The 2018 Climatescope Report, titled Emerging Markets Outlook 2018: Energy transition in the world’s fastest growing economies states that in 2017, new coal-fired capacity additions fell to their lowest level in the last decade but the actual year-on-year generation from coal-fired plants increased by 4% to 6.4TWh. Even the generation of natural gas rose by 3%. Even though, there is ample evidence to support that new-build renewables can underprice new-build coal-fired plants, 193GW of coal is currently under construction in developing countries. Three of the five BRICS i.e. China, South Africa and India, along with Indonesia are responsible for 86% of this.
The displacement of existing coal-fired plants by clean energy poses a longer-term challenge, especially for India and China, wherein three quarters and two-thirds of the power demand respectively, is met by coal. Between 2010 and 2017, both countries have together added 432GW of coal capacity. Overall, around 81% of all emerging market coal-fired capacity is located in these countries. Policy-makers will be reluctant to decommission these new plants anytime soon because of the significant pressures exerted on India in terms of energy access expansion and China in terms of affordable pricing of power.
Another fundamental challenge is posed by the question of how to accommodate large volumes of intermittent clean generation into existing power markets. Renewable energy projects operate at effectively zero marginal cost since they require no fuel inputs. Thus, in flooding the grids of liberalized power markets, they can potentially decimate wholesale power prices for all generators, thereby leading to the collapse of older and less efficient fossil plants in the short run to keep carbon dioxide emissions under check.
However, in the long-run, high clean energy penetration can destabilize markets if not properly managed and clean output does not neatly overlay the electricity demand. In such situations, clean energy projects can become highly dependent on the goodwill of grid operators. For instance, in China, over-capacity is acute in some regions and the production in wind/solar projects has been curtailed in favour of coal-fired power plants, at times.
Developing countries are actively seeking to implement various solutions to confront these challenges posed by rising levels of clean power generation. Brazil is planning to have auctions for the development of transmission lines into regions that are rich in natural resources. The World Banks’s Scaling Solar program in Madagascar includes incentives to build power storage and South Africa’s state-owned utility has declared a 800MWh storage goal for 2019. Meanwhile, countries such as Algeria and Tajikistan have aggressively promoted the use of smart meters, vital to demand-response programs.
With the progressive drop in clean energy costs and rise in deployment, the developing countries must ensure that their grids must go beyond matching and surpass the sophistication of those in wealthier countries. This will entail the opening up of enormous economic opportunities for the government, private companies and financial institutions. However, they will need to supplement these by concerted efforts vis-à-vis policy development, investment and deployment of latest technological advancements.
India Outbound
December 20, 2018
source https://indiaoutbound.org/challenges-in-decarbonising-power-sectors/
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