Graphic: Mint
Graphic: Mint

Will monsoon aggravate fuel challenges for thermal sector?

As of June, thermal power plants had 10 days equivalent worth of coal stock, less than half of the normative stock requirement

Coal production in the country usually slows during the monsoon season. This can increase the problem of fuel availability for the thermal power plants, unless electricity demand slackens or renewable energy, especially hydropower generation, steps up to the plate.

As coal production and offtake slows during the monsoon months, inventories historically have trended lower at the power plants by the end of the rainy season. The challenge this year is even more pronounced as the fuel situation is already tight.

As of last month, thermal power plants had 10 days equivalent worth of coal stock, less than half of the normative stock requirement (22 days), shows data from the Central Electricity Authority. If production at Coal India Ltd slows in the next few months in line with historical trends, the fuel buffer can reduce further.

To be sure, coal inventories improved slightly from nine days at the beginning of this year to 10 days equivalent of fuel last month. However, the levels provide no comfort. Inventories in tonnage were at multi-year lows as of end-June. They are 10% lower than during the same period last year.

When the sector had similar low inventories in 2014, the fuel stock fell to a precarious five days by the end of the monsoon season, by end- September.

Also, wind energy generation is lagging. Despite the rise in capacities, generation dropped in April and May this year compared to a year ago. One reason why fuel supply issues came to the fore during the 2017 monsoon season was the unexpected slump in wind energy generation.

Of course, demand is an overarching factor. During two of the previous four years, when coal inventories fell to single digits by the end of the monsoon season, thermal power has seen strong offtake.

Much too depends on hydropower generation. Thermal plants usually enter their maintenance period during the monsoon and subsequent winter months due to a seasonal slowdown in demand and expected ramp-up in hydro and wind energy generation. However, as the experience in 2017 shows, this conventional wisdom is being tested.

Thankfully, the government is mindful of the situation. According to reports, the government is advising state utilities to import coal to avoid shortages.

Even so, the question that needs to be asked is if the remedies are rather slow in coming, given that the fuel availability issues were simmering for some time now.