Yet, as a result of this conventional analysis, high economic growth rates in both India and China are taken to mean a new age of coal is upon us. But, as we are continually reminded, history rarely follows the well-worn path of conventional wisdom.
Most importantly there are two fundamentally different price trajectories - that of coal and that of renewable energy. Indian steam coal (used to generate electricity) while “cheap" by international standards increased in price at a compound annual growth rate of 4% from 2001-2008. A trend that is even worse for other large economies abundantly endowed with coal including the U.S., Germany, and Poland, which saw a combined price hike of 13% annually over the same period.
Even more striking is the extreme price spike in several of the world's largest coal export economies, including the U.S. and Australia which have seen the cost of coal triple in price in just the past three years. Given the fact that these economies may be required to ensure future coal supplies to power India's economic growth, the underlying assumption that coal will be the low cost option over the 40-50 year life of a new plant is questionable at best.
On the other hand, the cost per watt for solar modules fell nearly 50% over the same time period. With module costs representing over half the cost of installation, the emerging differential between these sources of energy couldn't be starker. More importantly, solar technology is just one of the several renewable energy options for which costs are plummeting. These fundamentally different trajectories stand in direct contrast to the insistence that low cost coal is India's future.
Given its desire to steer climate finance decisions for the international community, the World Bank should be at the vanguard of this emerging economic reality. Instead it is India's young entrepreneurs, who are driving an energy revolution with a fraction of the resources. Having witnessed the landscapes of extraction and persistent energy poverty that coal has delivered for 400 million rural Indians, these entrepreneurs are laying bare the false illusions of cheap coal, relying instead on renewable energy to bring rural India from darkness to light. It is time the World Bank, moved with, rather than against, this revolution finally putting to rest false notions of the future of energy.
Justin Guay
Associate Washington Representative
International Climate Program, Sierra Club
