ARKANSAS, Oct 19 (Future Headlines)- In a sharp and unexpected turn of events, coal inventories at Indian power plants have witnessed their most rapid decline in two years, a trend that has sent ripples through the country’s energy landscape. With a significant boost in electricity demand and coal-fired power generation outpacing supply, this situation has not only put immense pressure on coal reserves but also triggered an increase in coal imports and power outages.
During the first half of October, inventories at Indian power plants dropped by 12.6%, reaching 20.58 million metric tons. This is the most substantial fortnightly decline since September 2021, and the lowest stockpile level since November 2021. This downward spiral in coal inventories has been driven by several critical factors.
One of the primary drivers behind the surge in power demand has been India’s unusually dry weather and an uptick in economic activity. While India’s power demand typically peaks during May, this year has witnessed higher consumption levels in October. The dry weather can be attributed to climate variations, but the economic activity points to an increasing need for energy, which coal-fired power generation has had to fulfill.
Coal-fired power generation witnessed a staggering 33% year-on-year increase during this period, far surpassing the 21.6% growth seen in September. This sharp rise in coal consumption stems from the 20.4% surge in power demand, a clear indication of the country’s increasing energy needs. Alongside this, hydropower output fell by 26.8%, further emphasizing the reliance on coal for power generation.
To make up for the seasonal decline in renewable energy generation, India turned to coal-fired power output. Renewable sources, such as wind and solar, saw their share in total output decrease to 10.1% in the first half of October, down from 12.1% in September. The intermittent nature of renewable energy sources and their dependency on weather conditions played a role in this decline, necessitating the increased use of coal.
Even with the surge in demand, coal stockpiles at power plants have dwindled despite the efforts of state-run Coal India, the dominant miner. Coal India ramped up supplies to power plants by 6% year on year between October 1 and October 15, reaching 23.5 million tons. This highlights the magnitude of the energy demand surge.
India’s need for higher coal-fired power generation is driving an uptick in coal imports. In October, India-bound shipments of thermal coal are expected to reach 19.35 million tons, marking the highest level since June 2022. This surge in imports is partly fueled by global benchmark prices, which have also benefited from increased Chinese demand in recent months.
The first half of October also saw a nearly three-fold increase in natural gas-fired power generation, with levels rising to 1,993 million kilowatt-hours (kWh), compared to 700 million kWh in the previous year. This diversification in energy sources showcases India’s efforts to meet its growing power demand.
While the power surge has boosted the economy, it has also resulted in more power outages. Average shortages increased by 33.1% during the first half of October, with a daily average of 19.3 million kWh, compared to 14.5 million units in September. Power cuts have been on the rise in some parts of the country, even though they had decreased during the first nine months of this year. This uptick in outages is a clear indication of the pressure the power grid is under.
India’s rapid coal inventory decline, driven by an unprecedented surge in power demand, underscores the critical importance of securing a stable and diversified energy supply. The country’s heavy reliance on coal for power generation has been magnified by the seasonal decline in renewable energy and the intermittent nature of these sources. India’s energy sector is at a crossroads, seeking to balance its immediate power needs with long-term goals of renewable energy adoption and reduced carbon emissions. The sudden power outages have also highlighted the need for infrastructure improvements and strategies to maintain energy security during periods of high demand. In the coming months, India will need to address these challenges to ensure its energy landscape can meet the growing needs of its economy and population.
Reporting by Moe Khaled; Editing by Sarah White