India's still burning coal — just not at home
- Even though India's not opening any new coal-fired power plants at home, India still continues to fund coal plants overseas.
- Nearly 30% of global coal financing was sourced from the Export-Import Bank of India.
- Funding coal power plants in other countries poses a financial risk and isn't strategically sound, according to a finance specialist with Sustainable Energy for All.
Its policy framework and ambitious targets for sustainable energy made it the top scorer in this year Climatescope rankings.
Not only is India working towards bringing in more sources of renewable energy, but it's also cutting down on fossil fuels. Its existing coal fired power projects are reporting stress and no new financial commitments for coal plants have been made.
However, India continues to financing coal fired power plants in other countries.
"India is reducing its reliable on coal domestically, leading the world in solar PVs. But what it's still doing, which we find curious, is funding coal projects outside India," said Olivia Coldrey, the lead finance specialist at Sustainable Energy for All (SEforALL), an initiative launched by former UN Secretary-General Ban Ki-moon to work towards SDG7, universal access to sustainable energy by 2030.
It makes no financial sense
As much as 30% of global coal financing was sourced from the Export-Import Bank of India. Most of it was for a project in Bangladesh amounting to $1.6 billion, according to data from SEforALL's Energizing Finance report.
"It (investment in coal energy production) is economically questionable in the sense that we know it's cheaper in a lot of markets to build a new good connected solar or wind plant from scratch than to operate a fully depreciated coal plant," Coldrey told Business Insider.
India is an exception to the trend of new coal fired power plants hitting their lowest level in a decade in 2018, according to Climatescope.
"There's a real strategic question around India's continued financing of coal plants outside the country and whether it makes financial sense. There's a risk of stranded assets and reliance on the fuel supply stores in the destination country," explained Coldrey.
Coal is dirty. Really dirty. But, it's also cheap, which is a big draw for developing nations like India. Nearly two-thirds of the country's electricity is generated using coal.
"I would suggest that if India wanted to own the supply chain then it would be much better off owning the wind or solar supply chain. It's more economically sensible as an investment," noted Coldrey.
There's hope yet — or maybe not
Nearly two-thirds of the total financing — $24 billion — tracked in 2017 was investment in India and Bangladesh, according to Energizing Finance. "Money is responding to the targets," explained Coldrey.
Most of the investment coming into India is coming from commercial entities. A shift has happened where the energy sector's development is no longer exclusively reliant on traditional development finance or public finance.
"Money tends to move where investors, particularly in energy projects which are long term investments, when they are seen as a viable proposition," adds Coldrey.
But there are still challenges to overcome. According to Climatescope's report, even though developing nations are moving towards cleaner power — it's not nearly fast enough. Even though investment is increasing, the requirements are much greater.
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