Indian power plants are using their high inventories instead of buying new coal from the state-run Coal India, despite an increased electricity demand.
According to a Reuters article, this is the fourth month in a row that the coal used for electricity generation has declined.
Coal India’s production capacity is often not enough to meet the increasing demand for electricity.
Coal India, a major player in the coal industry, is responsible for about three quarters of its total output.
India is the world’s second largest coal producer, and also the biggest consumer. Only China comes close in these categories.
The interdependence of the energy sector in India, as evidenced by the high reliance the country has on coal and Coal India’s share of the market, is a testament to the importance placed upon the supply and demand for power.
Reduced coal-fired electric power
Power plants’ ability to use their stockpiles is a crucial buffer in times of high consumption of electricity, helping them to maintain grid stability while meeting the rising energy demands of the country.
Analysts and data from the government indicate that increased production of hydro- and renewable energy has resulted in a decrease in coal-fired power output.
A Monday note by Citi analysts shows that coal stocks at power plants have seen a 13% drop in July. This is a dramatic decline from the record of 58.1 millions metric tons recorded at the end June.
The drop was much greater than the 2% average July decline observed over the last decade.
In a Reuters article, Partha Sarathi Battacharya was quoted saying that “adequate inventory and the absence of a risk of a shortage of coal have helped power plant reduce their buying from Coal India.”
The utilities have more control over their cost management, he said.
This is a temporary situation, as coal demand will rise once it starts to grow faster.
Output decline
Coal India’s production fell 15.6% in July. According to data from the company, simultaneously, supplies decreased by 9,9%. This is the highest rate of decline since five years.
The market share of Coal India has decreased due to the increased production by private miners. The shift started in 2020, when New Delhi began to open coal mining for the private sector.
The growth in electricity consumption has been slowed down this year because of the general economic slowdown and heavy rainfall that reduced cooling needs. However, July saw an increase in electricity production.
Grid-India, the regulator of India’s federal grid, has analysed data and found that coal-fired electricity generation, which accounts for about 75% of India’s total production of electricity, declined for a fourth month running in July.
The total power generated in July increased by 1.8%, to 164.66 Gigawatt Hours. This was due to an increase of 22.4% in hydropower as well as a 14.4% in renewable energy sources such as wind and solar. The data shows that this growth was achieved despite the fact that coal power fell by 4.2%.
The coal contribution to electricity generation in July fell to its lowest level for five years, 64.3%. This is down from the previous year’s 68.3%.
Analysts expect this trend to continue. Analysts expect this downward trend to continue. This is due to India adding a record-breaking 22 GW solar and wind power in the first half 2025, and its ambitious goal of reaching 500 GW non-fossil energy capacity by 2030.
As new information becomes available, this post Coal-fired Power Declines as India Leverages Inventory may change.
