The year 2020, due to the COVID-19 pandemic, saw low power demand and better air quality, during the lockdown caused by the pandemic. Apart from that there were negative effects on the environment too. There was a huge increase in biomedical waste generation, haphazard disposal of safety equipment and Municipal Solid Waste generation . But now as we are trying to get back to normalcy, new obstacles to economic growth arise. One of them is the coal crisis.
What is the coal crisis?
Coal being the source of 70% of India’s electricity needs, is facing a serious crisis. This is impacting India’s growth which has been witnessing a steep rise in power demand since the economy shrank by 7.3% due to the pandemic. Even though the Ministry of Power(MoP) sent out a statement on 10th October 2021 assuring that there is enough coal to meet the demand, the regular power cuts do not indicate the same.
This crisis has ushered us to focus on diversifying the sources of energy and prioritising locally available sources. Recently, MoP identified key reasons for the coal crisis and subsequently issued guidelines for optimum utilisation of generating stations as per the grid requirement.
According to MoP, the five reasons for the depletion of coal stocks are:
- The speedy recovery of the economy leading to increased demand for electricity.
- Adverse effect on mining and despatch of coal due to heavy rain.
- Increased dependence on domestic coal due to unprecedented hike in the price of imported coal.
- Not saving adequate stocks before the arrival of monsoon.
- Coal companies’ legacy of dues in states such as Madhya Pradesh, Rajasthan, Tamil Nadu, and Maharashtra.
The speedy recovery of the economy after the lockdown was expected, but the states failed to procure the coal stock. Not procuring adequate stock purely based on previous year’s electricity consumption has rendered a challenge. It must be observed that the previous year was an outlier with the entire country going through a lockdown and only essential services operating on a regular basis. Therefore, undertaking stock management without factoring the possible increase in demand for the subsequent year has largely contributed to the coal crisis in concern.
Impact on the electricity sector
Due to this crisis, India’s electricity sector is finding it difficult to manage its finances as well as supply over and above the financial crisis it's already facing due to subsidies, delayed payment by state governments, large consumers moving towards open access and high AT&C Losses. India’s electricity tariff is not uniform. With each state deciding its own tariff rates and absorbing most of it to keep the tariff steady, the state-owned distribution companies have plunged into debt. Cumulative liabilities triggering delayed payments have led to disincentivising the sector. The power producers who are locked in for a long-term contract cannot pass on the increased cost unless such clauses are included in the contract.
Can electricity tariff increase?
With skyrocketing import prices and mining at a halt, many parts of India are facing power shortages. This suggests that the economy which was booming after the second wave of COVID-19, could face a power crunch. This will in-turn affect the manufacturing sector and economic growth.
It must be recognised that the coal shortage will not affect the power tariff immediately. But the utilities can request the regulator to increase the tariff in the coming years while filing the annual ARR. As such hikes take time, an immediate increase of tariff is not an option for them. However, power curtailment being an option, utilities would be forced to do some load shedding. States like Andhra Pradesh, Telangana, and Tamil Nadu which introduced free power for agriculture round the clock, would experience some curtailments. In such a case, the agricultural sector is likely to face more power cuts than the industrial or residential sector. With the festive season at its peak, the power demand is set to spike and the manufacturing sector cannot afford curtailments during this present recovery status after the pandemic.
The importance of diversifying energy sources
Tata Power has diversified its sources of supply for Mumbai. It has a combination of hydropower plants, imported coal-based plants, and renewable assets. Hence, TATA was able to affirm that it can ensure power supply as it has enough backup. Thus, diversification of sources rather than depending solely on coal helps develop resilience to varying coal prices.
Even as the richest economies are facing power crunches, it might be a hint for us to transition to cleaner and domestic fuels with lesser dependence on coal. As a developing nation, India would be able to channelise its energy sources better compared to the developed nations which already have sufficient infrastructure and capacity to meet demands. Being a nation with a mixed population of agriculture and industries, we can adopt region-wise Best Available Technology (BAT). This will develop the Distributed Energy Resources (DERs) which can be grid-connected or off-grid.
India has considerable availability of biomass. As per the Ministry of New and Renewable energy (MNRE), the availability of biomass is estimated to be 750 million metric tonnes per year. It has also indicated that an additional potential of 28 GW can be obtained from agricultural residues. Apart from this, 14 GW of power can be produced from bagasse-based cogeneration in 550 sugar mills existing in India, if these could adopt optimum technical and economical levels of cogeneration for producing power from the bagasse they generate. This shows that biomass sources are not used to their full potential.
According to MNRE’s annual report of 2020, wind power potential in India at 100 meters above ground level (agl) and 120 meters agl are 302.25 GW and 695.50 GW respectively. But the installed capacity stands at 38.62 GW. Owing to the fact that most of the wind potential exists only in 7 windy states, these states have to carry the responsibility of its development.
The annual report also mentions that the solar potential of the country stands at 748.98 GW, but installed capacity is only 37.46 GW. It can be clearly inferred from these figures that our indigenous potential is not exploited.
Before connecting a region to a grid, a detailed examination of resources in that area should be done. The abundant energy source should be used for power generation, as renewable sources are site-specific. This relieves stress on other energy sources to meet the increasing demand thereby minimising environmental hazards. We have seen disasters caused by burst opening of dams by floodwaters. Thus, exploiting a single source extensively would have serious environmental impacts. The same is true for utility-scale solar and wind energy. Increasing the installed capacity targets solely from these sources would lead to environmental disbalance due to large area requirements. So more focus on having diversified sources of the energy mix with some percentage of locally available DERs would decrease our dependence on imports, improving our resilience to the varying coal and oil prices.