A couple of years back , there were no buyers for Coal India stock. It was picked up by a few of us only to get the mouth watering dividends. Reasons : ESG concerns , most environment polluting PSU stock, poor govt policy, Future of coal is bleak …
But today, what has changed ? There seems to be a bee-line to buy this stock- all brokerage recommend this stock, MF are picking up this stock and FII’s have a holding of 7.5 % by end Sept , 2023. Parag Parikh has had this stock for the last couple of years in their portfolio. During the last one year Coal India stock has given a respectable return of 78%.
I thought of catching up the developments during the last one year and join together all bits and pieces, which makes an interesting story on Coal.
At COP28 in Dubai recently, India was conspicuously absent from a list of 118 countries signed on to a pledge to triple installed renewable energy capacity by 2030. It is in sharp contrast to India’s stand during G20 presidency.
When it comes to sign a legal document, why India is hesitant? it has an interesting story.
(1) India said, while being committed to expanding renewable energy, India would not be bound by “restrictions” on what kind of energy sources it could or could not use.
(2) India was also against the sentence which says " phase out unabated coal power - Unabated coal power refers to running coal plants without technology that stores and captures carbon.
(3) According to India’s latest communications to the United Nations, its greenhouse gas emissions increased only 4% from 2016-2019 to 2.6 billion tonnes of C02. The energy sector contributed the most to the overall emissions (75.81%), followed by the agriculture sector (13.44%), Industrial Process and Product Use (IPPU) sector (8.41%), and Waste (2.34%).
(4)India has also reiterated its right to use coal on the grounds that its historical contribution to the carbon crisis has been negligible, as below-Global-average per-capita emissions of 4%.
(5) Coal is the only Fossil fuel which is abundant in India (India is next to China in terms of coal production) and it has its rights to best utilise its resources.
So can we use coal in such a way that it is almost carbon neutral so that the other COP countries are happy at our strategy.
There is an answer to this.
Gasify coal. we have studied in our school college- what happens when steam is passed over red hot coal in restricted oxygen, a gas called Syn Gas also known as water gas
(mixture of Co & Hydrogen) is produced.
Hydrogen so produced is called Grey Hydrogen and in this process if we capture Carbon CCUS (carbon capture , utilisation & storage) and don’t let it go to atmosphere, then we call the hydrogen as blue hydrogen. we can not call it green hydrogen though, but yes, upto 80% carbon can be captured and the name is blue hydrogen.
So blue hydrogen so produced from coal can be used by the large consumers of hydrogen like the fertilizer industry , Refineries , steel industry, and to some extent reduce the burden on expensive Green hydrogen. Currently, dependence on imported natural gas which is used as feed stock to produce Grey hydrogen for the above mentioned industries would also reduce.
We can also use blue hydrogen from coal to produce electricity by Fuel cell method and we can also fuel automobiles from blue hydrogen from coal. So our train was running in coal - now automobiles would indirectly run on coal.
What else ?
Along with Blue hydrogen, CO2 captured can be used to produce a number of Green fuels like methanol , ethanol, and fertilisers like urea, DAP, Ammonia, Ammonium nitrate etc.
Each of the above products to be produced from coal has a different technology basically Gas reforming with catalysts and different temp and pressure- technology is already developed.
So what the govt has done so far ?
Set a Target of 100 million tonnes of coal gasification by 2030 and initiate actions at various plants across the country.
Currently, Steel plants use Coking Coal fot the blast furnace for producing pig iron, which is high carbon emitting process and that too Coking Coal required for steel making is mostly imported as our indigenous high ash coal not suitable for blast furnace pig iron process. But coal gasification can be done with our indigenous Coal of high ash content at steel plants which produces Syn gas/hydrogen which reduces iron ore iron oxide to Iron by DRI- direct reduction of Iron process. So it is a win-win situation. No more imported coking Coal and no imported natural gas required
Similarly, Fertiliser plants can produce hydrogen from coal Syn gas to produce NH3 , DAP.
Offer incentives- The Centre has formulated a policy wherein, a provision has been made for a 50% rebate in revenue share for all future commercial coal block auctions for the fossil fuel used for gasification. This will be subject to the condition that the quantity used for gasification is at least 10% of the total production. Apart from this GST reimbursement being planned.
Adani group seem to have prepared and submitted a project report to govt on coal gasification in India which I got it from a govt website- link given below.in a Adobe link
What is the progress on various coal gasification projects across the country link is given at the end of this post.
The other thing with coal India is that they have vast open lands and abandoned coal mines / already mined coal mines which are being put to use for solar wind farms and pumped energy storage systems.
If China can make best use of their Coal reserve , why not india ? yes, sure, may be going forward more incentives would come towards Coal gasification and we may see more action.
For now , what are the stock to watch ??
Coal India, All steel makers , NTPC, All Gas oil AMC , Adani , all thermal power producers, all fertiliser plants.
Technology solution providers like BHEL, L&T, Thermax , Siemens , ABB.
Whether , Green hydrogen, Solar , Wind, Hydro, bio gas incentive will take a hit ? These are different stories with separate and unique objectives of carbon reduction in different categories …and there is a lot of space for each catagory … hence all will coexist together
Discl: This is for educational and information… not a buy / sell recommendation of any stocks discussed above