Technology can help India cut coal imports

India must increase research on clean coal technologies and diversify fuel sources for energy security, says Nitya Nanda.

Coal has long been considered the answer to India's energy problems. Often, the shortage of coal is blamed for a shortfall in electricity generation. As demand for electricity rises, so does the dependence on imported coal. In fact, some projections peg the demand for imported coal by 2030 at levels as high as that of total coal traded in the global market presently. This raises a host of new energy security concerns, including the effect of trends in world coal prices, changing trade patterns and geo-political issues. These will be discussed at the Delhi Sustainable Development Summit 2014 in early February.

Need to reduce coal importsIndia needs to tap all technology options in this sector to meet its energy needs. It would be prudent for India to reduce its dependence on coal and diversify its energy basket. One option would be to use natural gas which can be imported through pipelines or as liquefied natural gas. It also becomes imperative to use efficient and clean technologies to extract more coal from the same reserves or by getting more energy from the same amount of coal.

Installation of clean coal technologies (CCT) can start at the mines. A balance between coal production from open cast mines and that from underground mines using efficient mechanised methods could be the first step.

In recent years, the government has adopted various initiatives to introduce CCT through R&D programmes, demonstration plants and pilot studies. There is a mission on CCT under the National Action Plan on Climate Change. But excessive reliance on combustion technologies or post-combustion remedial measures needs to be avoided. For example, maintaining a carbon capture and storage system itself requires significant energy, delivering less energy per unit of coal, apart from requiring more land.

Coal can be a clean, efficient fuelGiven such a scenario, making clean fuel out of coal through liquefaction and gasification can be a useful option. In India, liquefaction was found to be too expensive while gasification raised some environmental concerns as well. Currently, India is extracting 90 per cent of its coal through open cast mines and the rest through underground mines, up to a depth of about 600 metres. Through gasification technology, it has been possible to access coal up to a depth of 1.5 kilometres, and in the future even this might increase.

India needs to engage more in R&D activities related to CCT, in particular gasification and liquefaction and ensure that the related environmental concerns can be addressed. While, the United States has much experience with such technologies, South Africa and China have made significant progress in some areas. India needs to consider such technologies seriously so that its dependence on imported coal does not impair its energy security.

Fluctuating coal prices cause concernFor now, India has to content with fluctuating prices of imported coal. During the 1990s and in the early 2000s coal prices remained stable, but prices started moving up after 2003 and the trend continued till 2008 when they crashed due to the global economic meltdown. Between 2003 and 2008, coal prices increased five times and crossed the US$ 190 mark. Though Australian coal price hit the bottom at US$ 65 per tonne in March 2009, prices kept moving up and touched US$ 142 in early 2011. Currently, it hovers around US$ 90 per tonne and it is unlikely that the prices will fall.

Australia and Indonesia are major suppliers of coal to India, but South Africa is also an important source. Heavy rain in Indonesia and floods in parts of Australia affected supply of coal towards the end of 2010 raising international prices. Factors ranging from rainfall in Indonesia to demand for steel and freightage can determine the price of coal.

China is the largest producer of coal with India coming in third after the United States. However, both China and India also have significant import dependence as their consumption levels are way higher. Though India imported a little over 21 per cent of its requirement in 2012, or about 160 million tonnes, it was only the third largest importer after China and Japan.

China and India are major coal importersChina, a net exporter of coal till 2007, is now the largest importer of coal in the world accounting for about 23 per cent of global share. Yet, imports constitute only about seven per cent of China's requirements. India's share in the global coal market was less than five per cent even in 2004, most of which was of the coking coal variety. Currently, however, more than 75 per cent of Indian coal imports are of the steam coal variety. This clearly shows the kind of impact China and India make in the global coal market.

In Australia, the government is now attempting to internalise costs to resource owners and develop carbon mitigating measures by introducing resource rent tax and a carbon tax on coal mining. In Indonesia, the government lays down more responsibility on licence holders and seeks to retain earnings/benefits from mining as a way of setting a benchmark price. It is also possible that some day countries like Australia may put restrictions on export of coal on the grounds of climate change.