Indian govt invokes emergency clause as power crisis looms large

• To tide over the power crisis accentuated by the shortage of coal, the Indian government has invoked an emergency clause that will allow idle power stations running on imported coal to generate electricity, according to reports.
• Apart from that, a government committee will facilitate passing on higher costs of generation to customers.

Present scenario

• India has been facing long power cuts in some parts of the country as the demand for electricity surges on account of the summer season and low output of coal.
• Stockpiles at coal-fired power stations have tumbled more than 14% since the start of April, leaving about 100 plants with critical supply levels
• The reserves are expected to shrink further due to high demand that will likely persist until the arrival of the monsoon.
• Over 43% of the plants fired by imported coal, which have a total capacity of 17.6 gigawatts and account for 8.6% of India’s total coal power capacity, are currently idle.

Coal Dependency for Power in India

• September 2021 - thermal power comprised 60% of India’s installed capacity in power generation.
• Coal-based power generation, with a capacity of around 210 gigawatts (GW) of the total 396 GW, accounts for about 53% of India’s total power capacity as on March 2022.
• India imports about 20% of its thermal coal requirements.
• According to a CEEW (Council on Energy, Environment and Water) assessment, a disproportionate share of generation comes from older inefficient plants, while the newer and efficient ones remain idle for want of favourable coal supply contracts or power purchase agreements.

Causes of the Power Crisis

• Revival of Economic Activities: The heatwaves and revival of economic activities after Covid-19 disruptions propelled electricity demand.
  • April 2022 - average daily energy requirement increased to 4,512 million units (MU) from 3,941 MU in April 2021, registering a 14.5% growth, compared to average year-on-year growth of around 5%.
  • The jump from March to April was 6.5%.
• Inefficiency of TPPs: With 236 GW of thermal power plants (TPPs) running much below their capability (at 59% capacity utilisation), India could have managed this demand surge by ramping up thermal generation.
  • While TPPs are required to maintain stockpiles approximating two-three weeks of fuel needs, more than 100 plants are operating with fuel stocks below 25% of the required level, and over half of these have stocks below 10%.
• Cash Flow Problem In The Electricity Sector: The inability of discoms to recover costs has resulted in outstanding dues of over ₹1 lakh crore to power generation companies. Consequently, power generation companies (GenCos) default on payments to Coal India Limited (CIL).
  • Following the Ukraine war, international spot market coal prices have soared to over $400 a tonne from around $50 a tonne in 2020.
• Discom Losses: Despite two decades of sectoral reforms, the aggregate losses of discoms stand at 21% (2019-20).
  • This is reflective of both operational inefficiency and poor recovery of dues from consumers, including those affiliated with state governments and municipal bodies.
  • These losses are also the reason for discoms not being able to pay the generators on time, resulting in payment delays to Coal India, which, in turn, is reluctant to supply coal on request.
• Multiple Structural Fault Lines: First is the chronic insolvency of discoms which has disrupted upstream supply chains.
  • Another is that the utilities do not undertake effective resource planning.
  • Moreover, the blame-game in such cases is inevitable; with every crisis, states blame the Centre for faulty coal allocation and dispatch, and the Centre blames states’ inability to pay upstream suppliers.
  • The result is ‘band-aid solutions’ to suppress the crisis rather than fixing structural fault lines.

Way Forward

• Planning and Policy Reforms: There is a need to change our planning from one of primarily managing scarcity to one of flexible resiliency.
  • We also need to introduce feedback loops in the ecosystem so that stakeholders have incentives to achieve/exceed compliance but repercussions if they don’t.
  • Policy focus should be on long-term structural solutions that address distribution financial viability and a robust mechanism for resource planning.
• Enabling Ecosystem: The need is to create an enabling ecosystem to ensure power plants work efficiently.
  • With more than 90% of power being procured through long-term contracts, discoms have little incentive to dynamically assess and manage demand.
  • Discoms should be enabled to undertake smart assessment and management of demand.
• Revisiting fuel allocation and supporting the priority dispatch of efficient plants could help India reduce coal demand by up to 6% of our annual requirement, and set aside more coal for the times of crisis.
• Strategic Energy Transition: A knee-jerk reaction to the current crisis may generate pressures to redirect investments to fossil resources, risking India’s long-term energy transition efforts. Coal dependency is neither predictable nor cheap.
  • A strategic approach to the energy transition that harnesses the low-cost power promise of renewable energy and opportunities for diversification in energy mix is critical to address persisting power shortages.
• Middle Term Solutions to Solve Crisis: While India is expected to tide over the current coal shortage, the only way it can secure its longer-term energy security is by ramping up production from renewables.
  • However, in the medium term, it is also imperative to upgrade infrastructure at coal mining facilities, and open up existing mines to the private sector for mining to augment the supply of coal.
  • Failure to do so will leave it vulnerable to imbalances in supply and have deleterious trickle-down effects.
• Focussing on Domestic Production and Reducing Imports: Increasing domestic production to reduce and even avoid imports altogether is imperative. The key enabler for this would be to dispense with the requirement for fresh environment clearance.
  • India must enhance investments in the deployment of clean coal technologies throughout the coal value chain.
  • Mining blocks allocated to the private sector, private commercial mining now being legal, may be helped to get into production at the earliest.
  • By doing so, the requirement for higher coal imports and the consequent onerous financial burden would get moderated.

Exam Track

Prelims Takeaway

• Coal availability in India
• Renewable and non renewable energy

Mains Track

Q. India is currently facing one of the world’s worst power crisis today. Discuss the factor contributing to it and what measures are currently being taken by the Government in order to resolve this issue.