Easing green norms for coal is no solution for power crisis

The power sector’s coal crisis has more to do with plants’ failure to build stockpiles and logistics constraints than coal production.

A bounce-back in demand after the two year COVID slump, coupled with the early onset of summer exacerbated by record breaking heatwaves across northern India, is the major contributing factor to the sharp rise in power requirements.

In a knee-jerk reaction to the ongoing power shortage crisis, the Ministry of Environment, Forest and Climate Change has eased environmental norms for coal mining. In a circular dated May 7, 2022, the ministry has granted some coal mines an exemption from environmental clearance and public consultation for an expansion by a further 10 percent of their existing capacity.

This is a further relaxation of an earlier exemption that granted expansion of up to 40 percent. The move from the ministry has been billed as a special dispensation to counter the coal shortage and meet the ongoing steep rise in power demand.

India’s electricity demand jumped 15 percent in April 2022 compared to the same month in 2021. In the final week of April, India’s daily peak demand reached 200 gigatonnes (GW) while facing peak demand deficits of 8–10 GW.On April 29, 2022, India’s daily peak electricity demand rose to a record high of 207GW.

The northern region faced an acute deficit of 10 percent in meeting the peak demand on that day. The supply-demand mismatch has caused brownouts throughout India.

A recent BBC report refers to a survey from a polling agency, LocalCircles, which found one in three households from 322 districts reported power outages of two hours or more each day in April.

Stockpiles and logistics 

The current crisis has more to do with the shortage of coal stockpiles at coal-based power plants and coal transportation logistics than the volumes of coal mined. India’s domestic coal production grew by 8.5 percent to 777 million tonnes (mt) in FY22 from 716 mt in FY21. Coal production in April 2022 was 29 percent higher compared to the same month last year, but the coal dispatch volumes increased by only 9 percent. Even then, plants have failed to maintain the necessary coal stockpiles.

The Central Electricity Authority’s report on coal stock at coal-based power plants on April 1, 2022, shows that 155 non-pithead plants (for which coal needs to be hauled via rail from distant mines) had aggregate stocks of only 31 percent of the normative level required.

The situation worsened at the beginning of May when 147 of the non-pithead plants had an aggregate stock of only 26 percent of normative stock requirements—83 plants based on domestic coal and 11 plants based on imported coal had stock at critical levels of below 25 percent. In October 2021, a similar power crisis emerged, during which the power ministry had directed all plants to maintain adequate coal stockpiles in advance.

Russia’s war in Ukraine is having an intense inflationary impact on coal prices. The Indonesian coal price has almost doubled to $89.6/tonne (t) in May 2022 from $54/t during the same period last year.

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.

Availability is not an issue 

To counter the power shortage crisis, the railways are Easing green norms for coal is no solution for power crisis The power sector’s coal crisis has more to do with plants’ failure to build stockpiles and logistics constraints than coal production. 38 JUNE 2022 Electrical & Power Review POWER GENERATION using 86 percent of their open waggons to transport coal to plants. This is somewhat reflective of the fact that the availability of coal is not an issue. 

A large proportion of India’s coal mining resources are concentrated in the central and eastern states of Madhya Pradesh, Chhattisgarh, Jharkhand, West Bengal, and Odisha. India’s coal-fired power sector is increasingly facing the challenge of hauling coal from mines in these locations to plants up to 1500 km away.

To reduce the pressure on the railways, some of the coal linkages between mines and plants have been rationalised over the past few years to optimise coal delivery. However, the railways continue to face the pressure of managing passenger freight versus coal freight on the same lines.

Pros and cons. 

Exempting coal-mine expansions from environmental and social impact assessment is not a long-term solution for power-supply security. In fact, it could have severe social and economic impacts on indigenous communities living near the coal mines, as well as on the flora and fauna surrounding the mines. The cons of the policy move potentially outweigh the short-term pros.

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.

Small and medium industries (SMEs), educational institutions, banks, hospitals, and residential communities will benefit from reducing their dependence on the grid and by producing their own electricity and selling some back to the grid.

There is a strong case for the government to give a further push to distributed solar to protect India’s economic activities from frequent power outages.

Expertise shared by Kashish Shah, Energy Finance Analyst, IEEFA