Replacing coal power purchases with renewables can save Kerala ₹9,000 cr over 5 years en route to 100% RE by 2040

New analysis by think tank Climate Risk Horizons suggests that Kerala can save over ₹9000 cr over a 5 year period by replacing coal power purchases with renewable energy contracts. With Chief Minister Pinarayi Vijayan announcing in December 2022 that the state will aim for 100% renewable energy by 2040, the issue of how to phase out expensive coal power purchases, for both climate and financial reasons, is now paramount.

The analysis, Greening Kerala’s Grid, suggests that if Kerala were to replace its scheduled purchases of coal power from central sector plants with new renewable energy at an average tariff of ₹3/kWh, the state would save approximately ₹969 crores per annum. The report also suggests a transition pathway that sees the most expensive central sector power contracts phased out first, saving the state ₹4,505 crores through the phase-out of 1560 MW of coal power by 2026-27. Coal power purchases from the private sector can also be phased out at a net saving, though unwinding these agreements may be more difficult. In total, a phased energy transition plan to replace all coal power contracts with renewable energy could save the state an estimated ₹1,843 cr. annually by way of lower electricity costs.

Kerala has suffered significantly from climate impacts in recent years, with severe floods, landslides, and storm surges causing loss of life and damage to property. The report suggests that despite its land constraints, Kerala can generate significant quantities of renewable electricity within the state itself, boosting local employment and village industry while reducing the cost of power procurement for the state discom and boosting the state’s energy security.

“Kerala still has significant untapped RE potential, with medium-scale floating solar in particular offering an attractive alternative to mega solar plants. Our calculations suggest that the state could install over 8 GW of floating solar alone on large water bodies, which would be sufficient to meet 70% of annual requirements, at a lower tariff than KSEB is currently paying coal generators” said report co-author Harshit Sharma of Climate Risk Horizons.

Kerala does not have any coal plants, but relies on plants in Tamil Nadu, Andhra Pradesh, and Odisha for over 63% of its electricity. Due to the increasing cost of coal generation at these plants, Kerala faces rising electricity tariffs. There will be a nearly 10% increase in Kerala’s per unit cost of energy from coal contracts during this financial year, costing the state a total ₹7,370 crores.

“The Chief Minister’s target of 100% RE is achievable and can benefit the state financially and economically. But it will not be achieved if we do not address Kerala’s large and growing purchases of coal power from other states. Phasing out these contracts will save the state thousands of crores over the medium term, and create thousands of jobs within Kerala’s renewable energy industry”, said Ashish Fernandes, CEO of Climate Risk Horizons.

Other options to boost the state’s RE output include village and panchayat-level solar schemes, the repowering of old wind turbines to replace them with higher capacity models, and exploring offshore wind potential along the state’s southernmost tip.

For the full report, click here.