75 GW excess fossil fuel capacity can be retired in S Asia

New Delhi: With South Asia over 75 GW of excess fossil fuel capacity, a new report released by the Centre for Research on Energy and Clean Air (CREA) and TransitionZero looks at electricity demand and supply in key countries – India, Bangladesh, Pakistan, and Sri Lanka. All of the excess capacity in India's power system is from coal-fired power plants.

According to the report, close to 75 GW of excess fossil fuel capacity can be retired immediately without compromising reliable supply of electricity in these countries. "Our analysis finds that South Asia has over 75 GW of excess fossil fuel capacity. This excess capacity can be phased out resulting in improved utilization of other power assets as well as annual savings of over $2.3 billion," CREA analyst Sunil Dahiya said.

The report found that approximately 75 GW, or 27 per cent of the total excess fossil fuel capacity (coal, oil and gas) in the modelled countries in 2021, can be considered overcapacity in South Asia. The high amount of overcapacity found in the study is a result of excessive investment in coal development, as construction has far outpaced actual demand growth within countries.

Together, India, Bangladesh and Pakistan commissioned over 30 GW of coal, oil, and gas capacity between March 2018 and 2021. The report finds close to 29 per cent of installed fossil capacity is in excess.

"Our analysis finds that India has the largest overcapacity of fossil fuel in South Asia. Over 67 GW of coal-fired capacity in India is found to be in excess. This is costing Indian rate payers over $2.1 billion (Rs 15,780 crore) annually. Retiring 67 GW of excess coal-fired capacity will not only save billions of dollars but also help India improve its air quality," Dahiya told IANS.

In regulated electricity markets like those in South Asia, investments are made through power purchase agreements (PPAs). Conventional fossil fuel generators are often shielded from market forces and receive fixed capacity charges and payments regardless of whether plants are utilised. Such payment policies make overcapacity a cost borne by consumers and can raise the overall cost of electricity. An estimated $2.3 billion in fixed operating and maintenance costs is spent despite no longer being necessary to meet peak demand.

Given the enormous potential savings in maintenance costs and benefits to human and planetary health, phasing out excess fossil fuel capacity and ensuring that future demand is met by renewable energy by halting additional fossil fuel projects is a crucial first step in the energy transition.

The report from CREA and TransitionZero, 'Ripe for Closure', highlights how retiring excess fossil fuel capacity can result in immediate cost savings worth billions of dollars as well as improve efficiency of existing systems.