India is on the verge of a major energy catastrophe as coal reserves plummet.
India, the world’s fourth-largest energy consumer, is experiencing a severe power shortage.
On Thursday, the Central Electricity Authority (CEA) of India warned that coal supplies at more than half of the country’s power plants might run out in three days or less due to a post-pandemic increase in industrial demand that caught power providers off guard.
“No one expected industrial demand to rise so rapidly,” says Nitin Bansal, associate director at India Ratings and Research. “As a result, power stations did not bother to replace their coal inventories.” “However, stockpiles are rapidly diminishing.”
The Federation of Indian Mineral Industries told India’s Ministry of Coal on Wednesday that the coal scarcity has created “an enormously hazardous scenario for coal consumers, namely the aluminum and steel sector,” and that the situation might lead to factory closures.
Meanwhile, Kerala’s southern state officials have advised residents to avoid using electrical appliances after sundown to preserve energy. Reuters adds that “unscheduled outages” have also occurred in places across northern India. As India’s industrial demand rises, Bansal predicts power disruptions in additional Indian states during the next three months, jeopardizing the country’s economic recovery.
Coal stockpiles at 110 of the facilities have reached critical levels, according to the CEA. Operators of India’s 135 coal-fired power plants are rushing to refill feedstock and save the country from a crippling power shortage to keep the lights on, and factories are operating. However, India’s coal scarcity might continue throughout winter due to a combination of sluggish domestic output and rising import costs.
Pits that haven’t moved in a long time
Coal India Limited, a state-owned company, maintains a near-monopoly on coal mines in India, producing about 75% of the coal used in India’s coal-fired power plants. However, production at Coal India Limited remained flat in the five months to August this year, despite a 16 percent growth in energy demand. Between April and August, the company’s mines extracted the same amount of coal as they did the year before when India was amidst a COVID downturn.
“Coal supplies usually drop during the monsoon season every year,” says Karthik Ganesan, an expert with the Council on Energy, Environment, and Water in New Delhi. “However, due to the protracted rainy season this year, the situation plummeted.”
Heavy rains make it harder for miners to retrieve the rock from underground shafts and open pits during the monsoon season, delaying coal output. Monsoon rains typically begin in late May or early June and persist until September, but this year’s storms lasted until early October.
Nonetheless, Ganesan claims that the coal scarcity might have been predicted before it became a national catastrophe. Normally, coal companies make up for output deficits by importing more coal, but global coal prices have risen dramatically. High-quality Australian thermal coal prices soared to a record $203.20 on October 1, a four-fold rise from August of the previous year.
“The issue isn’t only the high worldwide price of coal; you also can’t import coal just because you need it.” Orders must be placed in advance, according to B.K. Bhatia, assistant secretary-general of the Federation of Indian Mineral Industries, is a trade group that represents private miners and metal companies.
Costs are increasing.
China, India’s neighbor, is one cause for the rising cost of imported coal.
As China’s economy rebounds from COVID-19, so does its need for electricity. However, Chinese environmental laws have reduced coal output, requiring power producers to import more, driving worldwide prices higher.
“As a result of the supply shortage, thermal coal prices have risen in recent months, making many coal power plants uneconomical to operate and produce coal electricity,” says Sabrin Chowdhury, senior commodities analyst at Fitch Solutions.
Beijing has attempted to alleviate the country’s power shortages by releasing coal stocks in batches and directing local coal companies to enhance output. However, according to Chowdhury, the scarcity in China would certainly persist all winter as demand for heating rises.
For India, this implies that import competition will last till next year. India’s Power Minister Raj Kumar Singh warned that the power deficit might last another six months in an interview with Indian Express this week.
“The issue that has to be answered is how can we avoid this seasonal swing and ensure that coal is delivered to facilities on schedule,” Ganesan adds.
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