Why India is facing its worst power crisis in over six years
NEW DELHI: India is facing its worst power crisis in over six years as a heatwave bakes vast swathes of South Asia, causing widespread power outages. A surge in air-conditioning demand due to an unrelenting heatwave this year, and an economic recovery due to removal of all COVID-related curbs on industrial activity, pushed power demand to record highs in April.
RELENTLESS POWER DEMAND
India’s total power output in the first four months of 2022 rose by an average of 6.1% from a year earlier and by 24.3% from the COVID-hit levels of 2020, POSOCO data shows. In April, as the heatwave kicked in, average power production spiked 11.9% versus 2021 and 56.8% from 2020.
Average power use over 1445-1530 hours in the afternoon surged 15.5% from a year ago, versus an 11.5% rise for the full month, POSOCO data shows. On April 29, when India saw some of its worst blackouts in years, its electricity supply rose to 207.1 gigawatts (GW) in the afternoon, the highest since July 2021. But that still fell 4.7% short of demand, causing grid breakdowns. There was no let up in power demand at night either, with supply averaging 180.3 GW over 2245-2300 hours in April, 8.5% more than a year ago, on heavy air-conditioner use.
“There is a definite likelihood of continued power cuts due to the current heat conditions,” said Rajiv Agarwal, secretary general of the Indian Captive Power Producers Association. India’s electricity demand this year is expected to rise at the fastest pace in at least 38 years, officials say.
Work from home culture is causing major power demand peak in the afternoon:India has traditionally seen peak demand late in the evening when people head back home but that has shifted to mid-afternoon when temperatures are hottest, government data shows, driven by record residential daytime use, a pick up in industrial work, and more use of irrigation pumps to tap higher solar supply.
Relentless daytime demand in the world’s third-biggest power market means utilities have been unable to ease output even over peak solar power supply periods, further straining grids already overwhelmed due to the heatwave baking swathes of South Asia. New hybrid work models adopted since COVID-19 struck in 2020 have resulted in millions of Indians working from home, boosting residential daytime power use.
The gap between power supplied and consumed has often been wider at night when solar supplies stop and air conditioning demand surges. “While the culture of work from home has gained more social acceptance, offices have also opened up across India, which has led to a combination of both higher domestic and commercial demand,” said Prabhajit Kumar Sarkar, Managing Director and CEO at Power Exchange India Limited.
A senior official from the federal grid operator POSOCO agreed. “The hybrid work culture is definitely causing a major power demand peak in the afternoon,” he said on condition of anonymity as he was not authorised to speak to media. A hybrid work model, where people work some days in office and others remotely, is a popular choice among companies as they emerge from the COVID-19 pandemic.
Grids unable to ease output even over peak solar supply periods: For power producers in India, this has led to a larger-than-usual drawdown in coal inventories, leaving them under-stocked ahead of the hottest part of the year, with disruptions to coal supply lines due to rail car shortages adding to their woes.
Many power plants ran out of fuel as a result of increasing output aggressively, with average coal stocks held by utilities at the lowest for this time of the year in at least 9 years. Despite record production by state-run Coal India, which accounts for 80% of domestic coal output, many utilities were not able to replenish stocks due to Indian Railways’ inability to supply enough trains Coal India.
Experts say govt could look at disincentivising peak time usage Industry experts say the Indian government could consider steps such as variable tariffs to disincentivise daytime usage to ease the power crunch. “Regulators could consider flattening the curve by incentivising power consumption during non-peak hours by reducing tariffs,” said R.K. Verma, former chairman of India’s Central Electricity Authority.
Hiking tariffs for peak hours is another option, he added.Analysts and experts cautioned that grids would remain under pressure for years, with midday peak demand adding to persistent high use during the night when solar power supplies drop off.
Risk of more grid breakdodwns as coal stocks at power plants hit lowest in at least nine years. Such sustained demand rates have taken a toll on coal stocks at power plants, which have fallen to just enough for 8 days of use – the lowest in at least nine years for this time of the year – and 42% below India’s target at end-April. India’s worst power crisis in over six years is partly attributable to the shortage of coal, which accounts for more than 75% of its electricity generation since 2015 on an average.
Amid a push for cleaner air, expansion of coal-fired plants has lagged, registering less than an 18% gain since 2015 and a mere 4% expansion in the past five years, data from the BP Statistical Review of World Energy shows. This compares to a near doubling in renewable sources in the past five years.
With the South Asian heatwave still raging, and temperatures set to stay elevated through the summer, low coal stockpiles remain a worry for utilities and the government. Who is impacted by the crisis?According to citizen-survey platform LocalCircles, nearly half of its 35,000 respondents from across the country said they faced power outages this month.
Factories in at least three states have been forced shut for hours as authorities struggled to handle demand. As the supply of coal to power plants operated by energy intensive industries was restricted, factories started drawing power from the grid, hiking industrial costs and putting further pressure on overworked coal-fired power plants. Power use by eastern Odisha state, home to the country’s biggest aluminium smelters and steel mills, rose over 30% in October-March, nearly ten times the average national growth.
What is India doing?
The crisis has pushed India to reverse a policy to slash thermal coal imports to zero, and asked utilities to continue importing for three years. It also invoked an emergency law to start generation at all plants running on imported coal, many of which are currently shut due to high international coal prices. The low inventories have forced Coal India to divert supplies to utilities at the expense of the non-power sector.
State-run Indian Railways has cancelled passenger trains to free up tracks for the movement of coal. India is also planning to reopen more than 100 coal mines previously considered financially unsustainable. Power Ministry has issued directions to all generation companies to place orders for coal imports by May-end or face the prospect of being declared a defaulter that will burden thermal units to import higher quantum of coal for blending upto October 31, 2022.
But it may be years before India can break free from the risk of further grid breakdowns, industry analysts say. “We need to focus on adding generation capacities which can supply during night hours, like nuclear, hydro or coal, which may take at least 3-5 years to come onstream,” said Victor Vanya, director at power analytics firm EMA Solutions.
What is next?
Officials and analysts expect India to face more power cuts this year due to low coal inventories and as electricity demand is expected to rise at the fastest pace in at least 38 years. Power generation from coal-fired plants, which account for nearly 75% of India’s annual electricity output, is expected to grow 17.6% this year, the highest rate in over a decade.
Whatdoes this mean for global prices?India’s power minister last month asked states to keep importing coal for the next three years. His ministry has also evoked an emergency law in a bid to restart generation at some idle power plants using imported coal. India’s moves are likely to provide prolonged support to global prices . While prices came off near-record highs this week, fears of the impact of sanctions on Russia – a key coal and gas supplier to Europe – and higher Chinese imports once lockdowns are lifted, have kept prices on the boil.