India May Soon Stop Construction of New Coal Plants

Sources have revealed that India may be planning to halt construction of new coal-fired power plants by eliminating a certain clause from its National Electricity Policy. If the final draft of this policy is approved after this change is made, China would become the only economy in the world open to increasing its coal-fired capacity.

Currently, China and India make up roughly 80% of all active coal projects in the world. This comes at a time when most developing nations are reducing their capacity in an effort to meet their set climate targets to reduce CO2 emissions.

Data from E3G shows that as of January 2023, only 20 nations have more than a single coal project planned. One government source revealed that India had reached a decision to the effect that no more additions were needed. The sources also revealed that the amended electricity policy’s approval wouldn’t affect the coal-fired plants already in pipeline.

This move by the country is a welcome surprise, as India had repeatedly refused to set a timeline for phasing out coal, basing its argument on the demand for inexpensive sources of fuel, increasing renewable energy capacity and low per-capita emissions. Coal has been used to generate electricity in India for decades, but now with construction of new plants set to be halted, this will significantly reduce the fuel’s share in overall power output.

The country’s energy policy draft also suggests that the retirement of old coal plants be delayed, at least until energy storage for renewable energy becomes financially feasible. Thus far, old coal power plants with a total capacity of 13 GW have been tagged for decommissioning after the retirement deadline to meet high demand for power.

The first draft of the policy had, in 2021, included new coal-fired capacity, in addition to proposing new technology standards to help reduce pollution. India’s policy revision could also affect coal prices and miners in Australia, Indonesia and South Africa, as the country is the second largest importer of coal globally.

In contrast, the National Development and Reform Commission in China revealed in a document circulated last year that the country would proceed with the construction of coal-fired power plants based on development needs.

China is currently the largest consumer of coal globally. Together with India, the country lobbied against an end date for the use of coal. Now the East-Asian country has announced plans to construct 100 new coal-fired plants to help support solar and wind capacity. Analysts highlight that this doesn’t align with China’s stated intentions to reduce the role coal plays in power generation.

When major coal consumers such as India begin mulling regulatory changes to put an end to new coal plant construction, the writing is on the wall for companies such as Alliance Resource Partners L.P. (NASDAQ: ARLP) that time is running out and they need to rethink their future if they are to remain relevant in the evolving energy space.

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