The energy crisis in Europe and particularly in the UK - after the shortage of truck drivers, who ferry fuel to pumps, due to Brexit and COVID-19 induced pandemic - is now spilling over to the rest of the world.
The latest country facing the energy crunch is India with authorities warning that the country’s power plants are running hazardously low on coal in the wake of a sharp surge in energy demands soon after the economy recovers from pandemic blows.
According to the Union Power Minister Raj Kumar Singh, India had an average of four days’ worth of coal left at the end of September - the lowest in years, down from 13 days at the beginning of August.
Since coal meets around 70% of energy demands of India with a 57% share of its energy mix, the Power Minister, in a latest interview, has warned that the bridging of the fuel gap is still likely to be a “touch and go” affair and that the nation could be handling a supply squeeze for as long as six months.
How did we get here?
India's growing energy crisis has some similarities to China's shortages, where rising demand from factories faced supply constraints due to high coal prices. In India, too, a sharp uptick in power demand post-pandemic coupled with power plants not anticipating the surge and hence leading to supply issues have resulted in the current coal shortage.
Further, an international increase in coal prices have India's power generators having cut back on importing coal in recent months along with the monsoon rains which alike every year flooded the mines and key transport routes ultimately affecting the domestic production of coal.
India's reliance on coal
Despite India being on track to exceed its target of delivering 450GW of renewable energy by the end of the decade, it still continues to expand its coal capacity. India currently has 233 GW of coal plants in operation and a further 34.4 GW under construction. This is not it. Prime minister Narendra Modi has further plans to ramp up domestic coal production to one billion tonnes per year as part of his self-reliant India policy which is evidently seen as a serious threat to the lives and livelihoods of indigenous communities.
Earlier this year, the International Energy Agency had also warned that Modi’s coal expansion plans are “difficult to reconcile with India’s evolving energy needs and environmental priorities.”
There are reasonable apprehensions that India is most likely to increase its domestic coal production over the next few months to make up for the shortfall.
Clearly the current crisis, along with falling support from investors to finance new coal-fired plants, raise serious questions about the government’s plans to expand coal production and might not go well with coming Cop26 climate talks which are scheduled to happen next month where India is expected to submit an improved 2030 climate plan to the UN.
However, this reliance on coal is not seen as changing anytime soon. By 2040, coal is still expected to cover 42% of India’s new demand for energy.
What happens next?
As of now there have not been any large-scale power outages in India yet, as per the data provided by grid regulator Power System Operation Corporation. However, small shortages have so far been mostly restricted to northern states such as Uttar Pradesh, Jammu & Kashmir, and Ladakh.
With the energy supplies most likely to remain constrained for a while as it will take time for producers to boost their output in response to higher prices much depends on the government's response to the crisis.
Apart from it, as India will move from summer to winter, demand for electricity from private households is also likely to fall in contrast to China, where extremely cold winters heat up the demand for electricity. Experts believe that the next six months will be particularly important for India's energy industry and the government will closely monitor developments in domestic production and prices.