Power crisis threatens India

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Power crisis threatens India

As summer temperatures soar, a power crisis threatens India. The situation was in the works with an abrupt change from winter to summer, faster-than-expected economic recovery, and global supply lines of gas and coal being affected by Russia-Ukraine conflict.

Supply of electricity has risen while demand for electricity has gone up. In April, power demand grew by nearly 13 per cent year-on-year, or nearly 16 billion units BU due to the early onset of summer. The economy has picked up compared to the same month last year. Industrial activity has increased. Power demand was higher in the northern region, which is facing a higher number of heat waves compared to the rest of India, said Manish Gupta, Senior Director of CRISIL Ratings. The price of power went up on power exchanges because of the spike in demand. In April, we saw a record-high monthly average price of Rs 10.06 per unit for electricity. The YoY power demand growth was 11 per cent during the month. Rohit Bajaj, Senior Vice President of Business Development at Power Exchange, India Energy Exchange IEX Disruptions in coal and gas supplies have led to their prices going up in the international spot market, as a result of a significant increase in demand and constraints on the supply side. In April, the price of the HBA index, which tracks the price of Indonesian thermal coal, was at $288 per-tonne levels. The variable cost for imported coal was in the range of Rs 8 -- 9 per unit due to limited supplies. The variable cost for gas works out to be more than 20 per unit, making it unviable to import and generate electricity using gas.

The central government has taken action with a series of measures. Coal allocation for the power sector has been increased and transportation has been prioritized through the Railways, among other measures. The power ministry has issued a warning to states and generation companies to import 10 percent of their coal needs to blend with domestic coal, operationalise imported coal-based power plants to full capacity, and weekly release of payments by power distribution companies to generating companies.

Timely payments by state electricity boards to power generators will ensure timely payments to Coal India, Indian Railways, etc. Power plants will be able to build sufficient coal stocks throughout the year, rather than trying to make more purchases when a crisis is imminent, says a senior executive with a leading public sector utility who wanted to remain anonymous.

According to experts, there needs to be enough attention to energy supply planning to prepare for future spikes in electricity demand. There is a need for increasing domestic production of coal, comprehensive demand forecasting and despatching of coal in an efficient manner to avoid a similar situation in the future.