The gravity of power crisis due to present coal availability challenges for Indian power plants?

In a country where 70 percent of the electricity is generated using coal, this is a major cause for concern as it threatens to derail India’s post-pandemic economic recovery.

Anil Saboo, CMD, Elektrolites Power Pvt. Ltd.

More than half of the country’s 135 coal-fired power plants are running on fumes – as coal stocks run critically low. Importing more coal to make up for domestic shortages is not an option at present. We have seen shortages in the past, but what’s unprecedented this time is coal is really expensive now. This is a global phenomenon, one not specifically restricted to India. If gas prices dip today, there could be a switch back to gas. It’s a dynamic situation. In view of above India should continually focus on increasing renewable resources for sustainable Power and permanent solutions.

Vikram V, Vice President & Sector Head – Corporate ratings, ICRA

In terms of coal import dependency for the power sector, the share of coal imports in the overall coal requirements for the power sector declined to about 4 percent in FY2022 against that of ~8 percent in FY2021, amid the increase in international coal price level by more than 150 percent over the last 12-month period (Indonesian coal price index) and challenges faced by the IPPs to pass on the fuel price cost increase to the distribution utilities (discoms) under the PPAs. With a sharp increase in coal price levels internationally over the past 14 months, the variable cost of generation for imported coal-based power projects is estimated to have increased by more than ₹3.0 per unit between March 2021 and May 2022.

Kashish Shah, Energy Finance Analyst, IEEFA

The current crisis has more to do with the shortage of coal stockpiles at coal-based power plants and coal transportation logistics than the volume of coal mined. Plants designed to operate on imported low-ash coal are suffering due to the record high prices of imported coal. Extremely low utilisation of a total of 17GW of such plants has been another obstacle to meeting the high demand. The current crisis presents an opportunity to accelerate the commissioning of clean energy capacity. Distributed and rooftop solar photovoltaics, which could be built faster without putting pressure on transmission networks, will provide better outcomes compared to increasing coal volumes that would require further expansion of the railway infrastructure.

Vibhuti Garg, Energy Economist, IEEFA, Lead India

The power shortage crisis has revealed that the cost of coal-based generation is high and, further, is inflationary. With energy demand likely to go up further, India needs to invest in sustainable energy choices. The government should accelerate the deployment of domestically produced, deflationary renewable energy. Investing in thermal energy to help India through the power crisis risks diverting limited financial resources away from cheaper clean energy, is needed. In addition, investing in a thermal asset at any stage of the value chain effectively locks in investment for 25-30 years or more.