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    Explained: Coal stocks down, India is staring at possible power crisis in hot summer

    Explained: Coal stocks down, India is staring at possible power crisis in hot summer

    Explained: Coal stocks down, India is staring at possible power crisis in hot summer
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    By CNBCTV18.com  IST (Updated)


    India had faced a similar energy crisis in October 2021, but the crisis this around may be worse with peak power demand expected to rise higher due to increasing temperatures.

    A large part of the country is reeling under the grip of an intense heatwave pushing India towards a national power crisis. With peak power demand in April due to the onset of early summer, coal reserves in several states are quickly running out threatening disruptions in power supply.
    Coal reserves have dwindled to a critical level and 12 states may face an energy crisis, the All India Power Engineer Federation (AIPEF) told CNBC-TV18. The country had faced an energy crisis in October last year when coal reserves dwindled as global logistical and internal production issues led to a major coal briquette shortage.
    Peak demand and short supply of coal
    India needs a significant amount of coal at all times to ensure uninterrupted power supply but as electricity demand peaks before season, thermal power plants have had to dip into their already meagre coal reserves to continue their power generation. Power generation demand hit a 38-year-peak in the first two weeks of April. As a result, power shortage in India increased to 1.4 percent. In comparison, during the coal shortage crisis in October, power shortage was only at 1.1 percent.
    While production hasn’t been adversely affected, the demand for coal has increased rapidly. Demand for coal has increased by 9 percent over the previous year, with the heat wave to partially blame for the increase.
    States like Andhra Pradesh, Maharashtra, Gujarat, Punjab, Jharkhand and Haryana are currently looking at potential power issues with Gujarat and Maharashtra already declaring load shedding. The Centre has asked states to import coal for up to 10 percent blending to deal with the present crisis. Stakeholders have also blamed state power discoms for not bringing their reserves up in line with future demand.
    "The problem is, even after Coal India and the coal ministry kept asking power plants to stock up, the utilities kept reducing their inventories," Rajiv Agarwal, secretary general of the Indian Captive Power Producers Association, said last week.
    Power plants had an average stock of only nine days at the beginning of the FY 2023, the lowest since at least 2014, reported Reuters. Power plants are required to keep a stock of coal for at least 24 days.
    Why is there a shortage?
    While India imports significantly high levels of fossil fuels like natural gas and crude oil, we fulfill most of our coal needs domestically. India has a total coal demand of over 1 billion tonnes a year with 300-400 million tonnes of coal being imported from countries like Indonesia and South Africa.
    But with the prices of coal over 350 percent higher YoY due to the ongoing Russian-Ukraine conflict, the imports maybe have been impacted. The Coal India Limited (CIL) has also increased production, but it’s still not enough.
    With the temperatures expected to rise further in the coming weeks, the power crisis may worsen as peak power demand rises by a considerable margin.
    The looming energy crisis has once again brought focus on India’s continuing dependence on coal. While Karnataka is mixing renewable energy and non-renewable energy sources to wean dependence on thermal power plants, the only long-term solution may be to start switching away from coal, other states are also expected to explore sustainable solutions.
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