Millennium Post

Black gold to bust

It was a looming crisis that we ignored. We kept gabbing about green power, even as coal stockpiles at thermal plants tanked, leaving us staring at blackouts

Black gold to bust

As I begin writing this column, I am repeatedly looking at my watch, racing against the clock, and that's because my power supplier discom (Distribution Company) sent me a message late last evening: "Electricity supply in your area will most likely be disrupted from 11 am to 3 pm tomorrow due to maintenance work." As summer finally draws to a close and cooler climes beckon, we are now maintaining our power distribution infrastructure. And we are maintaining it so diligently that I am now getting such messages every other day, informing and warning me about impending power outages.

But we all know the real reason for the sudden zeal to carry out maintenance work – it is the acute shortage of coal at India's 135 coal-fired thermal power plants, with most having coal stockpiles of less than three days. The painful truth is that this crisis has not crept up on us like the Coronavirus or other disasters; this is not something that happened overnight and caught us napping and unprepared. This is a crisis that was months in the making, which we chose to ignore as we waxed eloquent about green and renewable energy options, even as coal stockpiles at thermal plants crashed to alarming lows. In the end-game, the country is now facing a crisis of power supply like never before.

As a nation, we are seemingly getting used to moving from one crisis to another. The first was when all of India scampered for currency notes when demonetization happened; then we faced an acute shortage of oxygen during the second wave of the COVID-19 pandemic; this, in turn, led to shortage of wood for cremation of the dead; and then came the crisis of vaccine shortage, as we decided to go on an 'exports and free distribution' mission to save the rest of the world, even as lakhs of Indians perished, while others ended up paying through their nose for the life-saving jabs at private vaccination clinics.

Worst possible time

The current instance of looming power shortages in India could not have come at a worse time. Non-power industry sectors that are just about shrugging off the killing blow of the pandemic are not being supplied with coal supplies till further notice. Power shortages and the resultant increase in prices will have an acutely adverse impact on industries, especially as global energy prices of crude oil, gas and coal are touching alarming levels. It is a painful paradox indeed; that as the global economy attempts to bounce back at the fag end of a once-in-a-century pandemic, the power that fires up manufacturing plants is drying up.

Reduced coal production in China and India due to extended monsoons and flooding of mines has also led to an increase in the consumption of other options like oil and Natural Gas. Just last week, the International Energy Agency (IEA) said soaring natural-gas and coal prices are forcing power-generation companies and manufacturers to switch to oil and natural gas, a move that could add half a million barrels a day of crude oil alone to global demand. The IEA also jacked up its global oil-demand forecast for the remainder of 2021 by 170,000 barrels a day and 210,000 barrels a day in 2022, further warning that the cumulative effect of the continuing energy crisis could be as much as 500,000 barrels a day from September through next year's first quarter.

Admittedly, reduced wind generation and reduction in gas supply by Russia to Europe (Russia has strongly denied this, though) have stoked an already fragile situation. As the world turns to other sources of raw material for generating power, all relevant commodities are seeing a spike in prices, which is adding fire to the cost of all essential commodities and fanning inflation across the board, around the world.

India is caught up too

India faces its own peculiar conundrum – not only are the authorities not providing any clear reason for coal shortage, they are denying that any such problem exists in the first place. But truth be told, the primary reason is that power generating companies have not stockpiled enough coal and the sudden economic revival has led to spiraling demand for power, with coal stocks at thermal plants dwindling even faster that normal.

Another problem is that while coal blocks and mining licenses were awarded to many private sector companies, very few mines are actually operational. The reasons cited for the delay are also peculiar to India – issues around land acquisition, clearances (environment and forests), lack of funding by banks and other institutions and so on. Had these private mines been operational, India would not be facing at such a diabolical coal shortage situation, particularly as private mines would have sensed the increasing demand and the possibility of greater profits, immediately hiking production.

Paradoxically, one of the reasons for coal shortages is the excessive focus on renewable energy options. While greener energy options simply have to be focused on, the interim administrative focus on India's conventional energy system should not have been reduced. The only way forward now is strict and continuous monitoring of coal production, transport and sufficient stock-piling at power plants. This will ensure that any reduction in power generation from other sources does not affect round-the-clock availability of power in the country. Green energy overtures worldwide have shown us that any power system can truly depend on renewable energy only when sufficient energy storage systems are available.

Changing world order

In the report quoted above, the IEA also said an acute shortage of natural gas and coal supplies stemming from the galloping global economic recovery was triggering a calamitous run-up in prices of energy supplies, in turn catalyzing a massive switch to oil products and direct crude use for power generation. As a result, power-generation companies, fertilizer manufacturing operations and refineries are all affected adversely.

Last week alone, oil prices rose by 1-2 per cent to nearly seven-year highs. Relatively weak natural-gas inventories and low wind levels in Europe (which is highly dependent on wind-fed power generation) have combined with the post-pandemic economic recovery, coal mining shortages in China and India, and the possibility of a cold Northern Hemisphere winter, sending fossil-fuel prices soaring. In the last three months alone, gas prices in Europe have jumped by nearly 190 per cent.

Analysts have also observed a rise in the trend known as gas-to-oil switching, when power plants that run on oil are fired up or ones that can be converted to run on crude products are switching over. Late last month, Goldman Sachs cited this in raising its oil-price forecasts, while energy consultants warned that the Asian power sector would use around 400,000 more barrels a day of oil than it did previously.

Clearly, the global power order is changing, and unless dramatic steps are taken, India will have no option but to follow suit. And even though Coal India Ltd, the world's biggest coal miner, has temporarily stopped supplying stocks to non-power users, coal supplies are simply not enough. The situation is so dire, in fact, that India's power generation companies have been asked to import up to 10 per cent of their coal requirements. That's the real cruncher, because international coal prices have jumped by over 300 per cent in the last few months.

Typical Catch 22

In the race to procure more stocks of coal, India is competing against buyers from Europe and China. China is the world's largest coal consumer and is under tremendous internal pressure to ramp up imports amid a severe power crunch in the country. This competition and spiraling demand is firing up coal prices to record levels, making it all but financially unviable for India's coal-based power plants to continue to sell power to discoms at contracted rates. India's coal mining companies are stepping up their act and expanding operations and output. Further, Coal India Ltd is keeping a close watch on the stock situation of dry fuel in thermal power plants, augmenting coal production and dispatches as and where most critically needed.

And as is customary in India, politics has entered the coal supply picture in right earnest. The Delhi Government warned of possible outages and blackouts in the National Capital Region if supplies of coal were not immediately made available. The central authorities lashed back with a strong denial, which prompted Delhi's Chief Minister to shoot off a letter to the President of India.

As this debate moves back and forth, discoms have jumped into the fray as well, sending out text messages to consumers directly, warning them of possible outages and blackouts sometime very soon. Other than this dance and jingoism, we need careful and immediate planning, and even more watchful implementation. That is the only way to ensure that parts of our country are not thrown into darkness and that the economic recovery of sorts is not cut short just because we played the cat-and-pigeon game with coal supplies and stock-piles for months.

The writer is a communications consultant and a clinical analyst. He can be reached at Views expressed are personal

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