Indian power plants are running out of coal

EELECTRICITY HAS is becoming increasingly rare in India. In a recent survey, two-thirds of households said they had experienced regular power outages. Residents of some rural areas in northern states report receiving only a few hours of electricity per day. The shortage has even reached uptown areas of Delhi, the capital, whose pampered residents are generally isolated from many of the inconveniences suffered by their compatriots.

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The most immediate reason for the crisis is the scorching heat. The past two months have been even warmer than usual in South Asia. In northwest and central India, average temperatures in March and April were the highest since records began 122 years ago (see map). As a result, air conditioners in homes and offices hummed to levels not typically seen until mid-May. This is on top of already growing demand following the easing of covid-19 related restrictions and an upturn in economic activity.

India no longer lacks capacity. Over the past two decades, it has built more coal-fired power plants, which generate about 70% of the country’s electricity, and accelerated the expansion of renewable energy. It also connected all but a tiny percentage of households to the grid (but not 24-hour power).

But in recent weeks coal-fired power plants have not received enough coal to operate at full capacity. At the start of this month, more than 100 of India’s 173 thermal power plants had extremely low inventories. In late April, Delhi officials said the capital could run out of coal within days, threatening electricity supplies to hospitals and the metro. Power plants scrambled to get fuel from state-owned Coal India and paid high prices for coal at auction.

One of the reasons for the shortage is that coal is difficult to move. Demand for rail travel recovered quickly after the relaxation of covid measures in March, causing busy tracks. The government has canceled hundreds of passenger trains over the next few weeks to make way for freight trains.

But there is a deeper and older reason: power producers have no incentive to keep large stocks of coal because they are not sure of being paid regularly. Electricity billing and payment are patchy, leaving many distribution companies in the red and unable to pay power plants, which in turn struggle to pay miners. “They knew for two months that coal stocks were dwindling, but instead of hoarding them then, we now have a bunch of broke entities scrambling to buy coal and power at a premium price. “says Karthik Ganesan of the Energy, Environment Council. and Water, a think tank in Delhi.

In the short term, power stations and distributors have no choice but to fend for themselves. In the longer term, several corrections are possible. One is to ensure that existing coal stocks are used by the most efficient plants, which are disadvantaged by long-standing distribution contracts that favor older, more fuel-intensive plants. This could reduce coal consumption by around 6% a year, Ganesan estimates, freeing up stocks for emergencies. And as the government continues to develop renewable energy, the pressure should ease.

Another solution is to convince more electricity users to pay for electricity. Farmers in many states are entitled to free energy. About 10% of households connected to the network do not receive regular bills. Theft is rampant. A study in 2019 by PwVSan accounting firm, estimated that utility companies lose about a fifth of their revenue to theft, meter tampering and leaks from faulty power lines.

Fixing the dysfunctional electricity distribution system will become more urgent as India gets richer. Climate change will make extreme temperatures more common. More Indians will install air conditioning: currently, only one in ten households has one. The International Energy Agency, a forecaster, estimates that to meet electricity demand over the next 20 years, India will need to more than triple its installed capacity of 400 gigawatts, adding another 950GWor about the size of EUelectricity market. Getting by will no longer be an option.

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