BackMint Explainer: High power demand and the need to blend imported coal
The rise in demand follows sporadic monsoon rains and hot and dry weather conditions
PremiumIndia witnessed its driest August in a century, and amid hot weather conditions and the resultant surge in demand for power, the central government earlier this month directed domestic coal-based (DCB) power generating companies (gencos) to blend 4% imported coal till March 2024.
In January, gencos were asked to blend 6% imported coal till September in order to meet high demand during the summer. In a recent notification the power ministry noted that Grid India has projected evelvated demand for power through FY24 which would necessitate blending of imported coal.
Here is a look at the decision and the reasons thereof.
Why were gencos asked to blend imported coal till March 2024?
The power ministry mandated blending of imported coal to ensure ample stocks at power plants for smooth operations. In its letter to gencos, the ministry had said despite an increase in domestic coal supply during the first quarter of FY24, it fell short of meeting the requirement.
In August, the gap between coal consumption at domestic coal-based plants and the receipt of domestic coal was about 200,000 tonne per day. “The gap was partly made up with import of coal without which coal stock would have declined to critical levels," it said. Further, supply of hydro power would decline going ahead with the end of the monsoon and the demand will have to be largely met by thermal power plants.
How has demand been?
Power demand touched a record high of 239.9 GW on 1 September, surpassing the Central Electricity Authority’s (CEA) estimate of 230 GW for the year. On 1 September, when the peak power demand neared 240 GW, the peak shortage had shot up to 10.75 GW. The rise in demand follows sporadic monsoon rains and hot and dry weather conditions. Demand, however, has eased since then and on Wednesday, 20 September, the peak demand was at 206.441 GW.
What has been the trend in power prices on the exchanges?
Power prices on the exchanges hit the ₹10 per kilowatt hour unit price cap in the first four days of September. On Thursday, the market clearing price stood at ₹6.48, higher than ₹4.59 per unit on Wednesday. As demand eases, prices are likely to soften going ahead.
What is the outlook for power demand?
Peak demand currently hovers at 200 GW, and is unlikely to rise hit fresh highs, according to senior officials. Demand is largely likely to be manageable going ahead.
What other steps has the government taken to meet power demand?
At the start of 2023, the Centre had announced a number of steps to meet the rising power demand. Last month, the power ministry also asked imported coal-based (ICB) power plants to operate at full capacity till the end of October. The original directive on this was issued in February when ICB plants were asked to run at full capacity till 15 June. This was extended till September.
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