Indian Power Plant Coal Inventories Decline Sharply Amid Surging Demand

October 20, 2023

In the first half of October, coal inventories at Indian power plants experienced their sharpest decline in two years, falling by 12.6% to 20.58 million metric tons. This significant drop is attributed to a surge in electricity demand, which outpaced coal supply.

Boost in Electricity Demand and Imports

Unusually dry weather and increased economic activity have boosted electricity consumption in India, even beyond the typical peak season in May. Coal-fired power generation saw a substantial year-on-year increase of 33%, surpassing the 21.6% growth recorded in September. Power utilities faced a 20.4% rise in demand and a 26.8% decrease in hydropower output, contributing to the decline in coal inventories.

Shift in Power Generation Sources

India responded to a seasonal decline in renewable energy generation from sources like wind and solar by ramping up coal-fired power output. The share of renewable energy in total output fell to 10.1% in the first half of October, down from 12.1% in September.

Supply Efforts by Coal India

Despite the surge in demand, state-run Coal India, the primary coal miner, increased coal supplies to power plants by 6% year-on-year to 23.5 million tons between October 1 and October 15. However, power plants’ coal stockpiles continued to decrease.

Impact on Imports and Prices

The rise in coal-fired power generation has led to an increase in coal imports, with India-bound shipments of thermal coal reaching their highest level since June 2022, according to data from analytics firm Kpler. Stepped-up imports of thermal coal and liquefied natural gas could have global price implications.

Power Demand Spike and Outages

The surge in power demand has resulted in more outages in parts of India. Average shortages increased by 33.1% to 19.3 million kWh per day during the first half of October compared to September. While power cuts reported by states to the regulator had nearly halved during the first nine months of the year, they have increased in recent weeks.

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