The social cost analysis of coal and renewable energy done by mid-year Economic Survey (August 2017) has suggested that investments in renewable energy should be made in a calibrated manner as social costs are high in promoting green energy (in comparison to conventional energy). Critically examine the rationale behind such suggestion.

Economic survey 2016-17 has raised the issue that investment in renewable energy would have social cost Rs 11 per unit of electricity generated.
Reasons attributed to high social costs are:

  • Shift to renewable energy would leave the conventional plants under-utilised, lower than maximum technically feasible limit.
  • Investments made in these plants would be deemed as sunken cost due to revenue loss.
  • Banking sector which has extended loans to Coal plants would come under stress. Debt servicing would become difficult due to reduced revenues.
  • Opportunity cost of land used for solar power plant. It requires 5-6 acres per 1 MW as per Ministry of New and Renewable energy.
  • Those employed in coal plants risk losing their jobs.

Even by 2027 when total installed capacity of renewable energy would be 43% its share in electricity generation would be 25 % hence conventional energy will continue to play a major due to intermittent nature of renewable energy. Land required for coal based power plant is 0.5 acres per MW which is one tenth of land required for solar plants but this overlooks the land under mining. Investment in renewable energy will create new jobs which would be much safer than jobs in thermal power plant and coal mines. Health cost associated with pollution from thermal power plants is overlooked.
India is a country which is vulnerable to impacts of climate change thus fostering renewable sources of energy is necessary.


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