2015

Is Solar energy answer

to Coal Indias woes?

Siddhartha Priya, Sales and Marketing, Coal India (WCL)

IIT Kharagpur (B. Tech.), MBA (IIM Ahmedabad)

Introduction
India has proven reserves of 60.6 billion tonnes which constitutes 6.8% of the global reserves. Also the
Reserve to Production ration (R/P) is 100 years. At present India is the 5th largest producer and 3rd
largest consumer of Coal (2013). Of the total reserves, nearly 88% are non-coking Coal reserves, while
tertiary Coals reserves account for a meager 0.5 % and the balance is coking Coali. The Indian Coal is
characterized by its high ash content (45%) and low sulphur content.
Currently, the government enjoys a monopoly in producing Coal with over 90% of the production
coming from government-controlled mines. Most of the government controlled mines are operated by
Coal India which operates through its seven subsidiaries. Coal India has given itself a target of producing
1 Billion Tonne of Coal by 2020 keeping in mind the requirements of the power sector. In the year 201415 Coal India produced 494.23 MT of Coal which was 7% more than the production achieved in the year
2013-14. Despite increase in Coal production y-o-y Coal India has been missing its production targets
and the production of coal is marred by land acquisition related issues and aging infrastructure. Along
with this few of its subsidiaries are also not in good financial condition and the manpower cost has been
consuming lots of resources.
As far as the international market for Coal is concerned (also known as seaborne market) the prices of
Coal has been going down drastically. In many cases the price parity exists between Indian Coal and
international Coal. One of the major deterrents for imports is port capacity and the freight charges
which are likely to be rationalized in due course of time as government has been focusing on large scale
export-import businesses and also improving the port infrastructure.

Indian Energy scenario and the Solar energy

The primary energy consumption is dominated by Coal (54.5%) and is followed by Oil which accounts for
29.5% of the energy consumption. Renewable sources account for only 2% of the primary energy
consumption though Solar energy generating capacity is 3743.97 MW (at the end of 2014-15 financial
year) which shows CAGR of 58% since 2012ii.

Coal India and Solar energy

The Coal-Electricity Equivalence (CEE, basis 2014-15 data) is 1,422 kWh per Tonne (please see the
Appendix) i.e. one tonne of Coal produces 1,422 units of electricity. With this CEE the 1 Billion Tonne of
Coal translates to 1,422,000 GWh of electricity. As 75% of Coal produced goes to power companies the
electricity equivalence will translate to 1,066,500 GWh of electricity.
The installed capacity to produce this much of electricity should be 148,125 MW (for normal power
plants) and for Solar plant this capacity should be 533,250 MW! This is more than 100 times the present
Solar power generating capacity.
The present growth rate of production of Coal is 7% and if it increases to even 9% the shortfall in Coal
production is likely to be 230 MT by 2020 which will translate a Solar plant equivalence of 170,310 MW.
The cost associated with establishing a power plant of this size will be prohibitively high. Does it mean
that the Solar energy should be discarded? The answer is emphatically NO!

If the issue is looked from a different angle the answer will be evident. A 100 MW solar power plant,
with present state of technology, will produce more than 2.00 MT (fixed installation) or 3.00 MT (single
axis tracking system) equivalent of Coal over 25 year period and without high additional cost associated
with running! Also what will be NOT required is
1.
2.
3.
4.
5.
6.
7.

Heavy equipments to run it

Heavy recurring cost
Issue with the labor
Search for more mines
Mine closure exercise
Tussle with environmental norms
High healthcare or welfare expenditure among other things.

The payback period is likely to be less than 10 years. As a practice the loss making subsidiaries could be
asked to start developing themselves towards a greener future.

Advantages
Keeping in mind various recent developments there are likely to be numerous benefits to the
organization as a whole.

1. This activity will increase future sustainability of the organization as the Coal sector is slated for
a long and most probably permanent slowdowniii.

2. There will be less need to manipulate the quality by various intermediaries though it is an open
secret that Coal producers manipulate qualityiv.

3. CIL will have wider geographical area of operation as it can expand to Rajasthan, J & K (Leh),
Uttar Pradesh and many places where power production potential through renewable means is
higher.

4. Less capital investment and less recurring expenditure

5. Higher satisfaction level of new executives as work environment will be more enriching
6. Higher satisfaction to involved manpower as CIL will be able to give better working environment
to executives by posting them at appropriate locations and reduce negative covenants in the
contracts.

7. Less opposition from environmental groups

8. Less excuses from different subsidiaries regarding missing targets due to land acquisition delay
or environmental factors.

Conclusion
It is high time that Coal India re-brand itself as an energy company rather than just a Coal mining
company. Even though the reserves may sustain for sometime the delay associated with land
acquisition, depleting quality of reserves, high stripping ratio, increasing cost of mining etc will make
sustained Coal mining more and more expensive. Renewable energy sources, namely, Solar holds huge
potential as Coal India holds large land reserves to make projects sustainable. Also the low running cost
as well as attractive payback period makes renewable energy ventures feasible. One of the steps could

be to ask loss making subsidiaries to pioneer efforts in green energy arena. The Government of India
realizing the need to integrate the strategy has converged all the relevant ministries under a single
minister which also gives Coal India an opportunity to expeditiously cease the opportunity and move on
a path to become a sustainable energy company.

Appendix
Total coal used by power companies (2013-14) = 524.74 MT
% of total Coal being used by power companies (basis 2013-14 data) = 75 % (= 524.74 MT/ 702.5 MT) i.e
75 % of Coal produced goes to power companies.
Total coal production by Coal India (2014-15) = 494.23 MTv
% of Total Coal production, including Coking Coal, being done by Coal India (basis 2013-14 data)vi =
approx. 66% (= 462.53 MT/702.5 MT)
Total electricity production in India (2014-15) = 1,105,446 GWh & total electricity produced by Coal
sources = 835,838 GWh i.e. almost 76% of electricity is produced by Coal sources (including lignite)vii
Coal-electricity equivalence (CEE, basis 2013-14 data) = (746,087 GWh/ 524.74 MT) = 1422 kWh/ Tonne
Electricity generation contributed by Coal India (2014-15) = 66%*835,838 GWh = 550,320 GWh
1 MW of Solar power plant annually produces 1.4 million kWh (1.4 GWh) of electricity in fixed
installation mode and 2.0 million kWh (2 GWh) of electricity in single axis tracking system. Also the cost
associated with 1 MW plant is approx 7.5 crore (excluding the land cost) and the space requirement is 5
acreviii.
It is assumed that a normal power plant will run for 7200 hours of annually (=300 days * 24 hours daily)
References
i

BP Statistical Review of World Energy, June 2014

ii

Growth of Electricity Sector in India From 1947-2015, Central Electricity Authority, Government of India

iii

th

Here's the latest sign that the 'No.1 climate criminal' is dying, The Economic Times, 14
July 2015
(http://economictimes.indiatimes.com/news/international/business/heres-the-latest-sign-that-the-no-1-climate-criminal-isth
dying/articleshow/48065646.cms, retrieved on 8 August 2015)
iv

th

Coal quality: Power companies take Coal India, subsidiaries to task, Financial Express, 24
June 2015
(http://www.financialexpress.com/article/economy/coal-quality-power-companies-take-coal-india-subsidiaries-to-task/89264/,
th
accessed on 8 August 2015)
v

rd

Coal India misses FY15 production target by 3%, The Hindu, 3 April 2015 (http://www.thehindu.com/business/coal-indiath
misses-fy15-production-target-by-3/article7065062.ece, retrieved on 8 August 2015)
vi

COAL AND LIGNITE PRODUCTION 2014-15 (PDF). Ministry of Coal

th
(http://coal.nic.in/sites/upload_files/coal/files/coalupload/chap6AnnualReport1415en.pdf, retrieved on 8 August 2015)
vii

Growth of Electricity Sector in India from 1947-2015 (PDF). CEA, India

th
(http://www.cea.nic.in/reports/planning/dmlf/growth_2015.pdf, Retrieved 8 August 2015)
viii

Gujarat Energy Development Agency (http://www.geda.gujarat.gov.in/pdf/Solar%20Power%20Plants_FAqs.pdf) (accessed

th
on 9 August 2015)