With schools and offices reopening, and the festival season kicking in, there’s a collective sense of relief and joy. At the same time, the warnings of coal shortage leading to a power crisis, and the possibility of a grid blackout in this sweltering October heat is cause for concern.
Fortunately, that has not happened, till now — and we should spare a minute to appreciate the system operators working on the grids.
But now many are left seeking answers to their queries: what was the reason for this crisis? Could it have been avoided? Is it a real or a manufactured crisis? How will this affect the consumer’s electricity bill? How will India take care of a growing economy’s energy needs if it does not have enough resources? Will this crisis relapse, and if yes, what can an ordinary citizen do?
India as of now, is in a fairly better situation as compared to most countries facing an energy crunch. This is primarily because we rely mostly on domestic coal for electricity generation, and currently have a surplus installed power plant capacity. What that means is that if we can manage to supply coal (mine and transport) in tandem with demand (requirement from power plants), we are largely unaffected by global fuel price volatility, and logistical disruptions. Thus, the current crisis is an internal issue, which can be managed.
However, this is not the first time coal production in India has fallen short of demand from the power sector. In the past, Coal India Limited (CIL), which produces about 83 percent of India’s coal requirement, has come under pressure for failing to meet demand.
Much has been said about CIL’s challenges in bringing new technology to increase its operations efficiency, litigation deadlock on private participation in captive coal mining, time-consuming and confusing processes regarding permitting and the environmental clearances for mine operations, and inadequate rail infrastructure which cripples further during the monsoon season. To reiterate, this is not the first time India’s coal-fired generators have faced forced outages, or had to run at lower plant utilisation rates, or asked to increase coal imports.
So what’s unique this time around? For one electricity consumption (this is kWh [units consumed] and not kW [demand]) stagnated even before the COVID-19-led lockdown was announced. Between FY19 and FY20, consumption grew at a meagre 1 percent, and then dropped by 1 percent during FY21 (from 1,375 MUs in FY19, to 1,389 MUs in FY20, to 1,380 MUs in FY21).
However, requirement suddenly picked up after the second wave of infections, with a steep growth registering since July. This steep growth period got coupled with the monsoon season. It was obvious from daily coal stock positions at power plants that quite a few of them were running with super critical inventory by the end of August.
Further, around the same time, CIL regulated supply to generators who had been defaulting on their payments for off-take of coal. The company had consciously refrained from such measures during the first and second lockdown, which led to smooth operations in 2020 and earlier this year. This culture of non-payment is a not a new problem, and represents a systemic issue which starts from discoms that do not pay generators on time, and in effect the generators are not in a position to pay coal suppliers on time.
Another parameter is CIL’s vision and strategy for the future given the uncertainties arising out of the speed of energy transition, and international pressure on India to limit its carbon emissions. In 2015, CIL set an ambitious production target of 1,000 Mts (million tonnes) by 2020. In reality, CIL’s production has almost stagnated for the last three years at around 600 Mts.
In its Coal Vision 2030 document CIL acknowledged the rise in competition from renewable energy by saying, “In the case of coal industry in India, trends portend that in the long run the demand is likely to decrease substantially” and expressed the need to timely diversify its operations in clean energy sources such as Coal Mine Methane (CMM), Coal Bed Methane (CBM), Coal-to-Liquids (CTL), etc. In light of this it can be interpreted that the miner is not prepared for any steep increase in coal demand hereupon that is beyond its current production levels. CIL appears to be literally between a rock and a hard place.
Since we are reliant predominantly on coal for power generation, we will have to come across more such demand-supply fluctuations and stresses. There are systemic issues in the energy sector which go beyond how bad/prolonged the monsoon is, how fast/slow the economy and end-consumer requirement for power grows, and how the policy guides future investments in more clean energy generation, plus demand-side solutions for managing the grid better. Till then coal shortage, and power crises are supposedly here to stay.
Rasika Athawale is Founder, India Energy Insights.
Views are personal and do not represent the stand of this publication.
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