Power crisis: Improve domestic coal availability, streamline projects using imported coal

Electricity demand in first 24 days of April increased by 11 pc year-on-year

INDIA-COAL/IMPORTS Losing steam: A coal-fired power plant in Ahmedabad | Reuters

MANISH KHEDEKAR is a software developer in Mumbai. With work from home still continuing, he made a trip to his village in the Konkan region of Maharashtra, hoping to spend some time with his family. But a crippling 12-hour power cut in the sweltering heat in his coastal village has made him think of returning quickly to Mumbai.

Across India, especially in the country’s vast hinterlands, power cuts are not uncommon. This time around, hotter-than-normal weather in several states has led to a surge in demand for electricity, which power generation companies are barely able to keep up with.

A shortage of coal available at power plants is a major reason behind this situation. The Maharashtra State Power Generation Company (Mahagenco) has a coal-based power generation capacity of 9,330MW. According to Shailendra Dubey, chairman of the All India Power Engineers Federation, Mahagenco’s daily coal requirement—for the full load generation, with 85 per cent plant load factor—is 1.35 to 1.40 lakh metric tonnes. Typically, each power plant must have coal stocks of around 22-25 days. But, as on April 22, coal stocks at Mahagenco’s various power plants were sufficient for just about two to six days.

Maharashtra is not alone. Over the past five years, average coal stock at power plants was at around 17 days. This time though, the comparable figure is just around nine days.

Thermal power plants still account for 75 per cent of electricity generation in the country. With domestic coal supply affected and price of imported coal going up because of the war in Ukraine, power generation is facing a major challenge, at a time when demand has jumped because of the unprecedented heatwave conditions.

“The country has 173 thermal power plants of which 96 have critical coal reserves, which means about 60 per cent power plants are facing coal shortage,” said Vikram Kasat, head, advisory, at the financial services organisation Prabhudas Lilladher. He said both supply and demand factors were responsible for the current crisis.

Electricity demand in the first 24 days of April increased by 11 per cent year-on-year. Between April 1-12, the average daily peak demand was more than 194GW. In comparison, in the January-March quarter, daily peak power demand had averaged at 187GW. At the same time, power plants that are dependent on imported coal have curtailed generation significantly. Gas prices, too, have surged.

Given the challenges in passing on the fuel cost increase to distribution companies (discoms) under power purchase agreements, independent power producers that are dependent on imported coal and gas have reduced production. “Imported coal prices used to be around $100 per tonne, it is now ranging $300-$400 a tonne. The result is that thermal power stations, which were operating with 100 per cent of imported coal, have either stopped or reduced production,” said Dubey.

Domestically, Coal India has increased its production and said it raised its supplies to thermal power stations by 14.2 per cent in the first half of April; supplies touched 1.64 million tonnes per day in this period, compared with 1.43 million tonnes in the same period a year ago.

“To tide over the intense demand, Coal India has made available additional 8.75 million tonnes of coal to state and Central gencos (generating companies) for lifting through rail-cum-road mode, till May 31,” the company noted. Experts, however, say that not all of it is reaching power plants in time, shortage of railway wagons being a major issue. “As many as 453 railway rakes are required per day to transport coal from mines to power stations. Till a few days ago, only 379 rakes were available. It has now gone up to 412,” said Dubey.

Failure of discoms to pay their dues on time is also a challenge, according to analysts. “Coal supplies have been impacted as discoms have delayed or defaulted on payments to power generation companies, which in turn, have difficulty in paying for coal supplies,” said Kasat. He said discoms owed Rs1.23 lakh crore to gencos. This coupled with high spot prices is also affecting their ability to buy power from the open market.

Most countries are trying to increase renewable energy generation, from sources like solar, wind and hydro power. India has set a target of 500GW or 50 per cent of energy capacity to come from renewable sources by 2030. But meeting this target would require huge investments.

“In FY 2022, capacity addition in the renewable energy sector increased to 14GW from 7.4GW in FY 2021. While the growth in capacity addition is positive, a significant scale up in annual capacity addition to over 40GW is required to meet policy targets. The investment requirement for such a large capacity addition is estimated to be over $280 billion, without considering the cost of augmenting transmission infrastructure and developing storage infrastructure,” said Vikram V., vice president and sector head–corporate ratings, ICRA Limited.

It would also require easing the land acquisition process for renewable energy projects, augmentation of power transmission infrastructure, development of storage infrastructure for integrating renewable power with the grid and a sustainable improvement in the financial position of state distribution utilities.

“Solar power costs roughly 02-03 per unit. But, the storage cost is about 07-08 per unit. There is work going on. Over time, the costs are expected to come down,” said Dubey. But for now, fossil fuels will remain the key to fuelling India’s energy requirements. Addressing coal supply constraints will then be crucial to resolve the brewing near-term crisis. “India has adequate installed capacity to meet the demand,” said Vikram. “Augmenting domestic coal availability and improving the utilisation of imported coal-based projects are required to address the power shortage.”