Energy crisis makes 'dirtiest fuel' the dearest shelter ahead of green summit

Representative image (Source: Reuters)

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26 Aug, 2025 12:21

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Last month, state-run NTPC Ltd awarded an order to another public sector company, Bharat Heavy Electricals Limited (BHEL), to build a 1,320 megawatt (MW) thermal power project. What makes this significant is that this is the first such order from the utility in the last six years.

With climate change becoming a reality, countries across the world made a stronger commitment to reduce the use of what is described as the “dirtiest fuel” by climate change activists – coal. But the global energy crisis after Russia invaded Ukraine has refuelled interest in coal in countries from Europe to Asia.

The demand to form policies to limit or disincentivise the use of certain fuels and technologies, such as coal‐fired power  stations, has gathered momentum over the years, but the disruption caused by the global energy crisis is making countries turn to coal, especially as winter approaches.

In this backdrop, the 2022 United Nations Climate Change Conference, more commonly referred to as COP27, will be held in Egypt this year. The meet may signal whether countries scouring for coal is just a blip due to the volatility in the global energy market right now, or a regressive step vis a vis urgent action on climate change.

U-turns

Denmark, which sources over 60 percent of its electricity from renewable energy, has asked its biggest energy firm Ørsted to continue or restart operations at three fossil fuel facilities to ensure energy security.

Mads Nipper, Group President and CEO of Ørsted, said on October 1, “We will, of course, comply with the Danish authorities’ order, and we'll now begin preparing and maintaining the units, as well as securing the staffing necessary to operate them. We still believe that we, as a society, must phase out the use of gas, oil, and coal as soon as possible, but we're in the middle of a European energy crisis, and we will contribute to ensuring electricity supply to the best of our ability."

After Russia sharply cut natural gas shipments to Europe in retaliation for sanctions that the West put in place against it for invading Ukraine, governments across Europe are turning on coal based plants to keep citizens warm this winter.

In July, the UK government directed its Department for Environment, Food and Rural Affairs (DEFRA) to temporarily relax conditions for the running of coal fired plants in winters. In view of the energy crisis, the government had said that some of the coal-based plants that were to shut this year may continue to operate.

In June, German Chancellor Olaf Scholz approved restarting 27 coal-fired power plants until March 2024. Others like Austria, Italy, the Netherlands, and France are also working on plans to restart power units which were shut down in an attempt to reduce carbon emissions.

While governments justify this as a “necessary evil,” experts are concerned that this would be a major setback for the carbon reduction targets set by the European Union (EU).

Ulka Kelkar, Director, Climate, World Resources Institute (WRI), said that the long-term direction, price, and regulatory signals are clear, and energy transition will take place, but will take time.

“From a climate change perspective, after the international climate negotiations, there is still the opportunity to phase out coal and reduce greenhouse gas (GHG) emissions over a longer duration of time. But from an air pollution perspective, each day we are actually putting more lives at risk as a result of the direct air pollution that children, elderly, and vulnerable people are being exposed to,” Kelkar added.

Closer home

India has committed to turning net-zero by 2070. But as a country that still derives the majority of its electricity from coal, it has been clear that while renewable energy capacity growth will be high, coal based plants will still play an important role.

In fact, at COP26 last year, India took a firm stand to “phase down” the use of coal instead of “phase out.” This was aimed at easing the financing challenges of coal-based projects.

The power crisis the nation faced this March-April, as coal supply dwindled amid a heat wave and a pick-up in demand, highlighted just how important coal-based power continues to be in the country.

Last month, India yet again extended the deadline for thermal power plants to install equipment to cut sulphur emissions by two years, to 2025.

The news brought relief to power utilities that have been lobbying for an extension as they struggled to meet the requirements. But does pushing back the deadline put India's commitment to climate change mitigation under the scanner?

Rahul Tongia, Senior Fellow, Centre for Social and Economic Progress (CSEP), and also Non-resident Senior Fellow, Brookings Institution, believes the extension of the deadline should not be viewed as a step backwards.

“In the last two years, the revenue side of the discoms (power distribution firms) was hit badly because commercial and industrial consumption went down due to Covid. More recently, there has been a huge increase in fuelcosts, and then the government mandated coal blending.

"Even at 10 percent (of the blend), the higher cost of imported coal meant an 80 paise hike in generation costs, which would need to be passed on to consumers. This lowers the appetite of power plants to make a one-time investment in cleaning up the plants. For them, it's a tactical decision and not a strategic one.”

Tongia said that regulators were busy figuring out who would pay for these projects,  given that some of the other costs have also gone up now.

All eyes will be on the 90 heads of state who will meet soon in November for COP27 to discuss the climate crisis.

They will need to find solutions at a time when the energy market continues to be volatile and countries are forced to choose fossil fuels to ensure energy security.