India’s coal-fired power plants, which account for more than half (52.4%) of the country’s total installed capacity of 386.88 gigawatts (GW), are facing a crisis. As many as 72 coal-fired power projects have nearly depleted their coal stocks, according to a Mint report on Oct. 4. About 50 power plants have coal stocks ranging from 4 to 10 days, and 13 projects have coal stocks to support power generation for just over 10 days. The state-owned Coal India Limited, the largest producer, said it was doing everything possible to avoid a crisis. However, it is worth asking what led to a supply shortage from the world’s second largest coal producer in the first place.
A number of factors are to blame. International coal prices have surged, which has increased demand for local coal. The demand for electricity, and therefore the derived demand for coal, has increased sharply over the past two months, possibly due to pent-up demand due to disruptions caused by the second wave of the Covid-19 pandemic in April May. Coal producers are still trying to catch up with this increase in demand. Excessive rains, especially in the charcoal-producing regions of Jharkhand, Odisha and West Bengal, have compounded the problems. In addition, demand has picked up sharply after disruptions caused by the second wave of Covid-19 infections to derail seasonal planning between coal producers and power plants.
Global coal prices are at their highest level
Coal prices hit a record high in August 2021, according to the International Monetary Fund’s commodity price database. Its coal price index was 95.41 in August 2019. It fell to 79.45 in August 2020 and showed unprecedented momentum since reaching 231.34 in August.
Prices have probably increased further since then. “Benchmark coal prices in Asia have reached record highs in recent times, supported by global demand for fuels for power generation as economies open up. A major energy crisis in China is the latest event driving global fuel demand, ”Reuters news agency reported on October 1.
Rising world prices have led to an increase in the production cost of power plants that depend on imported coal. This will likely lead to a reduction in plant load factor – a measure of capacity utilization – in plants that depend on imported coal. This will likely put additional pressure on electric utilities using coal mined domestically.
“Ind-Ra estimates that an increase in imported coal requirements is likely in 2HFY22 (second half of the fiscal year until March), as domestic coal production would gradually increase. Alternatively, in the event that the PLFs of imported coal-fired power plants continue to remain low due to high international coal prices, Ind-Ra estimates that energy deficits are expected to increase by 2HFY22, ”said an October 4 rating by India Ratings and Research. , a securities rating agency.
What led to a squeeze in coal supplies on the home front?
If we are to believe Coal India, thermal power plants are at the origin of the crisis. Coal stocks have plunged since August, as the electric utilities allowed them, a person familiar with the developments said on condition of anonymity, and that the matter has been reported to the relevant authorities.
Coal stocks were at a comfortable level of 28.4 million tonnes (MT) at the start of the fiscal year, Coal India said in a statement. Even at the end of July, the coal stock of the power companies stood at 24 MT, which is the five-year average. It was in August that the stock of power stations fell by more than 11 MT. “If the power companies had maintained the standard 22-day stock prescribed by the CEA, the situation of low coal stock could have been avoided,” the miner said on September 29. CEA is the abbreviation for Central Electricity Authority of India.
However, analysts believe the problem isn’t just with power plants. “The rapid recovery in demand for electricity after the second wave of Covid-19 infections, coupled with less than adequate domestic production of coal, has resulted in reduced levels of coal stocks at various power plants.” , indicates a rating from India Ratings and Research.
Coal India’s production increased slightly to 209.2 MT in August, compared to 195 MT in the same month last year. In addition, coal withdrawals by thermal power plants increased to reach 259.6 MT in August against 208.35 MT the previous year.
Coal India said on September 29 that it was doing everything to manage the crisis. It seeks to increase the supply of electric utilities and to build up adequate stocks. Over the past three days, the miner has increased its supply of power plants to 1.4 MT per day. The supply of coal plants from October is targeting 1.5 MT per day which will exceed 1.6 MT eventually, he said in a statement on Tuesday.
The Union Department of Energy said a Central Management Team (CMT) monitors coal stocks and shipments on a daily basis to ensure follow-up actions with Coal India and Indian Railways to improve the supply of coal to power stations. On August 27, the ministry formed CMT to ensure a fair distribution of coal.
Continued rains in August and September this year have resulted in lower shipments from coal mines, the ministry said in a statement. Shipments have picked up and will increase further, he said. “The average stock of coal at power plants was around four days on 3/10/2021. However, it is a rolling stock, the coal is transported every day via rakes from the coal mines to the thermal power stations, ”he added.
The Coal Ministry said in a statement: “The availability of additional coal will ease the pressure on power plants and also help in import substitution of coal. The allowance for the sale of the prescribed quantity of coal or lignite should also motivate tenants to increase production from captive mines.