Lights across Delhi just went out. Here’s why.
India is currently in the midst of an unprecedented energy crisis. Coal powered plants power a whopping 70% of India's electricity. However, 110 of these 135 plants have critically low coal supplies, 63 of which are projected to only last another day. This is a far stretch from having at least 2 weeks worth of supplies as stipulated by federal guidelines.
How did this happen?
As the lockdown eased and industrial activity increased, power demand rose. Neither power suppliers had anticipated nor the stagnant domestic production could satisfy. An extended monsoon this year further slowed down the extraction process, creating an acute shortage.
However, Importing more coal to substitute for domestic shortages is not an option. As world economies recovered, global demand and hence prices, for power generating fuels like natural gas, coal and oil skyrocketed.
Long-term agreements were signed by Indian import-based power producers to prevent them from passing the economic burden onto distributors, rendering them unable to afford imported coal. About half of import-based plants have begun generating at half capacity. Since India heavily relies on imported coal (it is the world’s 2nd largest coal importer) this further increased strain on domestic coal supplies.
Is India the only country struggling?
This is a global energy crunch. Weather conditions across the globe both increased demand and decreased supplies. For example, an unexpectedly long and cold winter exhausted natural gas supplies in Europe while unusually calm winds in Russia reduced wind-powered power production, increasing strain on other power-producing fuels.
China, the world's largest coal consumer, has had a series of rolling blackouts for residents. Shortages are even more serious in Europe and East Asia where prices have risen 130% and 85% respectively since the beginning of September.
Economic Impact
The spike in energy costs threatens inflationary impact as businesses try to pass the burden onto consumers. Since electricity powers most of the manufacturing sector, goods’ prices will undoubtedly rise. Simultaneously, higher energy bills will lead to a decrease in consumer spending.
Moreover, if the Indian government asks industries to decrease activity, this could further hurt our economy, which is still trying to recover from the recession.
Green Energy: stepping forward or backwards?
India has been grappling with the extremely challenging question of how to meet its ever-increasing demand for electricity while reducing dependency on non-renewable sources of energy like coal for years now. This blackout could incite a shift towards fortifying and revitalizing coal production, which had slumped to pivot towards greener energy sources, especially since coal remains inextricably central to energy production in India.
On the other hand, this could also act as a wake-up call to aggressively diversify sources, ramp up renewable energy production, and transition towards a greener economy, and the planet.
Khushi Parikh
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