way, central or state government, but governmental, were the answer. So it was large, centralized plants, keep growing it. And what is now different, first thing that has happened is India's no longer deficit in total supply of capacity, meaning there’s enough energy, is there enough capacity at the right time, time of day issues may still be there a little bit, but it's no longer a deficit. The second change that happened was between 2011 and 2016, the capacity of coal-based power plants grew enormously.  They had a growth rate of something like 14.5%, while the electricity growth rate the demand grew by only about six and a half, 6.7% in that time period. So there's a lot of additional capacity of coal power plants that came up and their utilization…

[0:04:41]
Jason Bordoff:  Help people understand the reason for that, the over investment, if you think it was over investment.

[0:04:45]
Dr. Rahul Tongia:  I mean, over investment may be a loaded term, but it was growth, whether it was planned or unplanned. So there were several things that probably happened. It's a little of all of the above. The first was catching up. So India used to operate Soviet style on five year plans. So they would lay out a plan and thou shall go build, and then they allocate the money to make it happen. And they were behind schedule till recently on how much they wanted to do. The second thing that happened was, traditionally they applied an elasticity of GDP, and said, if you need to grow the GDP by 1%, you need one or more than 1% growth in electricity capacity. That may have been true 10 plus years ago, but that has changed as the services sector of the economy grew. And as energy efficiency has also grown. And so now the growth required of electricity has slowed down. And then you've also had the rise of renewable energy, which is now about 10% of the generation in India, it's much more, it's almost double, I would say in terms of capacity. This excludes hydropower, India classifies large hydro as traditional energy. So they use renewable to mainly mean wind and solar and micro hydro and biomass. And so renewables have grown from a couple of percent over the years, gradually, slowly, but surely, and not so slowly to near 10%. And so all of these put together meant that the capacity utilization factor, which in India is called plant load factor has fallen from just about nine years ago, it was 73ish percent. It's now sub 60%. And thanks to COVID, of course, it's much lower, but we will treat COVID as an outlier.

[0:06:25]
Jason Bordoff:  So a lot of unused capacity or some unused capacity…

[0:06:28]
Dr. Rahul Tongia:  Underutilized, yes.

[0:06:29]
Jason Bordoff:  I'm sorry. Underutilized capacity, you have significant growth in renewables, and then ambitions from the Modi government for much greater growth, 175 gigawatts by 2022 and somewhere between 350 and 500 by 2030, very strong growth rates. When you combine those two things, does that mean no more coal is needed, no more coal investments and actually moving away from coal or not?

[0:06:53]
Dr. Rahul Tongia:  This is a great question that nobody really knows the answer to, because there's so many variables, but let me walk through a few of the contours. First, India's renewable energy targets are amazingly ambitious.  Aer they aspirational is a question that many people ask, are they signaling?  And I sort of view it as it's okay, if you fall short on the timeline, because to achieve the 175 gigawatts, that was planned for 2022, translated to about a 25% annual growth rate from the announcement till 22, which is just astonishing, mind blowing. And the way I look at it is if it takes you a year or two more to achieve that, that's okay. It's still remarkable.

[0:07:36]
Jason Bordoff:  So the listeners know how close is the country to achieving that now?

[0:07:41]
Dr. Rahul Tongia:  Actually, honestly, it changes every month. But India's certainly falling short of what the original plan was. And many scholars or market analysts envisage getting to about 135 to 145 range, again, it depends, because COVID has mainly put a damper on too many things. But leaving aside the renewables and the target for 2030 is now I think 450. So that's very remarkable. But I think by that time, there is a move to classify hydro as a renewable source. So that's just arithmetic, but the details don't matter. It's just incredibly ambitious. And so the question becomes, is that enough to stop using any more coal and what we found, when we did some very simple, just arithmetic, if you grow your energy demand by let's call it 6.2%, there's a paper, a study we have separately, that really digs into how much you may need to get zero load-shedding. So you meet the aspirations of quality, you meet the growth of GDP, you meet other targets, like housing for all or making India there's a move to move manufacturing into a growth mode for the GDP and employment. So assuming some fraction of these materialize, if energy demand grows up, let's call it 6.2%, and renewables grow, as per these targets that people talk about, you still don't grow enough new supply to meet all of the growth.  You meet most of it, but not quite all of it. Now, it's entirely possible energy efficiency may change the curves a little bit, it's possible, your elasticity to GDP may shift, but assuming certain assumptions, you're almost needing no more coal, but you're not quite there yet. This is electricity. What's a lot harder is non electricity coal, thermal processes, steel and cement especially,…

[0:09:40]
Jason Bordoff:  And just, dorry, just for our listeners, again, what share of India's coal use comes from non-electricity?

[0:09:45]
Dr. Rahul Tongia:  About a quarter. So just like 75% of electricity was coal, about 75% of coal went into the electricity sector as well. And within this, a fraction is what's called metallurgical coal or cooking coal, and that's used for steel production.  A fair amount of that is imported, because domestic reserves of met coal or cooking coal are not sufficient. And so that is still growing. And that's very closely tied to the GDP, unlike coal for the power sector, where you do have to look at what's happening with renewables, because that's another factor.

[0:10:23]
Jason Bordoff:  And what do you think it will take in cement, steel, brick, other industries to slow or reverse coal use? Is their policy aimed at that and efforts aimed at that? And what do you think that technology will look like?

[0:10:35]
Dr. Rahul Tongia:  So absolutely, it's going to be a combination of all of the above.  I think the lowest hanging fruit is probably efficiency. So the production efficiency, the technologies used, using the existing bouquet of technologies probably has more ways to go.  It's further away to talk about DRI or hydrogen-based processes, especially where it's an input. But in between, you could have thermal needs just pure temperature, that could be met, either through potentially gas or there are a lot of people trying to work out even before we get to a hydrogen possibility, using renewables for the mid-grade thermal processes. So all of these will chip away at the growth rates, but they're very unlikely to even have a scenario, envisage that by 2030, no more, while in the renewable space, you can say, if storage technologies get cheap enough, then you can actually meet baseload or firm power needs, that could do away with growth of coal entirely.

[0:11:38]
Jason Bordoff:  So what I hear you saying is, with very ambitious goals for renewable energy, and efficiency, you might be able to get close to plateauing coal in electricity, and you're still going to see it grow in the 25% that's not electricity. So you know, many people listening to this will hear that and say, Well, that's a problem, because we have a global carbon budget, and it is what it is, and we need emissions to not just stop growing, but eventually come down to net zero. So we stop adding to that cumulative budget. And of course, India, on a percentage growth rate, not total tons of emissions is one of the fastest growing sources of emissions in the world. Just talk about how that is perceived by you and within India, is that growth in coal, seen as a problem? Is that something that there has been a meaningful effort to try to slow and reverse?

[0:12:30]
Dr. Rahul Tongia:  So absolutely, I mean, India has ambitious renewable targets, because it takes climate change very, very seriously. Now, the good news that has happened is renewables are not a niche, they are not considered expensive. They are business as usual, in some ways. So that's why a lot of the growth has been coming out of renewables. The question is, can we do enough out of it to go beyond what business as usual for renewables look like. So if you have an ambition, for example, to cap coal or plateau coal.  So the way India or a lot of people think about it is, we want to reduce it as much as possible through both renewables, but also efficiency. I talked about the efficiency side in industry; the efficiency of coal power plants has a lot of headroom for improvement. So, India has only recently started using supercritical power plants from energy production, it has only one as far as I remember, ultra-supercritical plant just started up. And so it could dramatically reduce the quantum of coal tonnes required to produce the same amount of electricity from coal.

So when I said, you may plateau coal that is the electricity coming out of coal. But if you improve your efficiency, you could actually reduce the quantum of coal coming up. I want to make one more observation about this quantum of coal. And this is something a lot of folks may not appreciate. Not all coal is the same worldwide. And Indian coal in particular, is very low quality. So, one tonne of Indian coal is nowhere near the energy content or the emissions of global coal from a carbon perspective, neither for the world average and certainly inferior to the United States, for example. And so one of the things that has been happening is the average grade or quality of coal in India has been steadily declining for the last 10 years. And this is because of a shift in where it's mined. And so the newer, cheaper mines, the larger mines are all ones where it's a different grade or quality, a different seam of coal. And so what this means is, if you see trend lines showing a growth in the tons of coal, you should discount that a little bit when you're trying to worry about the emissions out of coal, not enough to make up for that growth necessarily, but it's not as bad as people would have thought using the standard average number.

[0:15:01]
Jason Bordoff:  So I hear you saying that you think there's a lot of potential to reduce plateau growth, maybe bring coal use down, emissions down by investing in much more efficient coal plants?

[0:15:13]
Dr. Rahul Tongia:  So if I may just piggyback on that. Efficiency is a wonderful tool for India, not just because of carbon emissions, but local air pollution is one of the strong concerns in India. And so we see a good co-benefit, that if you go for efficient power plants, it reduces both of them. Because now coming to a national policy or a psyche, this is again, my opinion, but the government is very proactive on reducing carbon, the states are slightly less so. And states is where a lot of the action occurs in terms of the electricity sector. But now when you come to the end user, sure they're “worried about carbon,” but they want to make sure they have cheap, affordable, secure electricity first. And so looking for co-benefits and win wins is really, I think, the way that a lot of change might occur quicker than otherwise. And so when you talked of how serious is India, very serious. But we have still more room to grow in aligning national objectives, desires with action on the ground, financing, pricing of energy, which is a state prerogative, etc.

[0:16:19]
Jason Bordoff:  Yeah, well, that's a little bit what I wanted to ask you about sort of what the drivers are carbon emissions versus air pollution and others. And we'll come to some of the other considerations, and what that means for the steps today, because I think I'm anticipating I could imagine some listeners saying, Well, yes, you can make, you can make steps in the right direction with investments in ultra-critical coal relative to less efficient coal. But that's still a new coal plant and with countries around the world, and China, Japan, others, you know, European Union, with things like net zero by anything close to 2050 targets, that is new built infrastructure that may have to be retired before the end of its normal economic life. If you're taking goals like that, seriously, how do you think about it? Is there a tension between investing in more efficient technology today? Because of the gains that can give you today? And where we want to be 10, 20, 30 years from now?

[0:17:12]
Dr. Rahul Tongia:  Absolutely. So a couple of things on that. First is, we aren't building too many new coal power plants. There are some under construction. But there is virtually no appetite from financier's to go build more coal power plants, partly due to the renewables growth, partly because there's a surplus of coal capacity that I mentioned. So there's an overhang. And so the really critical question is not today, it's going to be a couple of years from now. So here's a couple of things that are going to happen. We don't know exactly when let's call it mid 20s, for argument's sake, plus or minus.  One, the overhang may start to go away. Second, the amount of renewables that have grown will be large enough that you will need decent storage technologies. Almost all the growth right now is opportunistic or variable renewable energy (VRE), take it when you can, when the sun shines, great, there's no storage, or India's just started some minimal investments towards storage with renewables, but they're still tiny on a scale basis. And so in a couple of years is when your question becomes very pertinent, which is, should India be investing in brand new coal plants?

So I can't answer for what will happen five years from now. But there's one more lens that kicks in, which is what if you could figure out a way to retire older plants that are in existence, and get the newer ones either finished, but forget finishing? So I think it's the wrong question to ask, are we going to be building a brand new efficient power plant, when you've got brand new, efficient power plants built recently that aren't being utilized enough? So if you've got a choice between running an older dirtier plant versus a brand new plant, one of the things I grapple with is, why the heck aren't we using this cleaner, newer, better plant more? And it turns out, that's an artifact of pricing and contracting, how your fuel is priced? Where do you get cheaper fuel from? Is the plant paid off? Who owns it? So these structural distortions, unfortunately, today are outweighing efficiency of power plants. 

So I would first start with saying, let's try and get the frontier of where your incremental generation comes out of only from the most efficient plants that you have. And then we worry and that's not going to happen -- run out in the next year or two, then we'll be in a better position to really judge, do I need to add more coal capacity? And in the same time, are we going to be able to retire our older, dirtier plants? So these emission norms, which are there, for coal power plants to comply with in a short amount of time, will really be one of the question marks that'll determine what happens to the overall coal fleet in India. If you really complied with the law, there have been waivers or delays, you may need to shut down some older dirtier plants. Now, is that enough to say that I need a new plant? Or do I get by with just your existing capacity run better? That's an open question.

[0:20:13]
Jason Bordoff:  And can you talk about what you mentioned a minute ago, the pictures of the air pollution over major Indian cities and how severe those problems are and how that overlaps with how people from a policy standpoint, they review the role of coal? Is there significant pressure to move away from coal because of that? Is that going to be the primary driver? Or will it mean there are technologies are used to address local air pollution that may not necessarily address the carbon emissions from the use of the coal?

[0:20:41]
Dr. Rahul Tongia:  So it is absolutely the latter, in the sense that, for example, very little of India yet has flue gas desulfurization technology installed.  There are mandates to move towards it based on new emission standards that I alluded to. But that wouldn't change your carbon. In fact, it would technically worsen your carbon, because of the fall in efficiency ever so slightly when you add these pollution control technologies. But that marginal carbon hit is well worth it from an Indian perspective, because of the much more dramatic improvement in local air pollution. A couple of points on this are probably very pertinent, which is urban air pollution that makes a lot of that press, especially in New Delhi, is an air shed problem. And it's not primarily due to coal power plants. Because the majority of coal power plants are either far away from cities in general, or, more specifically, they are near the mine, because of transportation costs. The majority of coal power plants that have been built recently, but more so that operate, the utilization of coal plants near the mine is much higher than distant coal plants, because they turn out to be more expensive, thanks to transportation costs, which are very non trivial. So the driver has a slight decoupling. Plus, if you look at a place like Delhi, a, they've determined that coal power plants aren't the major cause. But it's things like crop burning, vehicular use, construction dust, it's all of the above. But that doesn't mean you ignore coal power plants, because they are a point source, they're easier to regulate. And so the answer to me is usually all of the above. But then let's figure out a reasonable prioritization plan.

[0:22:19]
Jason Bordoff:  I want to ask you, you know, why it is so hard, given the urgency of moving faster to deal with carbon emissions globally? Why it's so hard to move away from coal. And I take the point, which, you know, I take the point that when someone sitting where I am, says things like, let's move away from coal, there's an understandable sensitivity to that was listen, look, we're using a fraction of the coal per capita, that countries like the U.S. or Germany, or others are, and the historic cumulative emissions have come from those industrialized countries. So I take all of that. But again, we have a certain amount of time and a certain carbon budget to think about. And the dramatic declines we've seen in the cost of renewables recently, batteries and solar technology, do mean that in many cases, new renewables are cheaper than new coal and renewables can even be cheaper than the marginal cost of coal in some cases, and a growing number of cases at least analysis I've seen. So talk about the actual economics of coal versus renewables. Do you agree with what I just said? And if so, are there barriers in terms of how the power purchase agreements are done, how Coal India works, that prevent sort of shifting, even if it is more economic?

[0:23:32]
Dr. Rahul Tongia:  So I think there's a lot of questions in there. First of all, in general, India is very price sensitive. That's a generalization that Indians make about themselves. And so if something is cheaper, they would try and latch on to it. But one of the key differences from global versus India is the cost of capital, the interest rates in India are very high. And that unfortunately, disproportionately hurts clean tech, both storage as well as solar, or wind, etc, which are pure capital expenditures. And so that is one of the barriers that is not due to Indian policy. It's just an artifact of the way the markets, the equilibrium is for cost of capital. And in fact, it's one of the things that government is trying to figure out, how do we unleash cheap global capital?

Now here, I want to emphasize this word cheap, because there's a fair amount of global capital that's willing to come in, but it's just business as usual. It's not soft loans. It's not grants. It's just markets sort of trying to figure out where do I park my money? And that may not be enough, because if you look at sovereign funds, you look at these pension funds, and so forth, their rates of return are very, very low 1% or, in some cases closer to negative even. They're not about to invest in India yet for clean tech, because, one, the hedge the foreign exchange hedge rate is a barrier right now when you buy commercial hedge products, you'll lose much of that arbitrage to domestic debt. The second problem is risk. And probably the single biggest risk for all of this sector going forward is counterparty risk, which is the state utilities, the discounts, the distribution companies who ultimately sign these contracts, who have to pay for them were the sort of intermediaries between the consumers and the generators or suppliers, they are financially strapped. This was pre COVID. So COVID has just exacerbated the situation.

And second, they are not entirely enamored of renewables, partly because they have a surplus of coal. So if I'm a state utility, and I've already bought or paid for or am obligated to pay for a coal power plant, then a new renewable only looks attractive, equal to its marginal cost. And its marginal cost varies significantly by location. So if I'm near the mine, coal is still far cheaper than renewables. If I'm further away from the mines in India, then renewables are cheaper at a marginal cost perspective, but renewables are also very location specific wind more so but even solar to some extent. So related to that is the time of day problem. So all of the renewables that are coming in right now are pretty much take it when you can. So what they're literally doing is they're reducing the utilization of your existing coal fleet to kick they come in the day, coal has to lower its output. But in the evening, you still need those coal power plants because the Indian grid has a peak, typically in the evening. It's not just lighting, but air conditioning, residential, and that will grow a lot.

[0:26:44]
Jason Bordoff:  Air conditioning is a huge source of electricity growth.

[0:26:47]
Dr. Rahul Tongia:  Absolutely, it's the largest expected growth of electricity would be for cooling. So one more difference that I want to emphasize is when we compare other countries with India, it's not as if other countries all said, let us jump to renewables. It's that a lot of them, especially the United States, but even the UK earlier found cheap natural gas. So the shift away from coal was driven partly by natural gas, India has not had success with cheap natural gas, the domestic fields turned out to be more expensive. And a good chunk of its gas is imported as LNG, which is always more expensive delivered.

[0:27:25]
Jason Bordoff:  And the concerns with imports, even though it is you know, in terms of air pollution, cleaner burning, and if you control methane, carbon, greenhouse gases too concerns about the cost and is it also an energy security concern, like imports versus domestic?  How big a factor is that in thinking about the potential for coal to gas?

[0:27:43]
Dr. Rahul Tongia:  So coal to gas is, you know, like many things, it's a little bit of column A and little bit of column B and a little bit of column C. Economics are absolutely not yet aligned. So we aren't at the point where we could test the queries about energy security or jobs. More than energy security, I think employment is a very big concern, because coal does produce a fair amount of livelihoods, more so in a regional basis than the All India, but in states that are coal rich, it's a very non trivial contributor, not just to employment, but also state budgets. Another small point about this global comparison I just wanted to throw out is in the U.S. or Western Europe, or many places, when they say 2050, I'm going to zero out my coal, oh, sorry, fossil fuels or carbon emissions, not just coal. Compared to where you are, your energy needs themselves had plateaued, if not, were marginally declining, thanks to efficiency.

On top of that, if you want to go down to zero, you're talking of a change of only about 3% per annum. But on the other hand, the Indian energy growth could be above 6% or more. And so that's one of the reasons it's a lot harder. 3%, luckily enough, is very close to your organic changeover of existing technology, end of life. Okay, stop using it more, you'll just next time around, you come to a technology decision, you'll stay clean. In India, a lot of your coal capacity is relatively young, a lot of all your electricity infrastructure is relatively young, it's nowhere near end of life. And now you're looking at all of it being new growth. So we are seeing a lot of renewables kicking in for marginal growth of capacity and electricity. But again, that's all business as usual, because it looks cheap for now. The real wall is going to come a couple of years hence, this is that couple of years that I talked about mid 20s when you've brought in enough renewables as you can absorb without needing storage.

You've already gotten rid of all your coal plant utilization, where the marginal costs were competitive. Now, the states are really worried that hey, why should I be signing a new contract for a new solar plant when it's not going to help me for my evening peak or my other capacity needs.  That's fundamentally the challenge going forward for a place like India. One more quick point, I understand the global concerns that India is not going down to net zero nearly as fast as some other countries. But one way to maybe think about that is look at the areas under the curve. Even if it plateaus, to me trying to get to net zero, maybe either artificial or expensive or infeasible, then instead speeding up the date at which you plateau, and the level at which you plateau, and then that plateau may continue for a decade or two, and then you come to a gradual reduction in your plateau, as opposed to the relatively sharper declines that you need in the West, going from where you are down to zero in 30 years.  If you actually looked at the area under the curve, you may be better off trying to hasten the plateau and reduce its height than to just push a target down of zero in a certain year.

[0:31:03]
Jason Bordoff:  I wanted to ask you about, you made a point a minute ago, I think is very important, because a lot of you know folks who look at where global emissions are going, where they're coming from, and talk about things like the growth of coal in India, and then compare it say, look how cheap renewables can be. There are other factors. And you mentioned one of them a minute ago, which is the tremendous economic impacts employment benefits that come from the coal sector, perhaps not for the country as a whole, given how many people how large a country doesn't have any people there are. But in certain regions, it's very important. And of course, even in the U.S., we see that, you know, it's a relatively small number of 50 or 60,000 workers in the coal industry, but in a few states, it matters. And for a few municipal budgets and fiscal situation, it matters. You say in the book, I think about half a million people work in the Indian coal sector, many more work in other industries that support and service the industry. It's a major source of revenue for the railway, for India rail.  Talk about how big a challenge that is and if we need to, for air pollution, and carbon and other reasons, shrink that sector over time, what's going to be needed from a policy standpoint to do that.

[0:32:12]
Dr. Rahul Tongia:  So I think this gets back to the question of what's your target? And also, what's the timeframe in which you want to achieve it? So, to me, one of the more interesting targets isn't, “decline of coal.” But first, let's slow down the growth rate of coal because until recently, we were growing coal by multiple percent per annum. So, to me, the first thing is, can we figure out the policies that will accelerate the reduction in the growth of coal to a plateau and then to a decline? And it's a subtle difference between just saying why don't we -- they're all reductions, but there are some practical implications of how they would play out. I think, figuring out better pricing signals is one of the key things that India needs to do. Because right now, there are distortions all around.  I mentioned that coal is not just employment, but it literally keeps the Indian Railways afloat. Indian Railways is the largest civilian employer in India, it's that big a deal. And it is afloat because it overcharges, all freight, coal is the largest freight, it overcharges coal, essentially, to pay for underpaying passengers. That's a policy/political decision; you have to keep it affordable for the large population, which is fine. But the instrument chosen has been one of cross subsidy. So people may actually say, hey, that's actually good. That means you'll reduce your use of coal. Well, when there's no alternatives then not necessarily, and then it ends up being regressive. So that's a concern. So better signaling,

[0:33:43]
Jason Bordoff:  Because the passenger rates would go up, or else government would have to subsidize that.

[0:33:47]
Dr. Rahul Tongia:  Yes, they'd have to step in on budget level. So the other part of signaling actually relates to time of day. And we talked about the time-of-day problem for renewables, especially solar, which doesn't match the grid demand 100%. But right now, the majority of Indian electricity over 90%, closer to 95, sorry, power purchase agreements are about 90% of the electricity transacted in India. So these are static contracts that say, I will pay you x rupees or cents per kilowatt hour. And it doesn't matter when I use it. There is a power exchange, which has a market mechanism for only about 4% of the electricity in India. And so we don't have dynamics that signal time of day for the majority of electricity consumption.

And the problem is, we're carrying forward this current legacy into contracts for new capacity. So India is adding a lot of renewables. But in none of those renewables until recently, there've now been some blended pilots or small projects where they're saying well, I want some storage with the renewables, but the vast majority is still opportunistic or variable, renewable energy. And so the problem is, it looks very cheap at one headline number. But when I look at it from a state perspective, they're saying, well, okay, I got to buy this renewable at this cost. But I still need the something else for the 75% of the time that the solar isn't available. It's not as cheap as it looked. So getting your signaling, right, to not just get storage technologies, but demand response load shifting, there's so many tools available, making the grid more flexible, more resilient, and less command and control top down, more dynamic, more market oriented, are I think other trends that India is working on, it needs to accelerate those.

[0:35:40]
Jason Bordoff:  And so just quickly, following up on the question of secondary, just help people understand how big a political barrier, the economic importance of coal is, to policies to move in another direction.  We saw in Germany recently, you know, a commitment to phase out coal by 2038. Very difficult politics with the regions of Germany that depend on derive economic benefits and employment from that, push back the timeline a bit, the German government, I think, was about 45 billion euros and compensation to those regions. Is that true in India, too, you're not really going to be able to think seriously about moving away from coal until policymakers are able to figure out how to address the economic dislocation. Is that necessarily the case as a political matter?

[0:36:24]
Dr. Rahul Tongia:  I think it's very important, but it's step two. Step one is the fundamentals. Meaning, if you found some energy source, be it gas, renewables with a battery, magic wand, whatever, you have dirt, cheap, modular nuclear reactors, whatever. And then you compared it with coal, that would be a no brainer, India in a heartbeat would say, let's move towards it. Because the fundamental step one is the bigger bottleneck. The step two is one of redistribution. And entire energy policy in India was often geared towards social welfare redistribution. And so India has always had subsidies and cross subsidies in energy. You look at electricity. It's heavily subsidized for certain classes of users, you could always tweak how much is subsidized where to whom to make it viable from the consumer perspective, or similarly figure out a cess or pool or tax or something you pay into to do a transition adjustment for example. I think those are the sorts of instruments India will need and can figure out, but I think the first bottleneck is just the fundamentals in the short run.

[0:37:36]
Jason Bordoff:  What other policies would you like to see the national government or regional governments take there or the international community with regard to the future of coal?

[0:37:44]
Dr. Rahul Tongia:  In India?

[0:37:45]
Jason Bordoff:  In India? Yeah. Yeah.

[0:37:47]
Dr. Rahul Tongia:  So this is something I personally believe in is that we should look for the lowest hanging fruit that are politically viable, because that's how you speed it up. So again, just like step one, step two, the first step is figure out what makes sense economically. And then ask yourself, well, if it's economical than why aren't we doing it enough? Now, obviously, you can choose, you can change the economics, find cheap capital. So that's something I really hope the global community can help towards. But similar to that, I believe efficiency is one of the lowest hanging fruits that's out there, because it doesn't dislocate as much and it is truly a win win, because it's both local air pollution and carbon emissions, for example. But you have to have players, both domestic and global, willing to say, you know what, I'm not going to ignore coal, I'm going to actually look at it strategically, in a manner that says, How do I, for example, figure out norms that will shut down the dirty, inefficient plants and get more utilization out of my newer, efficient plants, and if need be, even take a call a couple of years hence, that I'll add a certain small amount of new, ultra-efficient capacity as well.  That's a very different thing than just saying, we won't touch the coal sector, and you're losing out on a lot of potential from a carbon perspective. I mean, it's stunning, how much less efficient the average fleet is in India, compared to the West. And even China has dramatically upped what coal it wants to keep, or it looks like it's keeping.  Their targets for specific fuel consumption are 10s of percent better than what they are today. And even that is much better than what India has. So I think we shouldn't discount any of the tools we have available to reduce the carbon instead of just saying thou shall be zero.

[0:39:38]
Jason Bordoff:  You talk in the book about the need for firm baseload power, particularly as the share of intermittent renewables continues to grow. Although we can start to think about renewables potentially as baseload too as storage costs come down and other things, but and that's true everywhere right in the U.S. where you live model net zero electricity and you want to keep the existing nukes open. You see, gas was CCUS planning role, even as renewables grow enormously talk about the role of coal there. And we haven't really talked too much yet about carbon capture. Is that a technology that you actually think can and will play or should play a meaningful role in the electricity sector? Or in the other parts of the energy system in India moving forward?

[0:40:19]
Dr. Rahul Tongia:  I think CCS is something that's in the short run not on the radar for India, partly because it's expensive. Worldwide, there's a cost to it. But also because some people believe that, well, yes, it emits. So if CCS is a frontier technology, meaning you have early adopters who will be willing to pay more than those early adopters shouldn't be in India. And so therefore, let others pay that premium. Let's see what works. Let them bring the cost down, down the learning curve, because all volumes anywhere help the world, you look at solar power, Germany's pays a lot for its clean energy, the EEG, the surcharge in Germany is very non trivial.

In some ways, the whole world owes a bit of thanks to Germany for paying that high costs, which helped the manufacturing in part, it's out of China, but globally, come down that price curve. So similarly, CCS, there's a view that, yes, it may be interesting, but we're not at that point where we need to take that call, necessarily, because A, we are relatively small and B, it's still expensive. And C, you may not need it from an Indian perspective, which is, like you said, if battery technologies do mature, depending on your assumptions and what plays out, then renewables plus storage could be viable. So let's do a thought exercise, let's say batteries and renewables now get really cheap, then that means you don't need to add more coal or use as much of it. But that doesn't mean on your existing coal fleet, I need to go add CCS necessarily, because that's a relatively small contribution to the overall emissions trajectory globally.

[0:41:54]
Jason Bordoff:  And just so people understand what I heard you say was, you know, and there's a view in India, understandably, that if we need to invest in early and high cost technologies and bring those costs down, that perhaps countries that built their economies in a carbon intensive way and used up a lot of the carbon budget should be the ones to do that.

[0:42:12]
Dr. Rahul Tongia:  I think you'll find a lot of resonance with that view in India, yes.

[0:42:16]
Jason Bordoff:  Just in wrapping up. We also haven't talked about the pandemic and COVID-19. And I'm wondering, you argue additional coal and renewable energy will be needed to meet voracious demand for electricity, as the economy grows for energy use more broadly, has COVID-19 changed that, in your view, is India's near term economic growth, which has, you know, taken a hit as many have from COVID. Once the dust settles, we might not need as much power supply growth, energy growth over the coming years. And then in the longer term, perhaps, you know, beyond the next five years, renewables and storage might be much more compelling, cost wise. So is it conceivable non coal sources then could meet a higher share of energy growth in the future?

[0:42:59]
Dr. Rahul Tongia:  Absolutely. And this comes back to the point I made about not just what are your targets, but by when. And so what COVID possibly did, one view of the world is, well, nothing much changes, except we're shifting it a year or two. So there's a recovery period, and then we're back to where we were, it's just delayed. So it looks like a lower growth rate, because of that pause. The other is, let's assume that happens, which I think is inevitable. But now you ask, is there also a change in the trajectories? And I think that that's certainly possible, because you're gaining more time for the technologies to mature, the cleaner technologies to mature. But even if you had a relative increase in clean tech, because of this factor, you're still so large in your energy growth, that what you end up doing is not changing the narrative from coal growth to zeroing it out, just slowing down how much coal you would have needed the area under the curve the plateau, for example. So yes, it'll be contributory. It'll be a factor, but it's not going to sort of shift you completely 180 degrees, or even sort of 135 degrees.

[0:44:07]
Jason Bordoff:  That's great. Thank you. This is really tremendous conversation, Rahul, thank you for joining us and congratulations again, on the book. I read it was incredibly interesting. I hope all our listeners will take the time to get a copy and read it as well. Actually, I read it the day in preparing for this after our election here. So it was compelling enough that it preoccupied my mind from relentlessly checking the returns, to see what information was coming in. So I don't know what that says about me. And maybe being an energy nerd, reading about coal in India was enough to take my mind bits and pieces off what was happening here, but I hope everyone will take a look at it.  It's a really, really important topic for India for the economy for obviously the future of global efforts to address climate change. So thank you for doing the work and for talking with us today about it.

[0:44:51]
Dr. Rahul Tongia:  My pleasure, and I commend you for having read it. It's a large volume, I will be honest, and we have attempted to summarize a lot of the insights on a blog and an extended blog on the CSEP website. So that could be a starting point for many people who want to get some insights without all the nuance and detail. But the fundamentals are very important. But in a few cases, the details do matter. You asked about what is politically feasible or not. There are things where you can move along slowly. India has typically done change through a policy called gradualism that has been decades of experience. Except the current government has been bolder than ever before and so it remains to be seen, which of these will win out going forward. But I think it’s inevitable. Change is inevitable. The only question people disagree on is how much?

[0:45:41]
Jason Bordoff:  Great, thank you. We'll put the link to that extended blog post on the website as well with the podcast so people can find it there. Rahul, thank you again for joining us today. And thank you to you, our listeners for joining us on this episode of Columbia Energy Exchange. For more information about the podcast or the Center on Global Energy Policy, visit us online at energypolicy.columbia.edu or follow us on social media @columbiauenergy. I'm 
Jason Bordoff, thanks for listening. We'll see you next week.