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    View: Coal is an unreliable source of electricity generation that is heavily dependent on a long supply chain

    Synopsis

    Electricity demand in India has soared on the back of recent strong economic growth. But peak demand during September and October is around 175 gigawatts (gw), less than it was in July when demand crossed 200 gw.

    Agencies
    Analysis of the daily coal stock position reveals a deterioration as more plants reported their supplies were reaching critical levels.
    Vibhuti Garg

    Vibhuti Garg

    The writer is lead, India, Institute for Energy Economics and Financial Analysis

    India is teetering on the brink of joining a growing global energy crisis. This burning issue is not only keeping coal power producers, distribution companies and state governments awake at night, but also the prime minister's office, and the ministries of power and coal. Daily analysis of coal stocks is taking place at the highest levels to avert the risk of blackouts.

    So how did we end up in this situation? And what can we learn from it?

    Electricity demand in India has soared on the back of recent strong economic growth. But peak demand during September and October is around 175 gigawatts (gw), less than it was in July when demand crossed 200 gw. In July, however, there was enough coal-powered production as well as generation available from wind and hydro to meet the peak demand. The real demand surges happened before the current crisis with much higher demand from late June to mid-July, and again during August.

    While electricity demand was expected to surge with the economic revival, it is less the demand level than the lack of preparedness at the supply side that is driving the current power plant coal and electricity shortage. At the end of FY2020-21, coal stocks hit a record high of 132 million tonnes (mt), with Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL) having the highest pithead coal stockpiles.

    CIL was sitting on much larger coal stockpiles than usual - over 40 mt - even at the end of September. So how has the situation become so precarious? Monsoons impact CIL production every year. But this year was different. India witnessed an extended monsoon season that exacerbated the coal shortage crisis. Further, transportation logistics led to lower offtake of coal.

    Enough Black Gold
    But despite these issues, CIL still had enough supplies to meet coal demand. On October 9, the total despatch of coal from all sources was 1.92 mt against the total consumption of 1.87 mt. The coal despatch was further increased to 2 mt on October 12. Although there is enough coal at CIL's end, it has been regulating despatch of supplies to coal power producers on account of distribution company payment delays. This means that the situation is worse in states where coal power producers have large outstanding dues.

    Analysis of the daily coal stock position reveals a deterioration as more plants reported their supplies were reaching critical levels. On August 1, 23 plants (with installed capacity of 33 gw) had critical coal supplies. By September 9, this increased to 92 plants (112 gw) and by September 22, 102 plants (123 gw). On October 10, the amount of capacity with critical coal supplies had reached 140 gw.

    A key problem was that power producers did not stock enough coal before the monsoons when coal stock supplies and dispatchability from CIL were not an issue. There was an expectation that another Covid wave would hit India in October and supress demand. So, power producers were 'playing safe' - at least financially - by not maintaining the mandatory coal stock supplies at their end.

    Moreover, with the increase in price of imported Indonesian coal - from $60 a tonne in March 2021 to $200 a tonne in September-October for 5,000 Kcal/kg GAR (gross as received) coal - the shortfall could not be viably met through coal imports.

    Blowin' In The Wind
    Although daily wind generation fell from a high of 510 million units (mu) in August 2021 to 100-150 mu in September-October, this is a normal seasonal event. And since September 1, wind has generated far more (between 23% and 41%) than in the equivalent period in each of the last three years, and hydro slightly more. So they cannot be blamed for the energy shortfall.

    While the current energy crisis has prompted alarm, GoI has sprung into action. With monsoons receding, domestic coal production and coal offtake have been ramped up. The government has suggested blending 10% of imported coal with domestic coal, which would soften the high prices. Captive mines have been allowed to sell 50% of their annual output in the open market. Plants with imported coal power purchase agreements have been asked to redirect coal to generators with low stocks.

    With these efforts, it is likely, at least in the short term, that a blackout situation will be averted. Looking ahead, there is growing recognition that coal is a 'zombie' fuel -the walking dead - and we should be progressively reducing our reliance on it by building clean, cheaper domestic alternatives at increased speed.

    Any kneejerk reaction that urges more investment in coal completely misses the point. The cost of coal-based generation is high and, further, it is inflationary. The current crisis has also revealed that coal is an unreliable source of electricity generation that is heavily dependent on a long supply chain. To ensure a secure, reliable and low-emissions electricity system, we urgently need flexible and dynamic generation solutions in the form of battery storage, pumped hydro storage, peaking gas-fired capacity and flexible operation of the existing coal fleet.
    (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
    The Economic Times

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